A special advertising feature by Lawrence Bivins

Todd Farrand knows a winning investment when he sees one. A former banker who now manages a private portfolio of securities and commercial real estate in Norfolk, Va., Mr. Farrand's investment philosophy is uncomplicated: buy low and sell high.

That goes for his own finances as well, which explains his recent acquisition of two residential properties in the village of Nags Head, a golf-course community in North Carolina's storied Outer Banks.

The Outer Banks is a narrow, 130- mile chain of sandy barrier islands stretching across three North Carolina counties, from the Virginia state line to the Ocracoke Inlet. It is home to the nation's oldest national seashore, and historic lighthouses include the 208-foot Cape Hatteras Light, the nation's tallest.

Mr. Farrand and his partner purchased their first Nags Head home in late 2005 with the intention of renting it to vacationers seeking sun, sand and solitude. Property prices had begun to slip from their 2004 peak -- having soared in the first half of the decade -- owing to the nationwide property price correction and the impact of Hurricane Katrina. "Then we found we liked it a lot, and have made some good friends there," says Mr. Farrand, who estimates that he now spends about half his time there.

In February, the pair closed on a second property, a three-bedroom home they will use for year-round rentals. The property's $318,000 price tag was a bargain compared to what similar houses were fetching until recently. "A year ago, the same houses were selling in the low $400,000 range," he says.

Real estate professionals in the Outer Banks say they've seen these cycles come and go. "Now is a great time to buy," says Randy Nance, senior broker at Village Realty in Nags Head. In 2006, the number of property transactions amounted to less than half the record-setting level of 2004, he says. Now, with prices having moderated, interest in Outer Banks real estate is heating up again. "I'm busier now than I've been in two years," says Mr.Nance. Peaks and troughs notwithstanding, he has seen steady growth in the area's popularity among buyers of permanent and part-time residences, as well as those purchasing income-generating properties.

The recent price surge aside, the Outer Banks is seen as bargain coastal real estate by most Northeastern buyers. "The big attraction of our market is that you get so much more house for your money compared with Delaware and New Jersey beach communities," says Mr. Nance. Upscale, ocean-front condominiums offering 2,200 square-feet of living space and the latest amenities can be found at the $1 million mark in Nags Head and Kitty Hawk. For the same price, buyers can get a 3,000-sq.-ft. detached home on the sound complete with game room, covered deck and "all the bells and whistles," Mr.Nance says.

In the past decade, high-end communities such as Corolla, Southern Shores and Duck have attracted the attention of buyers, builders and vacationers. The northernmost Outer Banks villages have become a popular destination for those in the Washington area -- just four hours away by car. "Duck is to D.C. what the Hamptons are to Manhattan," explains Carolyn McCormick, managing director of the Outer Banks Visitors Bureau in Manteo.

Isolated Communities

More isolated communities to the south -- quaint villages such as Avon, Hatteras and Ocracoke -- offer seclusion and bargains in exchange for accessibility and commercial amenities. "A lot of people come here to get disconnected," Ms. McCormick says. Strict architectural standards and limited municipal water capacity have precluded development of the sprawling resort communities and high-rise condominiums that are staples in most coastal regions. "We've worked hard not to have the look or feel of Anybeach, USA," she adds.

Demand remains strong for midrange investment properties, especially those with proximity to the beach, says Joel Patton, managing broker at GMAC Nags Head Properties. There are promising opportunities for buyers with a six- to 10-year horizon. Realtors who have watched the market through the decades say they have noticed a cyclical pattern to prices. "If you're looking at the long haul, you could do very well," Mr. Patton says.

Like many who have settled here, Mr. Patton, a Tennessee native, recalls regular vacations in the Outer Banks as a youth. A resident of Kitty Hawk for the past 20 years, he says northeastern North Carolina's fragile chain of narrow barrier islands offers a combination of unique climate, shoreline and culture. "You can go up and down the East Coast, there's nothing that compares to the Outer Banks," says Mr. Patton.

Currently, the "best bang for your buck" is to be found in sound-side properties geared toward permanent residents, according to Mr. Patton. In recent years, the area's popularity among vacationers has been complemented by the arrival of retirees and semi-retired professionals from around the country.

After relocating from Los Angeles to the Outer Banks in 2003, Carol Hartman continued full-time work as a business consultant until last year. "Relative to real estate in California, I found the prices here refreshing," she says. Now a resident of Colington Harbour, a gated residential community overlooking Roanoke Sound, Ms. Hartman says the great variety of residents along the Outer Banks made it easy to adjust to her new life. "My neighbors include commercial fishermen and boat-builders, as well as bankers and lawyers," she says.

Others buy or build homes in the Outer Banks as a way of having both a second-home and an income stream. In 2004, Jean Rogers and her husband Gene built the second of their two Ocracoke cottages. The idyllic island village is four hours by car and ferry from the couple's permanent home in Williamston, N.C. "We slip away there as often as we can," says Mrs. Rogers. The properties have become a regular holiday spot for the Rogers, their three children and five grandchildren. When they're not using them, the couple turn the adjacent cottages over to summer tourists through a rental agent. "It maintains itself pretty well," says Mrs. Rogers of their properties' income potential.

Returning Visitors

With few national hotel chains operating in the area, property rental is the preferred choice for most returning visitors. "We market and manage about 1,500 rental properties, handling everything from booking to cleaning," says Richard Hess, vice president and general sales manager at Sun Realty Outer Banks in Kill Devil Hills. Huge, oceanside homes -- some offering as many as eight bedrooms -- are sought after by extended families vacationing together, Mr. Hess says. Many offer private pools and home theaters, and their rental prices during the summer can reach $10,000 a week.

The Internet has made it easier for Outer Banks property owners and rental agents to attract visitors from around the world. "On the Web, people can see what they're getting," explains Gordon Jones, owner of Coldwell Banker Seaside Realty and Seaside Vacations, a rental property sister firm in Kitty Hawk. Mr. Jones sees more and more Outer Banks visitors arriving from abroad. Given the region's eco-tourism attractions and rich history -- Roanoke Island, for example, was the site of the first European outpost in North America, and Kitty Hawk is the birthplace of human flight -- the Outer Banks offers foreign travelers far more than pristine beaches.