While the words "beachside property" often elicit images of $1,000-a-night stays somewhere in LA or Maui, the vast majority are much more modest — one vacation home platform calculated that renting out the average beachside property brings in somewhere between $20,000 and $50,000 a year in profit.
Proximity to an ocean or lake is certainly a strong visitor draw, but the higher costs of upkeep, insurance and taxes in many beach communities often bring total profits in line with those brought in by an average vacation property.
DON'T MISS:Here's Where to Invest in a Vacation Property
That's why the decision to invest in a beachside property is one that should take in numerous factors going beyond the initial price of the home — from growth potential and the amount of traffic the town receives outside the popular season, to whether one plans to live in it part of the year or approach the property purely as an investment.
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If You Want A Profitable Beach House, Consider These Five Cities
The best town to invest in a beach house is, according to an annual round-up put together by vacation rental management platform Vacasa, the lakeside community of Lake Anna in Virginia.
Developed around the namesake freshwater reservoir, the 21,000-person town is a 72-mile drive from Washington, D.C. and has recently been gaining traction as a popular swimming and camping spot.
Despite significant changes to the economy and real estate market, Lake Anna also topped Vacasa's 2022 beach house round-up in 2022 due in no small part to a fishing tournament season that keeps the visitor flow steady during the colder months.
"The bidding wars keeping some second home buyers out of the market a year ago may be less of a headwind today, which can open up the right opportunity to purchase if buyers are comfortable with some level of increased costs to purchase," Daned Kirkham, senior director of real estate for Vacasa, said in a statement.
According to Vacasa, the cap rate (a real estate measure of the difference between net operating income and current market value) is 12.1% and the highest in the country. The median home price is $385,000 — higher than the national average but lower than many of the other cities on the list.
As Nationwide Demand Cools, Many Markets Remain Strong
Lake Anna was the only beach town on the list to see a double-digit cap rate. With 9.5%, North Carolina's Hatteras Island scored second on the list — the barrier island off the state's coast is the longest in the country and a very popular destination among affluent tourists.
The median home on Hatteras cost $412,500 at the end of 2022.
Other cities to land in the top five include Florida's Navarre Beach (8.1% cap rate and median home price of $370,000) and Palm Coast (7.1% cap rate and median home price of $345,000) as well as North Carolina's Surf City (5.8% cap rate and median home price of $520,000).
The market, Vacasa says in the report, has shifted significantly as high entry prices for many popular beach destinations pushed the cap rate too low to be lucrative for buyers. This constant push-and-pull is what draws a rush of buyers to what were formerly under-the-radar destinations.
"The real estate market has changed significantly since we published this report last year," Kirkham said. "Interest rates are higher, mortgage applications have slowed and generally the market has cooled."
