Top Tips for Buying a Vacation Home in the Outer Banks

Outer Banks Vacation Home - its time

Have you considered buying your very own vacation home in the Outer Banks?  Perhaps, you have visited the OBX every year for decades and want to buy a home to enjoy with your family and friends before retiring to the area.  Maybe you just want to diversify your investment portfolio with real estate and maximize the rental income.  There are many vacation rental homes on the market that have positive cash flow.  Plus, the homes are likely to appreciate at a higher rate now that the recession is over and the market has picked up. Read the tips below to find the perfect vacation home for your family and your circumstances.

Can you get to the home easily?

Generally, your vacation home should be within 3 hours drive from your permanent residence.  This makes it convenient to travel to the home with little notice.  It also makes it more likely that you will use the home for your own pleasure.  Alternatively, scheduling commercial flights and ground transportation to arrive to the Outer Banks from across the US can be more time consuming and more complex than just jumping in the car.

The Outer Banks does have a General Aviation airport in Manteo, as well as several landing strips.  Air Charter Service directly to the area has recently been initiated which can be an option to Owners who live further away.  Also, flying to the area can be a viable option for a private pilot; but check ahead for availability of overnight parking of the aircraft.

How Much Can You Afford

Use our mortgage calculator to begin the process of budgeting for the vacation home and determining how much you can afford.  Generally, you will need to put down 20% and your total monthly expenses for houses and cars (debt) should be less than 36% of your income. Insurance and taxes are in addition to the mortgage amount and must also be factored in as well. 

Ideally, even though the vacation home will generate income and cover your expenses; life always throws surprises.  You should have cash flow and reserves to cover the cost of surprise repairs or replacement for an appliance that breaks.  It is far better to overestimate what the potential repair and maintenance cost may be then to get in a pinch and be short.  Your Eillu Agent can help with costs estimates based on performance of like homes in the Outer Banks. 

Get Pre-approval

Once you have completed your estimates, it is time to validate them and get pre-approved from a local lender.  Local Outer Banks lenders are knowledgeable about the area and are familiar with the issues that arise with coastal properties more than a familiar lender near your permanent home.

Who will use the Vacation Home?

Even if you intend to use the vacation home as a second home with occasional use for family and friends, it is a good idea to have a local contact who is able to check the property for you in the off season, be available for emergencies and perform any needed assessments after a storm.

If you intend to rent out your vacation home, there are more options than ever today about how to manage your vacation rental.  The Outer Banks has dozens of professional Property Management firms that specialize in vacation home rentals.  These firms can handle everything from reservations, payment disbursement, maintenance, emergency calls, cleaning and respond to guest inquiries.  It will cost you about 15% of the gross for their services, plus any fees for additional services. 

At the other end of the spectrum, you can use services such as VRBO or Airbnb to manage the reservations for your vacation home and secure the remaining services locally as needed.  Of course, this puts the responsibility on you to make sure there is a cleaner scheduled, pool / hot tub technician scheduled and the guest has their keys or working keyless entry code.  In addition, having a handyman or maintenance tech for any calls should also be planned for in advance. 

There are also hybrid choices where both VRBO and Property Management services can be combined at a lower commission rate. 

Managing a vacation home can be a wonderful rewarding experience but can also be challenging.  You should carefully consider how much time you have to dedicate to the endeavor before deciding which direction to go.

Vacation Home Location

Deciding where on the Outer Banks to invest is very important.  While the entire strip of Barrier Island is lovely, each neighborhood has a distinct vibe that may not be obvious at first sight.  Our guide to selecting neighborhoods will help you evaluate all the factors.  Also, you can read about each of the Outer Banks towns here.

On the one hand, if you intend to rent the home, you want to have strong demand for vacation rentals.  Corolla is a lovely resort area with great rental demand.  You truly feel like you are in a special place during the summer.  However, the year round population is rather limited and it can be isolating to be there during the winter.  As you can see, if you plan to eventually retire to the home, then this may be more difficult to satisfy all the criteria for both.  Obviously, a 7BR oceanfront home, while lovely to vacation at, may not be ideal for retirement with only a couple living there.  We at Eillu are here to help you find the perfect home to satisfy all your criteria.

The Outer Banks provides lots of choices for your vacation rental location.  Waterfront locations include the Atlantic Ocean and the sound.  In some places, the island may only be a mile wide between them. 

Generally, vacation rental homes on the oceanfront or oceanside have greater demand than soundfront or soundside locations.  Many soundside locations are considered a maritime forest and are wooded with fewer manicured yards.  Oceanfront locations have more sparse vegetation and can be impacted with blowing sand to require more frequent painting and upkeep.

Each town or community also provides background character to your vacation rental.  A “resort” community may have abundant community amenities but few year round residents as neighbors or friends.  In some areas, shopping and restaurants close for the winter months or after the fringe season.  In other locations, more businesses stay open year round to provide services to you or your guest in the off-season and provide potential rental income over the holidays.  It is always a good idea to visit the area you would like to purchase a vacation home in each season to see how the area differs through the seasons. 

Even if you have been visiting the Outer Banks on vacation for years, make sure to view the other areas before deciding where to invest.  Many families have come to the same beach town (and even the same house) year after year and never venture further. 

At the north end, there are areas, like Carova, where the homes must be accessed by 4 wheel drive that provide utmost privacy.  Carova also is home to the wild horses often seen frolicking on the beach that may be perfect backdrop for the “escape” you seek.  

Corolla is well known as a high end resort area and is perfect for summer vacations but becomes isolated in the winter.  Further south are more year round communities like Duck and Southern Shores, with both sound and oceanfront locations.  Kitty Hawk, Kill Devil Hills and Nags Head are in the thick of things year round and have more shopping and restaurant options open.   

Manteo has a unique character all of its own, a quaint small town on an island (Roanoke Island), but with fewer vacation home rentals.  Finally, Hatteras Island and Ocracoke can be more isolated in the winter or after a major storm event and Ocracoke requires traveling on a ferry to get access.   Each area has its advantages but you must consider them all to know what is best for you and your investment goals.

Tax Implications

Everyone’s tax situation is different.  While your vacation home can be rented out and used as a business investment where your expenses are deducted, your financial advisor can be more specific to your exact situation.  Vacation home owners can use the property for two weeks a year and still maximize the tax advantages, like depreciation on the home and the furnishings.

The Outer Banks rental market continues to be strong to provide income from the investment and enjoyment for the family for years to come. The Outer Banks has been named a top beach destination every year.  For more information on buying Outer Banks Real Estate or to learn more about the Outer Banks in general, please contact us and check out our blog.

infographic map with cost and ratings for vacation destinations from Maine to Florida

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