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Brandon Richardson
  • Investor
  • Atlanta, GA
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Actual Numbers: 2-Year Update on VR in Destin, FL

Brandon Richardson
  • Investor
  • Atlanta, GA
Posted Oct 19 2017, 07:58

I've received a few direct messages over the last few months regarding this thread:

https://www.biggerpockets.com/forums/530/topics/20...

So, rather than typing everything out every single time, I figured I would post an update in a new thread. Here goes.

We bought a VR in a beachfront condo property in Destin, FL in July, 2015. It's in Miramar Beach, to be specific. I have 2 good years worth of data. I won't give exact numbers, but you can figure it out.

  • We put 25% down. Got a 30-year mortgage at 3.5%.
  • It's a 2 bedroom, 2 bath unit on the 7th floor with a great beachfront view.
  • Closed at just under $400k.
  • Gross rental revenue for 2016: $43k.
  • Gross for 2017: $45k.
  • We use the on-site property management service, which charges 25% of gross rentals
  • HOA fees are $649/month

If you do all that math, you'll figure out that we come out of pocket a little bit (~$1,500-2,000/year). And actually, there was a special assessment this year that set us back another $4k.

All that said, it's not as bad as it seems.

We use the condo ourselves for 2-3 weeks per year. That's a few thousand dollars we don't have to pay to rent a place. We only use it during the off-season and random weeks or weekends when it isn't rented.

We have a 1-year old, and will have at least 1 or 2 more kids. We plan to own this place for 20+ years and bring the family here.

I've run the model out for that long (20 years). At the 10-year mark -- if we were to sell -- then the profits would average back out to around 7% year over year. That isn't great, but it isn't horrible. This is all assuming around 1.5% appreciation.

If we do hold onto it for 20+ years, then that number grows a lot.

Another thing to consider is the 25% property/rental management fee. If we did this all ourselves, then we'd clear $10,000/year. But, we live in Atlanta. Managing a beach rental from 5 hours away would be an absolute nightmare. The last thing I want to deal with every single Saturday during peak season is someone not happy with something, not able to get the key code to work, the unit isn't clean, etc. There are other third-party management companies in the area that take smaller fees (20%, I think). But our rental program is on site. It's completely seamless for guests, and the office handles everything. It's basically like a hotel where people own the rooms.

Along with the other fees mentioned, there are a bunch of other small fees that come with a VR:

  • Broken dishes/appliances/toilets/whatever
  • Annual fees for certain items maintained by the that are NOT part of the HOA dues (cable boxes, fitness center, etc.)
  • Replacing furniture as it wears out

So, I guess my final take is that a VR in a popular beach area is only a good investment if you're willing to hold onto it for a long time. We went in with this mindset, so I'm pretty happy with how things are going so far. In fact, I'm typing this from our balcony right now.

You can get properties across the street from the beach or a few blocks away for a little cheaper. I'm not sure if they rent as well, but I've seen some gross rental numbers that are pretty close to ours. So, properties just off the beach may cashflow better, which is something to consider. You also may go to less touristy areas, but I can't say if they will gross as much.

I think I covered most everything. Sorry if anyone was looking for a wonderful story of quick riches, but I'd rather be honest about our specific case. I'm sure every market is a little different.

Thanks!

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