When we think about private island owners, the mind conjures images of paparazzi-plagued celebrities hiding on a remote piece of an Atlantic archipelago.
In reality, island ownership isn’t limited to the rich or eccentric. They can be ordinary, albeit wealthy, people seeking extraordinary adventure off the grid.
Investing in an island is just like any real estate investment, except that demand often outweighs supply, and the exclusivity draws high premiums. North America has a wide range of sandy island locations to choose from, but “a lot of islands haven’t even been on the market before; they’ve been in the family for over a hundred years,” says Chris Krolow, CEO and founder of the Canadian company Private Islands Inc. “It’s rare you get a quality island coming onto the market.”
Buyers tend to see island ownership as a chance to customize their own hideaway.
“Most of our clients want something undeveloped. If it is developed, they want their own flavour on it,” says Krolow. “However, the personality type who’s going to buy is likely going to want something different, so it’s going to be hard to recoup [development]
costs” when your client sells.
Mark Lester, senior vice president with the Specialized Assets Group, Sotheby’s International Realty Canada, says most clients approach this purchase from both rational and emotional perspectives.
“Buying a private island is a major lifestyle decision,” he says. “So when I am having initial conversations with prospects I want to make sure they understand the logistical issues. [For instance], living on a private island means self-sufficiency; you can’t just drive to the corner store for a quart of milk.” Also, there are no neighbours, so children have to import all their play-friends; they can’t just come over for the day.
The cost of an undeveloped island can mount quickly. “[The buyer is] going to have a hard time being able to complete a project from beginning to end for under a million,” says Krolow. “You need to buy the island, you’re going to be spending probably $500,000 to build on it, and that may very well cost you 50% to 100% more.”
Then there are additional costs associated with employing a full-time caretaker, building a barge or dock, installing off-the-grid electricity and telecommunications systems, and closing the sale. Plus, there are tax considerations if the island is in an offshore jurisdiction.
Often, the biggest yearly cost is insurance. Areas prone to hurricanes are hit the hardest. The cost of comprehensive hurricane coverage can be upward of $20,000 for a luxury home in a high-risk zone, according to U.S.- based HouseLogic.com, and the cost for an entire island will rise accordingly.
However, the current phase of the economic cycle means it’s a good time to invest. Islands carried higher price tags four years ago and current prices are more in tune with value.
Krolow strongly recommends prospects try island life before buying. Bigwood Island in the northern part of Georgian Bay, for instance, costs $5,000 per week to rent.
Plus, Lester says most sellers would let prospective buyers spend some time on their properties. “You want to have a sense of the feel of the place; if somebody is selling an island and a purchaser [wanted] to stay, I can’t imagine an owner saying no.”
- Diamond Cay, Honduras
- Watch Island, New York
- Bart Island, Alaska
- Five Cove Island, British Columbia
- Hog Cay, Bahamas
- Ronde Island, Grenadines
- Majucal Maje, Panama
- Emerald Cay, Turks and Caicos
- Lake Glenville Island, USA
Originally published in Advisor's Edge
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