Buyer Tips May 16, 2023

Outer Banks Real Estate Investment vs. 2nd Home Buyer

We typically work with 3 types of buyers on the Outer Banks: Investment Buyers, 2nd Home Buyers, and Primary Home Buyers.  Given our vacation resort area, we usually see more investment and 2nd home buyers than primary home buyers. 

What is the difference between an Outer Banks investment buyer and a 2nd home buyer?

An investment buyer is focused on purchasing a property based on its cash flow.  Cash flow is determined with many factors including gross rental return, utility and insurance premium expenses, and property management fees just to name a few.  Many investors are looking for property with at least a 10% Gross Rental Return. This can be calculated by simply dividing the gross rental income for the most recent rental year by the current asking price.  This gives a buyer a general feel for what % gross rental return the property will produce. 

Is it that simple in reality?  Definitely not. 

There are many different factors involved in determining cash flow.   What is the difference between advertised and owner gross rental income?  Is the property priced right for the market? What are the current carrying costs (insurance premiums, utilities, etc.), and have any of these costs like insurance increased recently?  Is the property located in an HOA with high fees?  What do these fees include?

A lot of detailed information is needed for a true investment purchase.  Heather Sakers and her team are here to help walk you through every step.  We provide our clients with a detailed cash flow analysis spreadsheet used to analyze these figures.  We also offer our expert local knowledge to determine what numbers should really be considered.  We specialize in investment purchases, and would love to help guide you through this process to find a property that really does ‘cash flow’!

A true 2nd home buyer is typically purchasing a property with the main goal being family and friend usage.  A 2nd home buyer is more focused on a wish list of property features that meets their specific wants and needs.  A 2nd home buyer puts less weight on a cash flow analysis; however, it is still good for these buyers to consider cash flow, or potential cash flow if the property is not currently in a rental program.

We also love working with 2nd home buyers and realize this may be a more emotional purchase decision.  Our goal is to get to the true heart of a 2nd home purchase so we can find the best fit for our buyers that also makes financial sense.

Ready to start your Outer Banks investment or 2nd home search?  We have the best ‘no obligation’ local lenders, so reach out to us for a few recommendations to get started!