STR purchase in beach areas?

Question

Hi There,

Looking for some Short Term rental properties, and it seems like some of the NC beaches are still a relatively decent 'value'. I'm pretty ignorant to the area, but I'm seeing some decent nightly rental rates (airbnb/vrbo) in the Surf City/Topsail beach areas compared to purchase price. I know I need to find something that qualifies for federal flood insurance.

Couple of thoughts:

- No appreciation in last few years. Obviously, not a deal breaker, but coming from Denver is a tough pill to swallow.

- Traditional management is out, I've done Airbnb very successfully for the past few years, and I'd continue to manage.

- That being said, can a 2nd row beach house rent? Do people really care all that much (if the price is much more attractive)?

- Where else to look?

- Does anyone personally vacation in the winter/off season there?

Am I crazy? Should I run away as fast as I can?

Thanks for reading my novel.

Kevin

Scott Trench · Answer

I know that a lot of this discussion has been around the erosion of the property, but I have an additional thought. Growing up, I lived near Baltimore and would make the 5 hour journey towards OBX every year for the family vacation. I remember a couple of times that relatives needed to fly in and there was nothing available. I know that Wilmington is nearby, but man, that seems so tough to invest on a beach on the other side of the country that is so inaccessible. The other big point is that you aren't necessarily competing with investors for these properties - you are competing with wealthy vacationers looking for second homes and just trying to get a decent deal. I had an Uncle with a property in OBX. I'd be shocked if he made any money on it, but as he used it for many weeks of the year, he probably came out a little better than if he had rented the place from someone else.

Since you asked, I'll answer that one quesion - to me, yes it seems a little crazy. I'd run away as fast as I could :). It seems to me that it's going to be touch to make money like that unless you are firmly convinced that the area has incredible prospects that will be worth the inconvenience - that's got to be up to you to answer.

Kevin Breed · Answer

@Kevin Shuler - Be very careful buying anything in North Topsail. That area has had beach erosion issues over the last several years. @Chris Martin is someone that could help with more details as well.

Bill S. · Answer

@Kevin Shuler so I "know" another investor in the OBX area from another source. They only do long term rentals to people in the area. They claim that vacation rentals break even at best and there is huge vacancy rates in the off season the eat up all profit from the peak. Perhaps if you could do the self management route you could do a little better if you throw in your management time for less than it would cost to hire it done.

Ben H. · Answer

Advice on N Topsail spot on. Beautiful area but it is being washed away. Surf City and Topsail proper have some life left. Make sure you understand Flood Insurance and that you will have to buy private flood insurance. Be prepared to spend quite a bit on maintenance. As for second row vs front row...just look at the rental rates posted for any of the dozen rental agencies in the area. Craigslist and VRBO as well. It is an appreciable difference in rents since most folks who are spending $$$ to go to the beach are willing to spend $$$ to get oceanfront. I have a builder friend who is slowly putting in high-end / large beach houses on vacant lots his company owns. I'm talking $900,000+ properties with 5000 sqft. If you can stomach the risk of losing it and can develop a decent maintenance/property management system, the returns are pretty substantial.

Kevin Shuler · Answer

@Chris Martin , Sent you a colleague request. Any chance I could pick your brain on a few things? Beers on me when I can make it down there to scope a few areas.

Chris Martin · Answer

Surf City and Topsail are not impacted quite like N Topsail. There are some harsh realities for any property built on a barrier island. Second row is the same as oceanfront, it's just a matter of when. This lot, and several others, are for sale by the county for, basically, back taxes owed. I'd say don't buy it.  Things could change in N Topsail with a terminal groin, but that's not a given.

Kevin Breed · Answer

Not that I have seen (its been since summer) that I have been up there, I have not heard of any issues either. So not sure what hurricane Matthew might have done to that area.

Kevin Shuler · Answer

@Kevin Breed , Definitely, staying as far away from N. topsail as possible. I haven't heard anything TOO negative about Surf City or Topsail. Any erosion issues down there?

STR purchase in beach areas?

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