Buying a vacation rental

5 Replies

Hello BP community,

I have a question with regard to vacation rentals in Panama City Beach. Should I wait for the market to go down, or should I invest now? I see the properties in $250K that cost $180k two years ago. Please give me the advise.

Tony, it is very helpful to have some more relevant information in order to properly weigh in.

Here are some questions that can help guide you more towards what you're looking for.

Why do you want a vacation rental there? What are the returns? What kind of occupancy do they experience? What's going on with local sentiment / zoning regulations regarding vacation rentals? Do you have a team put together to run the rental? Are you prepared to come out of pocket a lot of money to furnish the property? Where is Panama in their real estate cycle?

Hi guys! I am a real estate broker in Panama City Beach. I have been a broker for 12 years and just recently moved here from the Tampa area BECAUSE the market here is one of the strongest in terms of growth in the state. 

We have a very unique market here in that they made the choice to not build hotels on the beach but condos. The vast majority of vacationers stay in condos. Many have been coming to the same one for generations. The condo market is unique and the vacation rental market is also unique. We have dozens of property management companies that will range in price from 10% to 30% and have as wide an array of occupancy/profit and quality of management. I believe you truly get what you pay for in this particular case so property management in each building is an important consideration. 

You cannot judge all 2/2 or 1/1's the same. Nor can you judge by price. Every building has it's attractiveness and it's drawbacks. 

The market here is growing very strong for the 3rd year in a row and it's anticipated that we will continue to hit double digit growth for the next several years. The Bay County area is very pro growth and has a plan in place to develop the area to increase year-round residents. Right now the vast majority of homes (including condos) are owned as second homes, vacation homes or by investors. We have recently built an international airport, it's small but has a runway that can accomodate the very largest air traffic in the world. FEDEX is building a 300 employee center by it and the Economic Development Association here is working hard to bring high paying jobs to this area. We have a strong military presence here (Navy Diver training, Navy Seals Academy, Tyndall Airforce  -top gun flight school) and our International Port is expanding though it's already the largest exporter of wood pellets to Europe and copper importing to the East Coast.

I mention all that to drive home the point that this area is becoming more and more of a destination attraction with amenities that were never here before. Baby boomers are a huge target market with over 145,000 homes being developed by one single developer that over the next few decades will provide housing for folks looking to get out of the cold but can't afford the more affluent areas of south Florida and west of us in Destin and Gulf Shores, AL.

Interesting questions poised by the people who answered ahead of me.  The Emerald Coast of Florida is a well kept secret that is slowly being discovered.  The area we are talking about is basically the stretch of incredibly white beach between Pensacola and Panama City, Florida.  The reason the beaches are so white is a different blog but these are the nicest beaches in the WORLD.  The fact that I live here does not color my opinion.  After 22 years in the USAF, I have traveled the world and these are the nicest beaches.  

Each of the areas has their own personality and reputation.  

Panama City Beach has a bad reputation as being the Spring Break Capital of the South East.  They are doing their best to counteract this reputation but the kids who came down here in the 80's have grown up and are bringing their children here now.  

Navarre Beach at the west end is the Red Neck Riviera, land of the big four wheel drive pickups.  This beach is now very quiet and very family orientated.  They had blue laws until recently and the number of restaurants and entertainment is limited.  

In the middle we have Destin and Rosemary Beach connected by Scenic HY 98 and HY 30A.  You can find a mix of all the above here, a little bit of red neck, country and what ever you a looking for as a vacation getaway or family reunion.  

As an investor, the time is right for all these locations.  Inventory is low, folks coming here on vacation are ready to buy.  Occupancy has been setting records year after year.  The 100 days of summer book early.  The local TDC does not spend money getting tourists here during the summer.  They are pushing the shoulder seasons as a great time to visit.  New airline service has just been announced between the local airport and Cincinnati and St Louis.  Service from PCB is great with South West providing South West style service.  It's a win win for all these different areas.  

There really are no cycles in this investment market.  Prices are creeping up, the quality of the inventory is interesting in that top dollar is currently being paid for units that need remodel.  

Call me with any question. 

Tony, 

Panama City Beach is the best bang for the buck if you're looking for gulf front vacation rentals.  The markets in Destin and PCB are appreciating at a normal pace now finally.  Last year PCB gulf front condos were up 9.1% from Dec 14 to Dec 15.    There is still room for growth and now there are more buyers inquiring than anytime since the market collapse.  Jan is usually the slowest month of the year for real estate sales, but this Jan has been better for most agents than any month the last 3 months of the year.  If you can manage it yourself through VRBO,com, you can capitalize on no management fees.  In this scenario 10% returns are available.   While nothing is ever guaranteed, there are steps you can take to increase the rentals.   There are certain condo buildings that are better for vacation rentals than others.   And there are certain condos floorplans in each building that are better for rentals than others.    Good luck in your search!