Real Estate Agent · Pensacola, FL · Member since 2014 · 379 posts · 307 votes
I am trying to calculate potential returns on a short term investment property, specifically a Pensacola Beach rental. I’ve nailed down rates per season but I’m not sure how to figure occupancy.
For those of you that own a STR in a beach town, how many days per year do you have renters? If you really know your numbers, how many days for each season.
Why don't you try looking at similar properties in that location on Vrbo and Airbnb and see how full their calendars are and what rates they are charging. You could drop this into Excel and easily get some averages from a few properties.
There is a company called airdna that compiles airbnb data. I think the data you are looking for is in their premium service. I believe the occupancy data is simply based off of days when it is off the market, so theoretically it could include days the owners use it/rent to their friends.
I am trying to calculate potential returns on a short term investment property, specifically a Pensacola Beach rental. I’ve nailed down rates per season but I’m not sure how to figure occupancy.
For those of you that own a STR in a beach town, how many days per year do you have renters? If you really know your numbers, how many days for each season.
If you pay $40 on AirDNA for the Gulf Breeze data set, you’ll get your answer to this question plus way more (Pensacola beach falls into Gulf Breeze on their map). Personally I’d consider it the best $40 you can spend given the magnitude of an investment like this :)
AirDNA will also help you validate the rates you’ve come up with.
@Tyler Weaver that’s great info, I kept seeing that site come up as I tried to research. I’d still love to hear from some actual owners though, I know various other sites like vrbo also do well and some owners even run their own private sites for bookings.
@Matt Jones I just bought a vacation rental in Gulf Shores, AL and over the course of the year, I was told to expect 50% occupancy from a seasoned local owner. Keep in mind that’s an average though. You might have 100% occupancy during summer months but in the off-season, vacancy goes up and nightly rates go down so you get hit twice. If you can find a snowbird who wants to live there part time every year, say October thru March, maybe you can up that 50% to 80-90%.
@Reginald Ross congrats on the new place in Gulf Shores! I had thought about lower occupancy and lower rents in the winter so I planned to not touch summer profits in the first year until I had a good feel for off season occupancy.
Why don't you try looking at similar properties in that location on Vrbo and Airbnb and see how full their calendars are and what rates they are charging. You could drop this into Excel and easily get some averages from a few properties.
@Tyler Weaver that’s great info, I kept seeing that site come up as I tried to research. I’d still love to hear from some actual owners though, I know various other sites like vrbo also do well and some owners even run their own private sites for bookings.
Matt. Coworker of mine owns a beach condo in perdido. Its across the street from the GOM 1br
He has more vacant days than rented. Even in this season. I can connect you to him for more specific info. Just txt me
@John Underwood I tried some of that but I did not see where Airbnb or VRBO would let me look at past bookings further back than the current month and looking at future bookings can be misleading because the vacant dates may continue to fill.
@Matt Jones I respectfully have to disagree with the above suggestions about AirDNA when it comes to occupancy rates for the Emerald Coast vacation rentals. I'm in Fort Walton Beach (down the street from you, lol). Feel free to message me, etc. But to give you the big picture: occupancy rates in the off-season are almost irrelevant because the prices are so much lower. For example, in January a beachfront two bedroom condo can be priced at under $120 per night. The same condo in June will be priced at over $400 per night. Also, in January and February you may choose to book monthly to "snow birds". While on the books that would show occupancy rates of 100% that still make those the least profitable months of the year. On the flip side, in the summer most beachfront vacation rentals require 7 day (Saturday to Saturday) bookings. So unless something is majorly wrong, you should have 100% occupancy in June and July. That is where you will make the biggest bulk of your money. In November you may have 70% vacancy. That happens and it's not that big of an issue. Saying that you have an overall occupancy rate of 80% for the year is actually irrelevant. There is a HUGE difference if the 20% vacancy occurs in November or in June. Message me if you want to discuss or if you want to call me.
I am not a fan of Airdna based on some numbers I've seen that aren't terribly accurate in my experience. Occupancy rate is not as important to me as gross/net revenue. I could have 100% occupancy charging only $50 a night but the margin is so low on my labor, not to mention the wear and tear (and clientele attracted to that price point) on my property. I tend to charge higher and have less occupancy but still come out ahead. Most STR properties that are 100% booked all year are leaving money on the table and getting more wear and tear than they should. It's a supply and demand balance. Not to mention that marketing, customer service, property management, owner usage, etc heavily impact each property individually. So, to answer your question, I'd do some research to identify the rate that similar units are charging during different parts of the year and as @Villy Ellinger said, factor in the occupancy for each part of the year.
Right on Wendy. Something many new and experienced investors seem not the grasp is it is not about profit. It is about risk adjusted profit. It is why we have locks and insurance and try some kind of screening on guests, Etc. It is why we worry about changing regulations and neighbors and a truly bad guest to might even falsely report hidden cameras or other things. But there are many other risks such as wanting to know the yield on a property in today's market. The most likely scenario in most parts of the country, is Market saturation driving down rates.
I am not a fan of Airdna based on some numbers I've seen that aren't terribly accurate in my experience. Occupancy rate is not as important to me as gross/net revenue. I could have 100% occupancy charging only $50 a night but the margin is so low on my labor, not to mention the wear and tear (and clientele attracted to that price point) on my property. I tend to charge higher and have less occupancy but still come out ahead. Most STR properties that are 100% booked all year are leaving money on the table and getting more wear and tear than they should. It's a supply and demand balance. Not to mention that marketing, customer service, property management, owner usage, etc heavily impact each property individually. So, to answer your question, I'd do some research to identify the rate that similar units are charging during different parts of the year and as @Villy Ellinger said, factor in the occupancy for each part of the year.
Right on Wendy. Something many new and experienced investors seem not the grasp is it is not about profit. It is about risk adjusted profit. It is why we have locks and insurance and try some kind of screening on guests, Etc. It is why we worry about changing regulations and neighbors and a truly bad guest to might even falsely report hidden cameras or other things. But there are many other risks such as wanting to know the yield on a property in today's market. The most likely scenario in most parts of the country, is Market saturation driving down rates.
In the case of areas with market saturation, we strive to compete on the experience rather than the cost. For example, in the Orlando area, we bought a very unique themed property that would stand out from the hundreds of properties that look the same. We market to friends, charities, media (including USA Today and TV), social media, etc to find customers that aren't going to be looking for the cheapest accommodations but know, like and trust us so they stay in our properties. It's a different ballgame than when we could just put them on VRBO and Airbnb and book like crazy.
I am not a fan of Airdna based on some numbers I've seen that aren't terribly accurate in my experience. Occupancy rate is not as important to me as gross/net revenue. I could have 100% occupancy charging only $50 a night but the margin is so low on my labor, not to mention the wear and tear (and clientele attracted to that price point) on my property. I tend to charge higher and have less occupancy but still come out ahead. Most STR properties that are 100% booked all year are leaving money on the table and getting more wear and tear than they should. It's a supply and demand balance. Not to mention that marketing, customer service, property management, owner usage, etc heavily impact each property individually. So, to answer your question, I'd do some research to identify the rate that similar units are charging during different parts of the year and as @Villy Ellinger said, factor in the occupancy for each part of the year.
We have two vacation rentals on the Big Island of Hawai'i which is a year round destination. Our 1 bedroom condo was rented 79% last year and our two bedroom townhouse was rented 70% of the year. Both are oceanfront properties which helps on getting rentals since the location is nice.
Don’t forget that your costs are higher on the beach. Salt air wears everything out. Then there is the occasional tropical storm or hurricane. Yes, you have insurance but it won’t cover everything. We have found our beach rental to be a break even in terms of cash flow, but the value of the place just keeps shooting up. We enjoy using it too, so we consider it a very good investment.
Call the vacation rental management companies in the area and fund out what their average occupancy rates are.
I would also request booking and income history and future bookings from the seller to see how the unit has performed. That’s probably your best metric since this unit may have an aspect that makes it more or less desirable.
There are so many other factors that go into your occupancy...
STR occupancy will vary by market, and even from two buildings a block apart. In Maui we can often achieve 85-95% occupancy (people come here year round). But there are many markets that might average 50-60%. I go to an island off NJ; Long Beach island and they can be as low as 20% or less since they really only get rented June-September.
Another factor of course is the condition, location and view of your unit and your nightly rate. If your neighbor charges $100/night and you charge $150 and his unit is nicer, you probably won’t achieve the occupancy that your market produces.
One more factor is history. Generally, The longer a unit has been a STR, the higher the occupancy since each year you'll earn more repeat guests that book the same dates each year.
Qualifications: I’ve worked w STRs for 7 years including managing 67 vacation rental condos on Maui for a few years.
I’m out in Maui and we may be a little different out here, but there are several factors that come into play.
1) How nice is your place? More appealing places book quicker. Does your place stand out?
2) Location: Are you in a highly touristy area? I buy in one specific area where there is walking distance to restaurants, shops, world-class beaches and activities.
3) Your property managers. This one is huge. While I’m running at about 98% occupancy year round, our average in this area is about 85%. Property managers make a huge difference. We do our own management so we can pay extra attention to our units, but if you use a pm company you’ll likely be just another client with no incentive for them to rent your condo over another clients.
Sorry I don’t know more about your specific area but those are some of the biggest factors out here.
Awesome info, thank you all for contributing. I'll call around to some local STR management companies and ask for estimates. This is a very touristy beach area but I would definitely expect it to be more seasonal with our climate. This particular unit is not currently a beach rental and has not been for the current owners so I have no past data. I would be doing a small renovation & furnishing it so it would be very nice & stand out when it was done I believe. We would probably manage this ourselves, I already manage LTR's for myself and others and have been able to keep vacancy extremely low. I expect after a learning curve we could do the same for our first STR. Thanks!
Awesome info, thank you all for contributing. I'll call around to some local STR management companies and ask for estimates. This is a very touristy beach area but I would definitely expect it to be more seasonal with our climate. This particular unit is not currently a beach rental and has not been for the current owners so I have no past data. I would be doing a small renovation & furnishing it so it would be very nice & stand out when it was done I believe. We would probably manage this ourselves, I already manage LTR's for myself and others and have been able to keep vacancy extremely low. I expect after a learning curve we could do the same for our first STR. Thanks!
Since it's not already a STR, make sure it's fully legal in the city and the HOA to do STR and make sure that won't be changing whenever the crackdown on Airbnb comes.
Also, unless you're getting a killer deal on this unit, it might be worth considering some units that are already STRs, to save the cost of furnishing, preparing for STR, permitting - if required there, and the long process of building of repeat guests and occupancy... Unless you're getting such a great price that it makes up for those added costs, it might be worth considering.
@Matt Jones we own beachfront condos in SW Florida (Sarasota/Siesta Key). The beach seasonality should be similar. You should expect to be fully booked mid-Jan through mid-August. There is a slight lull between the end of Spring Break and start of Summer vacation. Once schools are back slow season starts and rates dip. We typically manage to stay busy but I would conservatively estimate 50% occupancy mid-Aug to mid-Jan. Thanksgiving/December holidays/NYE should be full.