Nathan Colmer | Van Dyk Group
C: 609.290.4293 | O: 609.492.1511
Nathan Colmer | Van Dyk Group
C: 609.290.4293 | O: 609.492.1511
One of the advantages of buying a home in the LBI real estate market is the consistent interest in summer rentals on Long Beach Island. The ability to rent a home not only keeps the LBI real estate market stable, especially in times of major economic trouble as we saw in 2008, rentals also provide an interesting investment opportunity. LBI rental investment properties offer the ability to purchase a home and generate immediate cash flow. With such a strong rental market, it is not uncommon to see the entire cost of ownership covered by the rental income. A down or falling real estate market on Long Beach Island can offer the perfect opportunity to enter the rental market. Lower prices and low interest rates can equate to a significant profit both short and long term.
Like many seasonal areas, Long Beach Island has some distinct trends throughout the year. Long Beach Island experiences a certain activity during the busy summer months of late June through early September which is flanked by the shoulder seasons of spring and fall. Winter sees little to no interest in the summer rental market on Long Beach Island. With such a small window of opportunity, it is important to understand the market and make sure the rental property is the best among its competition and remains a profitable investment. There are three ways to help accomplish this goal. They are:
Many homes on Long Beach Island serve as both vacation properties and rental investments so when buying an investment property in the Long Beach Island real estate market, you can typically have a good idea of what kind of income for a property will generate. As I mention above a down real estate market can offer added opportunity to an already profitable rental scenario.
Real estate has proven time and time again to be a sound and safe investment long term. You own something when you buy real estate and having the ability to rent that asset and generate income makes it a great balance to a stock heavy portfolio. This is especially true for younger buyers who can take advantage of the long market hold to capitalize on that investment.
Real estate can also have added tax advantages that can be leveraged against your other sources of income. Of course it is best to speak to your advisor and accountant to see how owning a rental property on Long Beach Island will impact you.
I am going to share some of my personal experiences and planning for real estate investment on Long Beach Island. If a buyer makes an investment on Long Beach Island strictly for rental purposes, long-term it could play out to their advantage. This is even more enticing when we are facing a down, falling or shifting LBI real estate market. Let’s take a lower cost market home and use it as an example.
If a property such as this were to be rented out for the entire summer season and ideally some off-season rentals, it is more than likely you can gross between $55,000 and $60,000 in the right property. While a break-even scenario may not sound like the best investment, it is important to remember that the property should come close to costing you nothing per year, apart from annual upkeep, as the summer rental income pays off your mortgage. If you can take a little extra profit, let’s assume that $5,000 overage, and apply that towards the monthly mortgage, the home would be paid off even faster. Looking forward in the future 25 or 30 years when the house is fully paid off, you own on an asset free and clear that is generating a net profit of around $40,000 as your entire out-of-pocket cost would be limited to your down payment and any repairs made to the home. This of course does not account for annual increases, inflation, etc. Even if you were out of pocket a few thousand dollars each year, the long term rental potential as well as the natural market appreciation would make your LBI house one of the best investments in theory.