@Kathryn Morea Thanks for the reply - PM’d for WhatsApp details.
For the appraisal piece, I assume that means most buyers are waiving appraisal but capping their “over-appraisal” amount to X dollars? (Ex. Buyer waives appraisal contingency; buyer to pay up to $10,000 over purchase price).
For the mini-splits:
- Materials + install is typically $3000-$5000 here in Florida; obviously a little more depending on how many you have installed. Is the cost for install significantly different in PR?
Also, you mentioned the cost of electric; don’t suppose you could give me a general idea on the average electric bill in the summer? (Ex. 3/2 Single Family ~$300/mo); want to make sure we’re accounting for appropriate utilities costs in our upfront math.
Good afternoon ya'll -
Still narrowing in on a region to focus on, but leaning towards N/NE coast (Carolina, Rio Grande, Fajardo, Luquillo, Ceiba) given the volume of properties compared to other areas; I'm also becoming a little more familiar with the search/acquisition process in PR, which I have to admit, is a fun little treasure hunt bouncing around Zillow/Realtor, Point2, Xposure, and Clasificados. I was hoping I might pick some of the brains of those local investors/market players on the following to help in our decisions:
1) Air Conditioning - my wife (Mayaguez-native) simply giggled when I asked about central air; that being said, I've noticed about 90% of listings either have fans/window units for air conditioning, with a select few having mini-splits installed.
a) In your experience, have you found the lack of A/C (modular or otherwise) to be detrimental to getting a good short term rate, or something that would deter vacationers?
b) I've installed mini-splits on travel trailers and sheds here in FL; considering that it's *relatively* straight forward, am I missing the reason more units in PR don't have these installed? Is it a lack of qualified installers? Prohibition? Price of energy/electric? Difficulty in acquiring the parts/kits? I figure it's a route we'll explore to maximize comfort, and wanted to rule out any regulatory limits and other barriers when deciding on any particular unit....that, or more favorably weigh those properties that already have them installed.
2) Due Diligence - after searching around, it sounds as though the proto-typical "home inspection" isn't really a thing for PR closings. Here in FL, the home inspection is more than just a QC of the major property components, but also plays heavily into financing and insurance:
a) Is the going assumption that the property is sold "as is" or that repairs will be the responsibility of the buyer prior to closing?
b) Does the appraisal act as the "inspection?" Do lenders routinely balk at repairs prior to closing?
c) Do local insurance providers require any kind of inspection reports? Wind/Hurricane mitigation? 4PT?
d) Is there anything specific to PR that I should keep an eye out for, or ask the listing agents/seller? For instance, in FL, roof/window/HVAC age are hot topics and are typically included as part of the listing description. Termites, and the inclusion of a termite protection plan, would be another big "must have" here.
3) Financing - we have a pre-approval from PenFed, but was planning to shop around a bit (SunWest, Co/Lab); setting expectations:
a) Minimum 25% down on a SFH / 40% down on a condo/apt pretty standard (as of 2022)?
b) Closing costs - for those that have purchased in the states...anything dramatically different? I typically set aside 5-6% of the purchase price for closing (outside down payments) in FL, which would include: taxes on the deed/mortgage, title insurance/fees, appraisal, etc.
4) Property Management
a) Any recommendations for brokerages/companies that perform all services in-house for short term occupancy (i.e., advertisement, tenancy, cleaning/turn-over)?
Thanks!
Good afternoon! My wife and I are real estate agents/investors up in the FL panhandle looking to add a short term rental to our portfolio, and have our eyes set on Puerto Rico (wife's a native) as a spot to use for our own occasional vacation spot. Right now, we're in the information collection stage, but have funds readily available (absent a local financier). We would prefer to keep our focus on the north/east portions of the island and/or Vieques. If there are any agents that could provide insight or direction--possibly a few referals for lenders that deal with CONUS-based buyers, we would greatly appreciate it - thanks!
@Dustin Sanders; unsure how big of an area you're encompassing in your search, as "Pensacola" spans quite a bit of land, but given your 3+ bedroom criteria and desire(?) to stay around/below the median home value as you mentioned, you'll most likely be pushed out and away from the downtown (and surrounding) sector and will likely find homes that need a little, if not a lot of love.
That being said, I wouldn't shy away from 32501/32502, especially those areas west of downtown (aka "Garden District, Tanyard, Belmont-Devilliers, Sanders Beach, North Hill Highlands"). See the area bounded by:
- North: Maxwell St.
- South: The Bay...
- East: DeVilliers St.
- West: Pace Blvd
You might find a few 3BR properties in need of a good refresh/rehab in a fast-growing area close to all the Palafox/Belmont activity.
Pricing is going to vary wildly between NAS Pensacola and Scenic Hwy/I-10, but as others in this thread have mentioned, the market is UP...big time: @Dylan H. is right that fairly-priced properties typically have multiple offers within 24-48 hours. @Matt Jones is correct that median prices for your 3/2's are nearing the 200k mark, and that includes properties that need quite a bit of rehab...land alone in some areas (East Hill, North Hill, Cordova Park, etc.) is selling for $180k/lot.
That's not to say finding a move-in ready home is impossible, but I would recommend expanding your search to include sound properties in need of an update; teaming up with an agent or lead-gen partner of your choice that is zeroed in on your numbers/criteria will give you a shot at being first to the scene. For example:
"I'm looking for...
- 3+BR/1+BA single family homes
- >1200sqft
- in the 32501 (or by other means bounded) area
- Listed for <$150k and/or <$100/sqft
- That will accept conventional/cash financing
- That require XXX level of rehab (cosmetic, cosmetic+, full gut)"
Better yet, give your agent/partner an idea of the capital you have readily available and any experience/contacts as part of your renovation portfolio ("I've installed flooring/tile before," "I've redone a few kitchens," or "I don't mind doing a LOT of demo and landscaping."). That will allow the individual to seek out properties that fall within your comfort/financial capacity level with regards to scope of work.
If you're set on move-in ready properties, seek out townhomes and/or smaller (<1200sqft) new construction; they exist, but again, they sell quick (typically before construction is complete).
Hit me up with any questions you might have - I'd love to
@John D.
Thank you so much for weighing in! You make valid points in line with sacrificing a little flexibility in order to retain capability, which I want to touch on -
But first!
Occupancy limitation is something I CAN wrap my mind around, because again, it's resource-based...it's tangible (i.e., only so many humans can physically occupy a measured area), but most importantly, it's a best practice of BUSINESS vice one of legality. What I mean to say is that there's nothing inherently perverse/illegal about more humans congregating in a particular spot, however, that doesn't mean that we SHOULD cram people into properties like sardines, because it tends to lead to damage, CapEx life-cycle decrease, etc. Occupancy "limits" make the most sense when instilled by savvy property manager who understands the balance of responsibly maintaining his asset and generating the highest possible return.
Truly, stuffing 16 people into a 1-bedroom house might net you more tenants, but I doubt it would actually net you a higher ROI (unless your model was based on charging each tenant vs. charging for a particular domicile). It goes without saying that a real estate asset has a best use, and if you determine as a property (business) owner that it makes more sense to allow for 8 people in a 3/2 vs. 6 people, I'm not sure why the "state" feels it necessary to intervene, unless of course, the utilities that those properties are tied to only allow for so much demand, in which case, it would behoove the property manager to only permit those numbers that wouldn't exceed that value.
I don’t disagree with the notion of occupancy limitation to promote longevity, I disagree with who enforces it and HOW it’s enforced. And this ties in to what I was excited to address in your comment -
Yes, we can ultimately “lose” a few legal battles, and therein some power over our operations, in order to maintain a level of authority; my issue is the growth of regulation. Here is where you’d typically hear the “slippery slope” argument - but again, I’d rather focus on the “why”...the root cause of the regulation, so I, as an investor, can take appropriate action to curtail these issues without the need of a government entity to tell me how.
If the concern is that your neighbor will stuff 16 people into a house, - “ok.”
But, what if your neighbor didn’t like that you put 8 people in your house? 6? What if he didn’t like that you had dogs? That you permitted smoking? That you had a pool? That your roof color is red instead of brown?
These are all personal preferences, but even so, they lack foundation in anything truly tangible and fail to provide context for the opinion:
And so I return to my original question which I’ve posed to a few in this thread: what EXACTLY about STRs is so distasteful that it drives regulation? I find it difficult to internalize that there IS a desire for regulation, simply because there’s IS regulation. That doesn’t help those that want to understand the origination, and where I start to question the overreach of elected entities.
I have a genuine, vested interest in staving off negative opinions of the STRs in my market, and would love to hear what characteristics of STRs are unappealing to your communities.
@Russell Brazil (see above)
@Russell Brazil
Do you remember any of the arguments against STRs - what are your own? More specifically, what were the general sentiments regarding STRs in/around neighborhoods? Was it a perceived impact to safety? Security? Were any of the sentiments based on historical examples?
I won't put words in @Thadeous Larkin's mouth, but I assume when he was discussing the VA-loan and its restrictions, he was making the argument that short-term renting (in addition to long-term renting) is a viable means by which to earn income while TDY/PCS'd/Deployed. The follow-on point is that if you're TDY/Deployed for what would be considered a short-term duration (<6 months in Florida), and you decide to rent out your property, you are not permitted to issue long-term leases, and therefore fall into short-term rules/regulations. Therefore, if your property is deemed non-viable as a STR due to the new regulations, you have lost one of your means of investment return. He also makes another good point, that if your neighbor opts to attain a STR license, you are now SOL if you, too (in line with the density measures), are taken out of the area of military duty in so much as your ability to use your property as an investment has been limited.
We have to be careful that we don't preach regulation as etched in stone, never to be changed; the federal limitation on occupancy is a best practice, codified into law to ensure, but it doesn't mean that it's the best practice for ALL situations. I very much doubt that the federal government saw the writing on the wall that was AirBnB/STR when developing occupancy statutes. In my discussion above, I conceded the occupancy argument because of the logical pairing with resource use, but again, if it's applied to STRs, it should be applied to owner-occupied properties as well...and I don't see a lot of federal agents running around town fining families of 8 opting to live in a 2BR residence (because that's what they can afford or how they choose to use their money).
@Joe Splitrock
Took me a while to compose my thoughts for my first response but wanted to double-tap on your comment about securing the quality and safety of neighborhoods. Can you point me to a data point where the safety of a neighborhood has been compromised because of the presence of STRs? I want to research this and pass to my future buyers if it does, in fact, have a positive correlation.
As far as quality...that seems rather...subjective in nature? How are you measuring it? Opinion of those that already live in the area? That's a very "us vs. them" mentality that would certainly impact growth more so than a landowner opting to rent their personal residence. What do you say to those individuals who chose to move to an area because they visited it and loved it?
I might buy the assertion that the "vacationer" is less invested in the upkeep of the property, and therefore more prone to damage the property and in turn, impact the surrounding home values, but I'm not sure how it differs from the long term renter other than in scale. If we apply this same argument of renters vs. owners to your ideal "long term rental market," then why is more acceptable? Is the assertion that because a renter is in a property for 6+ months vs. 1 week, their mentality shifts in such a dramatic fashion that it offsets all possible risk to the community? If so, why not just rely on the economic mechansims in place to affect these one-off scenarios instead of blanket regulation?
If you damage a property or negatively impact your neighbor while as a long-term tenant, you are at risk of eviction and loss of deposits...plus all the follow-up consequences (poor rental record, fines, etc.) which might prevent you from renting in that area again.
If you damage a property or negatively impact your neighbor while as a short-term tenant, you are at risk of losing your vacation rental, losing your reputation on third-party sites (AirBnB, VRBO, etc.), losing your deposits, and losing your ability to visit the area again (let alone other vacation areas).
I'll side with you in that pride of ownership tends to have a positive impact on communities (i.e., if you own something, you're more apt to care for it), but again, if that's the basis of the argument, why not require EVERYONE to own the property?
@Thadeous Larkin @Joe Splitrock
A really interesting topic, and one that I'm sure has similar matches in other cities/states as AirBnB/STR become more popular, widely used, and as more brokerages/investors incorporate STR into their overall business model.
I want to weigh in, but will first identify my bias in that I believe property rights to be absolute and natural (immune to regulation and restriction). I truly feel that what you do with your property (provided it does not directly infringe upon the natural rights of others) is up to you; let the economy and social contraction determine how a city develops. For sake of argument, however, I'll concede that there will always be a government presence, and I look to find ways to limit regulation and restriction to the least amount possible in order to promote creativity, free enterprise, and growth.
That being said...
Let's examine and attempt to determine the intent behind the proposed regulation, and weigh the merits of the attempt to benefit the greater good:
1) Occupancy: again, while I disagree with limiting how an individual opts to use their domicile, at least this one lends itself to resource use. I can make the logical leap between the number of persons utilizing water, electric, and most importantly sewer, and what demands are put on the infrastructure in place. Where this argument breaks down is when you look at larger families that opt to occupy smaller residences. For example, let's say Owner A and his family live in a 1500 sqft, 3BR/2BA in Sunnyville; Owner A is married, has 6 children (ages 12-18), and 4 dogs. Assuming the owner sleeps in one bedroom with his wife, and the children share the other 2...that leaves 3 children per room, not to mention the pets.
Conversely, you have AirBnB Tenant "B" who opts to rent out the same property for a week for himself, his wife, his best friend, and two other couples for their upcoming trip (7 adults); the AirBnB host has determined the house can easily accomodate 8 persons (3 beds, one pull out couch), but would be restricted from doing so since his property is a "3 Bedroom" on paper.
Who is putting more demand on the property? 2 Adults + 8 Kids (and dogs) living full time, or 7 Adults using the space for a retreat at the end of the day? Even if you conceded the argument that adults leave "more" of a footprint on the environment/neighborhood, why does this change between an owner-occupant and a renter? How is the functional use of the property (sleeping, living, eating) changing between the two groups? If you're going to limit occupancy to "(2) persons over the age of 12 per room," then I would assume you would also place the same limitations on owner occupants...otherwise, how have you mitigated the issue? (Again, I would prefer neither group be limited). Additionally, I have qualms on the assertion that parking/traffic is an inherently negative attribute of STRs, again, because it applied without recognizing how an owner occupant utilizes the property during their routine (maybe they have 6 cars...maybe they have deliveries scheudled every day...maybe they choose to throw house parties for their family and friends once a week).
2) Density (as proposed): Wow...this one screams slippery slope and significant impacts to investors. When I perform my due dillegence in assessing a property for investment purposes, I am most certainly including a determination of its capacity to perform as a short-term and long-term rental (I want to retain multiple exit strategies).
From a macro-perspective, this regulation would limit the creativity of investors to take otherwise non-performing and derelict properties and turn them into updated, economy-strengthening assets. I try to avoid the thought of a scenario where I or an investor seeks a property in a particular neighborhood because of its proximity to amenitiy "ABC," but find out that:
- the "cap" of STRs for the neighborhood has already been reached; how is this determined?
- the property I'm looking at is the only/last one available, and it happens to be 4 lots away from the nearest STR; this decreases the value of the "landlocked" properties as they can no longer be used as STRs
- because of the dimensions of the architecture, or the way units are laid out (multi-family), I'm not permited to turn one of these units into a STR because of its proximity (<500') to other similar units; would this apply to apartments? townhouses? duplex/triplex? shotgun/row homes?
As Thadius mentioned, how is this going to be tracked? Will some branch of the local municipality keep a running tally of who/where STR licenses are dolled out? Who determines how many STRs the city/township can hold? How long can one hold a STR license? Will it transfer with a deed? Will these licenses then act like currency due to their inherent value? How will this information make its way to sellers/buyers? What impact will this have on areas of HIGH tourism, where vacation renters ARE the lifeblood of the economy? I woe the day that I have to represent an investor searching for their next property, only to have to inform them that this particular property CAN'T be used for their business model because of a density regulation.
I can already hear the "well Mark, if these properties don't work for their model, they should look elswewhere." Guess, what, they WILL! And their money, talent, businesses, jobs, education, experience with them.
Think of the impacts to pricing when applied to simple supply/demand...you (the government) artifically limit the supply (available STRs) -> prices for STRs go up due to limited supply with the same influx of renters -> more people turn to hotels as the more affordable option -> properties lose their ability to support STRs due to increased vacancy -> property values decrease; not to mention that many tourists opt to stay at AirBnB BECAUSE of their unique experiences; strip that away, and you've removed of a facet of your tourism industry.
Ultimately, I am dissapointed every time I hear about support for these-type restrictions (especially from investors in the BP community) because it eats away at possibilities...possibilities that newer investors are using to a find a leg-up any where they can; how have we become so elitist in our mindset that we diminish one investing strategy over another? In my area, in particular, long-term rentals are becoming a less feasible approach to buy-n-hold investment strategies as the price of homes outpaces the growth in rental rates. Many, I mean...MANY owners/investors are turning to STRs as a way to supplement their income and/or find a means to offset the higher mortgage costs.
I do want to touch on the "impact on neighborhoods" and "security of your investment" comments that mirror much of what a typical HOA is founded upon. I won't argue that STRs change the dynamic of a neighborhood...there are facts to base an argument on, such as higher turnover, but I will argue that the predicted dynamic is much different than the actual dynamic. Much in line with Thadeus' arguments, HOW has this "destruction of the fabric of the neighborhood" been documented? Higher crime? Lower school scores? Economic/job stagnation? Rise in property destruction/abandonment? What exactly are you (a supporter of the regulation) trying to avoid and/or prevent? It seems ethereal, and reeks of fear of change/diversity in community makeup more than any attempt to secure an investment. Again, "Keep the Vacationers Away" is a sure fire way of undermining your entire enconomy.
If a group of homeowners truly wishes to prevent their neighbor from performing activity "XYZ" in their proximity, there are social constructs in place for that (HOA, peer pressure, "gentlemen's agreement"); these entities/ideas work well because they are limited in scope and require buy-in. Why overlay a generalized restriction on the entire community without volunteer participation? Better yet, if 99% of the community decides they want to prevent their own residences from being used as a STR, they are more than capable of doing so through their own means...in other words, don't participate in the STR market.
Truly, if your property rights (possession, USE, enjoyment, disposition, exlusion) are not negatively impacted, why is what your neighbor does inside the bounds of their home any interest of yours, or the city's for that matter?
I do enjoy the opportunity to be shown the light and proven wrong in my assumptions, but I have yet to hear a convincing, facts-based assertion regarding the impact of STRs on a community; on the other hand, I see greater influence of government on personal property rights under the guise of communal protection. If anything, I know of many business owners that welcome the influx of tourism and renters. I think we can all agree that a town full of HOA-driven communities is NOT what drives growth, and therefore value. Truly, safety and security of oneself and belongings are paramount, and I won't begrudge a neighborhood from installing a gated fence, nor measures to encourage (not force) character/architecture retainment, but again, I have yet to see any data that support increases in crime or poor performance due to the presence of STRs - more importantly, then, is ensuring the city/municpality is afforded the oppportunity to welcome in visitors;
Businesses thrive, jobs are created, demand for the area and its amenities increases, and values rise, which is something ALL investors want.