Florida Vacation Rental Market Opportunites ?

Question

Hello everyone,

I’m currently looking  home to purchase in the next year or so somewhere in South Florida (considering both east and west coast) as a second part time home as well as a vacation rental to cover the holding costs when I am not there. My question is, does anyone see any future buying opportunities in particular markets that may be heavily affected post COVID 19 pandemic? My initial prediction was markets that were oversaturated with newbie Airbnb investors who were attracted to the increased monthly cash flow will eventually become forced sellers, ultimately deflating  single family home prices.

I’m looking in the 1-1.25 million dollar range with a minimum of 4 bedrooms. I know that in certain markets that is considered a lot and others, not so much. Areas that I had my eye on were Sarasota, Key West, St. Petersburg and SE Florida.

Any input would be greatly appreciated!

Jill Haselman · Answer

@Nick Liddell We seem to have much in common in terms of investing; I hope my two cents can be of help.  I live and invest in SoFL (East Coast) in Delray Beach, having come from Boston where I also owned rental property (Martha's Vineyard and Killington, VT).  I currently own 7 units (3 properites) in Delray Beach and I am always searching for deals.  In terms of finding FL deals on the East Coast (I can't speak for the West Coast):

• The next "hot" market, unequivocally, is the Space Coast (Brevard County). Click here for an article I just Googled quickly.  Waterfront, canal front (boat docks) property, walk to beach and/or especially walk to nightlife/fun is absolutely KEY to STR income.  I'm no expert on Brevard, but I'm in research mode.  This market has multiple upsides for investors:  increase in population due to SpaceX, military bases, beaches, multiple popular beach towns (Melbourne, Cocoa Beach, etc.), proximity to Orlando/Disney, multiple airports, and geographic placement being in northern FL gets an influx of vacationers from across the border in Georgia.  And, in your price range, for >$1M, you can get massive bang for your buck compared to SoFL.  Oceanfront property (doing a quickie search) can be found under $3M whereas in SoFL it STARTS at $10M.

• In terms of newbie AirBnB owners or post-pandemic fallout that render deals, although anything is possible, I wouldn't set my sights on that as a huge opportunity in the SoFL market.  In fact, my experience is the exact opposite.  Typically summer is the low season in SoFL, but because of the pandemic and people being quarantined for so long, my listings are being bombarded with inquiries; people want to travel and vacation and they're willing to pay for it!

• Market-wise (again, East coast intel only), I would steer clear of Miami (high prices and overbuilt condos), and walk carefully regarding Fort Lauderdale unless you could find a waterfront DEAL (good luck).  However, there are endless "small towns" that are gaining BIG popularity in the STR markets but of course you have to do your homework and it depends on your strategy.  Towns to look into include, but aren't limited to:  Pompano Beach (huge I.T. complex going up which will attract young money needing rentals) and a great CRA.  Hollywood is on the upswing but has a bit of a hippie/beach bum vibe still, Boynton Beach is definitely worth researching, as its CRA has plans to mimick Delray Beach's downtown.  And, where I am in Delray Beach is widely publicized as the hot place to be and vacation in the small beach town market; I LOVE living and investing here, but the deals are basically gone and prices are high-- there is still upside, but you have to hunt daily and strike immediately.

I'm no expert, but I hope my comments can provide some color to your search!  Best of luck; you'll love it here.

~Jill

Joe Cassandra · Answer

Go to https://www.zillow.com/research/data/ and start digging through which areas are seeing

1. Stagnating RE prices

2. Longer DOM

3. Increasing inventory

There you'll find the Airbnb busts

Karen Chenaille · Answer

I looked at Key West three years ago. They were not allowing anything under 30 days so definitely check out the regs.

Avery Carl · Answer

From what I am seeing through my own experience with my 6 VR's, my clients' experience, as well as data, the drivable vacation rental markets have hit a bit of a boom post-Covid. People are dying to get out of their houses, but they are still leery of airplanes and large metropolitan areas. My suggestion would be to go with one of the more northern markets you mentioned that tourists are more able to drive to than to be forced onto a plane. We need to get Covid a little further in the rearview mirror for the best data, but as it stands the drivable destinations have proven to be more recession resistant than the fly-to destinations.

Jill Haselman · Answer

@Nick Liddell Gulf Stream is essentially Delray Beach, just not walkable by a stroll, but certainly within Uber or Golf Cart distance and that is a great neighborhood!  I don't know much about Hollyweird, but I've stayed at Margaritaville a few times for a staycation night and strolled the boardwalk, etc.  I love the geography and there is MUCH building, so not sure what it will be as it gentrifies.

Brian G. · Answer

@Luke Carl congrats on finally getting your first Destin booking/stay. Hope you crush it there!

Keith C. · Answer

@Nick Liddell hi Nick sounds like a good plan.

I’m aware of a quadplex ocean front with pool and jacuzzi , 2 car garage and 8 parking spots

Primary unit has 4 beds 3 baths , 2nd unit is 2 bedroom 2 bath and the other 2 single room efficiency. You can have long term remnants or run as short term vacation rental since it comes with appropriate licensing for transient rentals .

That said it’s Central Florida location about an hour out of Orlando. PM me if interested

Steven Wallace · Answer

@Nick Liddell, I'd probably stay away from this market for the time being, as local code is not friendly towards STR's in general. I've heard from multiple people that their Airbnb has been shut down due to the fact that you are only allowed to rent out your property 3 times a year, unless you are in a hotel/motel zoning area or have a special "overlay" permit. The application for this permit is $2,400 and can take up to 6 months for approval. Source here: https://www.stpete.org/planning_zoning/docs/Short%20Term%20Rentals%20HANDOUT.pdfWith your budget, you may want to look into Anna Maria Island. My family owned property there for 30+ years. It is primarily a vacation rental market and you may find deals on homes that would fit your budget. It's a particularly great location because almost any home you purchase will be within walking/biking distance from the beach. If you find one on a canal (like we had), that is a major plus.

Hope this helps!

Jed Haslam-Walker · Answer

@Nick Liddell Hi Nick,

That's a good question. I'm a Realtor here in Sarasota and can address your question:

"

"I’m currently looking home to purchase in the next year or so somewhere in South Florida (considering both east and west coast) as a second part time home as well as a vacation rental to cover the holding costs when I am not there. My question is, does anyone see any future buying opportunities in particular markets that may be heavily affected post COVID 19 pandemic? My initial prediction was markets that were oversaturated with newbie Airbnb investors who were attracted to the increased monthly cash flow will eventually become forced sellers, ultimately deflating single family home prices."

You would be correct that AirBnB investors are taking a hit at the moment, in some coastal regions this will be an issue but in Sarasota it won't be. In order to protect economic stability in such a hot vacation location there is extensive and strictly enforced leasing restrictions on the majority of SFRs and condos so AirBnB is not an option for many owners.

The market here in FL is unique from the rest of the country particularly in Sarasota - the price of SFRs is driven by general economic principles far more closely than investment properties whose price is driven by the income producing capabilities it has. The stability of the Sarasota economy is protected to a large degree by the significantly higher retirement population here. Our largest employers are the healthcare sector and we have the largest influx of retirees than any other state, this combined with the #1 beach in the US and having the cultural capital of Florida badge gives the county an edge in terms of stability.

"I’m looking in the 1-1.25 million dollar range with a minimum of 4 bedrooms. I know that in certain markets that is considered a lot and others, not so much. Areas that I had my eye on were Sarasota, Key West, St. Petersburg and SE Florida."

Your market would be considered the Luxury Real Estate market and normally the revenue multipliers for seasonal vacation rentals here is 4 times annual rent rates - and so done correctly you would more than cover your holding costs :)

As I said depending on where you buy you may encounter restrictions on the minimum lease period you can offer and so you need to be careful where you buy - unfortunately I hear it happen a lot that buyers end up buying a second home they can't make work because they walk into a min lease period their Realtor never told them about or didn't know to check on.

Hope this helps.

Anand S. · Answer

There are some opportunities here in Fort Lauderdale that are extremely compelling.

Florida Vacation Rental Market Opportunites ?

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