Destin Florida AIRBNB/Vacation Rental- Condo or House?

Question

Hey BP. I am looking at buying a property in Destin, FL for short term vacation rental/AirBNB. Should I buy a condo or a single family house? With the condos I am seeing HOA fees up around $800 or more per month. I would want to be putting that money to a larger house payment instead, but if condos are going to give me a greater ROI then I am fine with going the condo route. I am familiar with the discussion against condos and HOAs taking away autonomy from owners. Just wondering if in this scenario the pros of a condo attracting more tenants would outweigh the cons.

Jennifer Wilson · Answer

@Carl Mccrory  I live in Destin and am a Realtor in the area.  I agree with everyone's comments regarding the HOA fees and especially Marshall's comments about financing.  Lenders do have restrictions on condos in the area based on different factors such as the number of owner occupants vs. investment properties, if it's considered a condotel, etc.  I have found that it is easier to use a local lender that offers portfolio products so they have a little more leniency.  Beach Community Bank is one that I've used in the past.

In regard to the HOA fees, $800/mo is pretty high.  There are some in the area that are in the $500s or lower that still offer plenty of amenities. That usually also covers things like water, trash, sewer, basic cable, sometimes basic internet, exterior insurance, plus access to the pools, fitness center(s), and private beach access.

Destin, especially along the beach, is full of condos which is why the majority of your AirBNB searches feature condos...  There are some homes very close to, or within a few blocks of the beach, but they are going to be pricey.  Most are mansions, but the smaller homes are still easily in the $450k-$650k range.  Depending on what your budget is, I'd say a condo is your better bet to find something a little more reasonable, but still profitable.

Matt "Roar" Gardner · Answer

@Brynn R. - I've worked with a lot of investors looking in both the Smoky Mountains and the Florida Panhandle.  Your sentiment seems to be relatively common these days.  I'm only an agent and investor in Florida, but it seems like the playing field has evened out a bit, where it's harder (not impossible) to find the homerun deals in both markets.  There are just a lot of investors happy to accept slimmer returns and higher prices.  People seem to be parking their money in assets, rather than the banks, in anticipation for higher impending inflation.

Richard Ibeh · Answer

@Carl Mccrory short answer is no. $800 for just HOA alone and you have to take into consideration, utilities, paper products, maintenance and (possible property mgr)...you're looking at about $2000+ just on expenses in the low season.

Much better off purchasing a house with low to no HOA and the returns will be higher.

Thomas S. · Answer

Go with the condo, assuming they approve, since that appears to be the most common airbnb in the area. Say away from residential SFH communities due to the risk of future legislation banning STRs.

Account Closed · Answer

@Carl McCrory Another possible thing to consider is financing. Depending on what you want, most banks are limited to what they can actually lend on. I was very close to putting a condo on contract down in Destin last fall, and three different banks told me last minute that they could not lend on the specific condo development because a certain percentage of the properties were considered short term rentals.

A house may be better suited, but then again houses close to the nice beach area will not be cheap.

Another thing to consider is the fact that most property managers will start at 20% for vacation rentals in that area. So unless you're going to be headed that way or have family that can run it, that will eat into that ROI pretty quickly.

Brynn R. · Answer

@Luke Carl good points. Do you still feel this way about the area? I feel like Pigeon Forge has shot up now and its more like 450k, similar now to Destin right?

Caleb Richardson · Answer

Jennifer Wilson made some great points, and I'll also suggest the most informational route you can take will be to reach out to multiple Short Term Vacation Rental management companies and ask them for their opinion on any particular property, or ask if they have any rentals in a certain condo building/neighborhood and how they perform. They are a goldmine for information and can tell you which of their properties the best occupancy rates and why, what their gross rental income average is for any particular area, and which amenities are most vital to maximizing your rental income potential during the prime rental times. There are a great variety of rental management company options along the Emerald Coast Beaches, it's a competitive market, so it should be fairly easy to get more than one opinion on the different HOA's, which are most agreeable, and who has the most reasonable fees vs. amenities available. Several of these rental management companies have in-house real estate brokerages as well, so it would be wise to consider their agent's interests when weighing their opinion on other rental management companies in the area. My recommendation is to stick with someone local, as it is very difficult to find and retain good cleaners, maintenance personnel, etc.

I'd also agree that 20% is the average cut for most STR management companies around here, but as usual, everything is negotiable and it depends entirely upon the property and how easy/difficult it will be for them to help keep it rented. Some require more advertising and repairs, which they will obviously take into account when offering projections and rental program numbers.

Jennifer Wilson · Answer

@Keith C. You may be right.  Our area is definitely a tourist area, so with that, there are busier times of the year than others.  Tourist traffic usually picks up in March and April for Spring Break, but then goes back to normal until Memorial Day weekend.  From then on, it seems as though every single unit in Destin/Miramar Beach is occupied based on the traffic!  That continues until Labor Day weekend, plus maybe a couple weeks after.

The numbers may be showing in the 35-55% occupancy rate due to the slower winter months. While we do have snowbirds that come down for longer term rentals during the winter, it isn't anything like the amount of people that come in the summer.  However, I do not manage short term rentals in the area, so I can't speak on specific numbers. You may be right based on your AirBNB analysis, but unfortunately I cannot say either way.  Because of that, I would always suggest that @Carl Mccrory, or any other investor, do their due diligence and speak with the HOA and/or short term management company to get specific occupancy rates, rental estimates, etc.

Destin Florida AIRBNB/Vacation Rental- Condo or House?

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