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
Flying To Hawaii To Understand Beachfront Homes
The Biggest Problem With Beachfront Property
Protecting Your Beachfront Property With A Seawall
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
More Problems With Owning Beachfront Property
- There will always be sand everywhere in your home. Hence, the importance of having a good outside shower or hose to wash off beforehand.
Buy A Beachfront Home For Lifestyle First
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
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. Or you can invest in a real estate ETF like VNQ or a publicly-trade REIT. The idea is to earn passive income to pay for your luxury rental.
From 1990 – 2010, I lived directly on the east coast of FL or w/i walking distance, in several difference cities, with great beaches. I found, time after time, that after the first month or two, I went to the beach less and less often. On the other hand, living in a place with a direct oceanview is wonderful. Like one of the other posters said above, I think Ill again just rent a nice oceanfront FL condo.
If you are even thinking about buying a Hawaii oceanfront condo, home, townhome, anything: first rent for several months during winter.
I’ve stayed oceanfront for months on Lahaina, Waimea, Kona, Waikaloa, and other locales. After doing this for years, I would never, ever, ever own oceanfront anything.
Stay long enough, a few days of strong oceanfront swells will scare you right the hell away from oceanfront ownership. Those big waves keep pounding, pounding, pounding, 24/7. They regularly breach/crest condo and home seawalls. Then you’ll have pooling seawater on the condo grounds, or the parking structure. Multiple times I’ve seen these areas get totally flooded, people having to move cars out of ankle-deep saltwater because the drains can’t keep up. Then you think to yourself, how long is the foundation here going to last? The concrete, the blacktop on the parking spots. What about the pool fence? You can see the relentless ocean scouring away the big lava rocks and walls; will my development be allowed to replenish in the future, or will the Hawaiian government instead prefer my development fail? And how the heck much is wall replenishment going to cost?
The winter tradewinds also really pound homes and infrastructure, as well as driving those waves inland (depending on your location).
Then, take a good look at the structures, in particular anything metal. Start with metal balconies and stairs. Absolutely guaranteed you will see rusted, failing metal, even in newer developments. Stuff built in the 70s, 80s, 90s, forget it, it needs entirely new outdoor metalwork and refastening to concrete. Rusted lights. Really bad condition elevators. Pool pumping equipment looking like it’s going to fail at any moment.
Interior, everything metal fails. Right down to the metal contacts on light switches and outlets (seen it many times, right down to the scotch tape on switches to keep them in position). Reduced life on everything, including refrigerators, washing machines, A/C, bathroom fans, window locks and rollers, hinges, everything.
So, before you buy, go and observe for months at a time. Know exactly what you are getting yourself into, and what it’s going to cost to maintain (answer: a lot).
Fantastic recommendation and insight. Thanks for sharing!
Try before you buy folks! Same if you plan to geoarbitrage to save money as well.
That is great information thank you very much I always dream of having a beachfront property now I can stop dreaming !
so you can buy water front, look at the European coastline, it is often raised at least 50-80 ft above sea level. No issues with beach erosion, look at the Basque country, Santander, beautiful towns with amazing cuisine . you may also consider the East coast along the ICW, the intercoastal water ways with breath taking views of the marsh lands and its wild life, properties may rest 20ft above sea level. Check out Wilmington NC, you’ll have to get used to Hurricanes.
We used to have natural sea walls down here in Florida, they were called Mangroves and Sand Dunes!
Happy New Year Sam! Great post on issues my spouse and I regularly discuss relating to our coastal
properties.
We own our primary as well as five units of rentals in north county San Diego. We intentionally bought just east of 101 for the reasons you stated so well in your post. As a result, our biggest concern in SD is not erosion or rising sea levels for those properties but rather drought and wildfire, and have thought about taking the tremendous gains we have had and getting out. But the rental market and interest in working remotely from SD is so strong that for now we are keeping the properties as we agree with your assessment of the real estate market generally. We also just purchased a vrbo property in a year round east coast beach town that is within 2-4 hours of DC, Philadelphia, and NY. We purposely bought several blocks from oceanfront there too, and the rental market is incredibly strong especially from remote workers. The town is sheltered from storms and hasn’t experienced a strong hurricane in 60 years so we will see. For the record I would never buy on the Florida coast especially Miami and the keys, or certain DE, VA, or Carolina beach towns. The climate change risk IMHO is too high.
What beach town did you end up buying in?!
Rehoboth Beach, DE. Low property taxes and great restaurants and activities year round.
It does seem like there are more climate change risks to be concerned about yeah?
With fire risk.. makes me think owning in big cities with great infrastructure will be come more attractive.
Has anyone looked at Kona Development Partners?
Apparently they are coming up with a 325 acres (oceanfront) in Big Island and are planning to develop and sell them as 1 acre lots.
Is this a good investment?
No idea. But do some research and let us know! thanks
IMO, it’s better to rent a beachfront house when you want to go. There is too much maintenance with the salty breeze. You’re right about erosion too.
Funny story. My cousin has a big beachfront property in Thailand. His grandparents claimed the land when nobody lived there. Then they filled in to claim more land from the ocean. Pretty lucky and opportunistic.
When you really look at it owning a beachfront home can be a pretty good win but the flexibility and dealing with the renters trashing it makes it much harder. Much higher insurance, and the threat of storms. But given the chance to purchase an oceanfront home in some areas while others pay for it is a pretty good idea if you buy in the right market at the right time.
It’s not just beachfront property climate change is affecting, the grassy plains in Colorado just went up in smoke destroying almost 1,000 homes. Insurance companies are threatening to pull out of high risk areas (e.g. California) if states don’t allow them to assess risk based on the future instead of the past.
Good reminder for everybody to update their homeowner’s insurance policy. Homeowners may be uninsured, especially since the median property price went up about 18% in 2021 alone.
Folks can shop around for free quotes with Policygenius.
I live in Colorado on a grassy mountainside, and the fires north of me in Boulder County have opened my eyes to the destruction that grass fires can cause. We have had many fires on our mountainside over the years, but fortunately the wind never was crazy.
Regarding insurance, our premiums in Colorado have been rising dramatically over the years due to fires, flooding, and hail damage. I won’t be surprised if they continue to do so and if some companies pull out. We have lost major insurers here in the past before.
Just imagine the resale value of your home when it becomes uninsurable, i don’t think a bank would be willing to lend to someone who can’t insure their property against a total loss.
I own a breachhouse in the Carolinas and yah it depends. Most beach homes on the east coast have public beaches behind them, which usually means a little more safety from rising oceans, but not much.
CAMA sets certain limits on how much beach must be behind you for the house to be “rebuildable”, aka insurable. The laws may be different now, but when I was shopping in 2018 the rule was 60 foot of dunes, from the top of the beach to your back door essentially. If you have little to no dunes, and your backdoor is at the top of those dunes right before they drop off into the beach, then essentially if your house gets wiped out, you can’t rebuild in the same spot, you can rebuild closer to the road, but you are not allowed to rebuild within 60′ of the top of the dunes. So if you can’t rebuild you have a lot with beach access. Some people use them for party gazebos.
So if you see a house you can afford, but it would not be re-buildable, then you can’t insure it, and if you can’t insure it, you can’t get a conventional loan. So essentially home shopping for me involved alot of time spent on google maps using the ruler function to get the CAMA distances.
Ultimately I bought a house on “2nd row”. This is not the beach front house, but the one across the street. Because my house is a 2 story house on stilts, I can see over my beach front neighbors. So I got the views and the sounds of the beach.
I would agree with all the other things said above. I think hurricanes are my biggest problem, followed by rust. My house has gained 70% equity in 4 years, but I did drop 100K into it when a hurricane hit about 3 weeks after moving in.
If I had to guess, I have 30 years before I won’t be able to offload it, because of rising tides. I will be out by then. Summer renters can cover 12 months of mortage/expenses in about 12 weeks of weekly rentals. If I rented beyond those summer months it would be profit, at a much cheaper rate.
Yeah, many times, watched kettles never boil, it’s the things that most folks least anticipate to happen that cause the most damage to their investments. Rising sea-levels, hurricanes, and tropical storms are one risk, but there’s also the first derivates from this devastation such as rising crime rates and poverty. Even if your home is well insured, many of your neighbors may not be and the beach community will still collapse.
Went to UCSB. Del Playa in IV is packed with beach front homes that have a cliff eroding below them. Some of them have been left hanging over the edge with no land below them. Its been a mess.
If you’ve watched the Netflix series Bloodline you know this is what happens to the family estate. These areas aren’t stable. Miami won’t be under water too soon, but it’s fresh water system that runs under the ground will soon be inundated with salt water and fresh water will have to be brought in. After seeing a sink hole open up under that condo building in Florida, I think everyone should be cautious. It’s the dream of many, but I’ve started to think that if you live in these areas, you have to be so wealthy you can afford a single family home you’re fine with losing a after a few years or selling for almost nothing as financing and insurance won’t be available. Treat it as disposable. Global warming is no joke. Entire island countries in the pacific have been moving to Australia and New Zealand because they’ve become uninhabitable.
Haven’t seen it, but will.
That Florida condo building collapsing was alarming. I’d be surprised if that didn’t negatively affect the prices of other ocean front condos in that area and around the country.
In my condo building, we certainly discussed supporting our building’s structure. Reminds me to check where we are on that topic. We did earthquake retrofit it several years ago. So that’s good.
Great post, Sam. I own island properties in the PNW and strongly considered a couple of waterfront purchases in the 2012-2016 timeframe. For the reasons you outline above, I don’t have any major regret in passing them over. My properties are well enough above sea level, tsunami safe, etc. And my money has gone way further for space and privacy; my primary is on 2.5 acres. Insurance and property taxes are also a relative bargain from my waterfront neighbors down the block.
I do plan to enjoy waterfront living as a renter one day, maybe even next year:) BURL all the way!
I live on Maui in a community on the ocean. The shore is eroding and there is detailed data on the amount of erosion up the coast for the past 30 years. The county doesn’t allow seawalls or other protective devices as they deem the erosion natural, impossible to fight, and usually cause problems down the coast. I agree with the county but the county does protect large condo developments if they are getting millions in property taxes a year. Anyways, in my HOA the community will most likely be responsible for saving the townhomes that are about to fall into the ocean. Can you imagine footing the bill for your neighbor’s townhome that needs to be physically moved back 50 to 100 feet? We are talking 5% of the townhomes in the HOA are at serious risk. People bought these homes less than 10 years ago, knowing there were issues but the HOA is going to pay. Townhomes on the coastline are selling for >$3 million while one block off the coast they sell for <$1 million. Know what your HOA is responsible for or what they will vote on before you buy into a community.
“in my HOA the community will most likely be responsible for saving the townhomes that are about to fall into the ocean. Can you imagine footing the bill for your neighbor’s townhome that needs to be physically moved back 50 to 100 feet? We are talking 5% of the townhomes in the HOA are at serious risk.”
That seems nuts! Does that mean HOA dues are extremely high? How much does it cost to move a townhome 50-100 feet back?
Surely buyers have these calculations baked in before buying no?
Great article! There may be more affordable options on the Big Island, particularly the Kona side. If Oahu is preferred, I thought the ocean views from Puuikena Dr. are among the best.
Yes, Hawaii Loa Ridge is nice. Feels nice to have security, the views, and tennis courts up there. I’ve played there several times.
A lot of the homes seem outdated though. All from the 1990s. Gotta find a new one!
Sea level rise will make erosion faster into the future…. I’m also scared of tsunamis, especially on the Pacific Ocean… We just spent a week by the ocean here. On the last day I had to take water to pour on our car windows before we could drive as it was so covered in salt spray you couldn’t see out. The car was parked right next to the beach and we were staying on the other side of the road from it. This is in mid-summer here. Being on a hill overlooking the ocean sounds much nicer.
PS – I think the volcanic islands in Hawaii are gradually sinking as the volcanism ends. The far NW of the chain shows the future for those nearer the Big Island which is still active. Coral atolls form on sinking/eroded volcanoes…
Great article ! It’s probably something a lot of people dream about, including me, to own a beach property someday. But you are right to point out this come with a lot of downsides.
Beaches are also a very good shock absorber for these massive Pacific ocean waves. When they are gone, the erosion of the land is even faster because the water hit the rock directly, without being smothed out on the sand.
Have you looked into buying a house on the Big Island ? I know this is not the same as Oahu, but home down there are so cheap. You can probably buy a very large beach front lot (many acres) and not have to worry about land erosion at all.
My favorite place to live in Hawaii would be Napali coast, on Kauai. But I think those homes are even more unaffordable, and even more at risk from erosion.
No. I’m focused on Oahu due to infrastructure, restaurants, education, family, and things to do. Plenty of space to feel secluded in Oahu.
I think it’s interesting that you would recommend limiting the purchase price to 20% of your net worth. That would exclude just about everybody. Only the very wealthy can afford to purchase a home for no more than 20% of their net worth, even for non-luxury, middle class houses. For instance if the median house is about $200K in the US, that would mean the median individual would need $1M in net worth to purchase, and the median net worth is nowhere near that amount.
It’s true. 20% is the IDEAL percentage for primary residence = net worth. I look to challenge myself to shoot for ideal levels, especially if it’s regarding a luxury house that will cost a lot to maintain that I don’t need.
The following house buying or house ownership guideline is pertinent for the majority of people. If you are somehow able to strike it rich early on and buy your first or second primary residence for less than 30% of your net worth, more power to you.
Age 25 – 30: 80% – 200% of net worth – Shoot to buy a primary residence by age 30
Age 31 – 35: 60% – 150% – Work to grow your net worth through aggressive savings and investing
Age 36 – 40: 40% – 100% – Shoot to have your primary residence equal to a minority of your net worth by age 40
Age 41 – 45: 20% – 50% – Shoot to have your primary residence equal 30% of your net worth by age 45
46+: 20% of net worth or less if desired
Again, the typical American homeowner has 70%+ of their net worth tied up in their primary residence. They are house rich, cash poor. Ideally, I’d like for all of us to be house rich and cash rich.
See Primary Residence As A Percentage Of Net Worth
Almost pulled the trigger on beachfront land in Florida Keys. Almost a full acre with beachfront and a 150 ft deep water canal in the back . Awesome property until….
1) Could take 7 years to get permit to build. County does not want new construction.
2) Keys are most likely going to be under water in 80-100 years. Not a good investment for the heirs.
The county/state is trying to justify spending $1.8 Billion to just raise the roads over the next 25 years. It won’t help. The keys are like a sponge and sits on coral. The water is already coming up through the ground in a couple of the Keys.
7 years is a lifetime. Better to buy a home built out already that has all the protection grandfathered in.
But yeah, our descendants might not have a home left to enjoy. Sad.
I find it odd that the waters of the Gulf if Mexico aren’t rising. The city pier on Dauphin Island is now totally landlocked. The ‘high tide’ marker is in the same place it was when a family friend built his beach house on Ft. Morgan in 1984.
You’ve come to the same conclusion I arrived at, Sam. While you might buy a mountain cabin, rent when you want the beach. And I spent a lot of my childhood living on Oahu.
There are also new studies that say, along with the salt spray, coastal dwellers are getting a constant rain of toxins. https://www.science.org/content/article/sea-spray-belching-toxic-chemicals-back-land
And with the whole sea level rising thing, I definitely don’t want to own on the coast. Also, I’ve helped with hurricane cleanup at a number of beach communities. It’s not good. It’s never good.
It’s made even worse by the fact that beach houses, when I was a kid, were cheaply constructed and furnished with stuff that could have come from the thrift store. Now people are building Taj Mahals with wallboard and wall-to-wall carpets and antiques just two feet above the high tide mark (and expecting everyone else to help them with insurance and beach replenishment) all while trying to prevent all public access to “their” beaches.
Personally, I feel that access to the water should only be restricted for major military and civilian ports, and that access to the sea, like access to the sky, is not something we should ever allow to be blocked. If anything, were I king for a day, I would have those beach hoggers become responsible for putting in public access and parking, depending on the size of their properties.
And yes, people building on a barrier island and expecting permanence is crazy. There is even a song about a foolish man who built his house on the sand (and it is not a new song).
Spent some time working for a coastal engineering firm in FL. There are issues with vertical sea walls (increasing surrounding erosion, limits natural renourishment, loss of habitat eg turtle nesting, and don’t actually protect that well against surges).
There are likely “preferred” alternatives to sea walls but all are costly. Periodic renourishment (trucking in or pumping nearshore sand) plus native vegetation or nearshore breakwaters like rock groins.
All this to say as a private homeowner, your options are limited, costly, and will likely become a recurring expense
We have a very similar situation occuring in San Clemente.
https://www.sandiegouniontribune.com/news/california/story/2021-10-02/coastal-erosion-san-clemente
My suspicion is not so much rising water levels as much as loss or displacement of sand and erosion. In our case, the sand has simply washed away over the years, and there has been no effort to replenish the stock. Also, massive efforts to “clean up” the stormwater runoff from inland deserts, combined with very little rainfall in recent years, has resulted in much less sand being deposited to the ocean via rivermouths, etc. Now that it’s a crisis and a couple homes are literally sliding off the edge, it’s starting to get some attention.
However, similar to what you describe, the coastal commission will NOT allow you to fortify your foundation with caissons to prevent damage. You’re simply out of luck. They consider it interfering with the natural coastline, which is a big no-no in their book. Adding insult to injury, no homeowners insurance covers this type of loss. You simply take a tax write off for the next several decades!
I would agree though, don’t buy the house right on the water. Buy the one that’s one row back and slightly elevated:)
Holy smokes I can’t imagine losing part of my backyard like that with it just dropping off into the sea. Water is so beautiful but man is it one of the biggest stresses for home ownership. Water can cause so much damage even when it’s just falling from the sky let alone when it’s crashing into your backyard.
I’ve heard beach front homes also have to deal with a lot of rust problems. With so much salt and moisture in the air it’s going to put anything on the exterior or outside on an accelerated life cycle.
I’d love to rent a beach front property on vacation, but am content not to own one. Ocean view is pretty darn sweet though. You can still enjoy the beauty of the ocean everyday with less maintenance.
These are all good points. What do yo think about a beachfront condo? For example on Maui, they are still under $1M, so comparable to renting or buying elsewhere, but I wonder if the higher maintenance translates to higher HOA dues, when something comes up in the future, if that is passed on to the condo owners
The older and wealthier I get, the more I like paying an HOA due for upkeep purposes. I was exploring the beachfront condos in Oahu and they are nice. But they also feel old and the beaches have sadly eroded away. I found only one patch of a small beach, but even then, the water would flush up all the way to the wall on occasion.
I’ve been strongly considering buying a LAKEfront home as my primary home in the next 3-5 years. I’d like to have the property a few hundred feet from the water. I’d imagine the obstacles you noted may not apply to lakefront (apart from buying flood insurance)..
Thoughts?
We owned a lakefront property for years and years in the Midwest. The problem is the weather is getting warmer which means more algae in the lakes. Not good. There have been many times over the years- we couldn’t swim in the water at the end of summer. Very sad what global warming is doing everywhere!
Ah, the algae bloom. That is sad! And there’s nothing you can do about it right?
Nope, nothing. In the Midwest, the pesticides that runoff from the farmlands are making lakes full of algae also.
There are plenty of lakes in MN, WI, and MI that don’t have algae blooms including the one we live on, Gull Lake near Brainerd MN. To me there is nowhere better in the summer and we owned a lakefront condo near Incline Village on Lake Tahoe for over a decade. Our lake freezes in early December and melts in mid-April but water temperature reaches 75 by mid-June and 80 by mid July. Average summertime high temps are 80, warmer than Tahoe or San Diego and the night time lows are in the low 60’s.
We also love our beachfront condo in Naples Florida where we spend the other 6.5 months but prices have gone crazy. Our 1,500 sq/ft condo is now worth $2.5M and a knockdown lot on the Gulf just 1.1 miles south of us sold for $26M recently.
Yeap, definitely agree with Lakefront is the way to go. Ideally – a lake / river that also connects to the ocean – like at Discovery Bay, CA.
I grew up in a coastal town in Connecticut. I came to the same conclusions simply looking to rent a place after I graduated from college. I’ll never by a beachfront house on the ocean. On a lake, maybe. Salt water is a devourer of homes.
Your dream of having your kids’ friends over at the beach house sounds lovely and I hope it happens for your family one day. Go BURL!
Beachfront cliff side homes in California can now considered to be temporary homes. Seawalls, cliffside protection, and other shoreline stabilization are prohibited in at least one county (possibly all of California).
Did you factor this in as well? https://www.civilbeat.org/2018/01/heres-how-the-state-could-end-up-owning-your-oceanfront-property/
Great article. I lived in a home fairly close to Kailua Beach and even not being on the water the maintenance was very high. That being said, if I had the wealth to support it, I’d love to live beachfront in Kailua.