Rental Property Investor · Fishers, IN · Member since 2016 · 337 posts · 470 votes
I recently vacationed in Destin with another family and returned to the same VRBO rental we stayed in the year before. Destiny East neighborhood if you're familiar. Our families are considering purchasing a luxury rental that mirrors what we stayed in. 5br/5ba, very unique pool, outdoor bar, 2 blocks from the beach, 15 years or less old, granite, stainless, etc etc.
We have a budget of $1.6M and are looking for a 3% COC, 6% NOI. With debt we'd use to finance the purchase, I'm estimating we'd have 10% of gross rents left over after debt service, setting aside for reserves/cap ex to reach those returns.
We made the owner of the property we stayed at an offer, but he's not going to sell cause he has a cash machine. The property rents for $1K a night in peak season and rents for 40 weeks a year, grossing almost $200K annually. He paid cash for $1.1M.
Can we find anything in this stage of the market cycle that will meet our goals? We are only considering properties that jump off the page when you see the VRBO listing.
@Paul Shannon - You can definitely meet those terms in the Destin market. Destiny East is a great community right new one of my favorite beach spots with the kiddos. I have a 5 Bedroom property in Crystal Beach and another condo in Fort Walton Beach, and I've help plenty other investors find solid deals. I'd be curious to see that owner's actual return because we charge about $1K/night peak season as well, but we only did $73K last year... lol Destiny East is definitely in a better location -- and we paid much less ($565K).
@Paul Shannon a lot of investors do also love Crystal Beach as most of the homes in that area do not have an HOA. Rentals are very strong in both Crystal Beach and all of the Destiny neighborhoods. Also, be careful that you understand what a rent by owner means by what they grossed. Many of them give you the reservation total they collected which includes taxes, pdp fees, travel agency fees, credit card fees, housekeeping charges, etc. Feel free to let me know if you want to see a rental revenue analysis on any address and then what your rental related expenses would look like. Then partner with a great agent like @Matt "Roar" Gardner to get a clear picture of ownership and HOA costs to have all the data you need to ensure you aren't missing anything in calculating your return.
Thank you Amanda. I'm trying to understand if having an HOA is a good or bad thing. The Destiny East neighborhood is beautiful, has HOA of $2600/year....not bad. We looked at a place in Frangista Beach and were unimpressed with the surroundings and neighborhood, which didn't have an HOA.
@Amanda Ferguson - Thanks for the public endorsement :) You definitely hit a great point -- When looking at projections, it's vitally important to understand what you are seeing. Personally, I will include all revenue as my gross number (cleaning, taxes, fees, etc.), while some other companies show you more of a "net-gross" number...which I can understand is confusing! lol Nonetheless, just understand the numbers that you are using to underwrite your deals.
@Paul Shannon - You definitely have to understand two things with HOAs -- How well are they managed? And what benefits do they provide? In the case of condos, some of them provide 90% of your expenses for the year (i.e. water, cable, internet, pest control, building insurance, electric), while others just provide the basic management of the property. HOAs for SFRs will rarely provide those expenses, but they could provide a lot of intrinsic value, such as a shuttle to the beach, a gated community, a fantastic pool, etc.
All that to say, I wouldn't specifically avoid or seek out HOAs. It's very property dependent.
@Paul Shannon re: the HOA, it will be up to you to decide if this is purely an investment, or is it a trophy? Neither is the wrong answer, but the answer to that question will determine the answer to your HOA question. You can have the most impressive looking property in the nicest HOA on the beach and have a much lower ROI than an owner with a very nice, but less glittery, property 2 streets over. If it's about the investment, the answer is one thing, but if it's about the perfect property for your family, the answer is another. The cost of some HOA's is totally worth it because they cover a few of the utilities, or cable and internet, and other amenities. Just depends on the HOA.
@Amanda Ferguson brings up a great point. Like @Matt "Roar" Gardner, when I say gross, I mean all monies coming in. A lot of people say "well cleaning fees shouldn't count towards gross," but they absolutely do. I charge my guests more than what my cleaners charge, so there is definite income there, not just a "pass through" number. You're also getting taxed on your gross number, not your net (on 1099 from the OTA's, it's different if you use a PM and the PM is paying you), so it can really complicate calculations if you quote an amalgamation of gross minus x, y, and z.
If anyone has true figures they can send for STR properties breakdown that would be super helpful. LTR is pretty simple but this is new to me so a breakdown love sample would help ALOT. Feel free to removed property specific info and address etc!
If anyone has true figures they can send for STR properties breakdown that would be super helpful. LTR is pretty simple but this is new to me so a breakdown love sample would help ALOT. Feel free to removed property specific info and address etc!
Which market?
It’s possible to do your own numbers you just need to learn how.
I'll take u up! Thx. Vacation this week but would y have an excel you could send in the meantime? Have a agent/good friend here but he's not too keen on STR.
If y look at the two avail now in CBV it just doesn’t add up to me even at 50k (they r 2 br only I think)
I recently vacationed in Destin with another family and returned to the same VRBO rental we stayed in the year before. Destiny East neighborhood if you're familiar. Our families are considering purchasing a luxury rental that mirrors what we stayed in. 5br/5ba, very unique pool, outdoor bar, 2 blocks from the beach, 15 years or less old, granite, stainless, etc etc.
We have a budget of $1.6M and are looking for a 3% COC, 6% NOI. With debt we'd use to finance the purchase, I'm estimating we'd have 10% of gross rents left over after debt service, setting aside for reserves/cap ex to reach those returns.
We made the owner of the property we stayed at an offer, but he's not going to sell cause he has a cash machine. The property rents for $1K a night in peak season and rents for 40 weeks a year, grossing almost $200K annually. He paid cash for $1.1M.
Can we find anything in this stage of the market cycle that will meet our goals? We are only considering properties that jump off the page when you see the VRBO listing.
Don't overlook some "Destin-adjacent" luxury STRable properties. I'd be happy to give you more info on some choice areas. I also love the Villages of Crystal Beach. Did you know they have a shuttle that will take you to the beach (door to sand) during the high rental season? And that resort style pool is fab!
I'll take u up! Thx. Vacation this week but would y have an excel you could send in the meantime? Have a agent/good friend here but he's not too keen on STR.
If y look at the two avail now in CBV it just doesn’t add up to me even at 50k (they r 2 br only I think)
Tia!
@Chris Rowland - How are the investments coming along for you now in the Destin area?