If you’ve recently bought a coastal home as an investment opportunity, you’re not alone. Recent news reports state that many investors are purchasing coastal homes as a secondary investment or vacation rental due to the amount of foreclosures and low market prices. If you are thinking about flipping a coastal home, there are few points you should be mindful of that could reduce your profit on the home.

Local county governments all treat property taxes differently. If you hold the home for a couple of years, you may be hit with a rise in property taxes. In these tough financial times, many local governments opted to either reduce the property taxes or freeze them for a period of time. When the market begins to recover (and it will recover) the local government could reevaluate the amount of the property taxes and raise them. This will likely vary with different markets. Many red-hot real estate markets have experienced property taxes double every few years in the past as a way of curbing the demand in the area.

If the home is not going to be your primary residence, you will likely pay a higher tax rates for secondary home owners. Secondary home owners generally pay about two times higher taxes than someone who is lives in the home year round. Ask your local tax office what both rates will be. Also, bear in mind that after you renovate the home the value will be reassessed, therefore the taxes and the insurance will be higher due to the increased value.

Many vacant coastal homes and foreclosures have been lacking maintenance. You should be able to negotiate a discount on the purchase of the home. Coastal homes have very strict zoning and building codes. It is recommended that you speak to some local building contractors who can guide you in your renovation efforts. If you have to replace the roof, you will probably be replacing more than just the roofing material. Some improvements to the framing such as roof straps may be needed to bring the home up to code. Replacing the windows and doors will probably require upgrades to windows and doors with high impact ratings which can easily cost more than anticipated.

When speaking to your building contractors for renovation estimates, a good idea would be to double the cost and double the time frame. There will likely be delays due to weather, material shipments, and other unforeseen problems that will affect both cost and repair time.

While projecting rental revenue for your coastal home, you should talk to a few local property management agencies about what the local economy and what the daily, weekend, and weekly rental rates are for comparable sized coastal homes. Make certain to inquire about what the management fees are and what they include. Most services like housekeeping, maintenance reviews, and service calls are generally included.

When forecasting your rental income for your coastal home, determining the length of the vacation season is important. Regions such as Florida and other southern states will likely rent out 9 to 12 months a year. Meanwhile coastal homes in Maine and other northern states may only rent out 5 to 6 months a year.

In Closing

If you are shopping for investment opportunities in coastal homes it is recommended that you begin by searching the internet. Online real estate marketing services and local real estate web sites provide listings, photos, and even video tours online. Once you find the property that fits your needs, you can then call or email the agent or seller with any questions you might have.

Hubert Miles is the founder of Waterfront Houses USA, an internet advertising service that provides Coastal Homes and Coastal Homes For Sale listings in the United States and Caribbean.

Posted on 31 December '09, under Houses.