All Forum Posts by: Brandon Richardson

Hi! 2019 wasn’t quite as good. We grossed around $43,000 (versus $50,000 in 2018). Not sure exactly why. The rental association increased the rates a little bit to try and “filter out” the clientele a little bit. We also had a few last-minute cancellations, which was an anomaly. One of those were snowbirds who usually rent the entire winter. But we basically reverted back to the mean.

2020 is probably going to suck. We refunded all rentals in April. Hopefully we don’t have to for May. We also have a large special assessment this year. And if things get worse, I wouldn’t be surprised to see another special assessment to cover overhead or operation expenses. We will see.

As far as tips, we just have this one property. It’s hard to say where to focus on or avoid. Some of the cheaper properties across the street from the beach rent like crazy. But the rates are a little lower, and so is the clientele (not sure about the “PC” way to phrase that). Like I’ve said over the years in this thread, this is more of a savings account and long-term play for us. With the added benefit of having a free place to stay a few weeks a year. We LOVE bringing the kids there!

If we managed ourselves, we’d cash flow maybe $12,000/year. We paid $380,000 for it, so that’s isn’t very good if you’re looking for an immediate cash flow investment. But we did refinance last fall and it appraised for $487,000. We’ve owned for not suite 5 years, so that’s not bad. Of course it’s only worth what someone will pay for it.

Just be wary of what RE agents tell you down there. They all “have clients” who are cash flowing “very well.” The ones on this forum I’d guess are a little more trustworthy, since everyone here is a little more savvy than the average shopper. Unfortunately ours was awful.

Hmm. Other tips. Just know that salt water puts real wear and tear on things. You’ll have special assessments every two or three years for building repairs and major maintenance. And it’s a vacation place. You see the current impacts of financial crises—vacations are one of the first expenses people cut (whether forced or not). 

I’ll post more if I think of any. 

@Caleb Richardson Sure.

Our unit grossed just over $49,000 in 2018. The major unforeseen expenses were a special assessment ($2,200) and a new washer and dryer ($1,600). Even after that, it still did a little better than break-even.

We spent 3 full weeks there as well, all of them during normally good rental periods (early September and late October). So it was definitely the best year to date.

Looking at comps, it's appreciated ~$40,000-50,000 in the 3.5 years we've had it. So it's doing better than I anticipated.

@Villy Ellinger I didn't say it doesn't rent from October to May. Snowbirds rent all the winter months. And it's pretty much full from March through October.

I'm 100% happy with it. It's exactly what I wanted -- a place on the beach where I can spend 4-6 weeks a year, paid for by renters. Would it cashflow if I managed it myself? Absolutely. Do I want to deal with that headache from 5.5 hours away? Absolutely not. My time is better spent doing other things.

@Jeff Kehl My condo in Destin would cashflow around $7,000-9,000/year if I managed the property myself. That would be around 7% CoC, I think. But that place is an absolute zoo from May through October. I want nothing to do with managing it from 5 hours away. It's not worth the time and headache. So I use the on-site rental program and pretty much break even on cash flow. That includes my family spending about 3-4 weeks a year there, as I've written about before.

@Neil Raj

We don't control the rentals. We use the building's on-site rental management company. It's managed kind of like a hotel. They handle all the bookings, payment processing, cleaning, maintenance, etc. There's a main check-in lobby for guests. It's a "condo-tel." During peak season (spring break and Memorial Day through August), they rent by the week (Saturday is turnover day). In the spring and fall, they'll rent by the night. They rent by the month to snowbirds in December, January, and February.

You don't have to use the on-site rental company, though. You own the condo. You're free to use any other third-party management company, or you can do it all yourself through VRBO or AirBNB. If you use the on-site company, then the only restrictions are what I mentioned in the last paragraph. But if you use a third-party or do it yourself, you can do whatever you want. The City doesn't have any say in it.

Our unit rents the entire months of January - March 15th to snowbirds. Then the spring break weeks are always booked, and 75% of May books.  And then it books every single week from Memorial Day through mid-August. It books about 90% of September and 75% of October (only because we always block out the last week in October for ourselves). 

Hi @Neil Raj - I appreciate it!

We definitely didn't buy expecting it to cashflow. We bought a place where we can take the kids for 5-6 weeks a year for the next 20 years. Renters just happen to be paying for most everything after the down payment.

If we sell the place in 10 or 20 years, then it may have been nothing more than a savings account. Or it could be a decent investment. We don't know, and we have no major expectations.

Feel free to shoot me any other questions.

@Luke Carl and @Richard White - Y'all's comments make me almost want to try managing it myself. And I don't even work a regular 9-5 job.

Right now, it's just not worth the $9,000/year. That's a small price to pay for a complete buffer between me and the chaos that ensues on turnover day in Destin, FL during peak season. If the wife ever threatens to make me go back to the corporate world, I may reconsider :)

BTW, I've looked at mountain cabins, and the numbers are much more appealing. One of these days...

@Mike Hibbs no problem! Let me know if you have any other questions.

@John D. that's kind of my point. We do value the personal use, and we let the renters pay for it. We eventually would have bought a place regardless of whether or not we rented it out. It's definitely a long-term investment -- if at all.

To gross $100k/year, you're going to pay $1MM for the property in the FL panhandle/Emerald Coast area. Real estate agents may tell you differently, but they have different motivations. And you may find an outlier or two.

@Kevin Lefeuvre this is why I wanted to give real numbers. And my numbers align with the other people we know who own properties in our area.

And you can chisel out some expenses, as @Peter Mohylsky mentioned. If you pay cash, then you'll obviously save on financing. If you manage the property yourself, you'll pick up that money, too. You just have to decide how much your time (and sanity) is worth.

So I just wanted to put VRs in the Emerald Coast area into perspective. It's a popular destination, and the real estate prices reflect that. There may be properties that perform a little better than ours, but ours is at or above average. And other markets along the east and west coast are probably very different.

Hope this is helpful for some!

I've received a few direct messages over the last few months regarding this thread:

https://www.biggerpockets.com/forums/530/topics/20...

So, rather than typing everything out every single time, I figured I would post an update in a new thread. Here goes.

We bought a VR in a beachfront condo property in Destin, FL in July, 2015. It's in Miramar Beach, to be specific. I have 2 good years worth of data. I won't give exact numbers, but you can figure it out.

• We put 25% down. Got a 30-year mortgage at 3.5%.
• It's a 2 bedroom, 2 bath unit on the 7th floor with a great beachfront view.
• Closed at just under $400k.
• Gross rental revenue for 2016: $43k.
• Gross for 2017: $45k.
• We use the on-site property management service, which charges 25% of gross rentals
• HOA fees are $649/month

If you do all that math, you'll figure out that we come out of pocket a little bit (~$1,500-2,000/year). And actually, there was a special assessment this year that set us back another $4k.

All that said, it's not as bad as it seems.

We use the condo ourselves for 2-3 weeks per year. That's a few thousand dollars we don't have to pay to rent a place. We only use it during the off-season and random weeks or weekends when it isn't rented.

We have a 1-year old, and will have at least 1 or 2 more kids. We plan to own this place for 20+ years and bring the family here.

I've run the model out for that long (20 years). At the 10-year mark -- if we were to sell -- then the profits would average back out to around 7% year over year. That isn't great, but it isn't horrible. This is all assuming around 1.5% appreciation.

If we do hold onto it for 20+ years, then that number grows a lot.

Another thing to consider is the 25% property/rental management fee. If we did this all ourselves, then we'd clear $10,000/year. But, we live in Atlanta. Managing a beach rental from 5 hours away would be an absolute nightmare. The last thing I want to deal with every single Saturday during peak season is someone not happy with something, not able to get the key code to work, the unit isn't clean, etc. There are other third-party management companies in the area that take smaller fees (20%, I think). But our rental program is on site. It's completely seamless for guests, and the office handles everything. It's basically like a hotel where people own the rooms.

Along with the other fees mentioned, there are a bunch of other small fees that come with a VR:

• Broken dishes/appliances/toilets/whatever
• Annual fees for certain items maintained by the that are NOT part of the HOA dues (cable boxes, fitness center, etc.)
• Replacing furniture as it wears out

So, I guess my final take is that a VR in a popular beach area is only a good investment if you're willing to hold onto it for a long time. We went in with this mindset, so I'm pretty happy with how things are going so far. In fact, I'm typing this from our balcony right now.

You can get properties across the street from the beach or a few blocks away for a little cheaper. I'm not sure if they rent as well, but I've seen some gross rental numbers that are pretty close to ours. So, properties just off the beach may cashflow better, which is something to consider. You also may go to less touristy areas, but I can't say if they will gross as much.

I think I covered most everything. Sorry if anyone was looking for a wonderful story of quick riches, but I'd rather be honest about our specific case. I'm sure every market is a little different.

Thanks!

@Mike Wood That is correct. It's not a greenfield site, so we had some buildings to demolish. But more than that, it's very high-end for multi-family. "Luxury" apartments, if you will...

And on top of all that, the market in Atlanta is extremely hot right now. Especially for multi-family. We're back to where we were 10 years ago when subcontractors were actually turning down work.

@Greg Behan Where do I find the post you referenced?