Condo for STR? Places with lower price points?

Question

I was just checking out a great vacay spot I like (Cape Cod) and its a milli for a house. Wow. A 2BR Condo is available for less than $350k though. Would that be good for a STR?

Any places in the US that are good for STR but have a lower price point entry? Thanks

Benjamin Carver · Answer

Make sure you have a strong idea of what assessments are coming up and that future assessments can be quite hefty and unexpected. Downside to condos for sure. In vacation markets, I'd be a lot less concerned about changing rules on Airbnb and would expect stronger appreciation, versus in a normal city. I stay clear of condos in my city for those reasons.

Dena Beck · Answer

We just purchased a condo in Myrtle Beach.  We'd looked at a lot of beaches in this general area (Southern East Coast), and found it to be more affordable to get into.  We are in a condo, and the HOA fees are about $1K per month.  I feel like there is a good value for what I pay.  I have an HOA for my current residence, and it isn't a lot less but I don't feel the value is anywhere near as much. With the HOA payment at the condo, I don't pay any utilities, I don't worry about landscaping or maintaining the multiple pools, hot tubs, lazy river, etc.  I did work with a realtor who is also a STR investor.  He has unit in a lot of different condotels in the area and so had great insight.  He's been in the building I bought in for quite some time, and was able to share a lot about the stability of the HOA.  That really helped my confidence, his experience. We're happy with the investment and looking to add another property in that area soon.  Best of luck!

Andrew Steffens · Answer

Condo's typically are cheaper entries but have additional HOA costs which usually eat profits.  It is also not stable, HOA increases and special assessments are common.  In FL we not have a milestone study requirement for all 30+ year old buildings.  I just sold a $2M condo and there was over $100k in special assessments charged to the person who sold to complete the study.  You also have an HOA on top of you breathing down your neck.  It is certainly not impossible but the opportunities are few and far between in my experience.

Dena Beck · Answer

@Greg Peterson

I just closed on my second in Myrtle. I've almost completed my first year in a 1BR oceanfront condo. I can share my experience.

My occupancy was at least 90% from 5/15 through the end of the year. (I did use it two weeks in the fall.) January - March were pretty slow. I had to lower prices to get bookings and those guests were really rough on the place. (I've already got a snow bird deposit on those months for next year...) I've got April somewhat booked up, but the gaps seem to be filling with last minute folks.

I am in one of the 2 buildings oceanfront that allows dogs. I believe that helped my occupancy,  especially in the fall. But it is my understanding that occupancy is really high for everyone in the summer.

I was listed on airbnb only last year. I was green and thought I'd master one platform before trying too many.  Since my occupancy was so high, I didn't worry about it a lot. I'm in the process of adding VRBO.  We'll see....

Happy to answer any questions.

Greg Peterson · Answer

Are you finding that the myrtle condos are booking well on Airbnb and vrbo? What percent occupancy is everyone experiencing?

Evan O'Brien · Answer

I know of a couple of investors in Myrtle beach who have str condos and have very few vacancy days each year.

Brooklyn McCarty · Answer

Condos are typically always going to be cheaper then a SFH. Plus is the house first row, beach front? Is the condo in a nice condo building? Is it water front? Too little information here to tell if it's a good deal or not.

Michael Baum · Answer

Hey @Alex Silang. So condo's can be a good deal if they are in an area that has a lot of vacation rentals and the municipality is all about tourism and space for visitors to stay.

The biggest issue is the HOA. You are essentially at the mercy of the HOA board. Folks vote for no more STRs, they are gone and you are out of luck.

If there is a large block of condo's owned by a single entity, like a wealthy family or corporate entity, you are also in the same boat. What they vote goes.

We almost bought a condo in Oregon (Bend) but the majority of the unit were owned by a single, wealthy family. They controlled the board and the votes. In the end there was a multi million dollar renovation that caused many families to have to sell their units. Some sold them for a dollar.

The large 3/3 or 4/3 top floor units had assessments of 500k or more. At the time, the condos were worth maybe 200k. No way they could afford it. It was a real nightmare.

Garrett Brown · Answer

Hey Alex! Thanks for posting this question. I agree with the answers above and that condos have a lot of red flags for STR investments. I would check into a few things to see what your best approach is.1) Find a great investor-friendly real estate agent (specifically one that knows STRs) to help navigate an area you may be looking in. Check out BiggerPockets Agent Finder that can help https://www.biggerpockets.com/business/finder/agents2) Utilize something like AirDNA.co to see their data for different areas you may be interested in.3) A simple way is to look at Airbnb and see if there are places listed in the complex you are looking in. This isn't the best way for a few reasons, but it will show you the competition in the area. It may also show that the condos are full of STRs, which is a good and bad thing. It's good because it will most likely let them operate since there are many. It's bad because you'll basically have to compete on price to win.

Condo for STR? Places with lower price points?

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