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. 

[Greg Dickerson]

Originally posted by @Jonathan Scheeler:

Originally posted by @Glenna Wood:

Originally posted by @Jonathan Scheeler:

Thinking of adding STR/vacation rental to our starting portfolio. We have the capital to invest at the moment but WAG'n these numbers is posing to be difficult. Anybody have any insight on estimated costs per sq ft for electrical, water, etc? Buy in the populated areas, or a larger home on the ocean away from the populated areas (Kitty Hawk vs Duck)?

Cost by SQ ft may be hard to find. Comparing by bedroom may be easier to dig up. It's the number if people that drive the showers, laundry, cooking, etc. For an example, I have a 3/2 in Kitty Hawk. The electric bill goes from $50/mon (winterized, heat on) to $300/month when guests are present. Water from $70/quarter to $180. When I added a pool and hot tub to my Nags Head house, it upped the electric about $100/mon in season (doubled the rent so well worth it).  So add the amenity operating cost in with # of people in your estimate. My 4/2 in Nags Head seemed to add another $80/Mon for that 4th bedroom over the KH house. Water double overall vs Kitty Hawk since the cleaners empty hot tubs after every rental. 

There are renters for both markets. The numbers on any individual property would drive my decision. The number one rule is as close to the beach and you can afford. I would go smaller by the beach vs larger a couple blocks off. My general impression is that rents are better on the upper banks than lower. Also the lower banks are evacuated more often with bad weather. But good rentals can be found all over. If I were buying now my sweet spot house is 5 BR. Big enough for two siblings + kids + grandparents. More rent per BR to cover the  cost of your basic house systems. At 6+ BR you start needing bigger game room space, double up appliances or second kitchens, etc. Also up your maintenance costs. In 15 years I've never had a heat pump last more than 8 years. The salt and wind are brutal.

I do not buy condos for rentals in any market as I do not want decisions about my property to be made by a committee. The HOA fees are a sunk cost and compared to a SFH, the insurance seems higher. OBX is renter friendly so I believe there is less risk than other areas for HOAs deciding to kick out STRs in the future.

The REMAX Surfside office has an awesome website for researching OBX properties. 

Thanks Glenda!!!!  Very helpful! 

 You can get the all the actual numbers from the listing agents on the properties that are for sale. Property management companies can also give you numbers for the different properties. Power will be consistent but water is different in the different towns and counties so you need to get the actual numbers from the properties you are interested in.

[Greg Dickerson]

Originally posted by @Kim Philips:

There is a lot of desire for renters renting in homes near or on the beach. What about condos and those that are on the sound-front? I am interested in a condo in Nags hear near Jennetts pier, but ready to buy yet. Any advice is appreciated 

Soundfront/soundside does not rent as well or cary the value like oceanside/oceanfront. You want to be as close to the Ocean as you can afford the be.

[Amanda Carlo]

Thanks for all of this great info! We've always been interested in OBX but would love to know more about the character of a few of the most major vacation spots along OBX... does anyone have a summary or link to a brief description of each to get a sense of the different communities? Typically we'd travel and spend some time in each but #COVID :(

[Donado Manuel]

Hey @Amanda Carlo, @Greg Dickerson offered 

https://scottrealtyobx.com/

in an earlier post. They have a bit about each area on their site. Hopes this helps and Good Luck!

[Kenneth Garrett]

@Greg Dickerson

I stayed at the 4 x 4 beaches a few years ago (6 bedroom).  There were some for sale below 300K, not sure if that is still true.  I think it’s in Corolla, Carova Beach.  What do you about that area? Popularity, flooding and other info.

[Glenna Wood]

Originally posted by @Kim Philips:

Originally posted by @Glenna Wood:

Originally posted by @Jonathan Scheeler:

Thinking of adding STR/vacation rental to our starting portfolio. We have the capital to invest at the moment but WAG'n these numbers is posing to be difficult. Anybody have any insight on estimated costs per sq ft for electrical, water, etc? Buy in the populated areas, or a larger home on the ocean away from the populated areas (Kitty Hawk vs Duck)?

Cost by SQ ft may be hard to find. Comparing by bedroom may be easier to dig up. It's the number if people that drive the showers, laundry, cooking, etc. For an example, I have a 3/2 in Kitty Hawk. The electric bill goes from $50/mon (winterized, heat on) to $300/month when guests are present. Water from $70/quarter to $180. When I added a pool and hot tub to my Nags Head house, it upped the electric about $100/mon in season (doubled the rent so well worth it).  So add the amenity operating cost in with # of people in your estimate. My 4/2 in Nags Head seemed to add another $80/Mon for that 4th bedroom over the KH house. Water double overall vs Kitty Hawk since the cleaners empty hot tubs after every rental. 

There are renters for both markets. The numbers on any individual property would drive my decision. The number one rule is as close to the beach and you can afford. I would go smaller by the beach vs larger a couple blocks off. My general impression is that rents are better on the upper banks than lower. Also the lower banks are evacuated more often with bad weather. But good rentals can be found all over. If I were buying now my sweet spot house is 5 BR. Big enough for two siblings + kids + grandparents. More rent per BR to cover the  cost of your basic house systems. At 6+ BR you start needing bigger game room space, double up appliances or second kitchens, etc. Also up your maintenance costs. In 15 years I've never had a heat pump last more than 8 years. The salt and wind are brutal.

I do not buy condos for rentals in any market as I do not want decisions about my property to be made by a committee. The HOA fees are a sunk cost and compared to a SFH, the insurance seems higher. OBX is renter friendly so I believe there is less risk than other areas for HOAs deciding to kick out STRs in the future.

The REMAX Surfside office has an awesome website for researching OBX properties. 

Thank you Glenna, that was very helpful. I understand that you say the Northern part of OBX is better but what about the new bridge that is being built to help with the issues you mentioned.  It is a jug handle from pea island to Rodanthe. I was looking in Hatteras, but am fearful of the issues you mentioned as well. Who do you use to manage your property in OBX and have you consider switching from short term to long term renting? Thanks for your help.

Kim Philips, I don't think the new bridge will change the situation. There WAS a bridge there and H Sandy wiped it out. In the 60's there was a ferry across Oregon Inlet. The landings were moved as the sand moved. You don't leave the southern banks w/I a ferry and when the weather is bad, they close. The lower banks is simply more isolated hence emergency management will always be inclined to close the southern end first.

I've rented my 3/2 older beach box about half LT and half STR. LTR is a tough market on OBX as a prior poster has stated. Many tourism jobs disappear in the winter and there isn't much else to drive the economy. Of the 8 years I did LTR, 3 ended in evictions. After Hurricane Sandy, I converted the house to STR. The best STR house is not best for LTR. You pay a premium for the lot closer to the beach and you can't charge enough rent to cover it. If you do want to LTR on OBX get a cheaper off beach house with a legal apartment downstairs. The rents would be lower and you'll have a better chance of a long term paying tenant. My best LT tenants for my first tier house were special situations (someone moving to OBX but not sure which town and a company lease for a construction foreman).

There are bunches of property managers.  The most important person to interview is the maintenance head since maintenance is the Achilles heel. I've paid for some really stupid maintenance calls from even "the best" PMs. Also consider size. How many houses do they manage? Does your property fit their inventory? When I was working I travelled 90% of the time was often some where with restricted phone or personal mail access so a PM was a must and they charged 15-18%.. Now I would self manage. There are now a few companies offering caretaker services. Smart because reservations are simple online but you must have someone reliable who can eyeball the property on very short notice.

[Mike Petrosinelli]

Sorry I'm late to the party, this thread is awesome, a lot of valuable information on here. I'm thinking about pulling the trigger on my first vacation rental property in 1-2 years, OBX seems like a good fit given that strong cash flow is possible (particularly if self managed), and beachgoers have favored home rentals over hotels long before Airbnb/VRBO existed. 

My biggest concern though is that the market is becoming saturated with STR's. There's a lack of STR regulation in OBX compared to other markets and property prices are still attainable, which creates a relatively low barrier to entry. There's 1,800 STR's in Corolla alone. Does anyone think the market is oversaturated? Concerned competition will increase while returns diminish. Curious to hear what others think. Would be super sick to own a property that could cash flow all Summer and use sometimes in the offseason.

[Stephen Ray]

Hey @Mike Petrosinelli. We've been looking at OBX for awhile for mostly selfish reasons (have a place to go to on the off season) I wouldn't worry too much about the market becoming over-saturated with STR's. Beaches have always been STR's between hotels, condos, and houses. There may be more people self managing now but I don't think there is enough new builds happening to change anything (especially ocean front. Right now the biggest thing IMO is that prices are super inflated. That being said rates are also super low so its a tough call. @Greg Dickerson is a super valuable resource for the area. Good Luck!

[Greg Dickerson]

Originally posted by @Kenneth Garrett:

@Greg Dickerson

I stayed at the 4 x 4 beaches a few years ago (6 bedroom).  There were some for sale below 300K, not sure if that is still true.  I think it’s in Corolla, Carova Beach.  What do you about that area? Popularity, flooding and other info.

Yes that area is called Carova Beaches. You can definitely get more house for the money as the properties do not rent as high as other areas and has a shorter season. Flooding is not an issue in general but some areas are lower than others and sometimes the beach is impassible at high tide during storms in the fall and winter. People live up there year round so it's safe and habitable all year round but a very different environment.

[Greg Dickerson]

Originally posted by @Stephen Ray:

Hey @Mike Petrosinelli. We've been looking at OBX for awhile for mostly selfish reasons (have a place to go to on the off season) I wouldn't worry too much about the market becoming over-saturated with STR's. Beaches have always been STR's between hotels, condos, and houses. There may be more people self managing now but I don't think there is enough new builds happening to change anything (especially ocean front. Right now the biggest thing IMO is that prices are super inflated. That being said rates are also super low so its a tough call. @Greg Dickerson is a super valuable resource for the area. Good Luck!

The inventory levels are not an issue and prices are actually better now than in years past. You will never reach over saturation as a market just obsoletion due to age, condition, lack of amenities and poor locations. The OBX is and always has been a STR market so it's actually where you want to own vs other markets that are more or mostly year round. The rental properties and market is regulated by state and local governments just not restricted like more year round communities because it is a vacation destination. There are very few hotels and the barrier to entry to build a new one is very high so that will never affect rental houses there either. The key is buying right. The closer to the ocean the better the rental income. You can search for properties that produce the most income per dollar and with todays rate these properties actually do pretty well.

[Mike Petrosinelli]

@Stephen Ray @Greg Dickerson Makes sense seems like the the market can bear the addition of new rentals without putting much downward pressure on occupancy rates. Definitely noticed that there is a lot of older inventory out there that could use updating, which could present an opportunity to buy below AV, upgrade, and increase rents. Attempting to run some numbers on oceanside properties, finding my expense ratios are 50-55% so possibly being too conservative, or maybe just haven't found the right property. Will keep looking thanks for the inputs!

[Greg Dickerson]

Originally posted by @Mike Petrosinelli:

@Stephen Ray @Greg Dickerson Makes sense seems like the the market can bear the addition of new rentals without putting much downward pressure on occupancy rates. Definitely noticed that there is a lot of older inventory out there that could use updating, which could present an opportunity to buy below AV, upgrade, and increase rents. Attempting to run some numbers on oceanside properties, finding my expense ratios are 50-55% so possibly being too conservative, or maybe just haven't found the right property. Will keep looking thanks for the inputs!

 The expenses are typically 40-50% including management depending on the property. You can get actual expenses from the listings and listing agents.

[John Ostrowski]

Thanks for all the great information  @Greg Dickerson   I am also thinking about a rental in the outer banks for some time.  In  terms of the strm,   how appealing are town-homes/ condo in this area.  I appreciate there are some downsides to condominiums,  but are they a viable option in this market?

[Greg Dickerson]

Originally posted by @John Ostrowski:

Thanks for all the great information  @Greg Dickerson   I am also thinking about a rental in the outer banks for some time.  In  terms of the strm,   how appealing are town-homes/ condo in this area.  I appreciate there are some downsides to condominiums,  but are they a viable option in this market?

Yes but a lot less inventory.

[Amanda Carlo]

We would LOVE to check out this market... does anyone have general numbers as to cash on cash return? Or even annual gross numbers? 

[Jeff Poarch]

@Greg Dickerson my wife and I are actually under contract on a townhome in Corolla. Any recommendations on great insurance agents in the area? 

[Daniel Alvarez]

Originally posted by @Jeff Poarch:

@Greg Dickerson my wife and I are actually under contract on a townhome in Corolla. Any recommendations on great insurance agents in the area? 

I've had a solid experience with Jackie from Elite. Great agent and very competitive rates.

Send me a PM and I can send you her details.

[Jeff Poarch]

Thanks @Daniel Alvarez! Jackie from Elite was actually my first quote (via my realtor) and is so far the best overall. What are the odds?! LOL

[Neil Roy]

@Greg Dickerson Thank you so much for doing this and creating such a helpful thread.  My wife and I are ER physicians and we've got a few properties that we manage ourselves in the DC area (with our little leftover time).  Vacation rentals seem to be a totally different beast!

1) What are some of the most common pitfalls you see with out of state investors in the outer banks?  

2) I'm using David Greenes book as a guide, and finding properties that are cash flow positive after the management fees and expenses seem pretty tough. Any suggestions for way to find deals when they pop up (e.g. property management companies, REI groups, etc)?

3) Lastly - with regards to the the short term rental ordinance for Nags head - do you know or have you heard of anything in the pipeline for Rodanthe? 

Thanks in advance!

[Greg Dickerson]

Originally posted by @Neil Roy:

@Greg Dickerson Thank you so much for doing this and creating such a helpful thread.  My wife and I are ER physicians and we've got a few properties that we manage ourselves in the DC area (with our little leftover time).  Vacation rentals seem to be a totally different beast!

1) What are some of the most common pitfalls you see with out of state investors in the outer banks?  

2) I'm using David Greenes book as a guide, and finding properties that are cash flow positive after the management fees and expenses seem pretty tough. Any suggestions for way to find deals when they pop up (e.g. property management companies, REI groups, etc)?

3) Lastly - with regards to the the short term rental ordinance for Nags head - do you know or have you heard of anything in the pipeline for Rodanthe? 

Thanks in advance!

Pitfalls are just paying too much or buying the wrong property with poor income due to location thinking you can get more by doing improvements. Proximity to the ocean is key for max income. The best thing to do is work with a good agent to help you find the most cashflow per dollar invested. Most properties that are listed on the market will have all the historical income and expense info in the listing so it’s easy to find the best income producing properties.

The ordinance is not an issue and mainly affects year round property owners renting rooms or portions of their property.  They are now required to list the property as a short term rental and pay occupancy tax like all the other rental properties are already doing. 

Reach out to Jeff Scott and tell him I sent you.

He’s been a top broker for 25 years or so and a close friend of mine for over 20 years now. He will take care of you.

[Neil Roy]

Thank you so much for the quick response! We're going up to visit off season in February and will reach out to him! 

[Joseph Danza]

@Greg Dickerson Jeff Scott is good, and second that about over paying for a property which is easy to do in this market. Make sure property cash flows. But it depends on your goals as well.

[Alexis King]

My husband and I are looking to purchase a property in OBX early next year. I would love to keep in touch until then. Looking for a 3-4 bedroom when the time comes. We have visited but are not very familiar with the area so we would need someone knowledgeable to kind guide us a little. I really enjoyed reading this thread! Lots of great information :)

[Greg Dickerson]

Originally posted by @Alexis King:

My husband and I are looking to purchase a property in OBX early next year. I would love to keep in touch until then. Looking for a 3-4 bedroom when the time comes. We have visited but are not very familiar with the area so we would need someone knowledgeable to kind guide us a little. I really enjoyed reading this thread! Lots of great information :)

Reach out to Jeff Scott. He's one of the top Brokers on the OBX and who I send everyone to. 

https://scottrealtyobx.com

[Bailey Clay]

I am thinking about house hacking in the Duck/Corolla/Kitty Hawk area. From the research I have done it seems like there is a high demand for places for locals to rent, but little supply. Do you know anyone who has rented out by the room? And a estimate on what type of rents that could be charged for nice house in this area?