Gulf Shores / Oragne Beach Investment

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Gulf Shores / Oragne Beach Investment

Matthew Miller
Member since 2020 路 4 posts 路 1 vote
Hello all! I am a total newbie to investment properties, so please bear with me.

I am considering purchasing a house in Gulf Shores/Orange Beach area initially as a vacation home and potentially as a retirement (way down the road) home.

Before I ask my questions, let me give some information:
I do not expect the home to be used by me, or my family, for more than 6 NON-consecutive weeks out of the year. Additionally, there would be limitations on when family could use the house - no, you can't go there for 3 weeks solid every July, you get the idea - to allow more rental availability.

I live 6 hours away, so I would need to use a property management company.

With those two points in mind, for those of you familiar with the area and investing there, will I be able to break even? Will the house pay for itself?

Cash flow would of course be nice, and who knows, maybe I'll venture deeper into real estate investing, but that is not at all my primary concern.

Thanks ahead of time for any and all information!
1Reply
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Most Popular Reply

Conor Shinnick
Rental Property Investor 路 Mooresville, NC 路 Member since 2016 路 19 posts 路 15 votes
6y

STR being more risky is not necessarily true. My first two properties are STR that we self manage from out of state and they are doing great. Don't worry so much about what kind of property to start with. It's more important to choose an investment that you are interested in and then find a great mentor (Lucas and Avery Carl for us!) to help you along. There will always be a learning curve to overcome, but a mentor shortens that time considerably.

Orange Beach/Gulf Shores is certainly a viable market to start in. Consecutive vs non-consecutive weeks of use isn't the issue. It's more of a total use during peak season concern. Candace is exactly right about use during the summer. Those months are critical to build reserves to carry you through the low season.

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  • Candace PfabBusiness Member
    Realtor 路 Orange Beach AL 路 Member since 2018 路 150 posts 路 125 votes
    6y

    Hi Matthew.  We live & invest in Orange Beach/Gulf Shores.  Buying now makes a lot of sense, especially if you are going to finance this investment since rates are at historic lows and you can lock in at today's values.  In this market, you see more value in appreciation than cash flow.  It will be tough to break even with 6 weeks of personal usage & you may have some tax implications to consider.  Here is the IRS position:  

    Taxpayers renting property can use more than one dwelling as a residence during the year. A dwelling is considered a residence if it's used for personal purposes during the tax year for more than the greater of 14 days or 10 percent of the total days rented to others at a fair rental value.

    Our prime season is Memorial Day to middle of August.  I would be happy to help you gather some numbers to do a deeper dive into your question if you want to connect!

    1Reply
  • John UnderwoodPro Member
    Investor 路 Greer, SC 路 Member since 2014 路 13k+ posts 路 17k+ votes
    6y

    It will be much easier to break even or make money if you aren't paying a PM 30% of your gross income. 

    It is easy to remotely manage with the tools vrbo and airbnb provide. Get a great cleaning crew that can be your eyes and ears and you also can remotely manage Ike many people here on BP also do.

    1Reply
  • Candace PfabBusiness Member
    Realtor 路 Orange Beach AL 路 Member since 2018 路 150 posts 路 125 votes
    6y

    Good feedback from John, but just want to clarify that management fees here run closer to 20% :)

    0Reply
  • Luke CarlPro Member
    Rental Property Investor 路 Tennessee Florida 路 Member since 2016 路 4k+ posts 路 5k+ votes
    6y

    A 20% PM will earn you 10% less than a 30% PM. It's all relative. Big John is right. Manage it yourself. If you don't like replying to a couple of messages a day.... hire a VA.

    PM Software (igms / yourporter) 
    Pricing Software (price labs / beyond pricing) 
    Auto Scheduling....
    Takes a day or two to set this stuff up but it's set it and forget it. 

    Distance is not a factor. I manage 26 doors. All of which are in different zip codes and some in different states than where I am physically. If there's anything COVID taught us it's that the boomer era of having to be somewhere to make money is dead and gone. 

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    3Reply
  • Katie House
    Accountant 路 Member since 2019 路 23 posts 路 7 votes
    6y

    Matthew, I wouldn't pick a STR as my first property to invest in. STR are a lot more work and risk.

    0Reply
  • Conor Shinnick
    Rental Property Investor 路 Mooresville, NC 路 Member since 2016 路 19 posts 路 15 votes
    6y

    STR being more risky is not necessarily true. My first two properties are STR that we self manage from out of state and they are doing great. Don't worry so much about what kind of property to start with. It's more important to choose an investment that you are interested in and then find a great mentor (Lucas and Avery Carl for us!) to help you along. There will always be a learning curve to overcome, but a mentor shortens that time considerably.

    Orange Beach/Gulf Shores is certainly a viable market to start in. Consecutive vs non-consecutive weeks of use isn't the issue. It's more of a total use during peak season concern. Candace is exactly right about use during the summer. Those months are critical to build reserves to carry you through the low season.

    4Reply
  • Katie House
    Accountant 路 Member since 2019 路 23 posts 路 7 votes
    6y

    Strongly disagree with Conor about your risk. If you are inviting more guest to your property you are inviting more risk. Most likely if you have a long term rental they aren't having as many guest over as you are with a short term. Just think about it. 

    1Reply
  • Luke CarlPro Member
    Rental Property Investor 路 Tennessee Florida 路 Member since 2016 路 4k+ posts 路 5k+ votes
    6y

    @Katie House You're way off topic. And also way uninformed. Guests don't have a lease. Your contract and rental agreement with them determine the number of people. If you're super paranoid, you watch the camera and count people. If they have more people than agreed - you send them a bill or you ask them to leave without a refund, if that's what your rental agreement says (and mine does). If they refuse to pay you get the platform involved. If they refuse to leave... you call the police and have them removed. 

    STR just like LTR has its systems. Your comment is no different than someone unfamiliar with LTR saying they're scared of evictions.

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    2Reply
  • Katie House
    Accountant 路 Member since 2019 路 23 posts 路 7 votes
    6y

    @Luke Carl feel free to PM me for my cell number and we can discuss via a phone call. I have both STR and LTR. My comment was "risk" and "more work" so I'm not sure why you think I'm off topic? More people, more problems. In a 3 month time LTR will have 20-30 people over, maybe. In a 3 month time during peak season a STR will have at least 150... I look forward to your call so we can discuss.

    0Reply
  • Katie House
    Accountant 路 Member since 2019 路 23 posts 路 7 votes
    6y

    Matthew I also suggest you follow the group "Pensacola Airbnb Host Club" if you plan to self manage as it is the closest one to the area. Other companies who manage in the area are Meyer, Kasier and Gulf Shores Vacation Rentals, if you need quotes (18-23%.)  Here's the licensing information for GS (https://www.gulfshoresal.gov/780/Rental-License)

    1Reply
  • Tom Gillotti
    Member since 2018 路 84 posts 路 28 votes
    6y

    This thread got spicy 馃挜 馃榿

    Good discussion all around!

    2Reply
  • Matthew Miller
    OP
    Member since 2020 路 4 posts 路 1 vote
    6y
    Thanks everyone for the input.

    Wanted to clarify, the 6 weeks would not occur during peak season. I'm thinking a maximum of 3 weeks non-consecutive May-August, and the remaining 3 weeks would be spread out over the rest of the year in short stays. Like 2-3 days at a time.

    With this in mind, would it be possible to break even/pay for itself or at least get close to paying for itself?
    I don't mind having to pay some for a vacation home, but it would be nice if MOST of the mortgage could be covered from rental income.


    0Reply
  • Tom Gillotti
    Member since 2018 路 84 posts 路 28 votes
    6y

    If you run your numbers and factor those periods in as "vacancy" and it still works then you're good. I use an app called investment property calculator. It's free with a paid option and works well!

    0Reply
  • Candace PfabBusiness Member
    Realtor 路 Orange Beach AL 路 Member since 2018 路 150 posts 路 125 votes
    6y

    It's possible.  Like Tom said, you just have to run the numbers & decide if you are going to self manage or work with a property manager!

    0Reply
  • Avery CarlBusiness Member
    Real Estate Agent 路 USA 路 Member since 2016 路 909 posts 路 1k+ votes
    6y

    Poor people analyze risk. Rich people analyze reward. STR's are more work and you do have more people in and out, but they are being professionally cleaned several times a week. My STR's have pro cleaners in there twice a week, and my tenants in my LTR's are doing God knows what all year or until whenever their lease is up. STR is a great way to start and a great way to generate more cash flow more quickly so that you can scale your portfolio faster, but they are not for everyone.

    Podcast Guest on Show How to Get More Airbnb Bookings This Spring and Summer Break
    0Reply
  • Katie House
    Accountant 路 Member since 2019 路 23 posts 路 7 votes
    6y

    Wow, I鈥檓 really not sure how (or why) my opinion is rubbing people the wrong way. I though this was a platform for learning and leaning on one another and for self growth. 
    Matthew, I鈥檓 here to answer any question you may have about the area or my experiences with both short-term and long-term rentals. 

    0Reply
  • Kevin Landry
    Rental Property Investor 路 Madisonville, LA 路 Member since 2018 路 3 posts 路 0 votes
    6y

    @Matthew Miller Most of May and August can earn decent rental income. It is best to limit personal use to the Spring and Fall and any last minute gaps. If you want 6 weeks on your terms, I wouldn鈥檛 plan on breaking even.

    0Reply
  • Joey Morea
    Lender 路 Tampa, FL 路 Member since 2018 路 149 posts 路 102 votes
    6y

    Are you looking for a home our a condo? There will be pros and cons to both. Condos are easier to rent and will rent more year round and less maintenance vs a larger home will have a shorter rent window for larger families but can bring in a higher nightly rate but more things to worry about with maintenance and insurance . Mortgages will be different for a condo tell which most of these large condos on the beach are vs a conventional mortgage. I wouldn鈥檛 plan on using anytime in May, June, July, or August. And if you are speaking about those 2-3 day trips don鈥檛 plan on doing them over the weekend if you want to maximize maybe a Monday to Thursday etc or just plan on only going last minute when it鈥檚 not booked. Which if you are doing it right should be not very often. I own a condo in PCB totally doable to self manage remotely as I live in atlanta 6 hours away and do it with this as well as a home in Orlando. I am not as familiar with the gulf shores market as the PCB/Destin area but I bet you could make it work with it paying for itself if you are willing to only go at slow, low rates times frames. I spoke to a couple in my building that lives in their unit from oct to March and rents it out over the summer to cover its entire cost for the year.

    0Reply
  • Matthew Miller
    OP
    Member since 2020 路 4 posts 路 1 vote
    6y
    Originally posted by @Kevin Landry:

    @Matthew Miller Most of May and August can earn decent rental income. It is best to limit personal use to the Spring and Fall and any last minute gaps. If you want 6 weeks on your terms, I wouldn鈥檛 plan on breaking even.

    So utilizing 3 non-consecutive weeks between May and August wouldn't allow me to break even?

    And to your point about last minute gaps, that is exactly how I envision using the other 3 weeks.

    I'll also add, I'm totally flexible. I say 6 weeks, but it'll probably be more like 3-4 max. Probably only 2 weeks the entire peak season. I just wanted to get an idea about personal usage to see if it would pay, or ALMOST pay, for itself.

    0Reply
  • Katie House
    Accountant 路 Member since 2019 路 23 posts 路 7 votes
    6y

    Here's the MLS for our county, https://www.baldwinrealtors.com/index.php?submenu=Search&src=gendocs&ref=search_mls&link=search_mls

    Feel free to start running the numbers. I will tell you that probably 35% of guest book last minute with less than 1 weeks notice on Airbnb during the summer. Also keep in mind not all condos allow rentals (The Sands being one of them.)

    0Reply
  • Matthew Miller
    OP
    Member since 2020 路 4 posts 路 1 vote
    6y

    Thanks everyone for the information!

    0Reply
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