Investing in Beachfront Property

[Charles A. Armistead]

I own a single-family rental in North Carolina. I am new to investing in property but would like to invest in beachfront property. The purpose of the property would be to place on Air Bnb and like websites for short term use. What are investors' experiences with these properties and what are some less obvious criteria to consider when purchasing a beachfront property? Some criteria I believe to be true or is unclear are below, please correct 

1. Monthly income on rental should be 2x monthly mortgage. 

2. Expect to pay property manager 10% of the monthly mortgage. 

3. What are the average costs of cleaning companies? 

4. What is the average monthly cost of insurance on beachfront property.

Finally, what have been your experiences with these properties? I have one friend who has already invested in beachfront property and swears by it. 

[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!