I'm looking into getting a vacation/short-term rental property on the Oregon coast. Currently looking at Coos Bay, but also open to other suggestions.
My main question is what gotchas are there to consider for an out-of-state investor? What is the stuff that's obvious to locals but which I might miss? I've already heard that some places are putting restrictions on short-term rentals, so that's one to check for sure. What else? Any specific maintenance items that might not be expected? Legal issues? Difficulty with banks or lending? Other?
@Robert Smith hey Robert, I live in North Bend the neighboring city to coos bay. You may want to look in north bend instead. We are in closer proximity to the dunes, have lower taxes, and more desirable schools. Feel free to contact me if I can help in anyway.
@Kevin Lehna Thanks for the suggestion. My searches have included North Bend as well, so glad to hear that's not a bad idea!
I have apartments, but I have a restored farm house in OR wine country that use as a VRBO until we move out there to live, so limited exposure. However, I gotta say for first year, I'm kinda shocked at how well it's done (yes, I had to apologize to my wife for doubting her).
About the only thing I got from our PM (who I trust) is that larger places (ours is 4/4 bed/bath) rent a lot better for families since she thinks smaller places are competing with hotels (that are buying business to stay open).
Other thing is the mgmt fees, which are about 40% of gross, so you want to make sure you get a lot of services (like cleaning and posting on the Internet) included as you can. I like a local person that knows the area myself since the bigger places are just going to hire a lot of contractors.
We have recently invested in LTR in the area. Demand is high.
The STR in Bandon have a strong appeal for the golfers and beachgoers. I would imagine that, due to the airport, you'd get lots of inquiries whether in Coos or North Bend. We see the golfers on every flight. They are always smiling. The big golfing event (Masters?) is being held at Bandon Dunes this summer, so be sure to adjust your rates accordingly for that week. It's already sold out for the STR in the area.
Originally posted by @JJ P. :
We have recently invested in LTR in the area. Demand is high.
The STR in Bandon have a strong appeal for the golfers and beachgoers.
How many months a year you think you have for use as a STR? I mean I live here and I don't know, but OR coast is not La Jolla :)
Yeah. We're new to the area, so I really couldn't say. Plus, we're LTR people only. But it's very tempting to wade into the STR market. We watch the neighboring beach STRs and just notice who's there. We can see the cars, who's checking in, who's walking to the beach with coffee mugs, etc.
So, it's not scientific, but here's what we see: The smallest one rents for about $160-175 a night, and sleeps 6 or 8 in a cozy manner (loft bedroom, not big). It's not fancy, but they keep the kitchen well stocked and it's clean. The decor isn't stunning, but they have the formula down pat. It's hardly every vacant. I'd almost venture to say never vacant. The owner is Out of state, and the $$$ must be pouring in. The bigger, luxury ones that we can see regularly seem to be rented about 2/3 of the time. I think many switch to winter long term rentals from Oct to May, and then go back to STR. I can tell you more next spring, when we've seen a full cycle.
I live, work and invest in Bandon and the surrounding areas. I can say that the long-term rental demand is very high. Short term rentals are definitely seasonal. Just be aware that Bandon restricts short term rentals within city limits. No Airbnb‘s and even if you buy an existing vacation rental they won’t grandfather in it’s use as a short term rental. I’m happy to connect with anyone interested in investing in this area.
I own 7 vacation rentals between Lincoln City and Rockaway Beach. You do need to understand what is drawing your crowd to the specific city and yes it's very seasonal so expect Dec - February to be lower than your mortgage payments, but summers are awesome. Financing is very challenging. The easy way is to buy it as a 2nd home if your income allows, but you have to qualify without using any rental income. Otherwise, you need a full 2 years of tax returns showing income for any bank to get really comfortable lending on STR's. Even low doc loans are only wanting to lend to month to month rentals with leases. What I like to use is lower interest private loan that's good for 2 or 3 years and then refinance into a longer term product once I have the tax return history. We do very well in Pacific city and Rockaway with a few of our houses going over the $100K in gross income.
Shoot me a message if you want to know a little more on the financing strategy and/or what cities I target on the coast. Also we use Vacasa to manage the properties and have really liked using them.
Good luck, STR's are an awesome rental strategy that's fun for the family as well as the pocket book.
The big gotcha's are the many different regulations/restrictions to be aware of from city to city/county to county. Some places are vacation rental friendly (Rockaway Beach, Tillamook County) others are not at all (Bandon, Lincoln County, Cannon Beach). Not only are there regulations currently set, but in some markets there are open conversations about adding more restrictions (Lincoln County).
You are going to want to work with a local Realtor or local property management company to learn which beach towns to avoid based on regulations first, then desirability. Ask the local Realtor or property manager what the current conversations are around regulations, if they don't know specifics, find another local contact. Even if you are thinking of self managing, which I don't recommend, you can get a lot of valuable info from working with a property manager to learn about vacation rentals on the Oregon Coast.
For rental income, AirDNAs free rentalizer tool is good, I recommend shaving about 10% off their projected gross rental revenue in general. I find the rentalizer to be mostly accurate. For costs, before mortgage, I recommend considering around $5k in annual utilities costs, property taxes vary by city/county, but are easy enough to find on Zillow, property insurance will runs around $120/mo. for most rentals. Property management fees/costs average around 28% on the Oregon Coast. With this info you can do some easy spreadsheet math to figure out what kind of a down payment you will need to break even... I find the average down payment needed to be around 30%, if you want to break even on the investment.
If you use the home, use it during the week/winter, and maximize the income on the weekends and during the high season of May to Sept/Oct.
Last tip, this is more geared towards the North Coast, but should be close on the South Coast as well, you can expect most vacation homes will generate around 7% to 11% of the homes real estate market value in annual gross... e.g. if a home sells for $500k and is nicely set up for vacation rentals it should make between $35k and $55k a year... A $700k home would do $49k and $77k.... and so on. Not every single home will fall in this range, but after working in vacation rental real estate on the Oregon Coast over the last 7 years I find around 90% of homes do fall into that range at just about every price range.