Still a good time to buy a STR in PCB at the current prices?

Question

Hey guys!

I'm a new investor, very actively looking to buy my 1st STR in the Panama City Beach area. However, I'm noticing the prices have shot up quite significantly since the last year or two. Some of the condos are even listed/selling for close to double the purchase price within 2-3 years. Was hoping to get people's sentiment on whether this is really a good time to buy in this market or maybe hold off for a few months to wait for the prices to settle down a bit (hopefully)?

Any help/suggestion will be highly appreciated.

Karen Chenaille · Answer

I own two condos in PCB. Both  in the shores of panama.  There are a three things that I dislike about PCB compared to other gulf coast towns.

#1. The seasonality is extreme.  A condo making 400-500 a night in peak plummets to 80-90 night in the off season.  Even at that low rate there is substantial vacancy.

#2. The partying. Despite what your realtor may tell you about the decrease in partying, it's not true.  There are numerous facebook groups dedicated to PCB condo owners that are rife with discussion about major party events geared toward college kids.  Do a google search on Panamaniac part 2.

#3. The HOA's...if you buy a condo with a poorly managed HOA, it does not matter how great an experience you provide in your unit, if the association does not manage the basic facility amenities well (ie elevators, pools, parking garage) your reviews will suffer.

If you are sold on PCB, try to stay out of the condos.  Another option to consider is going a bit further west to Destin, or even as far as Biloxi.  We own two in Biloxi and while they don't command as high a rate, the vacancy is less, prices are lower and the crowd more genteel.  Biloxi was also listed in Air DNA's top 10 upcoming markets.

Jake Wiley · Answer

Where the market will go is anyone's guess.   If prices stabilize or even come down a bit, with rising interest rates the same payment today may still get you less condo tomorrow.    What you really want to know is the market dynamics of PCB.    Is there a housing shortage, is the population growing or stagnant, where you are looking to buy could they build a new condo building across the street?    If you can get a sense of the pressure on the market and the scarcity of the asset you are looking to acquire, you can get a sense of whether investing now, even if it's slightly inflated, will be a strong investment over time.   That takes the speculation out of the equation (i.e. do you wait hoping for an adjustment, or by now only to find that there is excess inventory right over the horizon).

Villy Ellinger · Answer

@Anshuman Vyas in you GOT to be in PCB, I would suggest the west end, Laguna, Riviera, Sunnyside. That area is less hectic that the Pier Park area and is also very close to 30A, which is a very desirable feature. Everything is PCB (and everywhere on the Panhandle) is overpriced. But if you are trying to cashflow, then townhouses and single family homes will do better generally if managed ok. Also, if you are at all ok doing some remodels, you will get a better deal. If you are financing, 10% down is no longer going to get you anything. Those offers are just being ignored. Cash is king. But... you can still finance. Appraisal gaps (which result in the buyer paying more cash than planned) are generally expected. But with interest rates going up, appraisal gaps expectation will get less as some buyers scare away from the market (because of higher rates).

If PCB is not a must for you, I would suggest that you look into Okaloosa Island/Fort Walton Beach, Fl. Prices are high here too as is demand. The area is smaller, so inventory is smaller too... but... check it out. Ok, I'm being subjective. All of my personal investments are here. As a Realtor I sell all along the Panhandle. But as an investor, I buy in Fort Walton Beach :-).

Good luch!

Kevin Pillow · Answer

Great insights here. I didn't know they were still having trouble with the partying seen but have age restrictions on rentals not been as useful as some say they are?

Ricardo Hidalgo · Answer

@Anshuman Vyas

I prefer townhomes and beach houses over condos since they have exploded in prices recently.

West end of pcb is exploding but if you want something more affordable look into Thomas Dr area. some of those townhomes are doing 60-80k in rentals on the books! Good way to earn instant equity is to renovate it.

I know there are developments in the 100s of million coming to the Thomas Dr area of pcb which will explode values even more. If there is gulf front lots that aren't built yet, there will be! Anything on the water will go for 4-6 million plus therefore I recommend buying nearby empty lots to gain equity in the future and increase desirability.

Joshua Strickland · Answer

It’s a valid question that no one knows the answer to. Like you mentioned, my PCB condo has doubled in value since last year. (I thought I was overpaying at the time.)

Also depends on if you are buying all cash or with a loan. We know rates are going up so at an increase in rate, values could fall significantly and you’d still have the same payment.

For example: a $700k condo w/ 20% down at 5% - principle and interest payment would be $3,006.20. If rates go to 7.5% that condo could fall all the way to around $537k and you would still have the same payment. About a 23% decrease in price which in historical terms is a big crash.

Pick your poison. Have good investing principles with ample reserves and you’ll be fine. If not, you’ll get crushed.

Bernard Joseph S. · Answer

Panama City Beach and Short Term Rental, come on daddy o! you got this! haha

Anshuman Vyas · Answer

Thank you everyone for the great insights.

Justin Allen · Answer

Biloxi has a good bit of STR restrictions. Gulfport, Long Beach, Bay St Louis and Ocean Springs has some great STR deals that are SFR as well as condos. You just need to know where to look.  Best STR’s are $300k and up.

Still a good time to buy a STR in PCB at the current prices?

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