Buying a Cape Cod Investment Property

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The newsletter goofed! Click the link below for the blog article on the Home Buying Process.

Review of the Home Buying Process

 

Cape Cod is a peninsula off the east coast of Massachusetts boasting 550 miles of coastline. Much of that coastline is occupied by gorgeous, sandy beaches and picturesque harbors — making Cape Cod an ideal vacation spot and a perfect location for purchasing a second home. If the thought of owning a home on the Cape appeals to you, but you just don’t see how you can afford it until later in life, perhaps you’re not considering the fact that most homes on the Cape go a long way toward paying for themselves through summer rentals.

Consider the following example. A woman wishes to buy a relatively young 3-bedroom 2-bath home in Harwich for $400K. The home is a short drive or bike ride to the beach and to downtown Harwich Port, but not close enough to walk. The weekly summer rental rate is estimated at $2500. The woman plans to rent it for just 8 peak weeks in the summer, and use it herself the rest of the year. Her gross rental income will be $20,000 annually. If we deduct from that the estimated rental agency fee of $3,000, and another $2000 for cleaning and utilities during the rental period, the net rental income is roughly $15,000.

If the buyer puts 20% down ($80,000), she will be mortgaging $320,000, which will result in an estimated monthly payment of $2000 — taxes and homeowner’s insurance included. So her annual mortgage, tax and insurance payment will be $24,000, or roughly $9,000 more than the gross rental income. She’ll be able to deduct her mortgage interest, real estate taxes, and some other expenses on her taxes, resulting in further subtractions from the $9000. In the end, owning her new Cape home might only cost her in the neighborhood of $6,000 annually. And this does not factor in the money she will save by not renting someone else’s home, nor the fact that she will now have a Cape house that she and her family and friends can use 44 weeks out of the year.

So if you’ve been putting off buying the beach house because you think you can’t afford it, don’t forget that a home on the Cape is one of those few investments that can help pay for itself, and that you can actually enjoy in the meantime. For details and for expert advice, contact your accountant or financial advisor. And remember — nobody on their deathbed ever said they wished they’d spent less time relaxing on Cape Cod. Happy Holidays!

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