Florida Vacation Rental with 17% COC Return

[Christian Cascone]

Been searching the BP forums and not seeing much discussion about vacation rental properties. So thought I'd share a vacation rental success story and hope to get input from other members regarding vacation rental investment.

I'm new to BP, but not treasure hunting or real estate investing. Picked up a little 1950's conch house on the water down in Marathon, Florida back in 2012 on short-sale. The house was an immediate success, renting at ~$1300-$1500/week for 30+ weeks each year, returning double-digit COC even with outsourced property management. We've been reinvesting returns to improve the property along the way, given significant comp appreciative value in the area. This year we're adding a pool, which believe it or not, jumps market rent from ~$1500 to ~$2300/week...vacationers love pools! Now COC for 2017 is conservatively projected at 17-18%.

The math:

We bought the property for $305k on a fixed-rate 30-year loan at 3.5% with 20% down. Improvements over the years total ~$145k, pool included. Vacation rental expenses are high...we're at $3525/month, a major reason for reduced investor interest, I'm sure. But weekly vacation rental income is typically much higher than a comparably priced annual lease property...we're booking weekly rent at a rate of $6708/month. NOI is $51,339 with monthly cash flow of $3182 or 17.19% COC! Thanks to great local property management, this property is essentially passive, requiring little to no owner attention.

Given the crazy real estate market transitions we've gone through over the last few years, we won't even take into account that the property is now worth three times what we originally paid back in 2012. So in this case at least, from both an income/cash flow and market comp property value perspective...we've found that vacation rentals can be a resounding success.  Not to mention the fact that you as owner get to enjoy the view and relaxation for yourself whenever it’s not rented.

Welcome any questions and would love to hear thoughts and perspective from the BP community regarding vacation rentals.  Thanks for tuning in...Christian