STR/Vacation rental NW Flordia

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STR/Vacation rental NW Flordia

Justin Aldred
Member since 2021 · 6 posts · 2 votes

I was having a discussion the other day with someone who said that Northwest Florida (especially more of the luxury areas around 30a) are more of a "capital appreciation" play and that It's impossible to get good cashflow in the luxury areas. Is this true? My thought is even with high and low season there has to be a way to generate good cash flow in this market and that maybe the houses are over-priced and have not been re-priced for the current interest rate environment.

My question: Are homes just overpriced or is it normal to have crappy cash flow in this area?

(for example the area we're looking at a house producing 100k in income asking 1.2million) when you factor in taxes, maintenance, cleaning, etc that barely breaks even or even looses a bit.

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Lake Lutes
Real Estate Agent · Fort Walton Beach, FL · Member since 2018 · 144 posts · 114 votes
3y

For 30A, Destin, Panama City Beach, etc - your "on the water" price points are going to vary greatly. For 30A specifically, there are luxury rentals that do hundreds of thousands of dollars a year. Once you hit a certain price point, it is true that it is tough to have a true logical investment. Obviously, money down, rates, purchase price, etc are going to impact your CoCR and cash flow.

To directly answer your question - the $1.2M house is probably going to lose money at 20% with an 8% interest rate. A large amount of the luxury owners on 30A are going to have much more servicable/cheaper debt than that, and have a much smaller note being carried than $900K+ - so it would make sense for them.

Happy to run some numbers on specific examples if you need any help, Justing! Just let me know - this is my primary investment market.

@Justin Aldredundefined

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  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    3y

    I mean if you're on the beach with a 6 million dollar home then no you won't "make" money. But if you buy a regular house and self manage sure you can make some money.

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  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    I cannot speak for 30a area but in Tampa area, you make more with a "luxury property" - that being $700,000-1,100,000 or so. After that, the ROI goes down.

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  • Lake Lutes
    Real Estate Agent · Fort Walton Beach, FL · Member since 2018 · 144 posts · 114 votes
    3y

    For 30A, Destin, Panama City Beach, etc - your "on the water" price points are going to vary greatly. For 30A specifically, there are luxury rentals that do hundreds of thousands of dollars a year. Once you hit a certain price point, it is true that it is tough to have a true logical investment. Obviously, money down, rates, purchase price, etc are going to impact your CoCR and cash flow.

    To directly answer your question - the $1.2M house is probably going to lose money at 20% with an 8% interest rate. A large amount of the luxury owners on 30A are going to have much more servicable/cheaper debt than that, and have a much smaller note being carried than $900K+ - so it would make sense for them.

    Happy to run some numbers on specific examples if you need any help, Justing! Just let me know - this is my primary investment market.

    @Justin Aldredundefined

    2Reply
  • Ryan MoyerBusiness Member
    Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 993 posts · 1k+ votes
    3y

    I think you've hit it on the head here.  Used to be a good cash flow market, but the secret is out and not so much anymore.  Realtors in the area aren't going to let anyone list at less than 10x projected gross revenue, and it's not a low expense area where you're going to cash flow much with those figures.

    And that's not even to mention they're listing at 10x 2021/2022 gross revenue which may not even be sustainable.

    Most people in the area either have pre-covid debt service or are buying for other reasons (appreciation, tax benefits, owner usage, etc).

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  • Justin Aldred
    OP
    Member since 2021 · 6 posts · 2 votes
    3y

    @Lake Lutes That kind of validates what I was thinking. In my current market my personal STR returns have been near 20% but the numbers I'm running are looking like 6-8% for that area. (even some of the 3-6 million dollar houses in Allys or Rosemary seem to gross about 350-500k) I guess I'm just not sure how new buyers are profiting (or if they are just accepting a minuscule return for a "free" place to stay and appreciating prices)

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  • Justin Aldred
    OP
    Member since 2021 · 6 posts · 2 votes
    3y

    @Ryan Moyer  that's helpful. I'm glad to know I'm not crazy. that's exactly what I'm seeing (10-12x revenue estimates)

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  • Ricardo Hidalgo
    Real Estate Agent · Member since 2019 · 569 posts · 257 votes
    3y
    Quote from @Justin Aldred:

    I was having a discussion the other day with someone who said that Northwest Florida (especially more of the luxury areas around 30a) are more of a "capital appreciation" play and that It's impossible to get good cashflow in the luxury areas. Is this true? My thought is even with high and low season there has to be a way to generate good cash flow in this market and that maybe the houses are over-priced and have not been re-priced for the current interest rate environment.

    My question: Are homes just overpriced or is it normal to have crappy cash flow in this area?

    (for example the area we're looking at a house producing 100k in income asking 1.2million) when you factor in taxes, maintenance, cleaning, etc that barely breaks even or even looses a bit.


    Buying lots and building on 30A or laguna beach could allow you to cashflow with a massive equity position. I like to flip and build in our area since the appreciation pays out exponentially versus the long term cashflow. Some of the projects we have done in the past, we were all in for 1.45 million and resale was 2 million with 200-225k rental projections. 

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  • Ryan MoyerBusiness Member
    Property Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 993 posts · 1k+ votes
    3y
    Quote from @Ricardo Hidalgo:
    Quote from @Justin Aldred:

    I was having a discussion the other day with someone who said that Northwest Florida (especially more of the luxury areas around 30a) are more of a "capital appreciation" play and that It's impossible to get good cashflow in the luxury areas. Is this true? My thought is even with high and low season there has to be a way to generate good cash flow in this market and that maybe the houses are over-priced and have not been re-priced for the current interest rate environment.

    My question: Are homes just overpriced or is it normal to have crappy cash flow in this area?

    (for example the area we're looking at a house producing 100k in income asking 1.2million) when you factor in taxes, maintenance, cleaning, etc that barely breaks even or even looses a bit.


    Buying lots and building on 30A or laguna beach could allow you to cashflow with a massive equity position. I like to flip and build in our area since the appreciation pays out exponentially versus the long term cashflow. Some of the projects we have done in the past, we were all in for 1.45 million and resale was 2 million with 200-225k rental projections. 


     How far from the beach was this?  Most lots I'm seeing even 2+ blocks from the beach are $750k+ for 9000sqft lot that would be tight to even fit a pool on, just for the lot.  And I figured you were looking at minimum $1M+ for the build in that area.  Are the home builds much cheaper than I'm anticipating?

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  • Ricardo Hidalgo
    Real Estate Agent · Member since 2019 · 569 posts · 257 votes
    3y
    Quote from @Ryan Moyer:
    Quote from @Ricardo Hidalgo:
    Quote from @Justin Aldred:

    I was having a discussion the other day with someone who said that Northwest Florida (especially more of the luxury areas around 30a) are more of a "capital appreciation" play and that It's impossible to get good cashflow in the luxury areas. Is this true? My thought is even with high and low season there has to be a way to generate good cash flow in this market and that maybe the houses are over-priced and have not been re-priced for the current interest rate environment.

    My question: Are homes just overpriced or is it normal to have crappy cash flow in this area?

    (for example the area we're looking at a house producing 100k in income asking 1.2million) when you factor in taxes, maintenance, cleaning, etc that barely breaks even or even looses a bit.


    Buying lots and building on 30A or laguna beach could allow you to cashflow with a massive equity position. I like to flip and build in our area since the appreciation pays out exponentially versus the long term cashflow. Some of the projects we have done in the past, we were all in for 1.45 million and resale was 2 million with 200-225k rental projections. 


     How far from the beach was this?  Most lots I'm seeing even 2+ blocks from the beach are $750k+ for 9000sqft lot that would be tight to even fit a pool on, just for the lot.  And I figured you were looking at minimum $1M+ for the build in that area.  Are the home builds much cheaper than I'm anticipating?


     The west side of 30A and Laguna beach in PCB. There are pockets of 30A that are cheaper in comparison to the east side. Prices and values change depending on community. Typically you could build for 250-350 a foot depending on finishes and type of build. I've seen some lots for 500-700k that could allow for 2.5 million dollar build. 

    1Reply
  • Tammi Montgomery
    Member since 2023 · 2 posts · 0 votes
    3y

    Have you considered Broken Bow? The return is much greater there. I am a realtor and service both areas. After management fees in the 30A area on a $1.2M home my last investor was going to be looking at a 5% return. You can make a little more if you self manage. Broken Bow can be a solid 15-20%

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