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What to do, what to expect, and what to watch out for
Buying a beach house really isn't that complicated, and in a perfect world, quite simple. You call an agent, find a house, make an offer, secure a loan, have the house looked over, and go to closing. Easy right?
There are a few things you should watch out for though, and that's why we're here. The purpose of this section is to take you through the process, step by step, and discuss possible pitfalls and difficulties so you are not surprised if one should arise when you are in the process of buying your beach house.
STEP ONE: Determine your price range
Decide how much money you have for a down payment, and what kind of loan you can afford. The best way to do this is to speak with any of our local lenders (click here for our recommendations). Local lenders are quite knowledgeable and experienced with financing rental homes, and getting prequalified is the best way to let agents and sellers know you are serious.
You will need at least five percent of the purchase price for a down payment, ten percent is better, and twenty percent the best. Keep in mind that when you finance more than 80% of the purchase price, mortgage insurance will be required, adding another expense.
How much income do you need to buy a beach house? Your income should be about double your current mortgage payment, your monthly debt expenses (credit cards, car loans), and the beach house mortgage combined. To get a rough idea of how much the beach house mortgage payment will be, figure about $800 dollars per month for every $100,000 financed, or $900 a month per $100,000 if you plan to put less than 20 percent down. We would be happy to run the numbers for you. Just call us (toll-free) at 1-800-318-4679 or send us an email.
STEP TWO: Finding an agent:
Of course, we think one of us should be your agent, but we know that you will most likely have talked to several before you have found us, so it is important to know what to look for in a buyer's agent so you can make a fair comparison. You should have an agent before you start looking, as just a couple of conversations with a good agent can save you lots of time over looking on your own. Of course, most people like to shop first with no pressure to buy, so we keep our approach fairly low key with no weekly phone calls to see if you are ready yet. We let you take your own time, and consider it our initial function to be nothing more than a provider of information.
1.) Look for someone you like and can trust. We can't emphasize this point enough - your agent will be your representative during price and repair negotiations, there are many difficult situations we have observed that could have been avoided by both the agent and the buyers if they had just been able to trust each other and freely share their thoughts and concerns. If you are worried about your agent's motives when you are just looking at homes, imagine what a difficult negotiation will be like.
2.) Make sure he or she is technically proficient. This is fairly easy - if the agent can answer your questions with detailed, accurate responses, you most likely have found someone who has been at it long enough to have heard most of the questions before. Agents need to know about financing, law, construction, negotiating, appraising, and most importantly the local market.
3.) Make sure he or she is flexible. Sometimes people tend to get stuck doing things the same way, year after year, which is fine when nothing changes. However, every piece of property is different, and every client unique. Rather than force one way of doing things upon my clients, we try to adapt to the situation as much as possible while still doing the things we know make sense. By keeping an open mind, we can predict and handle situations that might catch others off guard.
STEP THREE: Finding a house
What do you want? Cash flow? Close to the beach? A home in perfect condition, or a fixer upper? While it is a good idea to ask yourself these questions before you get started, realize that what you want most likely will be determined when you see it, so don't worry too much about coming up with the perfect formula beforehand.
Avoid the cash flow pitfall. Most people justify buying a beach house by looking for one that will pay for itself - a fine approach if you want nothing else. Problem is, there are other things to take in to consideration. Do you like the house? Will it appreciate? How far do you want to be from the beach?
Ask yourself if you are looking for cash flow or appreciation. Higher rents are generated by improvements such as bedrooms, hot tubs and pools. So, the less you spend on land, compared to the improvements, the better your cash flow will be. However, improvements do not appreciate in value. The buyer who hopes to sell for a profit some time in the future will be much richer if he or she forgoes the positive cash flow now in favor of a prime location.
Finally, don't be afraid to look for a house you like - after all, rental income can be improved by adding things that renters like, or by simply waiting as rents have shown a tendency to increase up to 5% a year. Your mortgage payment will stay the same or go down, improving cash flow in the long run. After all, why own a beach house if you don't enjoy spending time there?
STEP FOUR: Let us take it from there
As part of our Outer Banks Beach philosophy, we take care of all the details in your closing: from arranging inspections to coordinating with lenders to setting up repairs. We understand that many of our buyers are from out of town and simply don't have the time to coordinate all these things over the phone. Our goal is to make the process easier than you ever thought it could be.
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