Best Gulf Beach for building a beach home rental

Panama City, Florida
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Best Gulf Beach for building a beach home rental

Leland S.
Developer · LA, Nashville TN · Member since 2015 · 295 posts · 75 votes

For some reason, I've decided I want to build a beach home along the Florida gulf coast. I want to make sure it can perform at a 10 cap or above. My understanding of Destin it's too expensive and returns aren't great. Panama City is a grungier environment but has higher returns. I was liking the Laguna Beach area, however, I saw lots in not-ideal places running for $500k. For that price, I'd have to put in a $2M total product - 4/5 bed home with pool/hot tub etc - which only grosses me 150k. Then I learned of Fort Meyers Beach where an agent told me sand is going for $300K, but a quick internet search shows sand is actually going for 1.7M. Possibly the demand is still too high for beach homes to make the numbers investor friendly, or possibly I just need to make sure I find the right spot and build the right product. 

I'm thinking of taking a week's vacation along the coast in a couple of weeks for my birthday/investment trip to do some field research. Contacts would be nice.

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John Bryant
Investor · Panama City, FL · Member since 2019 · 51 posts · 20 votes
3y

Hey Leland, We invest heavily here in the Panama city beach area. Everything you said is correct about PCB Laguna beach. We have multiple STRs there. However just over the past few years we have seen a massive gentrification of the area, and it only seems to be increasing. I feel like Laguna beach is not only a great 10 cap or above , but a good appreciation play.    Now just outside of Laguna beach is Riviera Beach, still considered PCB, it has a whole different vibe and more of an old beach town look. Might want to look at Sunnyside as well, but the farther west you go the higher the prices will go and the smaller the caps get IMO.    All that 30A (Graton Beach, Rosemary Beach, Seacrest, Seaside) multi million areas, which we are only 5min away from, are just gonna all slowly creep over to PCB. There's only so much water front and so much Beach like ours!

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  • John Bryant
    Investor · Panama City, FL · Member since 2019 · 51 posts · 20 votes
    3y

    Hey Leland, We invest heavily here in the Panama city beach area. Everything you said is correct about PCB Laguna beach. We have multiple STRs there. However just over the past few years we have seen a massive gentrification of the area, and it only seems to be increasing. I feel like Laguna beach is not only a great 10 cap or above , but a good appreciation play.    Now just outside of Laguna beach is Riviera Beach, still considered PCB, it has a whole different vibe and more of an old beach town look. Might want to look at Sunnyside as well, but the farther west you go the higher the prices will go and the smaller the caps get IMO.    All that 30A (Graton Beach, Rosemary Beach, Seacrest, Seaside) multi million areas, which we are only 5min away from, are just gonna all slowly creep over to PCB. There's only so much water front and so much Beach like ours!

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  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    3y

    I'm afraid you picked an expensive area. Unfortunately, it's either change course/location or not build and just purchase a home.

    [email protected]330-557-3021
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  • Jeff Moore
    Real Estate Agent · PCB/30A Florida and St. Thomas USVI · Member since 2015 · 36 posts · 18 votes
    3y

    Hey Leland, I'm a Realtor in PCB. I also own 5 properties in PCB. I have a house in Laguana Beach and 2 townhouses in Sunnyside. I think this area is still one of the most affordable beach communities to buy property. Like every beach town, competition for STR's has increased over the overs. Everyone is doing the exact same thing as far as decor and design. I don't think it would too difficult to do a few things to stand out and increase your returns. Especially if you are building something new. I'd be happy to help you if you. I can set you up to get property alerts for lots in PCB. I always say "if you want to buy an investment property you need a Realtor that owns investment properties". So if you don't choose me I would suggest you follow that rule. Let me know if need any help.

    1Reply
  • Ryan MoyerBusiness Member
    Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 993 posts · 1k+ votes
    3y
    Quote from @Leland S.:

    Possibly the demand is still too high for beach homes to make the numbers investor friendly, or possibly I just need to make sure I find the right spot and build the right product. 


    I'm not sure this will ever change, and I'm not sure beachfront will ever be a 10 cap again unless you're looking in a very undesirable STR area.

    People have traditionally bought beach homes as true 2nd homes.  This limited prices somewhat as they had to stay reasonably priced enough that people could afford to pay an entire additional mortgage to have a family beachfront vacation home.

    Now that the STR secret is out, it's more affordable than ever for people to own one as a 2nd home, even though the actual home prices are much higher. The people that used to look at having to pay $5000/mo to have a beach home see it as a great deal to be able to buy one now and "only" have to pay $1000 out of pocket each month after a PM rents it out for them. Or, if they can break even, "what a deal" in their mind.

    It's the same problem in ski markets.  Very desirable true second homes are tough to make cash flowing investment properties.  Because investors might need that home to cost $1.2M in order to cashflow as a 10-cap, but there are too many people at that are willing to pay $1.8M and break even and have a true vacation home for their family that drive up the prices.

    Cosmic Vacations4.9172 Reviews
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  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    3y

    Hey @Leland S., Sounds like an interesting project.

    You could reach out to @January Johnson for PCB and surrounding areas. She has been doing STRs there longer than just about anyone.

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  • Leland S.
    OP
    Developer · LA, Nashville TN · Member since 2015 · 295 posts · 75 votes
    3y
    Quote from @Sarah Kensinger:

    I'm afraid you picked an expensive area. Unfortunately, it's either change course/location or not build and just purchase a home.


    Unsure why you think buying a home is better than construction. Aside from getting a great deal on a fixer and executing a nice flip, I find new construction provides better margins. Economics are all the same no matter which route you go, just a matter of doing the research.

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  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    3y
    Quote from @Leland S.:
    Quote from @Sarah Kensinger:

    I'm afraid you picked an expensive area. Unfortunately, it's either change course/location or not build and just purchase a home.


    Unsure why you think buying a home is better than construction. Aside from getting a great deal on a fixer and executing a nice flip, I find new construction provides better margins. Economics are all the same no matter which route you go, just a matter of doing the research.

    I didn't say if it was better or not, just that if your budget limited you picked a beautiful and "my heaven on earth" place, but also a really expensive area.
    [email protected]330-557-3021
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  • John Bryant
    Investor · Panama City, FL · Member since 2019 · 51 posts · 20 votes
    3y
    Quote from @Jeff Moore:

    Hey Leland, I'm a Realtor in PCB. I also own 5 properties in PCB. I have a house in Laguana Beach and 2 townhouses in Sunnyside. I think this area is still one of the most affordable beach communities to buy property. Like every beach town, competition for STR's has increased over the overs. Everyone is doing the exact same thing as far as decor and design. I don't think it would too difficult to do a few things to stand out and increase your returns. Especially if you are building something new. I'd be happy to help you if you. I can set you up to get property alerts for lots in PCB. I always say "if you want to buy an investment property you need a Realtor that owns investment properties". So if you don't choose me I would suggest you follow that rule. Let me know if need any help.


     100% agree with what you said about the saturation and everyone doing the same design. You've got to step it up these days since it's a more competitive market now. Anything to make your property stand out and have great reviews. 

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