Any "near beach" locations for profitable vacation rental?

Question

I have had a vacation rental in Dauphin Island Alabama for a few years now. We love to load up our large dogs and take them there with us on vacation (not easy renting a place that will accept 90+ LBS dogs). The house rents fairly frequently at local market rates but does not even cover the basic expenses let alone a mortage payment/opportunity cost of capital (it is paid for). When you are near the beach you need hurricane and flood insurance which are not cheap. Additionally, we are hundreds of miles away so it would be difficult to manage it myself so there goes another 25% in mangement fees.

Does anybody know of an area, near a beach, where this is actually profitable?

I get 10%+ cap rate for the rentals I own in Indiana. If I sold the vacation rental and bought property there, we could take some sweet vacations on profits (not sure what the dogs would do though:-) ).

Rocky V. · Answer

I would suggest short term rental. I have a friend with his only rental property being at a lake in Texas which is not even lake front. He gets booked frequently and self manages from 1.5 hrs away. They have already started booking for this summer.

Jeremy Baker · Answer

We have had a vacation rental condo in Kihei, Maui since 2012 and it's right across from a great beach. We put 25% down on that property and easily cash flow each year. We actually just closed on a second property (25% down) and should easily cash flow on this property also. There are vacation rental deals in beach areas, you just have to find the right deal!

Al Wilson · Answer

We have owned beachfront and near-beach property from Mississippi to Florida. Unfortunately, there is no such thing as one that cash flows if you use leverage. You have to enjoy using it yourself to make it worthwhile.

Account Closed · Answer

Have someone housesit your dogs for free through someplace like housesitters.com.

John D. · Answer

@Al Wilson writes "Unfortunately, there is no such thing as one that cash flows if you use leverage." Al, fortunately for many of us, that is far from true. @Rich E. there are lots of markets in NC, SC, FL, and elsewhere that are near beach and cash-flow positive. I can find 10% COCR returns inclusive of management fees (and 25% might be a fair rate if your average rental period is just a few days, and they are the leading company in the area and provide a large percentage of repeat/direct bookings exclusive of the major listing sites). I'm still hunting the 20-25% COCR which is where I need to be for it to make sense for me to open a new vactation rental market. I'm pretty sure it's out there though!

Monika Haebich · Answer

@John Underwood sounds like you're doing a great job and are probably more sophisticated than a lot of other homeowners! A lot of managers actually are in charge of paying for the maintenance, cleaning, repairs, and occupancy taxes. I work in a marketplace that matches homeowners with property managers, and we currently have over 500 managers paying for all of those things.

Keith Courtney · Answer

Rich -I advocate vacation homeowners hiring property managers that allow the owners to do their own bookings saving the 20-25% fees. By following this strategy, a homeowner's marketing costs are only ~5% of rental income, which pays for listings on HomeAway, VRBO, FlipKey, etc., and also a separate marketing website for the home that integrates with the listing websites. The property managers charge $250-$300 per month, which includes weekly pool cleaning. If you are an absentee owner, paying a good property manager is money well spent. There are just too many instances that I have witnessed when someone needs to go to a home to help a renter - he can't figure out how to use the electronic lock on the front door, a light bulb needs replacing, something breaks, etc.Keith

John Underwood · Answer

I have a great PM... me!Homeaway.com allows me to easily and remotely manage my vacation rental and keep it fuller than I really need. I use also use systems to self manage my 16 rental properties with very little interaction on my part.I can't see giving away my hard earned money for something that is so easy for me to do.

Chuck Pappas · Answer

John I'm doing the same thing. I have a condo in Lewes de. I inherited it so no mortgage but the fees are brutal. About 1000 a quarter. Given that I have 4 kids. One in college and 3 go to private school we had to decide to rent or sell. After paying a year of bills we got a real estate agent. Once I was comfortable I started doing it on my own. I have a wifi thermostat and wifi door lock. I can program my own access codes and remove them when people check out. I have a maid and a few different handymen that I can reach out to. It's 3 hours away so I like to pop out on occasion but like many others say you end up working vice relaxing. The last few years I've been pulling in over 20k gross rent. Now with that you have the VRBO fees and all the utilities. I profit some every year but have been putting most of it back in it upgrading flooring beds etc. I don't need the profit but I don't want any expenses either. It's a few miles from the beach so the weekly rent isn't what it could be but I've been getting a good group of renters. I still have a realtor but only pay when they rent it. So far this week has only been 1 week and it's a couple from last year. They only charge 12 percent so it's not so bad.

John Underwood · Answer

I don't use a PM. I use Homeaway.com I have a House cleaner that I text. I have wifi thermostats. I have a lockbox for the keys. I have handyman that I text if I need something fixed.Why would I want to pay someone 25% of rent. PM doesn't have to pay property tax, insurance mortgage, maintenance, cleaning, repairs etc. My property is an hour away and I don't need to be there to rent or maintain it.Why would I want to pay someone 25% when that money needs to go towards owning and maintaining property?