Location considerations for a vacation beach house

[Sherrie P.]

Someone else posted the question below, but I don't think anyone responded. So, I am re-posting because my husband and I are in the exact same situation. Any advice?

My husband and I are considering buying a beach house/vacation rental on the gulf coast. We are incredibly flexible in our location but would like something between Dauphin Island, AL and Seaside, FL. This encompasses all different styles of beach community from sleepy Dauphin Island and Seaside to lively and more touristy areas like Gulf Shores and Destin. Our primary objectives are highest rental return for dollar invested (ROI) and to own a place that we would enjoy staying in. Any idea if the return on beach front is better or worse than 2nd tier? I can pull rental rates to get a per week reference but can't make out whether the beachfront might rent more weeks per year or not. Also, any guidance on which would be better, hip and happening vs sleepy beach town? Obviously, touristy areas like Destin would draw more potential renters BUT you are also competing against a thousand condos for rent in the dozens of high rises. Any particular geographical considerations which we need might need to think about? Does a home in a gated swim/tennis community such as Watersound or Kiva Dunes rent better than a one off on the beach?

I honestly think that there are opportunities to make a profit all along the coast, but our aim is to maximise out investment as much as possible. I would be interested to get your perspective.

[Jon Holdman]

@Sherrie P. I've changed your subject line to be more meaningful. Hopefully you'll get a few answers. We've been considering this stretch, too. I think Dauphin Island is too rural for me. When I looked on VRBO there was plenty of availability, too, which indicates low occupancy. I'm thinking of trying to take a couple weeks next year and do a slow drive from New Orleans down to Port Charlotte or so and check out some of these towns.

[Karen Margrave]

Welcome to BP! I'm sorry, I don't have an answer for you. I would suggest that you do a search of the site on vacation rentals and read up on them. Also, @Rich Weese is probably the most knowledgeable person I know of, that contributes to BP, and has the experience with vacation rentals. Hopefully he'll see this and chime in. Also, I'd suggest that you fill out the keyword alerts. (though you may need to be a paid subscriber). Good luck!

If you end up reposting, mention the Vacation Rental Advice Needed in the subject, you may draw someone with that experience.

[Sherrie P.]

Thank you Jon for changing my title! I know what you mean about Dauphin Island being a little bit sleepy.. Of course, that is what I love about it. (LOL) hmm.... another indication, I am getting old. I want to enjoy quiet beaches, but this is not about me. :) This is about potential "renters".. So good point! Gulf Shores is like vacationing in the city and Dauphin Island is like taking the ferry to the country. Good luck on your journey along the coast. I have vacationed in most of those towns over the years, if I can help you in anyway, let me know.

Karen, thank you for the tips. Based on your comment, I hope Rich Weese sees this as well...

I also have a question about financing the purchase..Stocks vs beach home investment etc.. Which forum should I post it on to get the most response? I noticed there a forum titled "General Real Estate-Buying and Selling Real Estate".. thank you again!

-Sherrie

[Sherrie P.]

Karen, I sure hope Rich sees this :) How can I reach Rich Weese on here? Do I need to become one of his followers? If so, how?

thank you!

[Jon Holdman]

@Rich Weese isn't around as often as he used to be. Lets see if my summons draws him out of the woodwork.

You can post financing question in the "Conventional and Private Lending Discussion" forum. Requests for specific lender, though, have to do into the Marketplace.

Most lenders are going to want 20% down. Rates on NOO loans are 0.5 to 1% higher than OO loans. There are requirements on reserves. It might be possible to buy a vacation property with an OO second home loan, but there will be occupancy requirements.

Also keep in mind that IRS rules get messy if you want to occupy a rental some of the time.

[Rich Weese]

Hi Sherrie,

I'm not sure my experience is going to help you much. I bought my first condo in Cancun when there were only 5 hotels-decades ago. Over the years, I bought 4 more in same building. 3 were on penthouse level and the other 2 were 1 floor below. I think I would buy 1st tier wherever you buy. It worked great for me and I also did better with my condos that slept up to 8 people. My market was the new thing when I started and everyone wanted to go there. Families, singles, Spring Breakers etc.Over the years I received as much as $2750 per week and less for the lower seasons.

As the years went by, Cancun completely filled up and people started doing all inclusives down the mainland Coast of Riviera Maya. This reduced my rentals and there was more competition as newer high rise condo buildings came in. I don't know what your competition will be.

I never paid much attention to the amount of usage since it was in Mexico and ....... I also can't help you on financing. Mine were all a different bird being in Mexico and I always paid cash.

Before you decide on tier and beachfront or not, I would suggest the following. Go to one of the rental sites like Home Away, VRBO and others. Look up your various cities that you are considering. There will be TONS of rentals listed of all sizes and types. Most (some) will have calendars showing what days they have available. If you research enough of them you'll get a feeling as to which rent better and the difference in rates. This should help you compare and decide which type looks best. Then research the listed prices and you'll be able to come pretty close on a ROI.

I don't want you to think this is easy. All the normal problems. High management fees, long distance oversight, etc. I had a great setup with a maintenance man on call and one of the building maids did my cleaning for nearly 30 years.

Cancun was never SLEEPY and always active and crazy, so you know which one I preferred. Hurricanes need to also be entered into the equation. We had 2 in 35 years. Gilbert in 88 (little damage) and Wilma in 05-which destroyed everything in its' path.

When I was younger I also had a couple condos in Park City, Utah but that was so long ago this old FART can hardly remember anything about them. It was a nice place because they rented in multiple seasons.

I hope you'll do LOTS of homework before you pull the trigger. It is a real difference than just owning normal SFRs or units. You need to realize there is a value to your usage and not compare it with ordinary rentals. I hope this helps a bit. Good luck. Rich

[Rich Weese]

I should've apologized for not replying sooner. Sorry. I pretty much just play softball, pickleball and golf these days and don't pay a lot of attention to BP. My investing days have slowed somewhat and I've changed direction to building homes with my available funds

[Jordan Meyer]

@Rich we'd love an update on how your quest is going to live tax free?

[Sherrie P.]

Yeah!!, Rich is in the building! (LOL) I am a Newbie and everyone kept saying, "I wish Rich was here" :) So as you can tell, I am glad to hear from you.

I agree it is alot to think about. Darn it, I wish you lived closer to the other "T" state of Tennessee. I would be tracking you down at Pickleball (whatever that is!) and show you the paper on this deal and pick your brain.

I keep thinking Real Estate is slowly coming back and there is only so much beachfront out there.. Now, if mother nature would give us a break on the hurricanes life would be easier...

Lastly, if you are ANY quest in which you are living tax free, please send me an invitation! At least living in Tennessee, I get a little state tax relief :)

Thank you Rich for your advice.

-Sherrie

[Paul Timmins]

@Sherrie P.

Vacation rentals can be quite lucrative whether they are on the water or not.

One caution about waterfront they are re-drawing the flood plains zones around here and are quite liberal. Many people were not in the zone are now. Insurance is skyrocketing est. $2,500 per foot below the zone. Some people are getting insurance bills 10K more than the previous year.

A buddy of mine bought an old Victorian with a bunch of bedrooms in a tourist area. She rents out per bedroom $200 a night to tourists huge cashflow. The trick is to buy one conventionally rented then convert to the vacation rental.

Good luck

Paul
@Sherrie P.

[Colleen F.]

I can't comment on Florida rentals but for RI rentals I have seen the best value is beach view and close enough to walk. Just talking to friends beachfront rents first but is pricier to buy. Beach view and walkable will rent almost as well and command a good price/week. Ours is beach view and we do alright we could rent it the whole summer if we wanted to. You need to decide on how much personal use and see you are on the same page about that. If you go over two weeks it is messy tax-wise but decide for yourselves the percentage you want it as a second home vs. a rental. It depends what you want from the purchase.

There is also a micro climate to some communities. Two or 3 streets that rent great and a block away not so much. Rental agencies know about the areas so I recommend talking to them. I was glad we did a lot of research before buying so we knew the right place when we saw it.

We did look in Florida around Sanibel but it was not cash flowing like we wanted and we don't know that area well so we dropped it. Looking on VRBO is a good idea but some places occupancy calender can be misleading if the place is also owner used. Good luck in the search and take some time on it.