Investing in waterfront homes has always held a special attraction, blending luxury with exclusive location advantages. Their limited availability and long-term investment potential have made them more appealing nowadays.

But if you’re wondering about the financial viability of this type of property, its expansion, and traps to steer away from, this article covers all your queries.

Here, I’ll address the financial advantages, development potential, and important investor considerations of waterfront properties to help explain why this is the ideal moment to invest in them.

Why This is the Right Time to Own a Waterfront Property

Rising Demand & Limited Supply

Waterfront property is a precious commodity because, unlike inland properties, its supply is limited.

And as populations grow and cities expand, waterfront locations become even harder to find.

According to the National Oceanic and Atmospheric Administration (NOAA), erosion and rising sea levels continuously lead to coastal land loss, further emphasizing the scarcity of waterfront properties.

This limited availability directly contributes to their higher value.

While the average home value in the US has generally increased by about 4.7% annually since 2000 (source: Intuit Credit Karma), waterfront properties typically see even greater appreciation rates. This is because they are highly sought-after for their prime locations and rarity.

Investment Potential

Waterfront properties in the US remain fantastic assets in 2024. They offer great potential for appreciation, rental value, and exciting development opportunities.

Here’s a closer look at their investment benefits:

Appreciation

Waterfront homes typically appreciate faster than non-waterfront properties. The National Association of Realtors (NAR) has found they can be valued up to 36% higher than inland properties.

Additionally, the Waterfront Property Market Trends for Summer 2024 report shows steady growth in waterfront home values around Lake Norman in North Carolina. There you’ll see a 10% jump in average waterfront home prices over the past year, making them a strong option for long-term investment.

Income Through Rental

Waterfront locations offer wonderful opportunities for vacation rentals or beach houses. During peak seasons, short-term rentals yield can generate impressive income.

And thanks to platforms like Airbnb and VRBO, exploring this profitable market has never been easier.

According to Apartments.com, the current national average for a three-bedroom house is $2,197/month. But, you can ask for significantly more rent for a waterfront estate, filled with scenic beauty and has limited availability.

Development Possibilities

Explore an exciting opportunity with undeveloped waterfront land. It is a promising first-time investment for future development projects. As waterfront communities expand, and create residential or commercial spaces, this will be a lucrative return on investment.

Important Considerations Before Investing in Waterfront Estates

Higher Upfront Costs

The beachfront view comes with a premium price tag, and that’s just the beginning.

Factor in potentially higher closing costs, inspections for water damage, and flood mitigation measures, all add up to your initial investment.

Increased Property Taxes

Living by the beach or a serene lake is obviously appealing, but consider the significant factor of increased property taxes before embracing the waterfront lifestyle in the US.

Waterfront locations are valued higher than inland properties. This makes property taxes proportionately higher as well. These taxes are typically calculated based on a percentage of the property’s assessed value (Taxable value = assessed value – exemptions).

Additionally, some waterfront communities require special taxes, such as for lake management, further adding to the overall tax burden.

Flood Insurance & Maintenance Cost

Living by the water is great, but some areas have a higher chance of flooding.

To protect yourself and your investment, insurance is a must for houses in flooding zones, especially if you have a loan from the government.

The insurance charge depends on a few things such as:

Where the property is (flood zone)
How high up it sits (elevation)
What it’s material (construction type)

According to the National Flood Insurance Program (NFIP), average flood insurance premiums nationwide hover around $800/year.

Remember, obtaining flood insurance quotes before finalizing a purchase is essential.

Also, constant exposure to wind, salt spray, and moisture accelerates wear and tear on a waterfront estate. Budget for more maintenance compared to inland properties.

For example, you must repaint the exterior more often (maybe every 3-5 years instead of 7-10 years), repair seawalls or docks, and maintain the roof frequently due to wind and salt exposure.

Top Growing Waterfront Locations for Investment

Lake Geneva, Wisconsin

Lake Geneva is turning into a hotspot for investors looking for waterfront property.

In the warm months, you can enjoy all sorts of fun on the water. And when winter comes, it transforms into a snowy wonderland.

Basically, it’s a year-round destination, and travellers are flocking to experience it.

This steady stream of tourists produces good returns for Airbnb hosts. Some sources estimate that waterfront homes in Lake Geneva, WI generate over 15% return on investment, which results in a whopping $42,000 annual revenue.

So, for investors looking to capitalize on a growing vacation rental market with year-round appeal, Lake Geneva presents itself as a promising location.

Savannah, Georgia

Thanks to its thriving economy, Savannah is heating up as a great place to invest in waterfront homes. The job market here is booming from its top-notch global film industry to diverse sectors.

Just last year, Savannah saw over 3,500 new job openings, and with unemployment as low as 3.5% (source: U.S. Bureau of Labor Statistics), there’s no shortage of opportunities.

Beyond its economic strength, Savannah attracts millions of tourists annually due to its rich history, large National Historic Landmark District, and pleasant subtropical climate, creating a strong market for both short-term and long-term rentals.

Also, the cost of living in this city is 3% below the national average, which makes it more fitting for real estate investment.

As you can see, Savannah’s overall market strength and the allure of oceanfront living suggest this location is set for ongoing appreciation.

Charleston, South Carolina

Charleston is all about that perfect blend of a booming economy driven by tech, aerospace, and tourism. This powerful financial mix creates a steady demand for both residential and commercial properties.

And let’s not forget Charleston’s historic charm.

Its beautifully preserved architecture and lively culture make it an absolutely delightful place to call a dream home. This leads to increased property values.

Additionally, the surrounding areas like Folly Beach and Edisto Island offer beautiful waterfront locations for investment in vacation rentals or luxury real estate.

Conclusion

Waterfront homes present a unique opportunity for investors with multiple benefits, from appreciating property values to lucrative rental income and promising development prospects. As demand rises and supply remains limited, waterfront properties continue to offer big returns for home investors.

So, grab the chance to own a part of this highly sought-after real estate, and enjoy the exceptional lifestyle and financial gains that come with it.