Macro Discussion: Vacation Rentals in Retirement Areas

[Troy Hebert]

Hi everyone,

I have been exploring some options buying properties (as previously posted) but have not found an attractive deal yet. A family member of mine owns ~8 rental properties, mix of annual lease and AirBnB vacation rentals.

He has been pushing me towards a couple areas on the coast in Florida such as Naples and Cape Coral. There are pockets of areas that have not returned to pre-recession levels but activity has been on the rise and he has been able to upcharge for vacation rentals in the area.

My issue is that when I look, there appears to be a large supply on the market. When I asked a broker about it, he mentioned these areas are predominantly retirees etc. who have passed away and the family is selling the home, or downsizing due to move into assisted living facilities.

I'm wondering if you agree or disagree with me here. I read about the aging population etc. and how it should be a tailwind for this type of market, but I think it's possible that as more and more of the baby boomer pass away, run through retirement funds (something like 60+% of retirees have less than $100k), unfunded pensions that never come to fruition, move into nursing homes, etc. that the price appreciation in the area is muted as there will be more and more supply in the market despite more and more investment money sloshing around. Surprisingly enough, I think the Millennial population is growing faster than the baby boomers, and thus one would actually look into areas where millennials are getting new jobs (Nashville, Austin, SoCal, etc.) 

Just a thought, maybe I'm wrong and more and more demand will be prevalent as more people retire, but when I look at the macro trends I get more concerned about projects luxury good sales (such as nice rentals on the water in Cape Coral) and more and more bullish on cost-efficient healthcare services (think adult day care centers that provide basic care but lower the cost on the healthcare system by keeping people out of expensive nursing facilities and into cheaper care).