First time investor, should I buy a multi-unit vacation property?

Question

I'm a first-time investor, and I guess you could say I've always been a little ambitious. I'd like to get some opinions on a property that I've been interested in for some time.

I live in Georgia but I found a multi-unit vacation property, on the beach, in Panama City Beach Florida. It's been on the market for a little while and I have been watching it like a hawk. I've already talked to the agent and got as much information about the property as I can. My question is, as a first-time investor with this be too big of a jump into the world of REI?

I've analyzed this deal in a number of different ways and it keeps looking great on paper. The purchase price is, what I feel, well below market value and generates great numbers on a rent roll. As of now, the property owner is not renting the entire complex out for almost half of the year so his friends and family can stay there for free. This means that the rent roll as it stands is lower than many investors would like to see. On top of that, it needs a few renovations to bring it up to speed. I've asked a few larger investors about why this property is still in the market, and the answer I keep hearing is that 8 units is too small for the big guys to go after, but the price is too large for many of the small guys to bother with. I feel like it may fall in a sweet spot for something that could be a great initial investment, but I don't have enough background or experience in real estate to know whether or not this deal is worth pulling the trigger on.

Let me know what you think about this deal, and whether or not it's something that a newbie investor should jump into as a first property.

Tyler Hardy · Answer

@Melissa JolleyI have considered looking into single, and multifamily long-term rentals in the Panama City area. This property was one that I drove by on my way to a restaurant on vacation and haven't been able to get out of my head for almost a year now. If you know the property I'm talking about, I would love to discuss it further with you, just to get some local professional input.As far as long-term rentals in the Panama City area, I would be very interested in talking with you about it. Send me a PM and we can talk about options and opportunities in the area. Thanks for the response!

Yolanda Salas · Answer

I am a local investor and real estate broker in Panama City Beach - happy to have a real conversation with you about the local area, no sales pitch I promise. I care that buyers make good decisions fully aware of the area and the property. You can message me if you like. @Tyler Hardy Think also in terms of cost per door, and cash on cash return per door. If it's been sitting a long time, especially in this market that is booming and needing housing, there are reasons. Have you been to this area since Hurricane Michael?

Natalie Schanne · Answer

@Tyler Hardy - it’s funny how properties stick with us. It’s very unlikely that this property is a great deal if it’s been sitting on the market for 1+ years (assuming no recent price changes or upgrades). Other people can value properties like you can. If you borrowed money at 6-7% and put 25% cash down, and assuming 50% expense ratio, is your ROI on your invested money good enough? Better than your other opportunities? How much is year round rent vs seasonal rental income? Can you Airbnb/str it legally? Do you trust the PM to take care of it for you and to do STR turns? Will you need to hire someone else like an Airbnb cohost?

Tyler Hardy · Answer

@Cassi JustizThanks for the response!. As of now, I would plan on retaining the current property management company. I've spoken with them and they are eager to had the property closer to full occupancy during the peak season. There are no regulations in the area that would become an issue. This is a very commercialized area and most of the properties are already multi-tenant vacation rentals. Panama City Beach is one of the highest vacation rental income areas in Florida, if not the Gulf Coast. I forgot to mention the best part of this property. It's a two-story complex as of now but it's zoned for an additional 150 foot vertical clearance. So the option for future development is massive!

Melissa Jolley · Answer

@Tyler HardyIt is likely the area (causing it to sit)....in fact....I may know which one you are talking about. That said-there are families of every type that need homes there right now. The need is the greatest in Panama City, not Panama City Beach (the bridge traffic has a lot to do with it.Let me know if I can help.

Cassi Justiz · Answer

I would try to find a mentor or someone to partner with that is familiar with that market. It could be a good deal, but it's hard to give advice without knowing the specifics. Also, are you going to be self managing or do you have a property manager in mind? Are their any regulations that you need to know about with vacation rentals in that city?