Hello - I'm looking to start my short term rental business and am considering buying a property in Ocean City MD. It's a 2 bed 2 bath condo, beach front in midtown. In doing some 3rd Party research through sites like airdna, I am seeing that similar condos have GRI of around 60k which would put my CoC at around 25%. The issue is the building has a special assessment on it where 25k is paid this year (by the seller) and another 25k will need to be paid in the near future tbd (by the buyer). This will put more value on the condo im sure as I am getting it under market value. My question are 1. Is this kind of return obtainable with str in Ocean city md and 2. Would love to hear some expert opinions on this investment. Thanks in advanced
I would need to know more about the condo itself, which building / street location etc. Is it Ocean side or Bayside etc.
I have been an operator in Ocean City MD for awhile and have units ranging from 2 bed 1 bath to 6 bed 3 bath. 60k GRI is achievable on some units, typically on the larger side, in the 3 bed 2 bath range. That GRI does include income for cleaning, taxes etc. though normally, which is really pass through expenses for the most part.
Happy to help more if you like, send me a message and we can connect on the details of the condo you are looking at. The special assessment seems high in general, so which building it is would help provide some insight into why and what you gain from it etc.
I would need to know more about the condo itself, which building / street location etc. Is it Ocean side or Bayside etc.
I have been an operator in Ocean City MD for awhile and have units ranging from 2 bed 1 bath to 6 bed 3 bath. 60k GRI is achievable on some units, typically on the larger side, in the 3 bed 2 bath range. That GRI does include income for cleaning, taxes etc. though normally, which is really pass through expenses for the most part.
Happy to help more if you like, send me a message and we can connect on the details of the condo you are looking at. The special assessment seems high in general, so which building it is would help provide some insight into why and what you gain from it etc.
Hey @Jeramey Rogers, what does the special assessment cover? What are they repairing/upgrading?
I, like @John Underwood, are leery of condo's and their related associations. Too risky IMHO, especially if it is a tourist driven condo. One big corporate owner runs the show and you pay when they want to do anything to the complex.
The 25% looks pretty good on paper. But I would really want a rundown on the SA. Is this the first one? What other things need to be done that aren't on the SA list?
I looked in OC to buy a few years ago. I saw a bayfront condo I liked at a good price, but then my agent told me it had a 40K special assessment, half payable that year, half the next (all by the buyer). I looked at the HOA fee, and it was only like $280 a month, much too low to maintain that building. Similar units in other buildings were $400-500 a month. The assessment was for replacing all of the railings and walkways in the building - those replacement costs should have been built into the budget of a well-run HOA. Special assessments should only be for unforeseen circumstances. I didn't buy it, because it sounded like a nightmare, with possibly more assessments in the future. I would not let the fact that it's a condo deter me, as the majority of rentals in OC are just that. There is not the risk of HOAs changing the rules like in other locations, it's a true vacation market with very few full time residents. You're looking at a 2 bedroom, which I believe is the most common and available for rent there. As Jason says above, 60K may be ambitious for that size, because there are so many of them. BTW, I ended up buying in Rehoboth.
Thanks so much for your responses @Lauren Kormylo@John Underwood, @Jason Charlton@Michael Baum This is my first time using the forum and was pleasantly surprised to see so much engagement so quickly. Here are some additional details that hopefully can provide the context needed to fully assess:
- Condo is Oceanside in the 40s. Elevator building. Has no amenities but a nice view of the beach from the deck and the entrance is only a few feet from the sand. There is currently another STR in the building and 3rd party data estimates its pulling in ~70k GRI per yr (Airdna and Rabbu). Again, not sure how real this is but it is reassuring that someone is up and running there successfully
- The SA covers a complete upgrade of the building - Walkways, roofing, deck pavement, building stucco etc. Hard to imagine anything else that needs to be done after this SA (at least in the near term). The work has already started and first phase should be complete prior to June. This includes repairing the front walkways / stairs and deck areas. 2nd phase will start in the Fall and be completed by EOY.
- The last SA took place 3 yrs ago for a new elevator which is currently part of the building. Significantly lower expense than the current SA. The current condo fee is only $200 so makes sense that the current SA could not be covered by the condo fees
Ok @Jeramey Rogers. That is good news IMHO. Both special assessments are pretty different and show that they aren't going back and fixing something that was just done. The current assessment looks to cover just about everything for the exterior. How old is the complex?
The next step I would take is see who owns what. How many individual owners and how many are part of a group? If more than 50% of the units are owned by the same person, group, trust etc then that is a problem. They control the votes and what and how things get done.
You might find there are more units renting than what you see on AirDna and Rabbu. Google the building name (and if 2 words, in quotes) and city + rentals like this: "south beach" ocean city md rentals. A lot of places are rented through real estate companies, and are not on Airbnb or Vrbo. With those you can use Luke's "enemy method" of looking at their rates and calendars, and estimate their revenue that way.
Ok @Jeramey Rogers. That is good news IMHO. Both special assessments are pretty different and show that they aren't going back and fixing something that was just done. The current assessment looks to cover just about everything for the exterior. How old is the complex?
The next step I would take is see who owns what. How many individual owners and how many are part of a group? If more than 50% of the units are owned by the same person, group, trust etc then that is a problem. They control the votes and what and how things get done.
Thanks for the insight. I just checked and no one owns more than 1 unit in the building.
You might find there are more units renting than what you see on AirDna and Rabbu. Google the building name (and if 2 words, in quotes) and city + rentals like this: "south beach" ocean city md rentals. A lot of places are rented through real estate companies, and are not on Airbnb or Vrbo. With those you can use Luke's "enemy method" of looking at their rates and calendars, and estimate their revenue that way.
Boolean Search. Love it. Looks like there are actually 6 rentals in the building. Appreciate the insight.
Great @Jeramey Rogers! So the place sounds OK. Have you checked into financing? Can you roll the SA into the mortgage?
Happy to hear this and thanks for your POV..... yes I've been setup with a local lender and vetted a few others. Got the best rate from the local lender which is a plus (want to support the locals). For the SA, seller is covering this year's cost and next year's (if the board decides to go forward with the next phase then, could be pushed out a bit) was a rough estimate from the management company. Technically there is nothing actually due from the buyer end this year as it relates to SA.
The short-term rental market in Ocean City, MD, is a lucrative opportunity for investors. With a Gross Rental Income (GRI) of around 60k, it's no surprise that similar condos in the area have the potential for a healthy return on investment. The key factor to consider is the special assessment, as it will impact the value of the property and the return on investment.
However, the fact that the assessment will be paid by the seller, and the condo is being offered at a price below market value, suggests that this could be a good investment opportunity. It's important to remember that short-term rentals are subject to fluctuations in demand, so it's essential to have a solid understanding of the local market conditions and the property's performance history.
Google awning airbnb estimator and take a look at the seasonality and performance of nearby Airbnb's to really get an understanding of how it might do
Hey Everyone - Figured i would keep everyone in the loop here with updates. I ended up purchasing the condo and just finished renovating it over the last week. Working to get it up and running for the STR platforms now and goal is to have it operational by next week. Wish me luck and will keep the group updated on progress by mid summer.
We stay away from condos. As Robert Kiyosaki mentions in some of his books, you are very limited in how you can increase it's value plus you have another layer of government on top of you.
Keeping everyone in the loop on my journey. The property has been up and running with all my team and systems in place for 7 days. Already have 11 bookings and summer rates are booking at much higher than my conservative estimate. So far so good. Will report back at the end of the summer
Looks nice! I thought about one of those game tables, but don't have a good place for it.
Not sure if you're aware that in OC, early June is "Senior Week" (mainly the first 2 weeks), where high school seniors and college groups try to book places to come and party. Usually they want to stay more downtown, but since a lot of rentals don't allow them, they may book in your area. You'll see other listings saying "no senior groups", so that's what that's about.
Looks nice! I thought about one of those game tables, but don't have a good place for it.
Not sure if you're aware that in OC, early June is "Senior Week" (mainly the first 2 weeks), where high school seniors and college groups try to book places to come and party. Usually they want to stay more downtown, but since a lot of rentals don't allow them, they may book in your area. You'll see other listings saying "no senior groups", so that's what that's about.
Thanks for the heads up. I have heard a few horror stories from several of the locals and it is on my watch out list. Will do my best to avoid this crowd.
Hey Everyone - Figured i would keep everyone in the loop here with updates. I ended up purchasing the condo and just finished renovating it over the last week. Working to get it up and running for the STR platforms now and goal is to have it operational by next week. Wish me luck and will keep the group updated on progress by mid summer.