First, thanks everyone for their replies. I sort of cut my teeth on coastal vacation rental condos back in the early 2000s by investing in the Florida panhandle beach towns. Granted you have to have a high tolerance for weather related events and the costs that go along with them, but the ownership experience has been enjoyable and frankly lucrative in terms of both appreciation and rentals.
Now, as it relates to Galveston and motives, i sort of equate the situation to jumping from a fast moving train (Austin) to a slower (albeit still moving) train in Galveston in terms of the markets. I have two properties in Austin, so diversifying now (while the market is white-hot in ATX) seems like a good use of the equity that I've been able to gain through appreciation.
Like everything else, I'm trying to figure out the business plan for how loft properties in Galveston pencil. Mid-term tenants have really been my sweet spot in Austin - with lots of people renting for 3 - 9 months because they are relocating or on a special project. Also common for me have been renters that are remodeling their nice homes nearby. These are great tenants to have. I'm currently limited by HOA to no STR and leases of at least 90 days or more for the property that I'd contemplate selling as part of a 1031.
My other ATX property is downtown and has a 30 day min lease period - which is very workable. So it really comes down to needing to know if there is enough demand for those mid-term tenants (30 days to 9 months) to rent one of these places out consistently. I've enjoyed almost no vacancy during the last 5 years of renting my Austin properties. I can't say I expect the situation to be as robust with Galveston...but that is really where my due diligence is headed. So in a nutshell, I can live without STR ability on a Galveston loft property provided that: (1) 30 day leases are permitted (I always rent my properties out fully furnished - so they are good for the corporate housing by owner type tenants); and (2) there is enough demand to sustain rentals of this nature approximately 9 months out of the year or more. Those are the big open ended questions. In terms of why Galveston - I live in Houston and it would be easier to manage the tenant turnover and upkeep on one my properties than having two that I self manage in Austin. Additionally, my family and I would get to take some advantage of the property when vacant (although hopefully not too often). Additionally, as a government relations professional, it is my belief that there is going to be significant federal infrastructure dollars flowing into the Galveston area in the near future. I get asked about Casino gambling all the time and while I don't see it this legislative session, those discussions will become more rigorous in the coming years.
