Vacation Home rentals in Panama City Beach, Fla.

[Sheila Evans]

I want to know if it is a wise investment to buy a condo on the beach in Panama City Florida with today's pricIng.  For rental income with property manager.  

[Brendan H.]

Hi @Sheila Evans! My wife and I own a vacation rental home and it has been fantastic this past year. You will hear varying opinions on here re: condos, but I would look closely at the HOA fees. Those can escalate quickly, and they are also variable (10 years from now the siding of the building may need to be redone, or the roof, etc.). Especially by the beach - rougher conditions = higher costs over the years. Also, many property management companies charge upwards of 30% of your gross rents, so shop around to find a great hands-on manager that won't take all your profits. (Easier said than done!).

Because management fees are so high, we manage ours from afar.  It sounds crazy, but if you have a solid cleaning service, they can be your eyes & ears.  We book everything through VRBO or AirBnB, so it is all done remotely.  Then, we use the KABA door code system and give each Guest a new code every week.  (We have a Saturday to Saturday policy during peak season) and a 4 night minimum during the off season.  

Condos are good because their cost to entry is typically lower.  However, there are more condos on the vacation rental market, so your competition is greater as well.  If you have a competitive advantage with marketing then it could be a good thing.  

In the end, run ALL the #'s, to include 30% Mgt fees, HOA fees, flood and/or hurricane or wind insurance (if required), and I would also recommend using a CapEx rate Greater than 10% because things wear down more quickly by the beach. You will also need to account for replacing comforters, couch cushions (or couches altogether!) dishes, lamps, etc. more often. With a traditional SFR you don't have to account in your budget for replacing furnishings. So that is an additional cost for the vacation rental business. But the margins on vacation rentals can be much greater, so it has been worth it for us. AND, if it covers your expenses, you have a FREE vacation home to use on your own when others aren't renting!

Good luck and feel free to holler if you have any other questions!  ....Run the Numbers!!

Brendan