Destin Florida… what vacancy rates are assumed?

Question

Can anyone give me an idea what kind of vacancy rate I should plan for in a STR in Destin, FL?

Villy Ellinger · Answer

Hi, @Justin Manges! I'm in Fort Walton Beach/Okaloosa Island (10 miles west of Destin). I agree with @Matt 'Roar' Gardner with some small philosophical divergence on "small properties". I too am a Realtor, vacation rental owner/investor and vacation rental manager. I usually see occupancy rates between 70% to 85%. That said, I have seen properties in the same complexes as mine do way lower (and some do better). Depends on the property condition, correct pricing (I agree that sometimes a bit of vacancy is ok if you maximize revenue potential through pricing), advertising, management, customer/guest experience, ect.

As for "small units", in particular studios: I love them as far as cash on cash return potential, "profit per square foot" and versatility. Yes, they are labor intensive, but I have not found them to be "a dime a dozen", at least not on Okaloosa Island. In Destin and Miramar Beach too small units are seeing a huger run-up in pricing per sq ft because demand for them in very strong based on their relative affordability vs income potential. If anything, there is an abundance of 2 bed/ 2 bath units that sleep 6 to 8, and 3/3s that sleep up to 12 sometimes. While these are very popular with larger families, there is a shortage of rentals in the summer especially that allow for less than full week rental and are in the budget of couples traveling.  Studios prices under $200K often gross $30K+ per year. I agree that lager 5/5s or higher vacation houses in Destin are great and have exceptional rental potential, but not everyone can afford a million $$ investment property, and those don't necessarily always cash flow any way :-).

For budgeting purposes and to estimate investment returns I usually use 70% occupancy. Please note that is not a flat % across the year. Total vacancy in November/December will not kill you. I budget for 20-30% in those months. 70% occupancy in June/July is actually very low. Unless there is a major issue/hurricane/etc, June and July should be at 100%!!! Those are the months with highest prices too.

Matt "Roar" Gardner · Answer

@Justin Manges - As a realtor and investor in the Destin market, I commonly tell my clients, "It depends."

The average band for occupancy is between 40-60%, with some properties able to achieve 80+%!  This is average occupancy through the year, but realize we are a very seasonal market here, which dictates both the occupancy and rental rates.

A 1-2 bedroom condo directly on the beach will most likely see the highest occupancy, due to the fact that they are a common target for snow birds to help with the off season dip. However, a 1-2 bedroom condo won't be able to charge nearly as much of a premium rate in the high season because they are a dime a dozen.

If you're able to get into the larger homes (5+ bedrooms), you may see lower occupancy, but you'll be able to charge much more of a premium on your rates in the high season merely due to less competition.

I hope that helps?!

James Byrd · Answer

And of course, if you’re at 100% occupancy in June/July, you’re not charging enough! 😉

James Byrd · Answer

@Justin Manges @Matt "Roar" Gardner nailed it. The occupancy (oppo of vacancy; more semantically correct IMO) rates are very seasonal in the panhandle. May to August are the massive income generators then you should be willing to open your property to longer term snowbirds (retirees north of the Mason-Dixon Line); it’s not prescriptive but a proven technique. Our property already has a Canadian couple booked from 01 Jan to 28 Feb 2022 at a reduced rate. I prioritized known occupancy over piecing together STR tenants in the “off-season”.

Are you looking to buy in Destin? The value is there, even in this Nationwide swing in prices. I recommend @Matt "Roar" Gardner or myself for your purchase needs! Feel free to PM me!

Justin Manges · Answer

@Matt "Roar" Gardner

It absolutely helps, thank you very much.

Kenneth Garrett · Answer

@Justin Manges

This is my first year in the Destin area.  Started renting to guests in March.  I was fortunate to hit the spring break crowd.  I’m almost at 50% occupancy already with the bookings.  Projection wise, I think I’ll hit between 70%-80%. I based all my numbers on 50% just to be conservative.

Good Luck.

Justin Manges · Answer

@James Byrd

I am looking to buy in destin eventually!

Destin Florida… what vacancy rates are assumed?

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