Since House Hunters is probably one of the most popular shows on HGTV, it only stands that each network must expand their content to continue to keep their audience engaged. HGTV went from House Hunters to International House Hunters to Tiny Homes to a new show now called Island Hunters. Yes, these are people who need to get away from it all whether it be in the northern regions of Canada down to the Caribbean. So, just how does someone know what it is really going to cost to get your own private island?
According to Business Insider, there’s an entire culture surrounding the purchase and management of private islands. Calling themselves “isolamaniacs,” these people tend to be independent, intrepid travelers who aren’t afraid of a challenge. Tech billionaires like Larry Ellison and Richard Branson have plopped down millions for their own slice of paradise in Hawaii and the British Virgin Islands, respectively. However, you don’t have to be a billionaire to get your very own private island. Here are my smart money moves tips when thinking about having an entire island all to yourself.
- Make sure you pick the right region
Based upon the shows I have seen thus far and my additional research, picking the right region is a critical first step in this process. Is this a place you would use all year round or something that would just be seasonal? Are you more concerned about a hurriance or more concerned about dealing with the ice and snow? Do you worry about having to take a long flight or multiple short flights to get to your destination? What activities are most important to you? Do you still want to be near civilization or many, many miles away?
- Lease it or buy it?
When it comes to islands, the geographical location of the island matters in the methodology you will acquire the island. Typically, in North America, the Caribbean, and Europe you will do something called a “freehold” which is essentially an outright purchase of the island. In the Far East such as Asia and the South Pacific, you will typically do something called a “leasehold” which will give you rights from 25 years to 99 years to lease the island, but it will not be a permanent purchase.
- What kind of improvements will you need to do on the island?
Obviously, this will vary from island to island, but the main thing you need to consider is what kind of cost will it take to build a home or renovate the existing home including furniture. This can be extremely costly because of the transportation of the materials to the island and the cost to have labor come back and forth to the island. If you determine you want to install a pool, for example, this can add an astronomical amount of cost to your budget. Most importantly, will you have working water, electricity, etc. and what will that cost to install on the island?
- What toys will you want on the island?
This will depend on the location of the island, but the odds are you will need some sort of boat to get you to and from the main land. You will want to ask about the depth of the water to make sure it can accommodate the kind of boat you are thinking about dropping in the water. You may also want to purchase additional boats for fishing, jet skis, or other toys for the property can cost a ton of money as well so you better plan to add that to your overall budget.
Make sure you do your ‘due diligence’ on taxes and the cost of insurance. Depending on the location and the possibility of a complete wipe out of your island, the cost for insurance can be very expensive. Just ask property owners what the cost of flood insurance is now on their beachfront property versus a decade ago. Also, get a complete history on taxes to see what your potential exposure may be for the future.
Not all islands have the ability to be financed. My research shows that only one out of two islands may be able to get a loan, so you better be prepared to pay cash when you go down this process or get a mortgage company/bank that is ready and willing to back you.
HGTV often makes these purchases look really fun and simple, but you hardly hear the stories a few years later on exactly how much money was sunk into a property or an island. If this is a route that you choose to go down for your financial future, use these questions as a good guideline when you decide to purchase your own private island.
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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.