Frequently in the summer we’ll get calls on the little affordable OBX ocean front homes for sale. Many of these smaller ocean front homes located in Kitty Hawk, northern Kill Devil Hills and South Nags Head appear to be priced to sell quickly. Good weather makes the beaches in front of these houses very inviting this time of year. Similar to most investments the pricing of these homes follow the risk versus reward theory. In short, the more risk involved the more reward possible. This post is a little bit about the risks and rewards of purchasing one of these properties.
So what’s the additional risk compared to purchasing a similar home that is three or four lots from the ocean? The main difference is these affordable OBX ocean front homes often cannot be rebuilt if destroyed. Here are some of the risks:
Most towns of the Outer Banks now participate in beach nourishment projects. Before those projects started, the state drew an imaginary line where the vegetation ended and the beach began. The state now does not allow homes to be built or rebuilt within 60 feet of that line. Because of erosion over the years, lots are sometimes not deep enough to rebuild if something happened to the house. Today there are stretches of beach in Kitty Hawk and Kill Devil Hills where there are no houses next to the ocean. That’s because houses were lost to the ocean and there was not enough room to rebuild them. To do your own research on this topic go to the state’s Coastal Development Rules here.
Buyers occasionally state that someone he trusts told him these homes can not be insured. That’s not completely accurate. An OBX Insurance company will insure them but if the home can not be rebuilt then often the insurance company will not pay full replacement cost. They may only offer replacement cost of the dwelling less depreciation. That rarely makes an owner whole if a home was destroyed.
Just about all of these ocean front homes have private septic systems. Prior to beach nourishment, a fairly common occurrence with these homes was that the septic system washed away and the health department condemned the house. Some areas of Hatteras Island still have this concern. When that happens, the owner cannot collect insurance money and the house is not usable. Some towns even have a nuisance ordinance that requires the house to be torn down or the owner gets a fine. That’s probably the worst case scenario.
So why do people even purchase these houses? For many buyers it goes back to the risk versus reward theory. Ocean front living provides many unique and wonderful experiences. There’s nothing like waking up in the morning and watching the sun come up over the ocean. Listening to the waves break at night is an awesome experience. I love the smell of the ocean. You don’t get that same smell just a few houses back. For many folks these experiences are priceless. These affordable OBX ocean front homes also generate considerably more rental income than the same sized house further from the ocean. If the risk is just too great for one of these affordable ocean front homes then there are many more Outer Banks ocean front homes where the lots are big enough to rebuild. Unfortunately, if they are priced correctly then they cost quite a bit more.
Before beach nourishment occurred the way many folks calculated value of these endangered houses was to multiply the annual rental income by the number of years they thought the property would survive erosion. That would give you a rough idea of value. Now that we have beach nourishment, it’s likely that most of these affordable OBX ocean front homes will be around much longer.