Outer Banks North Carolina

[Greg Dickerson]

Who has a question about investing, owning and or building on the Outer Banks? 

I lived there from 1997-2011 and was one of the largest builders in the area. I have built and developed hundreds of homes and done over $200 million in total building and real estate transactions over the years. I still build houses there today and have owned lots of rentals over the years. I know the area intimately. I am a North Carolina General Contractor and a North Carolina Real Estate Broker as well. I would be happy to discuss and answer any questions. 

[Michael Baum]

HI Greg! Thanks for being a sound board. My wife and I will be trying to add to our vacation rental portfolio end of this year.

What areas are considered the best place to invest in STR without going crazy on price? I haven't spent a lot of time looking in this area. We have avoided oceanfront due to the very high cost of flood insurance.

We looked at a place in Lincoln, Oregon that was one block from the beach and flood insurance was almost 6k per year. That was FEMA. The Lloyds of London flood insurance was much less and better coverage but the mortgage company wasn't going to approve.

Thanks!

[Shaun J.]

Big $$ in OB 

[Michael Baum]

Big money to buy or big money from the rental?

[Greg Dickerson]

@Michael Baum @Shaun J.

The Outer Banks has houses starting in the upper $100k range up to several million. All depends on location and rental income. 

The houses that are rental machines are generally $300k and up and do very well. The OBX has a long solid track record including solid performance during the 2009 recession. Rents increase every year and managment costs are low compared to other similar markets. 

In general you can figure 30-40% operating costs including management so it’s very similar to most commercial or multifamily but. without the headaches and tenant issues of those assets.

[Michael Baum]

I spent some time looking at real estate in the area and found some nice looking places for about 350. The one I really like is on the water at 349,000. 

I need to do more research on the area and maybe do a visit. Thanks for the idea of the Outer Banks.

Do you have any ideas of STR regulations they may be planning?

[Greg Dickerson]

Each town on the Outer Banks has its own rules. They want to Regulate them like they do other rental houses in the area as they are all short term rentals. North Carolina has the vacation rental act so all short term rentals must compliment with that. Here’s an article about it

https://outerbanksvoice.com/2019/04/03/nags-head-sets-new-rules-for-airbnb-other-short-term-rentals/

[Michael Baum]

Thanks Greg!

[Jonathan Breton]

I will be keeping an eye on this thread. Have visited OBX several times over the past couple of years and have fallen in love with the area. Looking to add a home to my portfolio in the next couple of years.

Does anyone recommend a major management company or self-management? (Living full-time in Charlotte, NC)

[Greg Dickerson]

@Jonathan Breton there are several great management companies to choose from. They all have their niche. Some people are going the self managed route with AirBandB and VRBO. It all depends on your goals and how much you want to be involved.

[Kevin Stringari]

I do both full-time and short term/Airbnb property management here in Charlotte. I would tell you that unless you have a really good cleaner and handyman who is available in the drop of a dime. You’re probably gonna want to hire a management company there, who does.

[Greg Dickerson]

Originally posted by @Kevin Stringari:

I do both full-time and short term/Airbnb property management here in Charlotte. I would tell you that unless you have a really good cleaner and handyman who is available in the drop of a dime. You’re probably gonna want to hire a management company there, who does.

 I always use. Management companies for my properties. Thee are some top notch people servicing the ABNB owners as well. It’s really taken off there over the past few years. 

[Jesse Clark]

Greg I've been going to obx for 25 years or so. Love it down there. It's become a goal to purchase a rental property in outer banks. I've always enjoyed the southern end of the island, Avon and below, quieter. 

You answered one of my questions about price range $300k and up being good rentals. I was looking in the $400k-800k. Seems like you get a large house, maybe even oceanfront for that in some areas. 

My other concern would be if flood insurance would kill income. And if the obx will be there in 30 years! I've seen highway 12 flooded on more than one occasion. 

So even with property management, repairs, expenses insurance etc. Are the rentals still making money? There's probably a sweet spot for bedrooms, size of house, location of course. 

This goal is still a little ways off, but very interested in all the info. I'll make it work somehow. Thanks!

[Greg Dickerson]

Originally posted by @Jesse Clark:

Greg I've been going to obx for 25 years or so. Love it down there. It's become a goal to purchase a rental property in outer banks. I've always enjoyed the southern end of the island, Avon and below, quieter. 

You answered one of my questions about price range $300k and up being good rentals. I was looking in the $400k-800k. Seems like you get a large house, maybe even oceanfront for that in some areas. 

My other concern would be if flood insurance would kill income. And if the obx will be there in 30 years! I've seen highway 12 flooded on more than one occasion. 

So even with property management, repairs, expenses insurance etc. Are the rentals still making money? There's probably a sweet spot for bedrooms, size of house, location of course. 

This goal is still a little ways off, but very interested in all the info. I'll make it work somehow. Thanks!

Jesse - You can buy more house and more income per dollar on Hatteras Island. Yes the right property can do very well. Oceanfront or semi is best. You really need to watch out where you buy on Hatteras Island as it floods frequently even during non hurricane related events.

You can count on 60% of gross rental income as NOI. So after all expenses including flood etc. you can count having 60% of the income as return on cash if you pay all cash or to use for debt service. You can get 4.5% for 30 years so you may cashflow after debt service.

[Jesse Clark]

Thanks for the info Greg, much appreciated. Some of the properties for sale will show gross rents for the previous year. But without knowing expenses, it doesn't mean much. 

My wife wants to buy in Delaware, rehoboth/dewey, where you get a small lot and house ocean block for $1M. Lots of people tear down and rebuild. The rents don't seem near as profitable as obx though, comparing home value to rental income. This helps my case for obx. Thanks again

[Jason Hathcock]

Hi Greg. In your experience, does ROI increase with the larger houses? I have noticed in many of the mls listings for the large vacation rentals, that the realtors will include the previous years' gross rents or this years' gross scheduled rents only. Getting actual expenses seems to be difficult to obtain and absolutely necessary to underwrite/analyze the deal. Other than using general rules of thumb for expenses, do you have any tricks to easily obtaining financials for previous years' expenses on these homes?
Do you have any contacts on the OBX that would be willing to share actual data with me regarding ROI before debt service for some of these houses? It would be interesting to see how the numbers compare on these large oceanfront/Oceanside houses to a SFH portfolio on the westside.

[Greg Dickerson]

@Jason Hathcock The agents should be able to get you actual expense records from the owners for properties that they have listed for sale. Will have this information in associated docs of the listing. The management companies can provide info as well.

As a general rule of thumb the larger properties with pools spas landscaping etc. are going to run 35 to 40% operating costs. That includes everything it takes to operate the property. The remaining 60 to 65% of the gross income is what you have left to pay the debt service or return on cash if you pay all cash.

Some Airbnb properties are doing better than traditional rentals. There is also a newer company called “Keys” doing flexible check-in‘s and short term rentals that are generating more income especially on smaller properties.

[Christi Hawkins]

@Greg Dickerson  Great post, I love the OBX! We rent an 8 bedroom house on the beach for for $9,000 a week and my goal is to have a house there someday. Until last year I never spent much time checking out the entire are but I'm falling in love with Rodanthe & Ocracoke Island. What are your thoughts on either of those areas for a vacation rental

[Greg Dickerson]

Originally posted by @Christi Hawkins:

@Greg Dickerson  Great post, I love the OBX! We rent an 8 bedroom house on the beach for for $9,000 a week and my goal is to have a house there someday. Until last year I never spent much time checking out the entire are but I'm falling in love with Rodanthe & Ocracoke Island. What are your thoughts on either of those areas for a vacation rental

They are very different destinations and markets. It all depends on your preferences. I would look at properties in both and go with where you can buy the most income for the dollar which will most likely be Rodanthe. Ocracroke is more expensive and has a shorter season.

[Jason Hathcock]

Hi Greg.  Meg and I are considering investing in a vacation rental between Kitty Hawk and Nags Head but aren't sure if we should start off small 3-4 bedrooms, or go ahead and get something larger 6-10 bedrooms that can accommodate larger families and hopefully provide more positive cash flow. 

Do you have any knowledge/experience with 3-4 bedroom vacation rental houses near the beach (between the highways)? If so, from a cash on cash ROI perspective, do the smaller houses cash flow as well as the oceanfront/oceanside houses? The smaller houses seem like a logical starting point (lower entry costs, maintenance, etc) for investing in vacation rentals, but if the larger houses provide better returns, maybe it is worth moving up to a larger house that is closer to the ocean. Your thoughts?

[Greg Dickerson]

@Jason Hathcock There really is no hard and fast rule. Each property and situation os different.

Income varies greatly depending on location, amenities, age and condition of the house. Smaller houses are doing very well in Keys program due to flexible checkins and there is definitely a sweet spot there. Some smaller homes are doing well AirBNB and VRBO if you want to go that route.

With larger houses net income can be affected by the maintenance costs and ware and tear etc.

You need to look at a few scenarios and run the numbers and compare. Ill reach out to discuss more.

[Matt Grubb]

@Greg DickersonThanks for posting this! What are some general rules when it comes to purchasing land and building a prefab home on the land? Is there a minimum Sq Ft requirement?

I like the idea of purchasing land and finding a modern modular/prefab builder that has options that would match the area aesthetically.  I'm looking in Salvo, Waves, Rodanthe, & Avon. 

[Greg Dickerson]

Originally posted by @Matt Grubb:

@Greg DickersonThanks for posting this! What are some general rules when it comes to purchasing land and building a prefab home on the land? Is there a minimum Sq Ft requirement?

I like the idea of purchasing land and finding a modern modular/prefab builder that has options that would match the area aesthetically.  I'm looking in Salvo, Waves, Rodanthe, & Avon. 

It depends on where you’re building. Some subdivisions have minimum sqft requirements some don’t. Usually  1200-1800  is the minimum in most areas if they have a requirement.

You have to be very careful where you build on Hatteras Island. Its very prone to flooding and ocean over wash.

We  don’t do prefab or modular home construction on the OBX due to code and flood requirements. Also no reason to do prefab as cost and time are about the same these days.

[Matt Grubb]

@Greg Dickerson I'm interested in sound front property. When I look at aerial views, it looks like there is almost a set back where homes are built. Is this true with the tides on the sound?

I like the idea of prefab or modular because there are some really cool structures/builders that bring something different to the table for Short Term Rentals. I'd like to do something different compared to the 5+ bedroom homes that have to be rented out by the week. If one of these builders could meet the code requirements, could this still be shot down?  

[Greg Dickerson]

Originally posted by @Matt Grubb:

@Greg Dickerson I'm interested in sound front property. When I look at aerial views, it looks like there is almost a set back where homes are built. Is this true with the tides on the sound?

I like the idea of prefab or modular because there are some really cool structures/builders that bring something different to the table for Short Term Rentals. I'd like to do something different compared to the 5+ bedroom homes that have to be rented out by the week. If one of these builders could meet the code requirements, could this still be shot down?  

 Yes there are CAMA setbacks on waterfront property so basically you will sit where you see the other houses. It's different in different areas. 

The building will not be turned down as long as it meets code which is 150 MPH wind-loads and DP 50 for doors and windows. Also you will need impact resistant glass for doors and windows or you have to have shutters or plywood cut to cover the windows at CO.

I am a NC RE Broker and NC GC as well. I built several houses there last year and will likely do some more this year as well.

I would be happy to help you with the project. Ill shoot a message so we can discuss offline. 

[Courtney Johnson]

@Greg Dickerson

I know it’s not outer banks but do you know anything about Harker’s Island? My grandfather use to own a lot of the island and part of me wants to buy rentals there to continue the legacy but do you know if there is enough attention to that area for vacation rentals?