Investing in Beachfront Property
Member since 2020 · 1 post · 0 votes
Investing in Beachfront Property
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Real Estate Agent · Santa Rosa Beach, FL · Member since 2019 · 112 posts · 116 votes
4yHello Charles,
I personally love STR as a strategy. I'm all about Cash Flow right now. I can share my personal experience and hopefully it can help a bit with your decision making process.
I bought my first Ocean front unit in March 2021. 1 bed 1 bath Ocean front condo in Myrtle Beach, SC. I purchased it with cash for $90,000. I rented it out on AirBNB starting in March. I lived in it in April and part of June so I only had about 8 months of rental income. My gross rental income was $36,000 plus $6,700 in cleaning fees. I self managed it. My HOA was $7,060 for the year. My main goal was Cash Flow and I'm really pleased with how it turned out.
A couple things I've learned over the last year.
1. 1 bedroom 1 bath units are the "sweet spot" for best cash flow ROI. You should be able to do 30-35k GRI. That was my target and I exceeded it.
2. Most resorts charge a 40% management fee. Obviously don't want to go that route. You can get property management for 20%
3. Finding good dependable cleaners was my main challenge. I paid between $50 and $75 per turn for my cleaning people
4. My HOA fee included my insurance. It also included everything else (electric, cable, water, trash, etc) so I just have that one payment each month.
Overall, the experience has been great and I'm getting ready to close on my second unit this week. Knowing the market or working with someone who does is key. Which buildings are having assessments coming up. Which buildings require that you use the onsite manager for the first couple years. Timing is important, we have a peak season in the summer and a slow season in the winter. Most of the money is made between March and October. You can get property management for 20%. And as Myrtle Mike Thompson mentioned, financing on "Condotels" can be tricky, so knowing the right lenders is key.
Hopefully that helps, I'm happy to answer any other questions you might have. Here's to a prosperous 2022!
13 Replies
- Investor · Woodridge, IL · Member since 2015 · 80 posts · 21 votes4y
1 it should 3 times
2 15 to 25%
3 depends how big the place, how many bedrooms
4 depends on insurance company, how much coverage, is it in flood zone, and is there hoa with exterior coverage
- Real Estate Broker · Raleigh, NC · Member since 2018 · 19 posts · 9 votes4y
Hello Charles! AIRBNBs are a great way to maximize your STRs profits. My first questions to you would be what areas are you looking to invest in? All coastal markets are a little bit different. For example, Myrtle Beach investing is going to be much different than Outer Banks investing. Prices are different, taxes are different, types of guests are different etc. Also some NC markets are starting to put restrictions on STRs like Wilmington. Once you determine the market you would like to invest in you can start worrying about numbers and making sense out of deals.
1. I would look into the CAP rate when analyzing rentals. Depending on the market, anywhere from 12-20% is a pretty solid cap rate. A good website figure out market rents in a particular area for STRs is AirDna. You can also network with different property managers in the area to get a fee for projected income.
2. Yes, it is safe to budget around 10% for management fees.
3. Having a good cleaning company is very important. A lot of times they will be the ones inspecting the property after each guest. Trust in this relationship is key. Also you have the choice of charging this cleaning fee back to your guests. I would say $65 per clean is a reasonable estimate for a smaller rental.
4. Beachfront property is unique because you have to pay more for insurance. This is because beachfront properties are considered a higher risk than inland properties and you will need additional coverage you would not need inland. Shop around with several insurance companies to find the best rates. Flood insurance is not cheap.
I have a single family STR in Myrtle Beach . It is not ocean front but close enough that I still have to pay flood insurance. Cashflow is good and it pretty much stays occupied when I want it to be. I would recommend it if you are familiar with the area you will be investing in. Remember your money will be made when you purchase the property. Numbers do not lie!
- 4yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votesYeah, 10% is not correct IMHO. You will pay at least 20% and more like 25% for management. Vacation rental management is not like a LTR.
- 4yMyrtle Mike ThompsonBusiness MemberRealtor · Myrtle Beach, SC · Member since 2016 · 350 posts · 204 votes
Hi Charles, I'm an investor-friendly Realtor based out of Myrtle Beach. Between Myrtle, North Myrtle, and the other neighboring communities we have good cash-flowing options to fit every budget. You're asking good questions. One thing I wanted to add is you'll want to have a clear strategy for financing. For example, many investors are leveraging 10% down vacation home loans to purchase rental properties in markets outside of their own. This won't work, however, for the vast majority of oceanfront resorts here along the Grand Strand which get classified by lenders as 'condotels'. So this strategy is best employed with beach houses or smaller low-rise condos a block or two from the beach. Also, it is very difficult to get financing for efficiency (studio) units. I've had clients come to me excited about a $100k oceanfront efficiency thinking they could buy it with $25k down and finance the rest. These have to be full cash purchases.
I'm just vomiting information that may or may not be useful to you, but let me know if you'd like to connect or if I could be of help at all to you. I've been in your shoes before. Be patient. I constantly see people overpaying for these properties because they're so anxious to get into the STR game. Good luck!
Myrtle Mike Real Estate580 Reviews - Member since 2021 · 2 posts · 1 vote4y
Charles,
I am in the exact situation as you, I own a SFH in NC and am currently looking for a beach house. I've been at this for quite a while and have put in three offers in the past month with no success, all lost to cash offers. In my analysis of similar questions here is what I have observed.
1. My search is for 4BR/2BA SFHs and I am seeing the opportunity to sleep 10-12 people. According to Airbnb, AirDNA and BP tools for Airbnp it suggest that I could earn 2x monthly mortgage. This assumes about 12 weeks of rental throughout the year. I am starting to hear of people seeing more winter rental demand for 3 months at a reduced rate. This would help increase income.
2. All property managers for STR that I have seen will charge 25%-35%. You can check out local companies or larger ones like Vacassa. My analysis suggests that if you do not manage it yourself the management company eats all of your net profit.
3. Based on input from others with experience I was told to plan for $250+ for each cleaning. If it is an emergency cleaning (your cleaner does not show up) it could go up to $500.
4. Due to the risk of damage from flooding and wind along the coast I am getting insurance quotes for about $7K per year, this is for homeowners and flood. I am also looking at 2nd row/3rd row and canal front, beach front could be higher. It will also depend on the area and risk of flooding.
I am super focused on finding a STR along the coast. With the mortgage, taxes, insurance, Airbnb fees, expenses, etc. my model still shows very nice returns. If you ever want to exchange some thoughts feel free to PM me.
Good luck to you! - Real Estate Agent · Santa Rosa Beach, FL · Member since 2019 · 112 posts · 116 votes4y
Hello Charles,
I personally love STR as a strategy. I'm all about Cash Flow right now. I can share my personal experience and hopefully it can help a bit with your decision making process.
I bought my first Ocean front unit in March 2021. 1 bed 1 bath Ocean front condo in Myrtle Beach, SC. I purchased it with cash for $90,000. I rented it out on AirBNB starting in March. I lived in it in April and part of June so I only had about 8 months of rental income. My gross rental income was $36,000 plus $6,700 in cleaning fees. I self managed it. My HOA was $7,060 for the year. My main goal was Cash Flow and I'm really pleased with how it turned out.
A couple things I've learned over the last year.
1. 1 bedroom 1 bath units are the "sweet spot" for best cash flow ROI. You should be able to do 30-35k GRI. That was my target and I exceeded it.
2. Most resorts charge a 40% management fee. Obviously don't want to go that route. You can get property management for 20%
3. Finding good dependable cleaners was my main challenge. I paid between $50 and $75 per turn for my cleaning people
4. My HOA fee included my insurance. It also included everything else (electric, cable, water, trash, etc) so I just have that one payment each month.
Overall, the experience has been great and I'm getting ready to close on my second unit this week. Knowing the market or working with someone who does is key. Which buildings are having assessments coming up. Which buildings require that you use the onsite manager for the first couple years. Timing is important, we have a peak season in the summer and a slow season in the winter. Most of the money is made between March and October. You can get property management for 20%. And as Myrtle Mike Thompson mentioned, financing on "Condotels" can be tricky, so knowing the right lenders is key.
Hopefully that helps, I'm happy to answer any other questions you might have. Here's to a prosperous 2022!
- New to Real Estate · Alberta, Canada · Member since 2021 · 10 posts · 1 vote4y
Thanks for sharing that Michael, it was helpful.
- Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes4y
Charles,
One thing to include from an insurance point is Flood Insurance. Coastal properties are more likely to need Flood insurance. Luckily, there are more choices for Flood Insurance than in the past. These new "Private Market" flood policies are rated on their own algorithms and often can be less than traditional flood insurance through the National Flood Insurance program. Make sure you have an Agent that can quote many of them. I find that there can be big swings in pricing from them and often the Private Market that is best for one property is not close on the next one.
- 4yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
I agree with @John Mocker. We almost bought a beach front property in Lincoln City, OR. We started the financing process and then found out the area only allowed the FEMA insurance instead of others.
We had locked in Lloyd's of London's flood insurance for the home at just under $600 a year. The required us to use the FEMA flood insurance at just under $6000 a year.
Make sure you can use alternate flood insurance.
- Rental Property Investor · Stewartsville, NJ · Member since 2016 · 418 posts · 280 votes4y
If you are beachfront, you should also budget more money for maintenance. Proximity to salt water will increase your maintenance costs (paint, deck, woods, HVAC, etc).
We have an STR in the Outer Banks and we learned this lesson our first year.
Mike
- Member since 2023 · 3 posts · 2 votes2y
Quote from @Michael Weigum:
Hello Charles,
I personally love STR as a strategy. I'm all about Cash Flow right now. I can share my personal experience and hopefully it can help a bit with your decision making process.
I bought my first Ocean front unit in March 2021. 1 bed 1 bath Ocean front condo in Myrtle Beach, SC. I purchased it with cash for $90,000. I rented it out on AirBNB starting in March. I lived in it in April and part of June so I only had about 8 months of rental income. My gross rental income was $36,000 plus $6,700 in cleaning fees. I self managed it. My HOA was $7,060 for the year. My main goal was Cash Flow and I'm really pleased with how it turned out.
A couple things I've learned over the last year.
1. 1 bedroom 1 bath units are the "sweet spot" for best cash flow ROI. You should be able to do 30-35k GRI. That was my target and I exceeded it.
2. Most resorts charge a 40% management fee. Obviously don't want to go that route. You can get property management for 20%
3. Finding good dependable cleaners was my main challenge. I paid between $50 and $75 per turn for my cleaning people
4. My HOA fee included my insurance. It also included everything else (electric, cable, water, trash, etc) so I just have that one payment each month.
Overall, the experience has been great and I'm getting ready to close on my second unit this week. Knowing the market or working with someone who does is key. Which buildings are having assessments coming up. Which buildings require that you use the onsite manager for the first couple years. Timing is important, we have a peak season in the summer and a slow season in the winter. Most of the money is made between March and October. You can get property management for 20%. And as Myrtle Mike Thompson mentioned, financing on "Condotels" can be tricky, so knowing the right lenders is key.
Hopefully that helps, I'm happy to answer any other questions you might have. Here's to a prosperous 2022!
- Member since 2023 · 3 posts · 2 votes2y
I'm investing in Myrtle Beach. Any advice would be great. I'm going in with $180,000 cash. Do I buy a nice one bedroom bath oceanfront condo or 2 short term rentals in town. I think I know the answer but any advice would be great. Or any other investments that make sense in Myrtle. Motivated to make some rental money. Thank you.
- 2yMyrtle Mike ThompsonBusiness MemberRealtor · Myrtle Beach, SC · Member since 2016 · 350 posts · 204 votes
Quote from @Justin Morrison:
I'm investing in Myrtle Beach. Any advice would be great. I'm going in with $180,000 cash. Do I buy a nice one bedroom bath oceanfront condo or 2 short term rentals in town. I think I know the answer but any advice would be great. Or any other investments that make sense in Myrtle. Motivated to make some rental money. Thank you.
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Myrtle Mike Real Estate580 Reviews
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