For many homebuyers, purchasing a beach house on the Jersey shore is the start of a lifelong dream come true. But with any major purchase, there are pros and cons you should be aware of. If you’re planning on buying a beach house in New Jersey, avoid these top three mistakes, risks, and pitfalls.
1. Forgetting the beach house is still an investment.
There are many risks to purchasing and owning a beach house. For example, someone could break into the property while you are away, and you’d never know. If something in the house breaks while you are away, you wouldn’t know it either. When major repairs sit for too long, they can worsen and end up even more expensive to fix when you are finally made aware of the problem. Buyers must remember that it’s not enough to fall in love with beach house during the peak of summer. Buyers need to remember that the home is still an investment.
A few other practical matters that beach house buyers should consider are the town’s history of property tax increases, zoning issues, and ordinances that might impact their ability to sell the property in the future. It’s also a good idea to take into account the home’s price history to ensure that you’re getting a good deal. Also, remember the ongoing costs involved in owning a beach house – property taxes, utilities, repairs, and even fees for maintenance when you’re not occupying the property.
2. Not understanding the consequences of renting it out.
When you don’t occupy the property for most of the year, it seems logical to rent it out when you aren’t using it. But this comes with risks. It’s critical that homeowners get an adequate security deposit from tenants, and are sure to run the necessary criminal and financial background checks. References are also important. When it comes to renting out a beach house, it’s also essential to have a system and set of requirements outlined for cleaning out the beach house when the rental agreement ends. Renting out the beach house can also change the owner’s tax status too, and it’s crucial to be aware of these things before handing the keys over to a tenant.
3. Failing to consider all the paperwork involved.
Should you hold the property in your name? Or make it a part of another entity? There are important considerations to think about before buying a beach house. It’s possible to transfer ownership of the beach house to an LLC. Although this won’t give you any tax advantages, it will protect you from any liability issues if someone gets hurt on the property and files a lawsuit against you. With an LLC, it’s critical to have liability insurance in place no matter what.
Owners can also put the property into an irrevocable trust. The property is protected from credit issues, in the event of a divorce, or a lawsuit. Putting it into a trust can also help you avoid paying estate taxes.
Buying a beach house should be a dream come true, not a nightmare. Keep these tips in mind and avoid some of the common pitfalls to buying a beach house in New Jersey.