Investment Property on the Outer Banks, NC

This page is general information, not legal, tax, insurance, or investment advice, and I do not tell anyone whether a property will make money. Rental rules, tax law, and insurance change, so please confirm what applies to you with your CPA, your attorney, your insurance agent, and your lender. I am a real estate professional, and my part is finding properties, pulling the facts, and handling the purchase.

For rentals under 90 days to someone with a permanent home elsewhere, North Carolina's Vacation Rental Act requires a written vacation rental agreement for every stay, requires advance payments to be deposited in a trust account within three banking days, and limits rent paid out before the guest arrives to 50 percent, apart from certain third-party fees. A management company can handle this. When you buy a house with future bookings, ask how those reservations and deposits transfer.

Lenders require flood insurance on a federally backed loan for a building in a Special Flood Hazard Area, and wind coverage may come through the Coastal Property Insurance Pool, which the NC Department of Insurance describes as serving the beach area including the Outer Banks. The IRS treats advance rent as income when you receive it, and personal use beyond the greater of 14 days or 10 percent of the days rented at a fair price limits your deductions, which matters on a beach house you also enjoy. For a Section 1031 exchange, identify the replacement within 45 days of transferring the property you give up and receive it within 180 days or by your tax return due date with extensions, whichever comes first. My investment property page has more, and my Outer Banks guide covers the islands. Call me with your budget and goal.