Florida Vacation Rental Market Opportunites ?
Investor · Lemoyne, PA · Member since 2014 · 22 posts · 4 votes
Hello everyone,
I’m currently looking home to purchase in the next year or so somewhere in South Florida (considering both east and west coast) as a second part time home as well as a vacation rental to cover the holding costs when I am not there. My question is, does anyone see any future buying opportunities in particular markets that may be heavily affected post COVID 19 pandemic? My initial prediction was markets that were oversaturated with newbie Airbnb investors who were attracted to the increased monthly cash flow will eventually become forced sellers, ultimately deflating single family home prices.
I’m looking in the 1-1.25 million dollar range with a minimum of 4 bedrooms. I know that in certain markets that is considered a lot and others, not so much. Areas that I had my eye on were Sarasota, Key West, St. Petersburg and SE Florida.
Any input would be greatly appreciated!
@Nick Liddell We seem to have much in common in terms of investing; I hope my two cents can be of help. I live and invest in SoFL (East Coast) in Delray Beach, having come from Boston where I also owned rental property (Martha's Vineyard and Killington, VT). I currently own 7 units (3 properites) in Delray Beach and I am always searching for deals. In terms of finding FL deals on the East Coast (I can't speak for the West Coast):
I'm no expert, but I hope my comments can provide some color to your search! Best of luck; you'll love it here.
~Jill
Might be opportunities with the people that are now failing misearably with arbitrage.
Hello everyone,
I’m currently looking home to purchase in the next year or so somewhere in South Florida (considering both east and west coast) as a second part time home as well as a vacation rental to cover the holding costs when I am not there. My question is, does anyone see any future buying opportunities in particular markets that may be heavily affected post COVID 19 pandemic? My initial prediction was markets that were oversaturated with newbie Airbnb investors who were attracted to the increased monthly cash flow will eventually become forced sellers, ultimately deflating single family home prices.
I’m looking in the 1-1.25 million dollar range with a minimum of 4 bedrooms. I know that in certain markets that is considered a lot and others, not so much. Areas that I had my eye on were Sarasota, Key West, St. Petersburg and SE Florida.
Any input would be greatly appreciated!
Welcome fellow Keystoner! You’re 100% on the right track here. I tend to buy in the Southern half of the US for 3 reasons:
1) you get much higher year-round occupancy rates in the South & it's simply tough to earn a good ROI in the North if your place sits vacant for a big chunk of the year
2) Culturally, the Southern half of the US seems to be a lot more accepting of STRs regulation-wise. A lot of these southern beach & mountain towns have been supporting STR for 75+ years, long before Airbnb was a thing, so they're very comfortable with it and it's a built-in part of the community.
3) The Southern half of the US is more forgiving if your property is out of service for a couple months (a flood, property damage, coronavirus) bc you earn year-round revenue. People in the north can get really screwed if, for example, their property is out of service during the peak summer season when they would typically earn all of their revenue
A lot of Northern places are FREAKING OUT over STRs & STR regulations & they don’t seem to be very supportive of it. So, in the North, best case you’re fighting an uphill battle with a lot of uncertainty. Worst case, it gets outlawed in a town AFTER you’ve bought a place there & now you have to sell at a HUGE loss bc there’s no buyer demand once STR use is banned! I’ve seen it happen...
Anyway, here’s a great summary, courtesy of @Avery Carl, of the kind of numbers you can expect down south (including complete pro formas). You simply won’t get annual revenue, annual occupancy rates, annual net income, & annual ROI like this in the north:
https://theshorttermshop.com/c...
Go to https://www.zillow.com/research/data/ and start digging through which areas are seeing
1. Stagnating RE prices
2. Longer DOM
3. Increasing inventory
There you'll find the Airbnb busts
I looked at Key West three years ago. They were not allowing anything under 30 days so definitely check out the regs.
From what I am seeing through my own experience with my 6 VR's, my clients' experience, as well as data, the drivable vacation rental markets have hit a bit of a boom post-Covid. People are dying to get out of their houses, but they are still leery of airplanes and large metropolitan areas. My suggestion would be to go with one of the more northern markets you mentioned that tourists are more able to drive to than to be forced onto a plane. We need to get Covid a little further in the rearview mirror for the best data, but as it stands the drivable destinations have proven to be more recession resistant than the fly-to destinations.
@Nick Liddell Sarasota is a great market to be in and will only be getting better in the coming years. As for buying opportunities, all of the local investors I work with were expecting a big drop in prices and a surge in motivated sellers like ‘08. But it seems that COVID just put a pause on the market for two months and now the market is bouncing back to normal pretty quickly. It’s smart to target Airbnb listings though as I’m sure some won’t be able to recover from this spring.
@Nick Liddell I didn't read much other than the title but I've got a 3000 sq footer in Destin 2 blocks from the beach. We bought it back around the holidays. It was a rehab. Took 2-3 months to rehab and then the state of Florida shut down STR exactly ONE DAY after I went live.
Fast forward.... my first guest is in there RIGHT NOW! The property if fairly well packed at a high dollar through the end of June with more inquiries coming in often.
Not sure if this helped but I’m happy to tell my success story!
I'm east coast on the barrier island in Florida, am had about $7000 in cancellations. I had enough bookings to pay the bills, but not much extra. Am now filling up quickly again.
@Nick Liddell We seem to have much in common in terms of investing; I hope my two cents can be of help. I live and invest in SoFL (East Coast) in Delray Beach, having come from Boston where I also owned rental property (Martha's Vineyard and Killington, VT). I currently own 7 units (3 properites) in Delray Beach and I am always searching for deals. In terms of finding FL deals on the East Coast (I can't speak for the West Coast):
I'm no expert, but I hope my comments can provide some color to your search! Best of luck; you'll love it here.
~Jill
@Nick Liddell Hi Nick,
That's a good question. I'm a Realtor here in Sarasota and can address your question:
"
"I’m currently looking home to purchase in the next year or so somewhere in South Florida (considering both east and west coast) as a second part time home as well as a vacation rental to cover the holding costs when I am not there. My question is, does anyone see any future buying opportunities in particular markets that may be heavily affected post COVID 19 pandemic? My initial prediction was markets that were oversaturated with newbie Airbnb investors who were attracted to the increased monthly cash flow will eventually become forced sellers, ultimately deflating single family home prices."
You would be correct that AirBnB investors are taking a hit at the moment, in some coastal regions this will be an issue but in Sarasota it won't be. In order to protect economic stability in such a hot vacation location there is extensive and strictly enforced leasing restrictions on the majority of SFRs and condos so AirBnB is not an option for many owners.
The market here in FL is unique from the rest of the country particularly in Sarasota - the price of SFRs is driven by general economic principles far more closely than investment properties whose price is driven by the income producing capabilities it has. The stability of the Sarasota economy is protected to a large degree by the significantly higher retirement population here. Our largest employers are the healthcare sector and we have the largest influx of retirees than any other state, this combined with the #1 beach in the US and having the cultural capital of Florida badge gives the county an edge in terms of stability.
"I’m looking in the 1-1.25 million dollar range with a minimum of 4 bedrooms. I know that in certain markets that is considered a lot and others, not so much. Areas that I had my eye on were Sarasota, Key West, St. Petersburg and SE Florida."
Your market would be considered the Luxury Real Estate market and normally the revenue multipliers for seasonal vacation rentals here is 4 times annual rent rates - and so done correctly you would more than cover your holding costs :)
As I said depending on where you buy you may encounter restrictions on the minimum lease period you can offer and so you need to be careful where you buy - unfortunately I hear it happen a lot that buyers end up buying a second home they can't make work because they walk into a min lease period their Realtor never told them about or didn't know to check on.
Hope this helps.
@Nick Liddell, I'd probably stay away from this market for the time being, as local code is not friendly towards STR's in general. I've heard from multiple people that their Airbnb has been shut down due to the fact that you are only allowed to rent out your property 3 times a year, unless you are in a hotel/motel zoning area or have a special "overlay" permit. The application for this permit is $2,400 and can take up to 6 months for approval. Source here:
https://www.stpete.org/planning_zoning/docs/Short%20Term%20Rentals%20HANDOUT.pdf
With your budget, you may want to look into Anna Maria Island. My family owned property there for 30+ years. It is primarily a vacation rental market and you may find deals on homes that would fit your budget. It's a particularly great location because almost any home you purchase will be within walking/biking distance from the beach. If you find one on a canal (like we had), that is a major plus.
Hope this helps!
@Nick Liddell hi Nick sounds like a good plan.
I’m aware of a quadplex ocean front with pool and jacuzzi , 2 car garage and 8 parking spots
Primary unit has 4 beds 3 baths , 2nd unit is 2 bedroom 2 bath and the other 2 single room efficiency. You can have long term remnants or run as short term vacation rental since it comes with appropriate licensing for transient rentals .
That said it’s Central Florida location about an hour out of Orlando. PM me if interested
Thank you everyone for the input, Lots of great responses!
@Anand S. Could you elaborate on the opportunities you are seeing in Fort Lauderdale?
@Keith C. Just sent PM
@Jill Haselman I have a good friend who just bought a home in Place Au Soleil (I guess its technically Gulf Stream?) but he really loves the area so Delray was on my radar for sure.
When you say Hollywood has a "beach bum vibe", is that where the term "Hollyweird" comes from? I was looking at homes around the Hollywood Lakes area due to the lower price points compared to neighboring markets. However it seems many homes there have been on the market for a really long time and very few under contract so I thought either they are still overpriced or the area is on a downturn. Could you elaborate on whats causing the upswing you are seeing?
Thanks again everyone for the responses!
In terms of Key West, you would need a transient rental license. Here in the Keys you have a 30-35 week rental season. In KW you would need to be in an old town conch home, and a million gets you 2-3 bedrooms. Maybe $250-300 per night. The numbers don't really make sense.
You can go up to Marathon where there is an airport, Publix, movie theater, etc and get on the water for 500-700k and have the same rental returns. We have had a lot of success, but also purchased years ago.
@Nick Liddell Gulf Stream is essentially Delray Beach, just not walkable by a stroll, but certainly within Uber or Golf Cart distance and that is a great neighborhood! I don't know much about Hollyweird, but I've stayed at Margaritaville a few times for a staycation night and strolled the boardwalk, etc. I love the geography and there is MUCH building, so not sure what it will be as it gentrifies.
@Nick Liddell - I lived in Hollyhood from 2006 until late 2018 and can answer your question. Most areas between Ft. Lauderdale and Miami had seen development over the years. The last holdouts were Hallandale and Hollywood, but that began to change over the past decade (maybe past 8 years). Hollywood did need updating so this was good - at first. Now it's not. Margaritaville is cool, a number of condos got facelifts as did some restaurants (also cool). But they've been approving of more and more buildings and it's becoming a mess. Parking is extremely difficult during peak-season and there are traffic jams, it's just not as fun as before.
The good news is that what you're trying to achieve can be easily accomplished and is better suited for the other side of the intracoastal. That area is named Hollywood Lakes and I happen to know it inside out (that's where I lived). It consists primarily of single family homes which are perfect for STRs. Your budget will easily get you a home there (and likely for less). You will not be on the water, but that doesn't matter because renters can walk to the beach. I used to walk, run, ride or drive.....depending on my mood. A friend moved out a decade ago and turned her 5BR w/pool into one and has done very well.