The Problem With Owning Beachfront Property: The Ocean

Are you interested in owning beachfront property? I was for many years, but no longer. Climate change is negatively affecting beachfront property. Water is also the most damaging element for homes. And as an investor, I don’t want to take that risk.

Before you plunk a large chunk of change on a villa by the sea, it’s worth understanding the downsides. The biggest problem with beachfront property is also what makes it so special: the ocean.

Real estate is my favorite asset class to build wealth because you can also enjoy it. Can you imagine making millions of dollars on your beachfront property while also living your dream life? I don’t care how much stocks go up if you’re never going to use the proceeds.

However, unless you are able to get a steal, beachfront property may have a more difficult time appreciating in the future.

The Aspiration To Own A Beachfront Property

Once I got my first job in 1999, I fantasized about owning an oceanview property. But I could not afford one, so I purchased a parkview condo in 2003 instead for about $580,000.

11 years and another home later, I was finally able to buy my oceanview property. At $1,240,000, it ironically cost much less than my no-view property at the time because it was a fixer.

An oceanview property is fantastic because living in one feels so peaceful. If you’re facing west, you get to see a different sunset every night. As a writer, being able to zone out at an ocean has helped with creativity.

I highly recommend owning an oceanview property if you can get your hands on one at a reasonable price. Not only will you feel less stressed living in one, but you may also be able to make a strong investment return as well.

After enjoying an oceanview property since 2014, I began to fantasize about owning a beachfront property in Oahu. That’s the hedonic treadmill for you. I figured, if oceanview properties provided so much tranquility just by seeing the water, then also hearing the water with a beachfront home surely would be even better.

Unfortunately, the cheapest beachfront home I wanted to buy near my favorite beach in Oahu was $10 million. Alas, it was too far out of my price range. But I went to investigate my dreams anyway.

Flying To Hawaii To Understand Beachfront Homes

Given everything I write on Financial Samurai is based on firsthand experience, I decided to take a business trip to Oahu to investigate beachfront homes for this article. From my trip, I was also able to write an article about my experience flying during a pandemic and what it was like flying on a United Boeing 777-300ER in the Polaris cabin.

I wanted to provide the latest color on flying during uncertain times so others who haven’t seen loved ones for a long time can make a more informed decision. I’m pleased to report my flying experience was smooth and it felt safe. Please go see your loved ones if it’s been over a year.

I touched down in Oahu at 2:45 pm, took a COVID test, and went to see my editor for an hour. After our meeting was done, I drove down to one of my favorite beaches in Kahala. On the beach was a 6,000 square foot beachfront home sandwiched between two 15,000+ square foot beachfront mega-mansions on two-acre lots.

The 6,000 square foot home was listed for $10 million on and off for 18 months. Back in 2015, the home was once listed for $15 million and then $12 million.

If I were to ever buy a beachfront home, this was it. My hope was that as its asking price continued to fall, my net worth could continue to grow until I could afford it.

The other beachfront homes were too big and would cost over $30 million if they ever came on the market. Maybe in the next life.

The Biggest Problem With Beachfront Property

When I got to the beachfront property, I was shocked. Over 300 square feet of its backyard had eroded! The lot was at least 30 feet wide. At some point since my last visit in 2019, the ocean had washed up and taken at least 10 feet inland worth of the lot.

Have a look at my investigative video yourself. In the video, I originally estimated only 50 – 100 square feet of loss because I was so surprised by what I had seen. Closer to between 300 – 350 square feet of land was lost instead.

The biggest problem with owning beachfront property is gradually losing your land to the ocean. And land is the most valuable piece of a property, not the building. The more the ocean reclaims, the less valuable your beachfront property gets.

There is only about 15 feet from one end of this home’s crumbled yard to its pool and gazebo. If ocean waters continue to rise, which they seem like they will, within 20 years, this home might no longer have space for a pool. And in another 20 years, this beachfront home might not have a backyard at all.

I have been coming to this beach since my wife and I got married here in 2008. The erosion has been quicker than expected. I estimate this home has lost one foot of land a year!

Therefore, if you plan to buy a beachfront home, it’s better to have as much land buffering your home from the ocean as possible. A single-family vacation property in the hills with ocean views seems like a wiser investment. Or, a nice condo vacation property at a resort.

Protecting Your Beachfront Property With A Seawall

You might logically conclude the simple solution to protecting your land from the ocean may be to build a rock wall or get some sandbags. I thought so too. This beachfront home could simply spend $100,000 – $200,000 to build a 10-foot high wall 30+ feet across. After all, the two neighboring mega-mansions already have.

However, the state of Hawaii does not allow homeowners to build seawalls to protect their property. I thought this was strange since a homeowner should have a right to protect their property. But according to scientists, erecting seawalls causes beach loss. And all beaches in Hawaii are public.

Further, state legislators argue if a homeowner chooses to buy a beachfront home, they should be aware of the risks. I don’t want you or me spending millions of dollars buying a beachfront home only to lose it to the ocean. Hence, the main reason for writing this article.

Apparently, there is significant tension among local Hawaiians and beachfront property owners about their seawalls. Locals are blaming seawalls for quickening the erosion of beaches. At the same time, beachfront property owners are claiming hardship, especially if their neighbors have seawalls that are causing damage to their homes.

It’s easy to side with non-beachfront homeowners on this one. It truly is great there are no private beaches in Hawaii. If they were, people like Mark Zuckerberg would buy up everything and shut locals out.

Below is an image of a seawall and the strength of the ocean in Lanikai. There used to be a beach a couple decades ago, but no more.

Hardship Exemptions Are Being Made

Despite it being illegal to erect seawalls, hardship exemptions are being made. Here is a fantastic article from Propublica that highlights the debate. The article, with its lovely pictures, reports that 46 homeowners have been granted exemptions to be able to build seawalls over the past couple of decades.

Therefore, there still is a chance a beachfront property owner can build a seawall to protect their property. When doing your purchase calculations, figuring out the likelihood of getting an exemption is extremely important.

If you don’t think you can get an exemption to build a seawall, then you need to calculate a drag to your property’s appreciation rate. You may have to just be OK with the property not increasing in value at all.

On the other hand, if you can build a seawall, then your property should at least outperform the price appreciation rate of other beachfront properties. But eventually, rising ocean levels will reclaim more land, whether there is a seawall or not.

Here on the western part of San Francisco, supposedly the beach extended 26 miles further west into the ocean 17,000 years ago.

Take a look at the Obama’s beachfront estate at Waimanola. It is massive compared to its neighbors. Notice how the water goes right up to the wall. The Obamas were able to get an exemption to build a seawall. However, given none of us have ever been the president, I wouldn’t count on getting a similar ruling.

More Problems With Owning Beachfront Property

The ocean might not reclaim your land, but the wind and ocean spray will cause damage to a beachfront home. Here are more problems with owning beachfront property:

• You must purchase more expensive materials to protect your home from wind and saltwater. We’re talking about the highest quality doors, windows, fixtures, and paint.

• In addition, you must replace your doors and windows more frequently. Poor quality windows will fail more easily due to the constant pounding of wind, rain, and saltwater. Moisture will likely seep into windows easier and fog them up. Doors will rot and decompose easier.

• It also takes more frequent paint jobs if you want to keep your beachfront home looking fresh. Paint cracks and chips more easily on beachfront homes. Thus, instead of repainting your home every 10-15 years, you may have to repaint your home every 5-8 years. Consider elastomeric paint for waterproofing.

• Beachfront homes are also more susceptible to flooding. As a result, you should buy flood insurance. If there’s ever a tsunami, god forbid, then your beachfront home will either be destroyed or need tremendous rehabilitation.

• There will always be sand everywhere in your home. Hence, the importance of having a good outside shower or hose to wash off beforehand.

If you have money, fixing these problems is no big deal. Just make sure to budget higher ongoing maintenance costs before you purchase. Further, make sure there is protection already in place. The wider the beach and the farther away your property is from the beach, while still being beachfront, the better.

Buy A Beachfront Home For Lifestyle First

Now that you know all the problems with owning a beachfront property, you should really only buy one for lifestyle reasons. Don’t expect your beachfront property to be a great investment, unless it’s priced closer to the median home price. In fact, with climate change as a hot topic, a beachfront home might actually turn out to be a poor investment.

Instead of buying a beachfront home, I suggest you rent one instead. Use my BURL method to real estate investing by Buying Utility and Renting Luxury. Renting a beachfront home and investing in cash-flowing rental properties is the ideal example of where BURL investing is most applicable.

But if you just have to own a beachfront home, then at least keep the purchase to under 20% of your overall net worth. You don’t want the stress of owning a beachfront property to keep you from enjoying it. If your beachfront home is not your primary home, then you should probably limit the purchase to 10% of your overall net worth or less.

Notice in the picture below how the beaches are all gone. Maybe during morning low tide, homeowners can find a sandy spot to lay on. At least hoping into a canoe from your backyard looks really fun.

Oceanview Home Over Beachfront Home

The beachfront home in my video above actually sold for only $6.4 million in October 2021 after being listed for $10 million for over a year. When I found out the price while laying on the beach in front of it, I was at first sad.

The selling price was a steal. My dream of owning my favorite home on my favorite beach was dashed. It would have been the perfect home to buy in 2027, when our son will enter the 4th grade. I imagined him jumping in the pool with his friends while my wife and I kept careful watch with a nice drink sitting in the gazebo. Then the kids would go run around in the sand and do some snorkeling to say hello to the fishies. It would have been a nice life.

However, after doing research about the problems of owning beachfront homes, I no longer feel too bad. $6.4 million is still a lot of money to sink into a home that is losing land and requires a lot of maintenance. The cost would be too much for our net worth at the moment.

It’s strange, but once you buy luxury property on Oahu, it seems very hard to make a profit. I have been diligently searching and observing $3+ million homes on Oahu since 2014. They have only slightly moved up in price (~10%), despite the median home price in Oahu and the nation moving up strongly since (50%+). The pandemic has certainly helped push luxury home prices higher. But not as much as I had thought.

For now, I’ll just have to take a six-minute drive down to my favorite beach and enjoy it for free. An ocean view home is a better investment. Perhaps if I bring my family along for our next business offsite, we’ll rent a beachfront house to see what it’s like. I have a feeling that being able to freely enjoy the beach takes us 70% of the way there.

Update Your Homeowner’s Insurance Policy

Whether you have a beachfront, oceanview, or no-view home, you should update your homeowner’s insurance policy. Building costs have risen and so have most property prices over just one year. As a result, your home may be underinsured.

Check out Policygenius for competitive homeowner’s insurance policy quotes for free. To get the best homeowner’s insurance rate, it is advised to shop around at least every two years as well.

If you want to practice my BURL real estate investing strategy, you can invest passively in single-family rental properties through a Fundrise fund. Fundrise is my favorite way to earn passive income in real estate. The funds invest in single-family and multi-family homes in the Sunbelt, where valuations are lower and rents are stronger.

Readers, do any of you own beachfront or waterfront homes? What are some other problems with owning such homes? What are some benefits? It’s concerning that soon after this post published, a volcanic explosion near Tonga caused flooding and tsunami warnings from Hawaii to Japan.

For more personal finance content, join 55,000+ subscribes and sign up for my free weekly newsletter. I’ve been writing about living the lifestyle you want with the money you have since 2009.