“What if we bought a beach house?”
BY: ETHAN LOHR, CFP® — November, 2025
You know the feeling. You’ve just spent an amazing week at the beach—morning coffee on the deck, salty air, and sunsets that blow you away. Then comes the checkout email. Total? $8,500. And suddenly, that little thought creeps in...
“Man, I bet the owner makes a ton of money on this place. Should we buy one?"
It’s a common curiosity that most families have on the drive home—or mid-week. What if your beach trips weren’t just vacations, but investments? What if your summer escape could pay for itself or even generate income?
With a little help from AI (and some financial modeling), I ran the numbers to see what this actually looks like in practice. Here’s what I found.
🏖 The Scenario: A Dream with a Mortgage
Let’s say you’re considering a $1.75 million oceanfront property in coastal North Carolina. You put 20% down and rent it out for about half the year.
You price it at $1,200 per night, and with 50% occupancy, that gives you ~$219,000 per year in gross rental income.
💰 The Financials
Here’s what the numbers look like when you zoom out from the beach chair and into the budget:
🗒 The Tax Angle: Where Things Get Real
To treat your beach house as a pure rental property (and unlock the best tax advantages), your personal use must be extremely limited. That means:
You must rent it for more than 14 days per year, and
Your personal use must be less than 10% of the days it’s rented
In this example, if it’s rented for 182 days a year, you can’t use it personally for more than 18 days.
If you stick to that, the IRS lets you:
Depreciate the entire property (minus land)
Deduct all operating expenses
Offset income with depreciation and even claim rental losses (up to $25K/year if you actively participate)
Avoid prorating deductions between rental and personal use
But if you exceed those thresholds, you enter "mixed-use" territory, which limits your deductions and adds complexity.
💸 The Cash Flow Catch: Timing is Everything
Here’s something you won’t see in a tidy annual summary: cash flow timing.
Rental income is seasonal. You might make $40,000 in July—and nothing in January. Meanwhile, your costs show up every month. Here’s the real monthly breakdown:
Even with a break-even year on paper, you’ll need a plan for how to float $15K+ per month in the off-season.
📈 The Investment Perspective: More Than Just Year 1
I showed a projection for Year 1 that signaled a slight loss—but that’s not the full picture. Remember, this is an asset. Each monthly mortgage payment builds equity in the property, slowly increasing your ownership stake.
On top of that, the house itself can appreciate in value over time—especially in desirable, limited coastal markets.
Rental rates also have the potential to increase over the years, improving income without dramatically raising fixed costs. And looking further ahead, you may have the option to refinance at a lower interest rate, improving monthly cash flow.
These are all elements that could tip this idea from “tight math” to “smart long-term move.”
In short: The first year is just a snapshot. For many investors, the real payoff comes through a combination of principal paydown, property appreciation, and rental income growth over time.
🧳️ Final Takeaway: Is the Beach House Dream Right for You?
What I’ve described here is just one path toward vacation home enjoyment. In my view, there are ultimately three distinct paths:
The Investor — This person is in it for the long term and will work the rental like a true business. They expect some bumps and bruises in the first few years but plan to optimize the property over time. It takes effort—but the payoff can be real.
The Owner — For this person, the financials are secondary. Sure, they may rent it occasionally, but primarily this is a place to enjoy with family and friends, to create memories, and to share with others.
The Relaxer — This person is perfectly happy continuing to rent. They get to show up, soak it all in, and hand the keys back—no stress, no maintenance, no ongoing responsibility.
As a dad with four young kids and plenty of other things demanding my attention, we’re just fine being the relaxer right now. And hey—that doesn’t mean that the next time we’re down in the Outer Banks, we won’t pull up a listing or two just to take a peek.
Regardless of what path you choose, I hope this has given you a helpful framework to think this decision through!
- Ethan M Lohr, CFP®
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