First vacation rental property, thoughts and advice appreciated!

6 Replies

I currently live just outside Cincinnati Ohio and have 2 rental property condos. Im looking at buying my first vacation rental condo and am leaning towards St. Pete, specifically the stretch between Madeira and St. Pete Beach. 

So first question would be any advice on those areas? Hoping to be walking distance to beach, restaurants, safe, etc.

I'm also struggling with cost analysis for these properties. With my long term rentals here it's fairly simple, you have taxes, HOA fees and insurance but with a short term rental i'm not sure how to handle VRBO fees, vacancy with a short term rental, out of state taxes, etc..

Still fairly early in the planning phase but have to start somewhere so any help is appreciated!

Each of those small cities have their own ordinances regulating short term rentals. As discussed in other forum topics, neighbors don't really like short term rentals and are organizing to do what they can to stop them. 

Hotels and short term rental owners on our beaches had a bad summer because of a red tide outbreak in the Gulf. Just something else to think about that I don't think I've ever heard a guru mention. lol

But, that being said, the area is very popular. I'd also consider Gulfport (just across the inter-coastal waterway from St Pete Beach) It is a growing destination and is actually becoming a mini Key West.

@Andrew Royce I'm more familiar with the panhandle but in that part of Florida a lot of the condo buildings are "non warrantable" so the financing is tough to get and they can require 20-30% down.  Just something to think about.  

I can help you with the analysis as well with a vacation rental.  You need to factor in cleaning fees, restocking, property management (unless you self manage), etc.  AirDNA is a good starting point for finding ballpark gross revenues and then factoring out your expenses.  What I've found, at least in the panhandle, is that you have to self manage or find someone cheap.  The 25% management fees can erode any profit you planned on making for the year.  

Jeff Morelock nailed it, each of the three cities, St. Pete Beach, Treasure Island, and Mad Beach (Madeira) each have their own short term rental regulations with Madeira Beach being the most inexpensive as well as the most highly regulated in that regard.  All of these beaches are located in Pinellas County and there is a great article entitled, 

"Pinellas beach mayors want to take back power over short-term rentals"

You can Google it and give it a read.  It's pretty obvious what the sentiment is at these beach towns and it would be unfortunate if they cut out the short term rentals all-together.  If you would like any help with anything, please reach out to me.

Appreciate the info, especially on the short term regulations. Something I will look into more as I continue my research.

As for financing, it shouldn't be an issue as I'll have 50% or more to put down. Both my properties here were either foreclosure or purchased without realtors. Because there are more costs associated with an out of state rental, I'm inclined to go the foreclosure route as the purchase price is really the only large variable that can determine if I'm going to be cash flow positive or not.

@Tyler Work Thanks for the offer, Im going to do some more research but will hopefully be in touch soon

A moment for background, I've lived here my entire life. There ain't much that happens here that I haven't seen before.

One bit of forewarning. This area is not like most other cities. One or two blocks in a different direction is a huge difference in price point, user experience, and risk factors. We're basically on an island. There is no room to expand. There are no sprawling HOAs on any waterfront. There is no urban creep, because there simply can't be.

These are great communities, and each one has it's own flavor (and regulations). Some are individualized down to particular houses in some neighborhoods, i.e. if you can't prove that it was used as a rental in the past two years, then you can't rent it now.

If you do a little shopping, you're guaranteed to come across a "condo-tel". Billed as the perfect blend of Condominium that allows short-term rentals, and a fractional ownership of the Hotel model, these are being pushed by both the developers and the municipalities. My take? It's a timeshare in a different wrapper. Avoid these at all costs. Because, while the numbers might seem to work, they only need to find a problem and you can be billed for a Special Assessment, which will wipe out any profits. And you're very limited on exit strategies.

In addition to the municipalities, we have a few other factors that wouldn't necessarily hit the radar of anyone who doesn't live here.

Environmental conditions, such as Red Tide. This year's version wasn't a naturally occurring event (thanks, State of Florida & the sugar industry), and the fish kill and other problems were the worst I've seen in over a decade. The root problem wasn't fixed. Hell, it wasn't even discussed. Which means, we will more than likely see this problem again. 

We also had a law passed allowing private property owners to claim the adjoining beaches. Many condos staked out their property lines right down to the water's edge and vigorously defended it.

These two factors alone have had a major cooling effect on the local tourism industry. Why come here, when the ocean is a death zone and you literally can't get to it anyway?

Even if that's only the general impression and not necessarily accurate, why would anyone risk it?

Add the local municipalities nitpicking short-term rentals, at the (arguably) top of the market, and you've got a bad scenario lining up. 

I know this area inside and out. I love these communities because they are my home turf. I want to own, well, all of them.

But if I won the Powerball today, I wouldn't buy any investment properties there right now.

Let the economic downturn (correction, crash, whatever) happen. Let the tourism industry suffer until it's on life support. Let the local governments feel the hard pinch of losing a massive amount of revenue. 

The current owners will be happy to sell (at a reduced price, of course), the laws will be relaxed, and the environmental policies will (hopefully) have been stabilized.

Let it shake out, and take that time to learn as much as possible. Come down on a scouting trip (aka vacation). Hit me up, we can go to Foxy's Cafe on Treasure Island for the best wings anywhere, and I'll be happy to show you around. 

But don't pay a dime for a property until you totally understand this market.

@Zach Kidd Just saw this, thanks for all the info! 

Yeah i'm hoping to see a decent dip in the next few years, and am not against buying foreclosures or short sales which I have done in the past here in Cincinnati. But you are right, there seems to be a lot of gotchas that I will need to learn. Also plan on coming down in May and spending a few weeks traveling down the coast staying at different places here and there.

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