vacation rental property success.

[Jeffrey Baughan]

Along with wanting to learn how to buy and hold and rehab houses, I've always been interested in owning vacation rental property near a beach or lake.  Does anyone have advice? success  stories or horror stories?  

Thanks in advance.

[George P.]

what's the question?

[Monika Haebich]

Hi Jeffrey! Welcome to the site :)

I recently saw a first-time, out-of-state investor make $150,000 per year with a vacation rental in Palm Springs (and that was after her management company paid for maintenance, cleaning, booking costs, marketing, etc.). She did it with a guaranteed income offer from a property management company in her area, and I'd definitely look into companies making similar offers if you won't be using the vacation rental too often.

How often are you looking to be staying in the home, and do you have any markets in particular that you're interested in? 

[Jeffrey Baughan]

@Monika Haebich That's awesome! Sounds like a good return. I am interested in some areas down in Florida like Siesta Key or more south.  Only interested in vacationing there one week a year so I can get the highest return.  I like how passive the income can potentially be if you hire the right property management company

[Monika Haebich]

That sounds great; the owners that do best are always the ones that treat it like a business.

[Lynn Burson]

It can be done especially in coastal areas &/or locations with a longer peak season.  There are several PM companies approaching us with rent guarantees... like anything else due diligence with VRs.     

[Jeffrey Baughan]

Thanks @Monika Haebich! really appreciate it.

[Robert Blanchard]

@Monika Haebich  What was the purchase price of the Investment Property in Palm Springs?   

I stayed in a Beach House in Virginia Beach for my Nieces Wedding and was surprised that they were going for $1.2 M. They were getting $3K for a week on off season and up to $6K for on season. Slept 22 and was 1 block from the Beach. Still a decent ROI but highly competitive, at least in Virginia Beach.

[John D.]

I'm working primarily in the Palm Springs area with vacation rentals.  For $150k net, ~$200k gross or so in rental revenue you are probably going to have to spend around $1mil.  I have 2 properties under contract, where those are the ballpark numbers.

[Monika Haebich]

Exactly, @John D.! 

The $150,000 was what she was netting, and she was grossing about $230,000. She bought the home in 2015 for $1.07M.

[John D.]

Those are some pretty solid numbers on a $1mil purchase, for a property without a ton of rental history.  Those types of properties are getting harder to find.

[Chris Strokes]

@Monika Haebich are you aware of anyone making those kind of returns on vacation rentals on the east coast?

[Benjamin Pekarek]

Jeffrey Baughan,

The Siesta Key market is a 20% management fee, 500k-900k price range, and monthly rentals of $5-$8k mo. for the average rental. Some are higher, and some are less.

-Ben

[John D.]

@Benjamin Pekarek what's the vacancy look like there? What percent of purchase price do you see in annual gross rents ballpark? I'm always looking for new markets. 

[Benjamin Pekarek]

@John D., 

It 100% depends on the economy. For season (November/December - April/May, again, depends on the economy/year), our occupancy hovers around 90-100%. In the off season (April/May - October/November), we sit around 50-60% if you price your unit competitively. 

It's going to also depend on if you're right on the beach or not. I've got one of the most run down, god awful 2/1s, but it's right across the street from Siesta Key beach (rated #1 beach in the US for 2015 by TripAdvisor) and it gets $750.00/week/season, and I can't keep it vacant. Off season is usually a month here, a month there for about the same price as the two week periods, but the dues are affordable, and the season more than makes up for it. If my clients are happy, then I'm happy. 

To put this specific complex into perspective, there is only one unit for sale - it's a 2/2 for $399,000, turnkey with leases in place for next season. 2015 income was $23,000.00 (stated by listing agent, I have not reviewed!). Taxes of $3,900/yr., insurance obviously depends on your personal investment strategy, & dues run $1,350/qt. but include cable, internet, water/sewer, & flood ins. 

-Ben  

[Regina Abayev]

If you're looking for good comps on what rentals go for, local demand and general pricing advice for short-term rentals, I highly recommend a company called Everbooked (I have no affiliation with them).  That's the analytics engine that crunches all of the airbnb data.

[John D.]

@Benjamin Pekarek thanks for the data.  $23k gross on $400k pp is pretty meager (less then 6% gross rent to purchase price), I am typically looking for 4x that or so, with gross annual rents representing  20-30% of the purchase price.

@Regina Abayev I've worked with quite a bit of airbnb data, in many of the markets I am looking at for larger, higher-end rentals,  they aren't a large enough piece of that market for their data to be relevant.  I'll dig into everbooked a bit though, appreciate the tip.

[Benjamin Pekarek]

John,

I agree wholeheartedly! Siesta Key, and Sarasota/Manatee in general are ridiculously overpriced! Unless you were here in the crash, none of the cashflow numbers make sense, and buying for an appreciation play is a crapshoot - if you're going to gamble, roulette is a lot more fun.

-Ben

[Monika Haebich]

Originally posted by @Regina Abayev:

If you're looking for good comps on what rentals go for, local demand and general pricing advice for short-term rentals, I highly recommend a company called Everbooked (I have no affiliation with them).  That's the analytics engine that crunches all of the airbnb data.

 Definitely. We also use their data & have found them to be the best in the industry.