The Hamptons’ booming real estate and rental markets have drawn new owners and investors to this market. Most of these new investors got off to a pretty good start. It’s not that hard to do well when the numbers and conditions are in your favor. But how do you maintain the investment value of your Hamptons home over the long term? Because nothing lasts forever.
One of these thoughtful new investors asked an interesting question: What was the biggest benefit of your first real estate investment in the Hamptons?
There are some things I wish I had been told before embarking on my own homeownership journey and my first purchase in the Hamptons was for a mix of personal use and investment. I climbed the ladder like everyone else. The circumstances proved difficult, but the end result was a gem. I have learned.
Not as fast as I would have liked. I watch new struggling investors and it breaks my heart. Because I know the road they take. It’s not funny.
First, once you’ve purchased a property, get it on a seasonal and annual maintenance schedule with a reputable company that shows up. Already, the odds are stacked against those who don’t know who these people are in the East. You think you can handle it all, but you probably won’t unless you and your career are heading in the same direction. Some, like me, fall in love. Most don’t.
Houses require work. Understand what this entails and know that you can ask for help. We have great service providers who do this stuff all day and are able to warn when things are about to go wrong, not after it has already happened. Much cheaper in the long run.
If you are offering the house for rent, know your numbers each year as far in advance as possible. You won’t be setting the ask price at your lowest numbers, but knowing what they are makes it easier not only to trade, but also to understand where the market stands in relation to reality.
Participation opens up a whole new world of stock market information for people who play in these markets. When you start to understand how people relate to their home and their free time about it, actually on a pretty personal level, it’s easier to understand other things as well.
There is always a hidden advantage that you will never be able to see when you leave. There is almost always a hidden cost.
Owners of the Hamptons can sometimes find prices rambling, mostly because they don’t know or understand their numbers. Renters almost never do.
If you end up renting regularly out of season, congratulations, that means you’ve made the choice for a comfortable year-round home. Not all do. These should be bonus months in your planning.
Prices and costs should always move together, but be prepared for random years with potential losses. It’s not an exact science and those who aren’t careful can lose money in an improving market.
I’m going to share a secret with you: there’s always a reason why something goes wrong. If you know your numbers and listen to your instincts, you’ll have a better chance of understanding what it’s all about and making the necessary adjustments to ensure your investment is successful.
It’s not just about the right price. Sometimes it’s also about attracting the right people at the right price. That’s where the pros come in if you don’t know how to get out of it.
The stakes are too high to be petty or thoughtless with this stuff. As soon as you feel it. Course.
Update your rental listing for the following summer as soon as possible after Labor Day, if not before; tenants looking in September and October may be the most committed as they would like to feel secure in their plans. They also usually have their finances and life balanced enough to plan ahead. Some things say more than a reference.
Don’t panic if you can’t fix the price before October. That’s fine too, if it’s a good season. They usually are. Don’t give up yet.
There’s also a rental market in January/February in typical years, as we’ve seen come back in the last off-season, but after that you’re usually testing the waters on what’s left, like we are in this moment. It’s a tough time, there could very likely be some last minute rental inquiries as people look towards the sun. Make sure you are ready to attract them if they come.
Prices should reflect fluctuating costs. From service providers updating their pricing schedules, adjusted property taxes and insurance, to any design-related expenses you might decide to make in any given year following trends.
Landlords who do not receive offers that match their costs will often choose not to rent that year. It’s not worth the cost of their profitless calendars. And they can afford the investment for a year without it, they’ve planned – there’s usually the stock bonus at the end of the day to look forward to anyway. Rentals can sit empty, and sometimes that’s the best decision for the landlord.
The biggest update costs, like a roof or major refurbishment, are usually paid back in cash flow over time or in the selling price when you get there. Protect both.
Always consult your accountant about your specific situation and depreciating the work the right way. Tell them all of your potential scenarios, including the worst, as you go. They may have good advice to help you continue.
It’s not all bleak, there should still be plenty of benefits on your tax bill and in your pocket if you do it right. But remember that the house next door could break down at any time and your rental season could be over, regardless of market conditions.
It’s important to maintain and replace things as needed and based on the total lifespan of the home, not 6 years after your agent, last tenant or handyman reported it.
This is how we end up with listings that everyone thinks are teardowns, but sellers don’t see.
It’s expensive to fix a mish-mash job that isn’t even in the trending realm here, and finding the right people to do it can be tricky unless you have a great team. It’s usually not worth the team effort when you can just build to suit another location. Listen to feedback, within reason.
Set aside some of the early years rental income to be available when those update moments or surprises – you will be bring them.
Now you will be able to know how likely you will be for the life of the investment. There will not always be additional paid holidays. If you’re not an experienced professional, it’s great to be able to afford a home in the Hamptons, should be the attitude.
If you are not an experienced design professional, it is strongly advised to seek advice on trends before spending money on them.
Agents work closely with interior designers to do more than just help a home look its best immediately before a sale. They are your partners for the life of the investment, at any cost. Study photos of rental homes and find out what they have in common.
You’ll likely pay an agent a commission when you finally sell. Use these resources to help you get the best price right from the start, and you’ll fully understand the value of the checks you end up writing.
Preference cycles change more often in the Hamptons than in primary residence markets. There is always a less desirable type of house and you don’t want yours to be one.
The best agents point you in the right direction throughout your journey, just as designers and contractors do during the life of the particular real estate investment project. Take them with you when they do a good job, forget everything that happened while you were learning. It’s usually not their fault.
If you plan on renting your home year-round, keep an eye out for changing New York State laws regarding raising your prices based on your costs.
You may think annual rental is your fallback plan if you’re not renting for the summer. Whatever your political affiliation I have none, Google “Good Cause Eviction” and read the fine print first. There are currently several reasons why people are waiting for a price:
For longer-term owners, a big salary is not what is needed. Thank you Fred Theile for saving our vacation rental market. It’s good to act independently.
Adjusting your prices (sometimes up, sometimes down) and biting the bullet by making necessary updates over time is what will keep you in business.
Remember that rental listings have as much reputation as their owners. The same goes for sales listings. The agent you choose really matters. The designer too. The handyman too. Research everyone.
Don’t be afraid to give to someone you think might have a good chance if they’re new but have knowledge, passion and drive. Some of the most successful investment partnerships over the years have been built this way. Yes, your suppliers are your partners. At least you should want them to be.
But the biggest takeaway, to answer the original question, the most important thing I wish someone had told me before I embarked on my romantic journey to real estate ownership in the Hamptons at the end of my adolescence is:
If the goal is investment, do it yourself first.
If the goal is home, don’t do it alone.
If you must rely on rental income to maintain or maintain the home, you may not yet be ready to become a New York State real estate owner or investor.
If you’re lucky enough to have some extra money to gamble with, the best advice I’d like to give you is: Protect it as hard as you’ve worked to earn it. This is necessary or you could lose everything. Thank goodness I ended up learning. I hope you never have to do it the same way.
Adrianna Nava is Director of Market Intelligence for the Christopher Covert team at Compass and founder of Hamptons Market Data.