Deciding on Selling Beach House

[Joshua Morton]

Hi Everyone,

     I have a situation that is causing a lot of stress in my life and I wanted to get some feedback.  My sister and I recently inherited a beach house, a condo, and a plot of land in the Cherry Grove, SC area.   All 3 properties are paid for in full.  The beach house rents during the summer months and nets $30,000 on average.  The condo is rented year round to a tenant, and the plot of land is in a perfect spot to build and rent on.  

     My sister wants to sell everything, but I would like to retain some of it since they are all paid for and are earning money.  Along with the NC properties I will have to buy her half out of I only think I can buy out just one of the SC properties.  I'm really struggling with making this decision.  I'm wondering if buying out the beach house is worth it, or if I should sell it and take the money to try and find other properties to invest with closer to where I live in NC. Ideally I would like to find a way to keep all 3 properties as they are in a great vacation location and will all rent well.  I would have to build and rent on the plot of land, but it's in a prime location. 

    If anyone can just share their opinions as to what you might do in my situation or any creative thoughts at all I would greatly appreciate it.

[David Krulac]

I've owned multiple beach houses. I like them that there is the unique attraction of the ocean.  They generally hold their value and increase in market value when times and markets are good.  If you do sell and the market goes up more, you could be priced out of the market in the future.  The downsides include property management is costly, more so that inland, or more than in regular non resort areas.  Depending on the location the season can be short, in the Mid Atlantic area the season is 12 weeks between Memorial Day and Labor Day.  That's where you make your money and make very little outside of that window.  I've owned multiple beach properties for decades and have never personally gone there in Jan, Feb, or March, even though they were available. Ideally you have renters for each of the 12 weeks, but that doesn't always happen, maybe you only get 10 weeks.  How much do you want to use the property?  You have to weigh your personal desire to enjoy the beach with the diminshed cash flow if you occupy versus a cash paying tenant.  One of the beach houses that I had was never rented, specifically so that I could go there on a moments notice.  Weather good go to the beach, no reservations needed.  Also family and friend got to use/stay there rent free.  One of the other beach rentals, we never occupied and rented on a yearly basis to people who permanently lived at the beach and had full time jobs even in the off season.  The 12 month rent was about the same as the 12 week rent, and the tenants paid utilities and were there almost alwasy so that the property wasn't vacant for months on end.  For I'd keep the condo with the paying tenant and try to keep the beach property, and ditch the lot.  See if your sister would like payment and would finance to you her 50% of the condo and beach house.

David Krulac

Bigger Pockets Podcast #82