Six Alternatives to Buying a Beach House

Editor’s note: Bryce Sanders is a longtime columnist with Rethinking65. Read more of his articles here.

“When I retire, I am going to sit on a beach with a drink in my hand, watching the sun go down.”

Advisors often receive this response when they initially ask clients what they see themselves doing in retirement. Buying a beach house could be part of their plan. But if “living the dream” is really about sitting on the sand and enjoying the sun for as long as they want, this might be achieved through other approaches.

Alternatives to buying a beach house include renting a beach house, selling their primary residence and relocating to a beachfront community, owning a timeshare, taking lots of cruises, mooching off friends who own beach houses or taking day trips to the beach near their home.

Here are some talking points to raise with clients on all these options:

Buy a Beach House

Pros:

• It is yours. You can use your beach house whenever you choose, decorate is how you please and use it to entertain friends — which could make you popular. Ideally it is within a two-hour drive from your primary residence.
• The property is a real estate investment. It contributes to your net worth and can appreciate over time. You can rent it out during the high season to earn some income.

Cons:

• This might be the most expensive option. Think down payment, monthly mortgage payments and opportunity costs.
• It could be a tax burden. You are paying property taxes, which are capped by the $10,000 SALT deduction cap [https://taxfoundation.org/blog/salt-deduction-cap-design-options/] What are the combined taxes on your primary and secondary residence?
• Rental-property realities. Renting it out means you cannot use it during the most desirable months. And if you don’t want to interact with tenants, you probably need to hire a management company.
• Expenses continue even when you don’t use it. You have carrying costs and maintenance expenses.
• Storms happen. Beachfront property gets damaged. Insurance can be expensive.
• Break-ins are possible. Consider security problems. You cannot be in two homes at once.

Rent a Beach House

Pros:

• You can choose the weeks you want to visit. You can choose high season or low season. Stay for a week or a month.
• You can vary the properties and location. You might get tired of that town. Try another one. You might prefer the Caribbean in the winter. Maybe you give Mexico a try. The major hotel chains have brands catering to the extended stay business traveler. These units usually have a couple of rooms, a kitchen and maid service. Maybe breakfast too.
• Maintenance isn’t your problem. If the toilet stops working, you call the management company or the hotel front desk.
• No carrying costs. You do not need to pay the insurance or property tax bill. You do not worry about lost revue because of unsold weeks. That is someone else’s problem. You simply enjoy the beach.

Cons:

• Renting is expensive. When you rent a beach house in the high season, the rental cost is multiple times higher than during the off season. Hotels might charge “surge pricing” if an event is taking place during a particular weekend.
• The cost rises every year. Owners face this problem too, but not to the same extent. Expect that the quoted rate for renting for a month during the summer will be “all the market will bear.” If you don’t rent, someone right behind you will open their checkbook.
• You are not building equity. You might pay to stay in the same beach house for ten years, but at the end of that time, you have nothing to show for it.
• Availability can be an issue. Others might booked your favorite place before you do, and there may be no availability anywhere worth staying during a very popular week.
• You must follow someone else’s rules. You love your dog, but the owner of the rental property prohibits dogs. Another property allows dogs up to 15 pounds. You break it gently to your St. Bernard.

Relocate to a Beachfront Community

As you profile your clients, you realize they don’t want to sit on a beach with a drink in hand from time to time. They want to live that lifestyle forever, wearing sandals and fishing. Tahiti and Jimmy Buffet enter the conversation. Your clients are prepared to sell their current home and move.

Pros:

• Lower cost of living. If moving from a city in the Northeast to a beachfront community in the Mid-Atlantic or Florida, prices should be cheaper. This can help stretch retirement dollars. Maybe they’ll now be able to afford the boat they’ve also dreamt about.
• Friends will visit. You left behind many friends when you moved out of the city. They will not lose touch, knowing you own a house at the beach. They see you as a rent-free hotel. The phone will keep ringing.
• You are only maintaining one house. Now you can live the dream while paying only one set of bills. This could free up more cash to put more equity into one home.

Cons:

• Boredom. If you are moving from a major metro area, you are giving up the cultural life and better shopping. You could always head to the beach if you wanted a change of scenery. Now you live at the beach.
• Availability of quality medical care. If you lived in a big city, you had great hospitals nearby. Living in a beachfront community, you might need to travel a distance for specialized medical care.
• Airport access. When you lived in the city, you could fly almost anywhere direct. Airfares were cheap because of the competition. Now you live near a regional airport. Suddenly, air travel is less convenient and much more expensive.

Own a Timeshare

Buying a timeshare is also known as fractional ownership. About 10 million Americans own timeshares. One industry study shows that 90% of timeshare owners are satisfied.

Pros:

• Ownership without many responsibilities. You “have your place at the beach.” It is yours for many years. You do not need to worry about maintenance. Someone else does that. You simply pick up and return your key.
• Fully furnished. You are not buying furniture and window treatments. You do not need to buy pots and pans. It’s like owning a luxury villa. Everything you need is there, except groceries.
• Storage might be available. The timeshare operator might offer the option to store a suitcase or two on the premises for your use every time you return. You might choose to leave personal items and beach clothing, so you don’t need to transport it back and forth.
• Desirable location. Timeshares are often resort-like properties in places you want to revisit again and again.
• Trade locations. If you get tired of living in paradise, you can often “bank” your week in Hawaii and choose to visit a ski resort or big city instead.
• Know you can go. If you own one week at this location, you know you can always go during “your week.” They will be expecting you.
• Space to spread out. Unlike standard hotel rooms, timeshares are often more generous with space. Your unit might have two bedrooms, two baths and a balcony.
• Resort living. Resort amenities are available. This probably includes a pool, gym and tennis courts.

Cons:

• A limited visit. If you own a timeshare unit for a specific week, you are only visiting one week, unless you buy more weeks.
• Rising carrying costs. The timeshare operation is a business. Their costs go up too. This is passed along to owners. Your annual fees will likely keep rising.
• Is it really cheaper? It can be expensive to visit a resort in high season, but it doesn’t need to cost that much. What are you paying in annual maintenance? Could you book a week’s stay at a nice resort for about the same amount, or maybe less?
• Selling a timeshare can be difficult [https://www.cbsnews.com/news/what-is-a-timeshare-cbs-news-explains/] And as long as you own it, you are responsible for your share of the annual maintenance costs.
• Is it a good investment? The average timeshare has 130 units. With 52 weeks in a year, that means 6,760 shares. If the operation is wound up and sold, each owner of one unit is getting one tiny slice of the net proceeds.

Taking Lots of Cruises

Some people almost live on a cruise ship. A world cruise might be 100+ days. Some people get off one cruise and begin another a few days later.

Pros:

• It’s not as expensive as you might think. Cruise ships don’t make money on empty cabins, so many offer cheap last-minute fares. And while 107 nights on Cunard’s new ship, Queen Anne, is about $16,000 per person, double occupancy for an inside cabin, that comes out to about $150/day, including your cabin and all meals. That’s less than many hotels.
• You see lots of beaches. Your resort is constantly moving. If you are sailing the Caribbean for seven nights, you are likely seeing seven islands, each with a different beach. If you own or rent a beach house, you have the same view every day.
• You get the deck chair experience onboard. You don’t need to go ashore! You can stretch out in a longer by the onboard pool with that drink in your hand.
• Everyone gets the same level of service. Don’t look down your nose at an inside cabin. Hotels have different grades of rooms too. The staff gives everyone the same level of service.

Cons:

• Access to medical care. Medicare and supplemental insurance stops at the U.S. border. You will need to consider buying a health insurance policy to cover you abroad. U.S. land-based hospitals also offer more sophisticated medical facilities.

Additional Reading: He Fell Ill on a Cruise. They handed Him a Bill Before he Boarded the Rescue Boat

• Not too much space. Your inside cabin might be 150 square feet. Your balcony cabin might be 250 square feet. .
• Storms can be an issue. If you live in a beach house, it might get stormy, but you can stay indoors or leave before the storm. On a ship, you can experience rocking and rolling during bad weather.
• You have daily costs. These include tipping, dry cleaning and drinks. You might want to take shore excursions. It can add up.

Mooch Off Friends with Beach Houses

Make a list of your friends who own beach house. Plan your summer around visiting each of them for a few days. Bring a bottle of champagne and pick up the cost of one dinner at a nice restaurant.

Pros:

• Low costs. You are becoming a professional guest. You are enjoying the beach lifestyle without paying for a hotel room.
• No overhead. You are not paying a mortgage or property taxes.
• No maintenance. You might notice the paint is peeling or the toilet runs. It’s not your problem.
• Variety of locations. You extend the category of “beach house” to include country houses and yachts owned by friends.

Cons:

• Damage to your reputation. You will quickly get known as a world class scrounger. People will avoid your calls.
• Need to return the favor. You are accepting someone’s hospitality. They will expect an invitation in return.
• Possible cancellation. You might be booked in to visit, but their plans might change. They must go out of town. Your visit is cancelled, or to put it more politely, postponed.
• They choose the time. Unlike a hotel, you cannot choose your date and book a reservation. They might have other guests. They might have rented out their house that week.

Take Day Trips to a Local Beach

This is an overlooked yet obvious option. You can do it next weekend if you choose. The cost of being a day tripper is low and there may be many oceanfront or lakefront options within driving distance, for variety. Some hotels with beach clubs offer private memberships for daytime guests. Some communities rent out medium-sized sheds for the season where you can store your folding chairs and beach-ware.

If your client wants to live the beachfront lifestyle when they retire, they have plenty of options. They don’t need to wait until retirement for some of them.

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor,” is available on Amazon.