Investor · Member since 2021 · 131 posts · 100 votes
As many of us are experiencing, prices of homes and condos nationwide are up quite a bit. I have been looking at consideration of costal vacation rentals in the Florida market. I have been centering on properties close to the beach (less than a 5 minute walk). With these being more desirable locations and prices being so high, each property that I look at, the numbers just don't support a secure cash flowing opportunity, unless vacancy is very low. With so many other vacation rentals also looking to capture business, it seems these properties essentially price themselves outside of a small business investor due to the risk of not cashflowing, and/or low CoC return. Have others had the same experience?
My clients and I are acquiring high-end properties for this purpose and the vacancy - even during Covid - is extremely low. But it's not an "investment" play - it is truly running a business and is more like a Hotel/Motel endeavor than a rental. Properties near the coasts will never provide a good return as anything other than vacation rentals because the prices are higher, flood insurance, and the age of lower priced properties.
My clients and I are acquiring high-end properties for this purpose and the vacancy - even during Covid - is extremely low. But it's not an "investment" play - it is truly running a business and is more like a Hotel/Motel endeavor than a rental. Properties near the coasts will never provide a good return as anything other than vacation rentals because the prices are higher, flood insurance, and the age of lower priced properties.
As many of us are experiencing, prices of homes and condos nationwide are up quite a bit. I have been looking at consideration of costal vacation rentals in the Florida market. I have been centering on properties close to the beach (less than a 5 minute walk). With these being more desirable locations and prices being so high, each property that I look at, the numbers just don't support a secure cash flowing opportunity, unless vacancy is very low. With so many other vacation rentals also looking to capture business, it seems these properties essentially price themselves outside of a small business investor due to the risk of not cashflowing, and/or low CoC return. Have others had the same experience?
The ocean front game due to the high sale prices for turnkey is to find the distressed ones (drive for dollars on those ocean front roads), and either flip, BRRRR, or rehab/STR. Anything turnkey will not cash flow.
I haven't looked at such properties but I imagine they are crazy expensive. Most of them are either 1) owned by rich people or 2) AirBNB or VRBO properties. I suspect investors can only really make it work with short term rentals and even then, there's a lot of competition.
@Patricia Steiner, We owned and operated several vacation rental properties for years, which have been great investments. Yes, you do run them as a "hotel" business just by the very nature of them being short term/nightly rentals. However, with the high prices along the Florida coast, it has been my experience that the profit margin is rather slim, given the high prices.
That has not been our experience. On a $735k purchase and maybe $35k in improvements, the net income year one was $300k and $350k the second year. Another MF property acquired at $1.175k which is slowly being transitioned over will net $310k the first year. There are certain key success factors in running these that are proprietary to my firm - but what I can share is that pricing sets a perception with guests. When priced too low, the prospective guests see it as a negative versus a value. They might be budget conscious at home but they're going on vacation - and the budget just isn't that important when it comes to having an escape.
I'm not advocating vacation rentals because they do require a different skill set. And, this is about the extent that I can contribute on this topic.