$300k US Virgin Islands house for Air BnB? Vacancy rate?

Question

Found a house in st. Croix US Virgin Islands which is centrally located so not beachfront. It's in a private neighborhood. Simple single family single floor house. Sinking to spend 300000 on the house and then invest 20000 to update it since the house hasn't been updated in over 20 years.

my concern is it seems difficult to get much data on things on a small island. A lot of stuff doesn't seem to be online. So I'm concerned about getting the house and having a lot of vacancies.

also if I have two co-signers on the mortgage would I still have to pay 20 to 25% down since it's not a primary residence? One of the co-signers is a veteran. We only have thirty thousand for down payment on this particular property.

what are your thoughts in general about investment properties in the Caribbean which are not beachfront properties. I realized the beach is going to be 5 minutes away from pretty much anywhere on the island but it's not the same thing as waking up to waves in your backyard.

Jeff Wagner · Answer

I'm not experienced with STX, but live on STT and have evaluated a number of properties in STT and STJ. The STRs almost never pencil out assuming you want them to cash flow. A few points to consider:
-airdna had some data for my zip code - 00802, it might be worth purchasing one month for STX ** caveat upon trying to validate some of the STR number, I found a number of data points were way off - USE CAUTION

-The only units I know that do better than break even are self managed and require over 75% occupancy to do so.  Hurricane season is May - Nov and slow season is Aug - Oct.  It is very difficult to achieve that kind of occupancy

-Hurricane insurance is 1.5 - 2% of the total home value per year... its expensive

-Electricity is currently $0.43/KWh - I think that's ~$0.10 higher than Hawaii.  Guests will consume loads of power, so solar may be a shrewd investment.  The payback period is very good given our high cost of power.  The power company and grid is a mess - outages are frequent, so you will want some type of backup for guests.  For reference a 1 bdrm condo power bill will run ~$350/mo in winter, higher in summer.  Larger villas can see $3k/mo for power.

-Our property taxes are exceptionally low :)

-Mortgage rates are about 1 point higher than the mainland.  My understanding is that anything with more than one kitchen will be treated as investment and require 25% down.

-STX does not have the tourist volume as STT or STJ, fewer flights, fewer ships, everything

-It will take a long time to do $200K of rehab - its on island time.  Everything must be imported

-Maintenance is never ending, the salt air, tropical sun, humidity, and power surges can do a number on the property.  Significant capital reserves required.

I do not want to discourage you but simply share some of the things I have learned about living/investing in the VI.  Feel free to PM me if you would like to connect.Best,

Jeff

Jeff Wagner · Answer

@Orlando Goodon - $50-70 seems light, how many beds bath?  For a full house, I'd expect at least $150 in high season, more depending on views, pool, location.  To your point, back of the napkin $150/nite x 180 nites = $27K Gross - there is no way it will cash flow.  In my observation on STT, I think rents are starting to decrease and normalize.  About a year ago we were still operating in a post Irma/Maria environment with obscene rents to FEMA workers and other relief workers.  (Example $8k month for a 1 bed condo that normally rents for $1.5k).  While many investors were able to make wild profits, I think its unfortunate as we (all US citizens) are  paying for it and not all of the funds are going to improve local conditions.

I think there is a good chance your house does better as a long term rental - you eliminate WAPA and internet overhead.  Ask a local realtor for a long term rental opinion.

Chris Seveney · Answer

@Orlando Goodon

How did this go?

My research is there are only a handful of lenders for the USVI and right now finding rates about 1/4 point higher. Every lender I talked with required 20-25% down payment on the property

As others noted electricity is High, insurance is high and depending on location probably have anywhere from 30-60% occupancy which is a big delta. But one hurricane could crush your prime season as well.

Dell J. · Answer

An air bnb doesnt have to be on a beach to do well in stx. what per night price range are you shooting for?  How familiar are you with st croix? are you living there?  At the moment vacancy rates are low due to the refinery reopening and other economic factors.

You said it needs 200K of work.   It will be difficult o finance a house that isn't livable.   I don't know how familiar you are with the area but construction cost and timelines maybe different to what you are used to.

Dell J. · Answer

Sorry to hear.  How are you advertising it?  have you tried the st croix facebook group?

Orlando Goodon · Answer

Hi Ben and everybody. Sorry I missed some of your comments.So just completed first year and ended up getting a long term renter who was there about 10 months. The rent just barely covered mortgage and expenses, so don't even have much reserves. Really need to bring rent up, but can't get tenants. Property is vacant right now for last couple months, which sucks as I'm looking to buy my 2nd property in NJ in March. I've depleted all my business account cash, so I don't even have enough to do the advertising I want to do. Sure I have the money, but that means exceeding my business budget. I may have no choice as now of all times, I can't keep paying for house out of pocket while trying to raise $30k+ for downpayment.Not really getting much interest in the property at all. Seems the island is in economic decline due to the closing of a major profit center for them. We were getting 20 views a day and now are down to 9 a day on AirBnB. Only a single inquiry in last 2 months.I'm looking at other properties and it seems like maybe the market is just bad right now.

Ben Lukes · Answer

@Orlando Goodon

Any change in your situation?  I hope things are going well and you are staying safe.

Orlando Goodon · Answer

Actually I'm lost. I see air bnb rates from $50 to $70 a night. That would barely cover mortgage with $30k down...however house rents start at $2500. Average $3000/month. That is double air bnb. I thought short term rental is more money.

$300k US Virgin Islands house for Air BnB? Vacancy rate?

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