Destin, FL Vacation Rental: worth it?

Question

Hi all,

We are fairly new to the real estate investing market.  We recently sold 8 units and are looking to reinvest our proceeds (we have already screwed up our 1031 exchange, lesson learned).  We have friends who have several units in Destin, one of which is a 2 bedroom/2 bath gulf view unit they claim to have grossed nearly 60k in annual rent last year, their purchase price was mid 300s, per their claims they profited nearly 30k for the year after accounting for their loan payment, HOA fees, taxes, and insurance.  Their other units gross around 45k which I feel is pretty reasonable for a good unit and seems to be where the average lies.  Is it reasonable to think we can turn a profit on a vacation rental?  We would be managing ourselves to save the 25% management fees.  We are looking for a 2 bedroom/2 bathroom in the 300-400k range and we'd be financing.  If we can't realize at least a $800-1000/month profit after expenses (not getting into depreciation and things like that, just strictly gross rent - loan payment, taxes, insurance, maintenance+cleaning), I feel like we might be better suited to take our cash and purchase several more rental houses locally which would get us about $200-300/month profit each after all expenses.  Any opinions?

Melissa Jolley · Answer

@Leah Simmons It is certainly not like it used to be on the Emerald Coast. Prices have gone up so much (good and bad). Right now, it is difficult to finance a condo and get ALL of the expenses (including P&I) covered by your rental income. Management (as far as bookings and things like that) runs around 25% of GRI (like you said). Association fees are anywhere from $6-$10K a year if you are gulf front. I have a client looking and he was going to be out around $8,000 a year to own the place without blocking off any vacation dates (2/2 in PCB on the gulf). That said- if you just love the beach and want to own one, $8K a year is cheap compared to just buying and keeping it for yourself. It really just depends on your goals.

Bottom line with the numbers above- They would have had a net income of $3,000 a year IF THEY DECIDED TO SELF-MANAGE.

So...although I am an agent here I really think there are better investments out there.

Bottom line with the numbers above- They would have had a net income of $3,000 a year IF THEY DECIDED TO SELF-MANAGE.

So...although I am an agent here I really think there are better investments out there.

Scott Holmes · Answer

Reach out to @Villy Ellinger.  She's an investor/realtor/manager in Destin/Okaloosa Island and incredibly knowledgeable.  We're basically looking for the same thing, though I'm leaning a little more towards the Island as of late-- hit me up if you'd like some of the preliminary resources I've compiled, or just to bounce ideas.

Erica Osborn · Answer

@Leah Simmons

Just one thing to say here. I owned a vacation rental in the Crystal Beach area and I ended up selling (after it appreciated nicely) because I didn't realize buying a vacation rental was actually buying a business. It was very time consuming and I didn't even manage it. I thought it would be like other rentals.....surprise, it's definitely not passive income, but it is a cool way to have a paid off vacation prop in 30 years and if you are aware of the man hours it will take, get your systems in place, and it's your thing, more power to you!!! Good luck!!!

Villy Ellinger · Answer

@Leah Simmons I actually think these are pretty reasonable numbers, especially if you look into some of the areas that are not right in Destin or Crystal Beach (those are still overpriced in my opinion). I would suggest you definitely consider Okaloosa Island (that is where I am, so I'm very partial), but also Navarre Beach and out toward Gulf Breeze even. On the other side, Miramar Beach is an option. I also think Panama City Beach might have some good options these days. Message me if you have questions. I've got several of my own and I manage for others as well. I'm also a real estate agent down here.

@Scott Holmes Thanks for the confidence vote :-). I appreciate it.

Matt "Roar" Gardner · Answer

Leah - I'm a Realtor and STR investor in the Destin area. I'll DM you now! :)

Dave Becker · Answer

I am curious what everyone thinks of Perdido.  I have thought about buying a townhome in Lost Key (not on the water).  It is built like a resort with a large resort style pool, a beach house on the water with a restaurant and dipping pool, and a few other amenities.  They have a shuttle that takes you between all of these.  They have beach chairs and umbrellas on their beach.  They are brand new as well.  I am just not sure how Perdido measures up to Pensacola Beach/ Navarre / FWB / Destin

Kevin Miller · Answer

@Kevin Miller their paying off their home with the proceeds

Kevin Miller · Answer

@Leah Simmons my parents live in destin and a friend of theirs move out their into the loft over the garage six

Months out of the year and get paid

Mike Ko · Answer

We own STR in Crystal beach, navarre beach, pensacola beach, gulf breeze, navarre, and pensacola.

These are all short term rentals where we hire the cleaning crews and self manage the rest.  Crystal beach (Destin) is putting up more regulations against STR so the ROI will be more challenging.  We have owned the Crystal beach sfh for the past two years and are considering selling as the regulations and traffic increase.

Eric P. · Answer

How much is flood insurance running there these days?

Destin, FL Vacation Rental: worth it?

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