Vacation Rentals
Real Estate Agent · Kannapolis, NC · Member since 2016 · 54 posts · 13 votes
Does anyone have any experience is vacation rentals? I'm just north of Charlotte, NC and have played with the idea of mountain cabin rentals and ocean front rentals. Good investment/bad investment? Upsides? Struggles? Any thoughts on the topic would be helpful. Thanks in advance!
Hi @Jeremy Aldridge! I've been selling vacation rentals to investors in Orlando for almost a decade now. If you're new to it, here is what you want to pay attention to:
1. The location should be within an hour of a major airport. Preferably an international one.
2. If you are going to look at Florida you should be aware of the high cost of insurance anywhere along the coast. It takes a huge chuck of your profit. The coastal areas are the most high risk for hurricanes here in FL so the cost of insurance is much higher than the areas that are inland such as Orlando.
3. Beds/baths. Here in Orlando the higher you go in bedrooms the more income potential you have. 6+ bedroom homes are grossing six figures while 2-3 bedroom condo and townhouses are lucky to see 25K a year in income.
4. Management. You need a good PM. If you try to self manage from afar it's most likely going to be a disaster. It's worth the fee if you have a good PM. They should also be able to put bookings in place as well. I would talk to @Gerard Lester about this.
5. Furnishing expense. Please keep in mind you will have this and need to factor this into your budget. You have to be willing to make it nice inside as well. There's a lot of competition and the ones that book first and the ones that are decorated nicest and offer the best amenities both inside the home and around it.
6. The view. Don't buy anything without a view. Preserve is better than looking at another house. Mountain and lake views are great up North. In Central Florida a preserve is better than a lake because people are scared of alligators.
If you need any more advice feel free to reach out. I'll send you my number if you'd like to chat. I also have spreadsheets on Orlando properties you can look at that you might find helpful.
Good luck!!
Does anyone have any experience is vacation rentals? I'm just north of Charlotte, NC and have played with the idea of mountain cabin rentals and ocean front rentals. Good investment/bad investment? Upsides? Struggles? Any thoughts on the topic would be helpful. Thanks in advance!
@Jeremy Aldridge I would like to hear what folks are doing with this here as well.
So going to follow this post some folks jump in
Alex
Hi Are you thinking about this because you want to use the property too?? for vacations, later retirement?
or are you looking to build equity in an asset?
If you aren't thereto personally oversee maids, repairs etc. it can be very expensive
i know ocean props require a lot of maintenance upkeep just due to the salt in the air (my aunt had a 2nd home and talked about how the salty enviro eats thru everything sooner or later.
I have a close friend that partnered with friends for a nice rental at a NC ski area.
AND the expenses and vacancy killed that investment.
It's different if you want a 2nd home to be partly paid for by seasonal renters, like VRBO.com... but work smart and if your own backyard is as affordable as Charlotte (vs Boston or San Diego we look dirt cheap)
then INVEST in your own backyard.
I know a fellow investor who has vacation rentals in Gatlinburg TN. The area has year round visitors. His rentals are 5+ bedrooms with mostly king master suites. His CAP rate exceeds 30%. Many rentals were previously bank REOs or foreclosures from owners who didn't understand the financial & operational aspects.
This would be hard to replicate elsewhere, as Gatlinburg is focused on year round tourism which is great for low vacancy. All reservations are done thru VRBO with local maintenance & housekeeping. Using a property manager would take a big hit on returns. They also spend 3-5 days/mo in Gatlinburg (they live near Charlotte).
Thank you all for your input. This property would be used for income and very rarely used for my personal vacation. I had a friend who invested in a condo in a resort in Myrtle Beach. HOA fees seem high. Do any of you guys have any knowledge of condo/resort type of investment?
Interested in info as well. My husband and I are looking in the Destin/Miramar/Seaside areas. HOA fees seem high as well as the realtor told us the management fees are 25-30%. We would like to get a condo that is ocean view to generate income plus have paid off down the road for retirement. But seems like the cash flow is small because of all the fees. Any one doing any in the FL area?
Hi @Jeremy Aldridge! I've been selling vacation rentals to investors in Orlando for almost a decade now. If you're new to it, here is what you want to pay attention to:
1. The location should be within an hour of a major airport. Preferably an international one.
2. If you are going to look at Florida you should be aware of the high cost of insurance anywhere along the coast. It takes a huge chuck of your profit. The coastal areas are the most high risk for hurricanes here in FL so the cost of insurance is much higher than the areas that are inland such as Orlando.
3. Beds/baths. Here in Orlando the higher you go in bedrooms the more income potential you have. 6+ bedroom homes are grossing six figures while 2-3 bedroom condo and townhouses are lucky to see 25K a year in income.
4. Management. You need a good PM. If you try to self manage from afar it's most likely going to be a disaster. It's worth the fee if you have a good PM. They should also be able to put bookings in place as well. I would talk to @Gerard Lester about this.
5. Furnishing expense. Please keep in mind you will have this and need to factor this into your budget. You have to be willing to make it nice inside as well. There's a lot of competition and the ones that book first and the ones that are decorated nicest and offer the best amenities both inside the home and around it.
6. The view. Don't buy anything without a view. Preserve is better than looking at another house. Mountain and lake views are great up North. In Central Florida a preserve is better than a lake because people are scared of alligators.
If you need any more advice feel free to reach out. I'll send you my number if you'd like to chat. I also have spreadsheets on Orlando properties you can look at that you might find helpful.
Good luck!!
Erica thank you very much for your response. This information helps a ton. I am currently in the piedmont of NC but I know some members on here are from FL. I would still appreciate being able to reach out. Please message me your number. Thank you.
@Erica Muller said it all .. I couldn't add a thing but this, when searching for a vacation rental look at it through not only your eyes but a renters .. If it appeals to you then it may very well work for potential renters with the exception to decor .. staying with neutral colors doesn't always have to be used , instead try decorating with native decor . In Florida it's plam tree leaves and bamboo , light houses , Dolphins , or Disney .. You get the idea .. Rattan furniture or wicker .. Bright pastel colors .. But be sure not to over do it .. To much can turn people off also .. Just my opinion .. Sounds like Erica knows what she's doing though .. Good luck and God Speed ..
I personally converted several of my long term rentals into vacation rentals. If you have the time and are capable you don't need to hire a property manager. That being said, the vacation rentals require a ton of work and time. You need to be prepared to communicate with guests regularly, coordinate cleanings, make sure the house is stocked with clean sheets, towels, toilet paper, paper towels etc.
I make more $ on my vacation rentals, but they also require much more work.
umar please forgive me I forgot got caught up in the moment
my family has a vacation rental (duplex) 1 block from beach in SAN Diego. It had a vacation rental on the beach in gulf shores Alabama.
For the SAN Diego unit it barely does better than it would as a long term rental due to pm fees and vacancy. A block from ocean is pretty close but the ocean front rent faster even though they cost more. So there is a big difference in vacation desirability between close to the beach and beach front.
The gulf shores units (duplex) we sold for a combination of reasons including 2 hurricanes, outrageous insurance costs, property tax increase that was going up faster than the rents. It was an awesome property literally on the beach, walk out the front door on to the sand. But it was a pain and no longer profitable. The insurance doubled almost every year that we owned the unit but rents barely moved. When hurricane repairs were needed the out of state owners were the lowest priority.
So a good vacation rental will be costly, high quality, great location unit that hopefully is safe from natural disasters.
Good luck
We have been doing exactly this for 14 years and have had incredible success with it. If you are in the right market (heavy tourism in a desirable location) you can almost guarantee reservations at will. Because of our success, we have had dozens (hundreds?) of interested owners in our area ask us to run their nightly rental as well. Unless it was very close to us we generally would pass.
The one absolute truth I can promise you is this. ALL customers want big, cheap, clean. If you can meet those standards you will have many years of happy renters.
@Jeremy Aldridge My recommendation if you are planning to invest in a vacation rental is to ensure that it is 6 bed/bath and larger. Even thought the home price is higher, it has a much better ROI potential that the typical 3/2. Also, you are competing with only 1.5% of all vacation rentals instead of the 98.5% which are 5 bed and smaller. Also, you can appeal to groups that are vacationing, life event, sports, and business travel. You can see more information at my website.
Regarding Florida; is it true that after one night a 'vacationer' can establish residency in the dwelling and be very difficult to evict?
Antonio, It is much easier to evict a transient guest in Florida than a long-term renter.Vacation rental properties in Florida must register with the Department of Business and Professional Regulation under Hotels and Restaurants http://www.myfloridalicense.com/dbpr/hr/index.html and are treated like a hotel by the state.
Short-term bookings for vacation rentals falls under the same category as a hotel. Read Florida Statute FS 509.141 titled Refusal of admission and ejection of undesirable guests; notice; procedure; penalties for refusal to leave.
Hope this will help.
I looked quite a bit at having a vacation rental that cash-flowed and came to a couple of conclusions, your mileage may vary but mine were:
1.) Beach areas were better than mountains because your have a longer peak some and some off-season renting. Some ski towns did have attractions in the summer and when looking at the statements from management companies it because it's to pick those out.
2.) Management fees can range from 20% - 40% (depending on the market) and that can make a huge difference in being able to cash-flow. Pro-formas you get typically won't include that management fee and look great...until you start called property management companies in the area.
3.) Maintenance is going to be higher than you think because sea air can just wear things out faster and you have to replace things like bed sheets, towels, etc. that you don't in a "standard" property.
4.) To cash-flow the property has to able have been built for occupancy. Meaning you really want as many bedrooms AND bathrooms as possible. Vacation rentals that are built like "typical" SFRs just don't rent for as much so you can't get as much in the peak season.
5.) While you can get a vacation rental to cash-flow it likely won't cash-flow as well as a multi-family or SFR because of all of the above.
6.) And, lastly, you have to really comfortable with banking money during the great months to pay the mortgage, expenses, etc. when it's not peak season. Not to mention watching a bank account decline on month-over-month probably 50% of the year.
I can see doing it if you want to spend time there during the off-season, let friends and family use it during the off season, etc. but on a pure ROI basis I've always found better options in multi-family.
A lot of people have recommended incredibly large (6+ bedroom) homes for vacation rentals. I'd like to throw out an opinion on the opposite end of the scale.
I have a 1 bedroom condo in a ski resort area that is doing incredibly well on Airbnb. I LOVE having the smaller units because everything is a little bit easier. We normally only have couples or maybe a small family that stays so we don't deal with people partying or or making a mess hardly ever. It's less laundry and way less to clean. I would assume there are plenty of young couples that probably want a get-away to Gatlinburg without having to invite their entire extended family to fill a 7 bedroom home. That being said, I'm obviously not in that local market so I'd try to talk to someone who is, but we have really loved the small unit rental.
We've been grossing $3500-4500/month on Airbnb with this strategy.
All, thank you very much for all of your input. I'm already learning a great deal on this website.
I'm also about to take my first steps in the vacation rental market - looking very hard at the St. Pete Beach, Fl area. By the prices I'm seeing im assuming most of the equity has already been recaptured on most beach front property at this point. I'd like to slowly acquire vacation properties that rent regularly enough to at least help me come close to break even on the mortgage each year - after expenses.
I plan to use the property as often as I (or friends and family) can, but my job keeps me living in various parts of the country, on the road, for the foreseeable future. I'd like to slowly acquire enough properties over the next 20 years to help subsidize my retirement years - and give me something to do. :)
My question is... does anyone have any opinion if there is a benefit to renting to the snowbird market as opposed to the shorter term vacationers? In my search of the St. Pete Beach area i have 2 condo listings that continually catch my eye - but these particular buildings require monthly leases (minimum). My favorite property may even be 3 months min.
I'm trying to feel out how much of a market there is for the longer term leases id be shopping to. Or if the short term market is more dependable.
As @Erica Muller suggested, I'd even be willing to purchase a larger house, with many bedrooms, as opposed to a condo, but i've been told houses in this area must also be rented on monthly terms. Once again making me question how much of a snowbird market there is out there.
Any and all advise is greatly appreciated.
Thank you in advance, Eric.
The snowbird idea has pros/cons. It's good to have that rent locked in for multiple months and your housekeeping costs should be less. However you will probably collect less overall rent than if you did days/weeks. And will that same snowbird property rent the other 7-9 months of the year?
We're also starting to collect short-term rental properties. I did some quick math on the concept of the 2/3 bedroom vs the 5/6 bedroom and I tend to lean towards the smaller properties for a few reasons.
One thing that is certain, is make sure it is in a very desirable area -- for as much of the year as possible. And something with either a view or something special/unique about the property will always get rented before any other units.
Just my opinion. Good luck in your approach either way!
Mark
Any thoughts on an oceanfront condos in a Resort? Particularly in the Myrtle Beach area. HOA fees are seem extremely high ($500 /month) but does cover all utilities, maintenance, and cleaning service. 60/40 resort split on nights they rent out.
I have a friend that has done this but he isn't the most reliable source. Any thoughts from someone doing this? Investors or agents in coastal regions?
Hi Jeremy,
I currently have a 2bed 2 bth beachfront condo in PCB FL. It rents well. I bought it last spring as a forclosure. I do have the management company handle it as I am out of state. They charge 20% except for June July and August they charge 30%. They handle everything. I do nothing. I did remodel it when I bought it. New furniture new fixtures. The works. My HOAs are 471.00 month.
I do not have a mortgage since I paid cash for the unit so I am making money. I'm waiting until a full year to look at my numbers but I can already tell I'm ahead. Plus it is fun to have a beachfront place to stay when I want.
Toni, thanks for your response! Have you had any problems with the resort or the HOA thus far?
"mountain cabin rentals and ocean front rentals. Good investment/bad investment? Upsides? Struggles?"
Mountain cabins seems to be a popular rental in New England. Not sure about NC but our philosophy before buying our first vacation rental was to make sure it was actually a vacation rental. Meaning... would someone consider this a vacation away from their everyday life. Or is this simply an apartment in an area where people vacation. I think if your mindset is the latter you will have a greater opportunity for success.
Mount Snow vacation rentals