Greetings again everyone! After a year of waiting for the right time, it seems time is ripe to buy my first airbnb. Actually I might be already quite late in the party-looking at market explosion in Florida! Last year in March i was so close to buying my first property for airbnb purpose and then covid happened. I instead bought a condo as a primary home.
My budget - up to 550k (preferably under 450 k)- 20% downpayment
Property preference- on the beach/very close to the beach- ideally a townhouse/SFH (If condo, 2bd 2 ba atleast and beach facing with not high HOA)
Ideal Revenue ROI- 13-15% - meaning if i buy for 400k, annual TOTAL rental revenue should be 50-60k (pretty achievable in these markets i think)
Solid year around traffic, no history of airbnb restrictions, good inventory, hybrid property management coompanies available. If the property has an existing airbnb rental history, that will be icing on the cake.
I researched all three markets (PCB, Destin area and Myrtle beach) and it seems most of my above criteria is satisfied while looking at available properties and airbnb rates for different seasons.
In one metric where Destin or PCB are scoring much more is property appreciation. Just compared from last year, certain property values have increased by almost 50-80% in many of the Destin, Miramar beach etc properties! That's insane and it still doesnt look like growth will slow down for foreseeable future. On the other hand, property prices in Myrtle beach are more affordable with comparable airbnb nightly rates.
So I would love to get your thoughts on these three markets based on my criteria above and which one will you choose. If there is any other market which fits the criteria, feel free to recommend!
Too many questions in one title please narrow it down :)
Can’t get much of anything in Destin for 550. PCB condo. Non warrantable. Don’t know the other market sorry
Thanks @Luke Carl . But I see listings for many beach side condos well below 550 in miramar beach, Santa Rosa beach and even few in Destin.
Also, what is the issue with non- warrantable thing? Arent most in that area non- warrantable anyways?
No issue! Just different. Most people have never heard of it. Im not a fan of condos so I don’t pay attention. Ask Cheryl
I'd say buy in Myrtle Beach.
You mention that property prices in Myrtle beach are more affordable with comparable airbnb nightly rates. Sounds like you'll get a better return in Myrtle beach
@Dev Paul that return seem's super low for STR's for me. I wouldn't run a STR for that return if it was totally or mostly passive sure but STR's are a business and that work stress and return ratio is pretty bad in my opinion. There are better markets out there in my opinion.
Dev, I buy and manage oceanfront properties in Myrtle Beach. I do very well for myself and my investors. I'm not familiar with Destin, FL, but that budget here would put together a nice portfolio. Being in the right area and right building make all the difference here. Happy to chat with you about it sometime.
@Dev Paul - Congrats on being ready to pull the trigger! As a realtor and investor in both the Destin and PCB markets, you can definitely make a budget of $550K cash flow. The biggest hurdle I see for you is your desire to offload the management. You'll see a few solid property managers, like @Amanda Ferguson , but a vast majority of them under perform excessively.
Have you been to the Gulf Coast before? PCB and Destin are two distinctly different areas, and I'm not sure which market you'd like to focus on. A lot of my appreciation/most speculative investors are putting money into PCB right now and expecting a lot of the run-down areas to really boom in the next 5 years or so. Destin really doesn't have any crappy areas and has consistently shown great appreciation, as you mentioned.
All that to say, I'm sure you can find what you're looking for in any of these markets! I wish you the best of luck!
@Dev Paul come on in! The waters fine.
As @Matt "Roar" Gardner mentioned, your property management gameplan can make a significant difference in your ROI. Expect the corporate giant managers down in the panhandle to stick you with 22-25%. Most of them overpromise and under-deliver.
I’m not familiar with Myrtle Beach, but I see a lot of people discuss STRs with a “nightly rate” comparison; IMO, it doesn’t really tell the whole story nor is it useful when looking at STRs. The traffic in the panhandle is extremely seasonal! My personal nightly rates can be different by more than 300% depending on the time of year. The tough part is finding an agent/investor who can provide you with accurate annual earnings. Because Destin/PCB revolve around these income generating properties, most will list with annual performance numbers.
I think a more useful metric to compare STRs in our seasonal market is the “peak season nightly rate” (July); that figure can set a generalized multiplier across the other month to get you close.
I've been quite successful with LTR in Fort Walton Beach. The rental market there is so tight no one want to loose a lease so they don't bug you with stupid ****.
Consequently good deals are HARD to find.
Thanks everyone for your responses.
@Luke Carl Understood. Will check more on this.
@Dan Johnson Thanks. Yes, but in terms of appreciation, it is no where compared to Destin/PCB.
"that return seem's super low for STR's for me. I wouldn't run a STR for that return if it was totally or mostly passive sure but STR's are a business and that work stress and return ratio is pretty bad in my opinion. There are better markets out there in my opinion."
Which markets you feel are better than that? Apart from good return, i feel that having minimal airbnb restrictions and history of airbnb is important as well-which these markets have.
@Kevin Gunn . Thanks. Will surely get in touch with you.
@Matt 'Roar' Gardner Nice to hear from you. I agree with you, but considering i have zero experience in managing airbnb earlier and the fact i will be remote managing, i feel prudent thing to do will be to have some hybrid management model-not a full management company which you rightly said changes the equation significantly. Do you feel there are enough cleaners and maintenance workers in these areas to have a robust management system to do it all on your own? What about certain hybrid management companies which take only 10% of the revenue and you do some work yourself? No, I havent been to gulf coast before, but planning a trip before i buy. For my first property, i would rather stick to tried and tested areas- whether PCB or Destin or nearby beach towns.
@James Byrd Thanks for confirming. Yes, the annual calculation makes sense. I was looking at July rates and they were phenomenal in these areas, but not much less in Myrtle beach too.
@Blake Hernandez Oh I didnt know that LTR market is good as well there. What kind of ROI can one expect in LTR there? Stress of managing a LTR is surely less, but then extra cash flow and experience earned in STR's can go a long way too.
@Dev Paul Those hybrid models do exist. In fact, my wife and I are starting a business for that precise market. Some refer to it as a “professional co-host”, but we look at it as a targeted out of town investor model. We handle the groundwork and the owner handles guest relations. If you’d like more info on our start up, feel free to PM me!
@Dev Paul - I know it can be unnerving for your first STR, but regardless of experience, I recommend to all of my clients that they self manage, if they have the capacity. As a fighter pilot, I have always been very checklist-oriented, and the book that really gave me the confidence I needed to make that leap was Get Paid For Your Pad by Huzefa Kapadia and Jasper Ribbers. It was a great overview of the STR lifestyle as well as a detail-oriented 'how-to' in a lot of areas. I definitely recommend that book to you, if you haven't read it already!
@Dev Paul there are lots of markets that have similar history of being favorite to STR's with as good or better returns. Also STR returns are far more about management than location. By management I also mean sales and profitability optimization. My point was that that ROI is to low for a business at least if you are running it if you make 20K or 20% of 100K for your business but also are on call and have 1 hour a day that's 365 hours at 20 dollars an hour your return not including your time drops to 12% after you pay for your time and that done at account for risk and stress both of which are real but vary greatly on you personally. So with the ￼￼ scenario I just gave you are buying a job all be it part time that pays 55 dollars an hour if it goes well that you needed 100K for. Most People often forgets time work stress and risk. All I'm saying is for me personally I would want why higher and get way higher returns for my time stress work risk and money.
@Dev Paul I don't know about Myrtle Beach so will not offer any options. As for Destin area:
* Yes, your budget is viable. I would suggest look at Fort Walton Beach or PCB. Miramar Beach will also have some option. Technically you will not be ON the beach there but across the street, but still ok with good views.
* Yes, non-warrantable condos will be the bulk of what is in your budget. Nothing wrong with that as long as you find the local lender. Also, some properties may not qualify for 20% down and may need 30% down. Also you may need to get a portfolio loan or some type of ARM product that mimic as fixed.
* Yes, I agree with above comments that management is key. Large companies are focused on their own profits through "multiple streams of revenue", i.e. nickle and diming owners and charging all types of fees to guests. Get some good local-owned management options. Also, don't overfocus on "rental history" but rather rental potential for the property. Low rental history can often be the result of poor property upkeep or poor rental management. Usually people who sell are not "killing it" in cash flow. That does not mean the property cannot be very successful for you.
I hope you find a great option for you. Good luck and keep us posted on hopefully a very successful deal!
@James Byrd I have some clients that might be interested in a hybrid rental manager at a lower fee. Please PM me if you are taking on any new clients. I will forward your info and website to them.
LTR market is currently VERY good. But with the ROI you are looking for I think you will have to go with STR. I get amazing returns but a lot of that is because I was lucky and bought here when prices were rock bottom. Buying in the current market i can probably get 10-12% but that is because i do everything myself (except finding and vetting tenants.)
@Villy Ellinger PM’d! 😎
Be careful how you interpret ROI, you don't use Total Return, you use Net Income or Cash Flow.
Thanks Villy, Matt, Blake and others for chipping in.
@Mark H. Porter I agree.
Its confusing most of the times what ROI means for different people. When I say ROI, i mean total net cash flow minus all the expenses (HOA, mortgage, taxes and other expenses in running the property). I know some people dont subtract the principal part of the mortgage in expenses calculation. Also, many a times ROI is calculated assuming all is paid in cash.
@Dev Paul I'm happy to help you out with any revenue analysis for short term rentals in the Florida Panhandle area, and I have a counterpart who covers Myrtle Beach as well that I can connect you with.
Thanks @Amanda Ferguson .
I have found out that the new rules which came in effect early this year, makes it impossible to get traditional funding for most condos in the areas Im looking at. I was counting on traditional investment property loan through Loan depot which financed my primary home. My officer had told me that as long as i can put 20% downpayment, have 6 months of mortgage payment cash reserves, i can get mortgage where the rental potential of the property matches my monthly payments. But loandepot wont finance ever present condotels in florida panhandle which are mostly unwarrantable in their books.
My one option is getting non-traditional loan from local lenders in Florida. I spoke with one and it seems there rules are different as they will mostly count my income to give me the loan rather than rental potential as with traditional loans. The issue there is that my income is mostly used for my current mortgage and i wont have much capacity left to finance another mortgage with my current income. Unless i rent out my primary home and move to rental place with significantly less rent than my mortgage payment (something which i was going to do anyways, but wont do just for this reason)
Another option is stick with only townhomes and SFH as nothing has changed there. Im more inclined toward this option. Only issue is it will make it impossible to get anything nice near the beach in the areas im looking at- Destin, PCB, Miramar beach, 30A etc. So perhaps time to look at another places/states where i can get a place for short term rental near the beach with my 550k and less budget?
Any thoughts? I wonder how are most investors financing their condos with these new rules?
@Dev Paul - Some condos are definitely considered nonwarrantable (and thus the 10% down payment option is not possible); however, there are still plenty where that is a possibility. That's a reason to work with a savvy local real estate agent, who understands the rental market and has lenders that can support your goals. I know plenty of lenders that will dismiss all condos now as nonwarrantable, but I know plenty that fight the rules to get the best options possible. Keep fighting! :)