A house that sits beside a lake, river or ocean can be an ideal vacation spot, or even a place to live year-round. A waterfront home can be a sound financial investment, if you choose a property carefully and you can afford the additional expenses that come along with it.
Think About Maintenance and Utility Costs
If you own a house near the water, you’ll have to invest more time and money in maintenance than you would for an inland home. Moisture can damage paint, which means the property’s exterior might have to be repainted frequently. With a beachfront house, you’ll have to figure out how to keep people from tracking sand all over the interior and damaging the floors. If the house is near saltwater, salt can damage the house and cause vital systems to wear out faster.
For any property, utilities can be expensive. Those costs can be even higher for waterfront homes since they’re often in remote locations that aren’t easily accessible.
Factor in High Insurance Premiums
A house near the water can be damaged or destroyed by a hurricane or flooding. Homeowners insurance can be particularly expensive for waterfront properties due to those risks. You might be required to take out a separate flood insurance policy, in addition to standard homeowners insurance coverage.
Consider the House’s Future Value
When searching for an investment property, think about how the house’s value might change in the future. Since there is a limited supply of waterfront homes available, those properties generally rise in value over time, although there are no guarantees.
Future changes might cause a house that’s desirable now to decline in value. Climate change can reshape a coastline and bring water closer to a home than it currently is. Erosion can wash away some of the land and cause structural damage to a house.
You Might Be Able to Rent Out a Home on the Water
If you’re thinking about buying a waterfront property that your family can use for vacations, you might decide to rent it out at other times, rather than let it sit vacant. That could help you generate enough income to cover most or all of your mortgage, insurance and maintenance costs. Before you decide to rent out a second home, make sure that you understand the Internal Revenue Service’s rules and the potential tax implications.
Weigh the Pros and Cons
Buying any house is a major financial decision that you shouldn’t take lightly. The stakes can be even higher with a waterfront property. Discuss these issues with your real estate agent so you can figure out if a house on the water would be a wise financial investment.
