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Do you fantasize about getting a place on Long Beach Island? A lot of people do, whether it’s a bungalow, cottage, luxury home or duplex. Transforming that dream into reality requires the same skills as buying any other home — along with some specialized knowledge.

Buying a Long Beach Island duplex or beach house can bring an excellent return on investment (ROI), a reliable income stream and access to vacations on the island for yourself and/or your family! Many LBI duplex investors purchase homes which they subsequently rent out all units during peak tourism times. And, many beach house investors claim that their rental income during this period covers their expenses for the entire year–effectively letting them live in the house for free, during the non-peak season.

But before taking the duplex plunge, it is important to understand the underlying economics involved, including borrowing costs, insurance rates, expenses and property management.

Long Beach Island duplex properties can be pricier than properties inland such as Beach Haven West or Manahawkin. As of November, 2018, the median home value on Long Beach Island is $892,700, according to Zillow. And typically speaking, mortgage interest rate for vacation properties are higher than those for primary homes. This can make a difference to your bottom line. For example, the principal and interest payment on a 30-year, $1 million mortgage, with an interest rate of 4%, comes to $4,774 per month. The same mortgage at a 5% interest rate, costs $5,368 per month in principal and interest. This $600 per month difference can quickly add up.

The homeowners insurance on your beach house is likely to be more expensive than that of your primary home, mainly due to the often mandatory flood insurance, which has spiked in cost over recent years after Hurricane Sandy, however, flood insurance is perhaps the most widely misunderstood area of the real estate market on Long Beach Island. The rumors that, “every house has to be raised” or “insurance will cost $10,000/ year” are simply not true. While there are homes that had to be raised or have to in the future, and while there are some homes that will see very high insurance rates, the vast majority of homes on Long Beach Island see annual insurance rates of between $400 and $1,500/ year!

Renting out your duplex many involve bill-paying above and beyond the mortgage and utilities. To ensure the best chances of renting out your property throughout the entire peak season, you typically pay for marketing and advertising on sites like VRBO or Airbnb. Other bills that may occur are cable/internet (if you plan to offer those services at your property) and cleaning services before or after renters.

Property management involves a lot more than signing lease agreements and collecting rent checks. When something breaks, such as an HVAC unit or a refrigerator, you are wholly responsible for the repairs. Landscaping, painting, roof maintenance and pest control represent just a few other tasks that fall under a beach house owner’s purview.

Unless you are a full-time real estate investor, you likely won’t have the bandwidth to juggle these responsibilities. Therefore, you’ll want to employ a full-time property manager to handle daily tasks, market your beach house during tourist season, execute lease agreements, and evict derelict tenants. But a good property manager isn’t cheap. Depending on the extent of services, most property managers charge 6% to 12% of collected rent.