Orange beach new construction house for str
Member since 2023 · 14 posts · 4 votes
Greetings, we are beginners with str investing, went under contract for a new construction house, 3/3.5, 2000 sq ft, across the street from the beach, good area with many restaurants and entertainment. Having cold feet! Estimates say the rental potential is 55 to 75k a year. I notice a lot of competition from beach front condos of the same size. The community has 120 houses, similar size, all eligible to be strs. Large community pool, 2400 Hoa a year. The house is not on a water. We are 6 hour drive away, so plan to use management comp. No mortgage, so can skip the insurance (is it a good idea at all?). My hope is if it will not give lots of cashflow, at least we’ll cover the expenses and it will appreciate as the area will develop, inflation raises etc. My thinking- many ppl escape Florida now bc of taxes and insurance cost. Maybe Alabama cost will flourish soon. Any thoughts? Should we do it? Have to decide by Friday.
Please do not skip out on good insurance!!!! This is your first line of defense if something goes wrong
I have a few thoughts:
-Homes just off the water (in walking distance) almost always have better ROI due to lower purchase price. It's honestly the prime location.
-Is there a garage? Can you convert into another bedroom?
-Don't skip insurance!
-I know the panhandle well in terms of STRs. We had quite a few there with the last large fund I was with and A LOT of the homes look exactly the same and have all the same amenities. I think this area is prime to stand out but you'll need to spend likely more than 30k to furnish and amenitize. I think 25k to furnish, stage and stock with essentials (linens, towels, kitchen, etc.) Then, I would add some stand out amenities and convert the garage if you can (or another small space if available). This should significantly boost your revenue and make you stand out among the competition.
Yes, golf carts allowed! My thinking hot tub would attract guests in winter months, when you can’t swim in the gulf or community pool.
My advice would be to knock it out of the park in terms of design and amenities and then you have less to worry about when it comes to the competition. Take a close look at properties that are doing well nearby and see how you can model what they are doing and then add some extra perks to beat those too.
@Natalia V. Don't do it!! Buying something that you would even consider skipping essentials like insurance or hoping for appreciation just to try to make your numbers work is a terrible idea. There are people all across the country who have jumped on the STR bandwagon hoping to make money and are now wishing they had never done it. Determine what your financial expectations are for an investment property, run your numbers very conservatively (and for gosh sake, include room for unexpected costs, even on a new build) and then see if it makes sense.
And be care of taking advice from someone who has something to gain from you.
I know the community you are talking about & have sold in there, so happy to help in any way. Do not skip on insurance. It's relatively inexpensive on new construction like that & I can connect you with a great insurance agent here. We have owned investment property in Orange Beach since 2009. Feel free to reach out! We have helped many BP investors in this area and have many resources that may be helpful to you!
@Natalia V. Don't do it!! Buying something that you would even consider skipping essentials like insurance or hoping for appreciation just to try to make your numbers work is a terrible idea. There are people all across the country who have jumped on the STR bandwagon hoping to make money and are now wishing they had never done it. Determine what your financial expectations are for an investment property, run your numbers very conservatively (and for gosh sake, include room for unexpected costs, even on a new build) and then see if it makes sense.
And be care of taking advice from someone who has something to gain from you.
I know the community you are talking about & have sold in there, so happy to help in any way. Do not skip on insurance. It's relatively inexpensive on new construction like that & I can connect you with a great insurance agent here. We have owned investment property in Orange Beach since 2009. Feel free to reach out! We have helped many BP investors in this area and have many resources that may be helpful to you!
@Natalia V. Are you looking for an investment or a retirement home? Two different objectives. And if you can’t develop potential revenue numbers with some level of confidence, you are taking a big risk (or leap of faith) in buying any property. That is a fundamental part of real estate investing.
@Natalia V. Are you looking for an investment or a retirement home? Two different objectives. And if you can’t develop potential revenue numbers with some level of confidence, you are taking a big risk (or leap of faith) in buying any property. That is a fundamental part of real estate investing.
All estimates from different sources are saying 55-75k, airdna gives 65k by the address. How confident can anyone be with this? Idk. Why not two objectives if they align?
@Natalia V. It is challenging to come up with revenue numbers given the fluctuations in the STR sector over the past four years and the vast increase in competition. So I suggest getting a ‘best guess' figure based on several sources (Airdna, Rabbu, STR Insights - don't rely on just one) and then build in some conservatism and see if you are still comfortable what your pro forma kicks out.
And yes, you can certainly have two objectives if they align in some ways. But deciding which is most important to you will help in determining the return you are willing to accept.
Enemy method seems good too to help being realistic
I just talked to the management company that handles a few houses at the subdivision we are thinking to buy, she’s saying the honest number of rents revenue is 45-50k, may to August is all the earnings, all other months are pretty much dead. There are a lot of competition and the market is weaker for str demand this year. So after all expenses maybe 20-25k to the pocket.
Oh I see
there are 2 options
1. Go through with your deal which may work out
2.Back out and spend 2 months doing research on Destin , Fort Walton Beach and also other places like Biloxi MS, connect with investors and realtors there and see if you can do better
I would definitely argue that Destin beaches are far, far superior to Orange Beach!! Just from a beauty and clarity standpoint... but both are of course great.
There's plenty of STR options on the Emerald Coast that still cashflow with today's rates... let me know if you need me to take a look for you or send anything over.
I guess the insurance in Florida plays a part
So in the dead months does MTR work?
See if this helps https://www.furnishedfinder.com/corporate/housing/Orange-Bea...
I actually just got back from a week vacation in Orange Beach - we stayed at one of the Phoenix condos - nice enough place, decent amenities - the kicker here was we were on the beach - the balcony overlooked the beach. That's my deal breaker - when it comes to the beach I want a beach view along with walking access. I don't want to drive a car, park etc.
You definitely need insurance - one hurricane could wipe you out or cause enough damage to where it essentially (not literally) still wipes you out.
Remember AirDNA includes the cleaning fee in their revenue calculations - you will have to pay the cleaners - this is a significant expense.
Management will likely be 15-25% of gross revenue depending on the service.
Lots of other houses in the neighborhood - why would someone rent yours? Better amenities? Better finishes? More activities (games, outdoor décor and games - games also end up with missing pieces very often). Better price? More convenient? Bigger size? I don't know if yours would be unique enough to stand out amongst all the others...
I gotta be honest - I don't think this makes money - high cost of materials, high rates relative to the last 15 years, probably not looking at much appreciation (I wouldn't expect the last 15 years to be the norm), lots of competition (there are a few brand new high rise condos going up), gulf shores is just down the road as well. It's a very seasonal area as well. You're competing against institutional investors (Brett Robinson to name one) that own a ton of them, market them very well and have this stuff down to a science.
I think the STR market peaked in 2020- very early 2022 - I don't think it's necessarily what it was played out to be. I don't think you see nightly rates increasing either - I think you actually see a decrease in rates due to the competition and peak from 2-3 years ago.
There's a HOA you mentioned - so there will be HOA fees and every 5-10 years there will be a "special assessment" (this is equivalent to capital expenditures on a LTR type house).
I didn't run numbers - but I personally don't like it. I looked heavily into the STR market back in 2022 and it didn't make a ton of sense then. I'd do it, but I'd need a unique location that's beachfront. I think it makes even less sense now
Greetings, we are beginners with str investing, went under contract for a new construction house, 3/3.5, 2000 sq ft, across the street from the beach, good area with many restaurants and entertainment. Having cold feet! Estimates say the rental potential is 55 to 75k a year. I notice a lot of competition from beach front condos of the same size. The community has 120 houses, similar size, all eligible to be strs. Large community pool, 2400 Hoa a year. The house is not on a water. We are 6 hour drive away, so plan to use management comp. No mortgage, so can skip the insurance (is it a good idea at all?). My hope is if it will not give lots of cashflow, at least we’ll cover the expenses and it will appreciate as the area will develop, inflation raises etc. My thinking- many ppl escape Florida now bc of taxes and insurance cost. Maybe Alabama cost will flourish soon. Any thoughts? Should we do it? Have to decide by Friday.
I have properties in states other than the one I live in. I use management comp for some of them, but not all. It is possible to manage your properties with Turno, as it creates automatic cleaning projects, has problem report functionalities and so on. It can be a bit overwhelming at first, but managing my properties remotely has given me a lot more time to focus on other activities. My only piece of advice is: don't choose the cleaner based on your pocket, choose based on your heart. The lowest-priced cleaner is rarely the most efficient one.
I know the community you are talking about & have sold in there, so happy to help in any way. Do not skip on insurance. It's relatively inexpensive on new construction like that & I can connect you with a great insurance agent here. We have owned investment property in Orange Beach since 2009. Feel free to reach out! We have helped many BP investors in this area and have many resources that may be helpful to you!
I think it can be a good investment for the right buyer with strategies for setting it up to stand out to potential guests, the right property management and appropriate expectations. It takes some time to gain traction as a new rental & it sounds like you will not be able to launch the rental until after prime Summer season, so you will need to be prepared for that as well! During the Fall season, you will see shorter stays of 3-4 nights vs weekly rentals like Summer and January-mid March will be monthly rentals typically. I have seen some healthy snowbird rental numbers at that community!