New Construction Condo in PCB what do you think of ROI?

Question

I have been looking at a new construction at Panama City Beach, FL, which claims to be the first high rise for the past 10 years. The condo is across the street from the beach with partial ocean view, rental projection for a 1b2b is $42k, I’m new to short term rental probably will work with management company. What do you guys think? Should I start with a condo right on the beach but further away from pier park or close to pier park but not on the beach but NEW across street)?

Jon Crosby · Answer

@Stepheni Larson Regarding your occupancy question, I wouldn't think it really matters if it's new construction or not if you are already in an established vacation rental market (demand is demand and you would likely just have a slightly higher ADR since your property is nicer). Just use Everbooked or Airdna as a place to start for occupancy rate and multiply it by the # of days you plan to have it available (I usually do 351 days as that is 365-14 days of personal use allowed by IRS). Then multiply it by your ADR (average daily rate). Here is a BP blog I wrote on similar topic if it helps at all. :) https://www.biggerpockets.com/blogs/10042/64779-8-...Cheers and best of luck on your search!

Villy Ellinger · Answer

@Stepheni Larson I have vacation rentals in Fort Walton Beach, FL (about an hour east of PCB) and work with vacation rentals on the Emerald Coast a lot. While I'm not as familiar with specific building projects in PCB as much, I am familiar with short term rentals, lol. The rental projections you were given may or may not be viable, depending on the source. Also, rental projections provided by one management company will differ significantly from those from another. Gross rental income (and occupancy, for that matter) is a function of several factors. The building/condo complex condition and location is only part of it. Management, marketing and overall guest experience, as well as the right kind of pricing and interior set up, are also very important factors. There are plenty of 1b/2b here on the Emerald Cost that gross in the $40K range. Not being right on the beach may be ok, if the beach and other amenities are easily accessible. Also, without knowing the purchase price and expenses associated with the property as well as the financing that will be available to you, it's not really possible to tell whether or not you will make cash flow or cash on cash return. As for occupancy, I would suggest that you check out properties that are close to and in a similar location and are listed on VRBO, even if they are not new construction. I would strongly recommend you look at those that are owner-managed and with many reviews. I'm a big proponent of self-management of vacation rentals, lol, so I feel those would give you the best feel. Look at the calendar and the seasonal pricing. My rentals in Ft Walton run annual occupancy close to 85-90% (over 300 days per year), but I self-manage and hustle :-).Not sure of the development you are considering.... but I know of several people who have purchase pre-construction directly from the builder on new condo developments on the Gulf coast and based on that got really good pricing (compared to what the finished units were listing post-completion) and so are getting very good returns. Feel free to message me with any other questions. I'm personally trying to learn more about the PCB area and may consider a property there in the near future (I'm a real estate agent myself, so always looking), so would love to know how your experience turns out.

Jon Crosby · Answer

@Stepheni Larson I always caution people from using 'rental projection' numbers if they are merely gross revenue numbers. The part most people don't realize about STR's are the extremely high op ex ratios involved. If you end up with with a full time management company that's even higher so make sure you really pencil out your investment the best you can before pulling the trigger. You can still cash flow but you will likely be putting a lot more down and lower your overall return potential. Remember you have to pay for everything, including but not limited to: HOA/CC&RsProperty Taxes/InsuranceAll UtilitiesCable/InternetFFE (Furnishing, Fixtures and Equipment)Property ManagmentBooking/Payments SystemsEtc...Apologies if this is redundant info for you but most of the time once you plug in the numbers (especially HOAs) you will start to get a much clearer picture on actual return possibilities. Cheers!

Sandra Alexander · Answer

Stepheni, there is only one tower under construction in PCB that is beach view (near Pier Park) with 1 BR and 3 BR floor plans that start at 290K and the prices will be going up within the next 30 days. The rental projections are estimated between 39.5K and 72.5K, depending on unit size and floor plan. This property is expected to be open for business in June 2019. This is the first and only tower that has been started here since 2008. There are no other new condo construction TOWERS beachside or view in PCB or surrounding areas. I believe that there are some new single-family homes going up along the beach and across but nothing complete or listed at this time. Would you be interested in more information about the new tower currently under construction or maybe a resale in PCB? There are plenty of resales available.

Stepheni Larson · Answer

@Sandra Alexander Hi Sandra! Thank you for your reply. As a PCB local real estate professional I wonder what’s your thoughts on the new construction condo across the street from the beach? I think you might know which one I’m referring to but not sure if I’m allowed to say that property name here in a post.

Stepheni Larson · Answer

@Jon Crosby thanks for your reply! I tried some online ROI calculators it seems to make sense. However one factor I’m not sure how to based off from is the occupancy rate. Do you know how can I best estimate the occupancy rate for a new construction? Thank you!

Sandra Alexander · Answer

@Stepheni Larson Please let me know if I can help you find a property here in PCB.