Vacation Home rentals in Panama City Beach, Fla.
Investor · Rockwall, TX · Member since 2015 · 7 posts · 1 vote
I want to know if it is a wise investment to buy a condo on the beach in Panama City Florida with today's pricIng. For rental income with property manager.
Hi @Sheila Evans! My wife and I own a vacation rental home and it has been fantastic this past year. You will hear varying opinions on here re: condos, but I would look closely at the HOA fees. Those can escalate quickly, and they are also variable (10 years from now the siding of the building may need to be redone, or the roof, etc.). Especially by the beach - rougher conditions = higher costs over the years. Also, many property management companies charge upwards of 30% of your gross rents, so shop around to find a great hands-on manager that won't take all your profits. (Easier said than done!).
Because management fees are so high, we manage ours from afar. It sounds crazy, but if you have a solid cleaning service, they can be your eyes & ears. We book everything through VRBO or AirBnB, so it is all done remotely. Then, we use the KABA door code system and give each Guest a new code every week. (We have a Saturday to Saturday policy during peak season) and a 4 night minimum during the off season.
Condos are good because their cost to entry is typically lower. However, there are more condos on the vacation rental market, so your competition is greater as well. If you have a competitive advantage with marketing then it could be a good thing.
In the end, run ALL the #'s, to include 30% Mgt fees, HOA fees, flood and/or hurricane or wind insurance (if required), and I would also recommend using a CapEx rate Greater than 10% because things wear down more quickly by the beach. You will also need to account for replacing comforters, couch cushions (or couches altogether!) dishes, lamps, etc. more often. With a traditional SFR you don't have to account in your budget for replacing furnishings. So that is an additional cost for the vacation rental business. But the margins on vacation rentals can be much greater, so it has been worth it for us. AND, if it covers your expenses, you have a FREE vacation home to use on your own when others aren't renting!
Good luck and feel free to holler if you have any other questions! ....Run the Numbers!!
Brendan
Hi @Sheila Evans! My wife and I own a vacation rental home and it has been fantastic this past year. You will hear varying opinions on here re: condos, but I would look closely at the HOA fees. Those can escalate quickly, and they are also variable (10 years from now the siding of the building may need to be redone, or the roof, etc.). Especially by the beach - rougher conditions = higher costs over the years. Also, many property management companies charge upwards of 30% of your gross rents, so shop around to find a great hands-on manager that won't take all your profits. (Easier said than done!).
Because management fees are so high, we manage ours from afar. It sounds crazy, but if you have a solid cleaning service, they can be your eyes & ears. We book everything through VRBO or AirBnB, so it is all done remotely. Then, we use the KABA door code system and give each Guest a new code every week. (We have a Saturday to Saturday policy during peak season) and a 4 night minimum during the off season.
Condos are good because their cost to entry is typically lower. However, there are more condos on the vacation rental market, so your competition is greater as well. If you have a competitive advantage with marketing then it could be a good thing.
In the end, run ALL the #'s, to include 30% Mgt fees, HOA fees, flood and/or hurricane or wind insurance (if required), and I would also recommend using a CapEx rate Greater than 10% because things wear down more quickly by the beach. You will also need to account for replacing comforters, couch cushions (or couches altogether!) dishes, lamps, etc. more often. With a traditional SFR you don't have to account in your budget for replacing furnishings. So that is an additional cost for the vacation rental business. But the margins on vacation rentals can be much greater, so it has been worth it for us. AND, if it covers your expenses, you have a FREE vacation home to use on your own when others aren't renting!
Good luck and feel free to holler if you have any other questions! ....Run the Numbers!!
Brendan
Thanks so much Brendan. Sounds like great advice. Is your rental a house instead of a condo? If so, would you be afraid of a condo with the HOA fees associated with it? By managing it yourself does it take a lot of your time to answer requests for booking? Is yours in Panama City Beach? Is there a resource for finding good cleaning services? We are going to the area in a couple of weeks to look more and I need to make some decisions.
Thanks again for your reply,
Sheila
Hi Shiela,
My company recently looked at home prices in comparison to the rental income a person doing a short-term rental could expect to make, expenses, etc., and PCB was one of the best U.S. markets for investing in vacation rentals.
I also have to agree with just about everything @Brendan H. said (although shopping for a property manager can be super easy—it's what my company exists to help homeowners do). Having a local, reliable cleaning and maintenance crew can definitely make or break a vacation rental for homeowners self-managing remotely, and home automation tools are basically necessary for anyone looking to manage from afar. They can also help you make money (80% of guests prefer smart tech, and 60% of guests would pay more for a home with smart technology).
To answer your question about how much time it takes to self-manage, HomeAway users reported that it takes 10 hours per week on average.
In terms of finding local cleaning services, these websites might help: https://www.thumbtack.com/, https://www.taskrabbit.com/, https://www.handy.com/
Thank you Monica for your comments. I appreciate all input.
I just bought a condo in PCB right on the beach and so far it has done well. A couple of things, like everyone else is saying, watch your HOAs. I fiound a building that I love and the HOAs are 464.00 a month. That's reasonable. They take very good care of the buildings and they are well maintained. Another thing is the management fees. They have onsite management which I love. They charge 20% except for June, July and August when they charge 30%. They do everything for my unit. I do nothing so I feel that it's well worth the fee. They do all scheduling, pay all sales taxes, do all the cleaning, provide all linens and toilet paper, I even had a tenet that damaged a new duvet cover and they notified me asking where I got it and they replaced it and charged the tenet for it. So I'm very happy with their service. One other thing. If you buy an older unit it would be in your best interest to update it. I completely renovated mine. Put in granite, glass tiles. Made it high end. And it stays booked. It's getting very good feedback and renters are rebooking well worth the extra investment long term.
Thank you all again for all your input. Toni do you mind me asking which Building you bought in. We are pretty familiar with the area and I wondered if an older building would be too much risk for future assessments or repairs. But you can get so much more space for your money and they are all on the same beautiful beach. It is encouraging to know yours is doing well with little work on your end.
I bought a foreclosure in the Dunes of Panama. I like the area on Thomas Drive. It's older but most condos there are well maintained and the HOAs tend to be lower. There are a few buildings there that are higher but just look around. I'm very happy with the Dunes. I'm in building E. And you are right. The older units are bigger and most are not what I call shoe box shaped. Mine has a really cool open floor plan. So does the Pelican Walk. They are big with great floor plans. But they do not have onsite management or security gate at entrance. Dunes does.
Thanks. Good point about the onsite management.
@Toni Murray, how has your experience been thus far with the Dunes onsite manager? I've had a number of homeowners come to our site looking for new management after working with the onsite manager there.
I'm very happy with the management there. They are friendly and very helpful. They do a good job.
Yes, we are in the process of buying a Condo in PCB. SO excited. It is right on the beach and it is nice! We are going to put it on the rental program for at least the first year to see how it goes. Thanks for your encouragement and advise on what to figure in.
@Brendan H. Hey Brendan my husband and I are new investors looking to jump in with our first investment in PCB! We are looking at a SFR house 2b/2ba on the east end of Panama City Beach. We did get rental projections from a local management company (who is also listing the house for sale). What equation do you use to run the numbers and what do you think about the rental potential on that side (beach rd) & the overall market conditions? Would love to have another PCB investor take a look at this deal since it is our first, eek! :-)
This is for everyone looking into investing in PCB. For the past 2 years, PCB has banned the consumption of alcohol on the beach throughout the month of March. It has basically abolished spring break. This is a good thing. The city is tracking more and more families visiting the are and we all know families spend more money in the local economy as apposed to the spring breakers.
I don't have the actual numbers on this, but I believe it is fair to say that there has never been a college spring break that came down here and left with a mortgage to a condo on the beach. Families will come down and fall in love with the Gulf Coast, and consider buying a condo as a rental/vacation home.
Panama City is making a turn for the better. The council is doing a great job with upgrades such as the overpass on the city side of the hathaway bridge (which currently has a very active train track and red-light causing tons of traffic), banning alcohol on beaches during Spring Break (this makes businesses hold more family friendly retail items which cleans up their look and act) and the addition of the new sports complex on the east end which will bring in youth sports teams and their families year round.
I would never recommend a condo for an investment. There are places you can make a much greater ROI. However, there are only so many miles of Gulf Coast Beach in this world and owning something right on top of it is a great lifestyle choice. If you can make the numbers work and cover your mortgage with a decent cashflow, I dont think there is a city on the gulf coast with better prices right now, and Panama City is on the rise.
Destin and Pensacola are already well established family vacation cities and you will see that reflect in the price of purchase.
@Ramsey Blankenship I am just starting out and looking at investing in PC, FL in rentals. What are the other "places" that you are referring to making a better ROI than condos? Also, why do condos get such a bad rap from investors?
Hey guys! We have been researching PCB for about a year. We have found a unit we are very interested in. My question is about financing. We are in Arkansas and haven't been able to find a banker here who will even talk to us about a FL condo. Are their FL lenders that require less than 25% down? Trying to figure out how to make the numbers work. We have several rental properties here and I really don't want to sell one of them for down payment. Not sure how a line of credit would work with it being out of state, etc. Please advise!
@Sherry Drennan- If you are still looking for financing or have any questions about our area I have plenty of local lenders that can help.
@Brendan H. Thanks Brendan! We made settlement this week on the east end 2b/2ba single family - first investment! - would love to connect with you on vacation rental property management options here in Panama City Beach and learn what you do. We are talking with several local full service companies - all taking 20% - but some of them have different marketing strategies & upfront fees. We are physically down here through 6/2/17 with hopes of having everything up on the market and actively renting by then. Bought fully furnished top to bottom - linens, towels, dishes, etc. If you get this, PM me if you have some suggestions or recommendations on managing the vacation rentals for this place remotely. We do plan to get out of the Colorado winters for FEB/March each year :-)
@Ramsey Blankenship thanks for that Info Ramsey! Also would be interested to get recommendations on how we can effectively and profitably manage our vacation rental investment from CO :-)
Great thread-- I'm learning a ton from everyone's experience and really appreciate the expertise. So juuuuust a few questions...
Has anyone looked into BRRRing a property in PCB or 30A to then use for short term rentals--specifically trying to turn a SFR into a multi-unit? I'm guessing this may not be met with a hug and a giftbasket from the local HOA...
Is flood insurance a very big concern/hurdle, or do you just factor it in and if the numbers work, then no reason not to move forward? I hear so much about avoiding flood plains, but maybe that applies more to the long-term rental business. I grew up in Niceville, 5 minutes from Destin, and remember well the havoc that a hurricanes caused the tourist economy once every 5 to 10 years (not to mention the occasional oil spill... actually, a lot of people got pretty big payouts from BP by essentially submitting a crayon drawing on a paper plate-- a lady I know was paid about 25K for "lost business wages." She was a hairdresser in downtown Fort Walton Beach where there was zero effect on local businesses. Anyway, I digress...).
@Brendan H., Figuring out projected income for short-term rentals... since realtors can be a little optimistically misleading in regards to what a property would command on the rental market, is there a way to calculate this if you don't have the actuals/T-12, i.e. the property wasn't previously used as a rental? If you cold-call prospective management companies will they give you a good estimation?
Taxes... it looks like there is a Florida Transient Rental Tax of 6% of the (rental) listing price and a Florida Discretionary Sales Surtax of .5% to 1.5% of the (rental) listing price. Then a County Tourist Development Tax of 2% to 5% that would apply in Okaloosa, not Bay County (i.e., Destin, not Sandestin or farther east). Just curious if everyone's still crushing it despite these not-insignificant tax hits.
As far as management fees, like most I'm not a huge fan of another 20% - 30% hit in that department, but also, like most, I have a full-time job that (in my case) doesn't allow me the ten hours per week commitment for self-managing as reported by @Monika Haebich in the HomeAway survey. If I have a solid team in place, maybe I could bring it down to less than three hours per week?
Furnishing a house/condo. Any good ways to approximate that cost?
Thanks. I will now leave all you fine people alone.
@Brendan H. Towels ruined by guests' make up is one my pet peeves. I have started putting wash cloths in bathroom and that has made some difference. Obviously wash cloths are much cheaper to replace.
Also, in the house rules I have specified that stained towels will be charged $15/towel although I have never enforced it. It has also helped.