I am considering buying a second home on the Emerald Coast, somewhere between Destin and Pensacola. The property would be mostly used for short term rentals, and I'd stay there during vacant periods.
Here's my question: Is it better to buy an upscale townhouse that is near shopping and restaurants in a higher density area (about 3 miles from the ocean), or a more modest townhouse of the same type (3/2) that is in a sparsely populated area but is within walking distance of the ocean (not a beach, just shoreline).
Both properties are new construction that allow STR. Which would you choose for $50K difference in price?
Just my personal preference, I would go with the first. I know when I’m on vacation I want to be near conveniences like restaurants and some form of night life. I wouldn’t mind a short drive to the ocean. Given that the second is more shoreline than beach, you’re really only gaining ambiance.
I think you’ll probably be able to rent either, just to different types of clientele. I’d default to what the numbers say. Will the more expensive one make up for the extra cost with higher rents/occupancy?
Thanks, Josh - The will be my first short term rental, so I don't know what to expect. I would assume that the location of the upscale property will likely bring higher rents and would also appreciate a bit faster. But no large body of water nearby, which would be important to families, probably less so for couples.
I don't know much about the STR market there, but I know someone that does. @Charlie Cameron is an active STR investor and the Emerald Coast is his backyard.
@Ryan Meyer thanks for the tag buddy!
@Rodney Turner personally I like to look at projected gross income vs. price as my first metric. TYPICALLY (but not always in this particular market due to varying expenses like HOA fees) that's a good first look. If a property is 20% more in price but grosses 40% more in income, I'd do that all day. It's the best return on your time and effort.
Hope that helps. Lots of investor money pouring into the area right now, but you can still win deals for sure.
I concur with @Charlie Cameron . I'm also an active agent / investor in Destin, and my personal STR is performing well. As I analyze additional deals, I've found that the traditional LTR 1% rule is still a very solid means to make an initial assessment. The key to this approach is retrieving a very accurate number for Gross Income. There are pockets along the Emerald Coast that perform extremely well. And then there are other spots that seem to flail. It all depends on your long term goals, of course. Like @Charlie Cameron alluded to, some of the best equipped properties come at high HOA expenses.
As an example, if I bought a condo for $350K, I would want the condo to generate $42,000 for it to be considered (1% of purchase price times 12 months). If I can confidently expect those numbers, then that might be a deal worth investigating. Of course, in today’s market of hyper-appreciation (not a long term indicator of performance, IMO), even $35,000 works.
As an aside (and opinion 😆), If you’re targeting the Emerald Coast, proximity to the water (specifically the beach) is going to exponentially increase your returns. Its why people flock here by the thousands every year! Hope this helps.
@Charlie Cameron @James Byrd Thanks for the advice - The upscale property I am considering is in Santa Rosa, closer to the bay but about 5 miles from public beaches.
What tools are available to analyze potential STR revenue for a given area?
@Rodney Turner AirDNA has a “rentalizer”. You can pay for a Gucci product with lots of charts and colors...honestly the default income it spots out for free is probably ballpark. But like Zillow, the algorithm isn’t perfect. And if it’s a new build, it may not be able to generate?
PM me. I’d be happy to give you my $0.02
In general, Santa Rosa Beach (and most of 30A for that matter) just doesn't seem to produce as much for the price as you would see in Destin/Miramar Beach or PCB; however, that is a gross generalization. Each investment opportunity needs to be underwritten specifically for itself. Location plays a role for sure, but amenities (i.e. pool, hot tub, volleyball, tennis courts, golf carts, etc.) and other nontangibles (i.e. water views) are all factored into the equation.
Build the picture of income expectation through multiple sources (local PMs, rental history, and AirDNA) to give yourself the most confidence to press forward.
Best of luck!
I love Mirmar but would need to generate at least 20-30k on an investment between 250-330k. Even though Sandetin stays busy, I keep reading that many don't come out ahead in this investment range. Is there a better place in Miramar in this price range for long term income and occasional use? I won't need a mortgage.
@Patty Osborne - Are you willing to jump over to Destin? If so, I recommend The Palms of Destin.
Hi Matt, My former boss bought in a larger unit at Palms of Destin before all of the HOA trouble that has been worked out. They don't rent it out like I would have to. Are the numbers decent on the smaller units? If I can come out 15-20k, I'm happy because we would use it also.
@Patty Osborne - For a normal unit there, you can bring in roughly $40K/yr. I know people who have brought in over $50K. :)
Awesome Matt. Thanks so much. My guess is that besides being updated, that a decent view matters.
@Matt 'Roar' Gardner I'm not very up to speed with what's been happening at the Palms lately. I see a bunch of them for sale. With a $40K+ gross revenue would a 2/2 be able to cashflow considering the HOA of close to $1000 per month? Does beach service come with it? Also, do you know if they still have the rule that if an owner uses a different management company (not Compass) they cannot use the little train to the beach? Also, what's up with the $3,000+ new buyer fee? I haven't been out to the Palms in a while, but definitely want to keep up to speed and will appreciate any info.
@Villy Ellinger - While it's getting tighter and tighter to cash flow at retail price at The Palms, it is still possible...for now at least. lol -- HOA for a Jr. Suite is $800/mo, and that includes everything (i.e. water, trash, pest, building insurance, tv, internet, electricity, and access to all the amenities) except for contents insurance.
I have multiple investors who have bought there, and I've never heard of any rule restricting who can use the shuttle service to the beach.
Regarding the new buyer fee, it's kind of nuts. I typically negotiate that to be paid by the seller, but that'll all depend on the circumstances of the offers.
I hope that helps!
@Villy Ellinger I'm an new owner at The Palms and don't use Compass, but my guests have access to the shuttle, bell hop, and all the other amenities that place offers.
@Patty Osborne I've only rented for a few months, but based on the strong rental demand down here and my revenue so far, I think 40k is very conservative, and 50k very achievable! A view helps, but my guests mostly just appreciate proximity to the beach and the onsite pool.