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Think of the lifelong memories you’ll create with friends and family on a lakefront property with a scenic body of water in the background. The memories will be priceless, but the waterfront property will have a price – and the price will be hefty.
Whether it’s your long-awaited primary residence, a vacation home for weekend and summer getaways or an investment property to generate passive income, like any house, a lake house is a significant investment with pros and cons.
If you’re shopping for a home on the lake, prepare to spend more money than you would for the same property sans waterfront.
Property located on a lakefront will cost a premium. So to help you decide whether you should spring for a house on a lake, we’ll jump into the deep end of costs, pros and cons and everything else you should know about owning a lakefront property.
Pros of a House on a Lake
Buyers are willing to pay more for waterfront property because lake houses have many unique benefits that owners believe make them worth their price.
Lakefront property is a savvy investment
Lakefront property can be an excellent investment opportunity. Let’s say you’re planning a vacation and are choosing between staying at a property a mile away from a lake and a property on the lake. We’re guessing you’d pay a little more to stay at the home on the lake. Honestly, we’d do the same – and many tourists probably would, too.
Let’s say you decide to use your lake house as a summer home and rent it out during the offseason. As long as you rent out your lake house for more than 15 days each year, you can declare the income from the rental property.
The IRS also allows you to deduct certain expenses on your rental property, including repairs, insurance, real estate agent commissions, maintenance and cleaning costs.
Easier to sell
Even if you never rent your lakefront property to generate income, lakefront homes are desirable and should fetch a high price and stand out from the competition when it comes time to sell.
Fun recreational activities
A lake can be so much more than a pretty view while enjoying your morning brew of choice. Livin’ la vida lakeside lets you take advantage of many water activities, like water skiing and jet skiing, fishing, swimming, boating and more.
Did you know that – according to at least one scientific study – living close to water may benefit your health? Not convinced of the health benefits? Close your eyes and imagine your family and friends gathering at your lakefront home to enjoy the swimming, stunning sunrises and sunsets. That has to make you feel good already.
Cons of a House on a Lake
Lake houses may look idyllic, but they aren’t perfect. Spoiler alert: living by a lake has some downsides, including higher costs, additional maintenance and the possibility that you may not own the land the home sits on.
Water and homes aren’t always a match made in heaven. Living near a body of water often results in added maintenance costs. Rising waters can damage your home, and large bodies of water tend to cause additional wear and tear.
Any additional structures on the property, like a boat dock or shed, will also require upkeep, so be sure to add the maintenance costs to your budget.
Before you buy a lakefront home, hire a licensed inspector and request that they pay special attention to any problem areas that might require repairs soon.
Higher insurance costs
Lakefront homes usually cost more to insure because insurance companies consider them at higher risk of flooding. Your lender will require you to purchase flood insurance if the property is in a federal flood zone. And even if your property isn’t in a federal flood zone, you should consider purchasing flood insurance coverage to be on the safe side.
Lack of privacy
Like it or not, the lake probably won’t be your private oasis. You may have some water rights – but so do other homeowners sharing the waterfront with you. Don’t be surprised when you’re divvying up your precious lake between neighbors, tourists and day-trippers during the busy seasons.
If this lack of privacy makes you uncomfortable, think long and hard before you decide to buy.
Many lakes are owned by government agencies or utility companies that may lease the land to homeowners on the lakefront. If your lake house is on leased land, technically, you don’t own it. Whether you own the land or not should be confirmed before you buy the home, and you should be fully aware of any costs and restrictions on the leased land.
How To Buy a Lake House
Buying a lake house is similar to buying any other home. You’ll need to determine how much home you can afford and how to finance the purchase. Unless you’re buying with cash, you should get preapproved for a mortgage to figure out how much home you can afford. You should also hire a local real estate agent who specializes in waterfront homes and start looking at available properties.
The two major issues you’ll need to consider while looking for a lake house are how much you can afford to spend and what you want to get out of the property. Do you think the lake house will be a summer retreat for you and your family, an investment property or both?
Once you find a house that fits your budget, your real estate agent can help you make an offer. If your offer is accepted, you’ll put down an escrow deposit, schedule a home inspection and get the property appraised. And if all is clear, you’ll close on the property.
Additional Considerations for Lake Living
Buying a lake house is a big decision that shouldn’t be taken lightly. The last thing you want to feel is buyer’s remorse. Think through all aspects of lake living before you buy a lakefront property.
Here are some questions you can ask to help make an informed decision:
- Is the view of the water obstructed?
- Can you see the sunrise or sunset?
- What’s the water quality of the lake?
- Is there a homeowners association?
- Is the property in a U.S. Department of Agriculture-designated rural community?
- How do the lake’s levels change over the year?
- Is there a septic system on the property?
- Will you need to store your boat somewhere else during the winter?
- What preparations will you need to make for winter?
- What wildlife lives in the area?
Lake House Life
Living on a lake can be a dream come true or a costly nightmare. It’s easy to get caught up in the fantasy of owning a lakefront property, but becoming the owner of one of these properties is no drop in the bucket. Buying a lake house is a serious undertaking. If you can afford and properly manage the property, it may be worthwhile.
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The Short Version
- Lake houses have many unique benefits that owners believe make them worth their price
- Buying a lake house is a serious undertaking. If you can afford and properly manage the property, it may be worthwhile
- Lakefront homes usually cost more to insure because insurance companies consider them at higher risk of flooding
Internal Revenue Service. “Publication 527 (2020), Residential Rental Property.” Retrieved September 2022 from https://www.irs.gov/publications/p527#en_US_2020_publink1000218983
National Library of Medicine. “Marine Biota and Psychological Well-Being.” Retrieved September 2022 from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5081108/