Vacation Rental Investments

[Ryan Owens]

My wife and I are looking at buying our first investment property and we've got family friends who own short-term vacation rentals who tell me that the money's good and that these units cashflow pretty well. From what I'm seeing in the local market, property management companies are charging between 20-40% of rent and HOA dues run about $500-600/month. These HOA dues include all utilities except power, maintenance of the pool and grounds, as well as insurance for the property exterior (coastal area prone to hurricanes/flooding).

Even if I manage to scoop up one of these vacation rentals for $115,000 (asking price is usually closer to $200k), it's still projected to cashflow negatively because taxes, HOA, and property management costs about $1350/mo before adding PMI. Is this normal for regional vacation markets or do I just need to keep digging before looking elsewhere? I appreciate any advice.