All Forum Posts by: Villy Ellinger

@Emily Anderson Oh, dear mother, lol! Whoever, or whatever, conducted this "analysis" has clearly never owned or been to Okaloosa Island! Yikes :-)! I own, manage and sell there, so yes, I am partial. But I'm also looking to buy there more. There is a reason. Do some homework, but here are a few points to consider:

1) Most beachfront properties, the nice, higher end rentals on the beach side, DO NOT USE AIRBNB!!! So if this analysis is based on selecting properties based on how many Airbnb reviews they had, well that kinda figures. As a very personal example, I own a condo a Azure (one of the nicer beachfront condos). My unit grosses $115K in rent (clean of any other fees or cleaning fees). Of all the numerous reservations I have every year there, only two or three are through Airbnb. Airbnb is geared to the lower end properties on Okaloosa Island. I also own a townhouse across the street, which mostly books on Airbnb and a small unit at El Matador on the very west end of Okaloosa Island, also mostly rents on Airbnb. In other words, it seems to me that the data in this study is skewed and incomplete.

2) Okaloosa Island is a "tale of two cities": the south beach side of expensive condos and the up and coming north side, where only a small portion allows short term rentals. The analysis mentions the area around Breakers West. LOL. That complex is different from the ones around it. The area around it is the fastest growing in potential revenue per sq ft. That said, it is COMPLETELY different from the beachfront condo area in both guest characteristics and overall potential. 

3) My personal opinion (based on years of on the ground experience in the area as a living breathing owner and manager) - 2b/2b have the lowest per sq ft income potential. 3b+ units do better as do STUDIOS!!! 

4) Also a personal opinion, but based on experience: with the exception of a small area on the north side of Okaloosa Island around Bluefish, Bream and Commadores Landing, AirDNA or any other Airbnb-centered data metrics are garbage. Even if they are able to capture VRBO data as well, none of these capture OTO data. Keep in mind that a number of the larger, more expensive units on Okaloosa Island are managed by large vacation rental companies like Vacasa, Southern, etc OR by more sophisticated owner-managers who have their own direct websites. Contrary to popular belief, some of the management companies do bring large rental numbers. The end result may not be very profitable for the owner, because the management company takes a large comp cut, but for analysis purposes the gross rental numbers they produce are significant, and they are NOT captured by AirDNA or other similar services. Even PriceLabs specifically indicates that they are not able to capture data from direct bookings from vacation rental company websites.

5) There are a lot of "pundits" currently proliferating various analyses based on a small window of data fluctuation: those who got into the business in 2020 and are now drawing various conclusions based on a very short time span. If someone is looking at Okaloosa Island (or any other area) with the goal of finding of investment options where they can make instantaneous cashflow or overnight appreciation .... well they are a dreamer or an idiot (sorry for the language, lol). The analysis above is short-sighted. Whether this is a good area to invest or not, should be based on more than that. Any analysis into Okaloosa Island should look into the current infrastructural developments in the works in Fort Walton Beach - a lot coming up - that will have both positive and negative repercussions. It should also look into demographic shift expectations and demand projections. The analysis only  looks at past numbers (incomplete and skewed, in my opinion).

If I sound harsh, it's not because I'm advocating one way or the other. It's because I believe there is more to market analysis than having a machine pull out some numbers out of its *ss and produce a conclusion :-). Anyone interested in Okaloosa Island investing should study it deeper and broader. Same for any other area.

I feel so much better now that I have this off my chest, lol. 

Good luck :-)

@Emily Anderson Okaloosa Island is my favorite!!! Seriously! I own three vacation rentals there (at Azure, El Matador and a townhouse on Bream Ave) and I mostly sell there. Also, I love to spend time there. I'm considering adding to my collection on the Island :-). I'm taking a closer look at Venus and Pelican Isle (I like the smaller units). 

Yes, there are some hotels on the Island and they add competition, but not as much as some other places. Demand for Okaloosa Island is steady and growing. There are a few unique things about it that really help out: 

1) Okaloosa Island has a height restriction for all building because of the proximity of military installations on the island. That prevents 20+ story buildings being built there, hence prevents overcrowding and oversaturation of STRs that you see in Destin and PCB currently. 

2) There is a large portion of the north side of Okaloosa Island which is strictly residential, where STRs are NOT allowed. That is actually a GOOD thing for those of us who have vacation rentals there, because it prevents oversaturation of rentals. Also, it prevents overcrowding (like the height limit). That alone keeps demand for rentals higher. Most vacationers don't want to be stuffed like sardines on the beach and surrounding areas.

3) Okaloosa Island is one of the ONLY beachfront resort areas on the Emerald Coast where there  are seven public beach access point with parking, restrooms, outdoor showers and picnic areas. If you have ever been to Panama City Beach, you have probably noticed that all the public beach access points there have no parking. Pretty much the same in Destin. So unless you are staying right on the beach, you really cannot get to it easily. Try getting to the beach on 30A if you are in one of the rentals a block away, lol. That is not an issue on Okaloosa Island, which means that STRs on the north (the Sound side, in the portions where they are allowed) can access the beach with no issue, yet the prices for those properties are much lower. That is where my townhouse is. I am looking to buy more on the north side as well. 

Yes, traffic on and off the Island can be rough in the busy season. But that is universal for the Emerald Coast. Also, the Brooks Bridge is being rebuilt (big project that is eventually supposed to make traffic issues better), which is causing some concern with some investors. I have not seen a drop in tourist interest because of it so far.

Another thing to point out, Okaloosa Island is the closes beach on the Emerald Coast to the VPS Airport (unless guests arrive in Pensacola). It matters for demand.

Lots of family friendly things to do on or near Okaloosa Island. 

A bit lacking in restaurants, shopping, night life, etc, but it's very close to Destin, where all that can be found within a short drive.

Welcome to BP! Sounds like you got a great plan in the works. Best of luck! The Emerald Coast is a great area to invest and to live :-)!

@Jason Wray this one was unique because it was a townhouse, so easier to get cash out (not a non-warrantable condo). Also, I bought this in the heat of the crazy market, so cash was the only way not to drive the price to $300K+ once other offers started coming in. The key for me in this deal (the thing that made it a deal, really) is that it's an area of Okaloosa Island where many were ignoring the potential. That has dramatically changed in just the last two years. We all tend to follow the crowd. This is one time when I "got in on time" :-).

This is grossing about $40K+ (rent) per year. The biggest expense that is kinda killing me is the insurance at close to $5500 per year.

My other investments are condos. I don't get very creative with financing usually :-). Probably can make more money if I brave that area, lol.

Investment Info:

Townhouse buy & hold investment.

Purchase price: $245,000

Remodeled it and turned it into an STR. Super close to the beach, so it's doing great :-)

What made you interested in investing in this type of deal?

I had sold and managed properties in that subdivision before. Believed that they are under-valued at the time, considering the location and STR income potential.

How did you find this deal and how did you negotiate it?

MLS. I'm a Realtor, so saw it as soon as it was listed and made offer immediately as I was already familiar with the layout, etc.

How did you finance this deal?

Cash to purchase to be competitive. Then cash out later.

How did you add value to the deal?

Remodeled.

What was the outcome?

STR rental currently

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I'm a real estate professional and I specialize in that area. That did make it easier to find and get the deal.

My STRs are on the Emerald Coast / FL Panhandle. I'm probably going to buy another one this year. I like Fort Walton Beach / Okaloosa Island and Navarre Beach as cashflow options. I also like the small units in the Sandestin Resort (that is what I'm looking into purchasing next). Destin and 30A is very difficult to cashflow with the current prices. Miramar Beach is nice, but you have to be pretty diligent in crunching the numbers. The demand and rental $$ is there. It's just a matter of finding reasonably priced options that others have not gotten to yet.

Pensacola Beach has great rental potential and demand, but options are limited and prices are high. Still, I like that better than Destin or 30A for cashflow.

PCB prices have come down, so if you are looking a bit longer term, that may be a great option. Demand there has decreased, not because there are less people going, but because that market got oversaturated by STR investors. Many who bought at the top of the market without clear understanding of the STR business model, are now selling off and will be exiting the STR market altogether. So hopefully the oversaturation in PCB will go away in a year or two. But immediate cashflow may not be as easy to achieve there right now, unless you self manage and do some great marketing.

I like the Panhandle because it is probably the closest DRIVABLE beach area for many in the southern and central states. So that assures that we have vacationer demand. Unlike Orlando (also oversaturated I hear) the beach has a universal and almost year-round appeal. It is a bit easier for me, because I'm a Realtor and also sell here, so I look a property all the time and can buy for myself. But even if you're not a real estate professional, you can still find some good options here.

@Marley Carnes you've actually done a pretty good job. Considering, I'm pretty sure which property that is in, I would actually say that the $43K gross annual income might be a bit aggressive if you are new to STR. Yes, you can get there, but I would run your numbers with something a bit more conservative just to be prepared. That is especially important since if you buy now you will be looking at a few months of low season. There is a learning curve in STR and hopefully you will get to a higher cash flow in a couple of years. One benefit of buying now even though the cash flow may not be immediate is that there might be more room for negotiation. If you are already working with an agent they can suggest some strategies. If I were the buyer's agent on this, I would definitely try to get the seller to cover some of the closing costs and the special assessment. I see the comments above about the special assessment, but most people who are familiar with our local market know that insurance has gone up tremendously, so many condo complexes are having to do special assessments to build up reserves and to cover insurance increases. These are pretty common now.

I would also suggest that you doublecheck if water might be covered by the HOA.

I also think that you need to budget for cap ex (your own reserves) or to up your maintenance budget a bit. Hopefully you will not need ever spend that, but just as FYI, replacing an HVAC unit can be $6K+, especially if you have to do that in the middle of summer. 

Another thing to add to your expenses is a monthly budget for supplies and materials. Guest will break cups, towels will tear, a toaster will break, etc, batteries for remotes, so maybe $50 per month at least for such incidentals.

As someone mentioned above, with 10% down and the higher rates will be hard to cash flow until you can refinance when rates are more favorable. On the other hand, I would talk to your CPA and review all the benefits you can get through depreciation and interest and other deductions. If you have other investments that can be very helpful. 

I'm not sure why you have selected Navarre Beach. I'm sure you have your reasons. It is a great area that has performed well in STRs and has appreciated a lot too. There are just not many small (studios or one bedrooms there). Small units do better per sq ft profit as STRs than large units. They make great investments. If you are flexible away from Navarre Beach, I would suggest consider Fort Walton, Miramar, Sandestin, PCB... 

Best of luck to you!

@Kimberly Bunch studios and one bedrooms actually do better in rent per sq ft than larger units and offer better returns in my experience. I have two studios and a one bedroom townhouse on Okaloosa Island as well as a 3/3 beachfront condo. In absolute terms the large units bring in more, but as far as % return, my experience has been that small units do better and are also more versatile when it comes to the off season, when people are not travelling in large family groups. So studios and one bedrooms can offer a more steady occupancy and rental income.

Sandestin if very popular and also well known. In a way buying there allows you to buy the "brand". People look for Sandestin by name. HOA fees are pretty high, but these days they are actually very comparable to other complexes. With insurance so high for single family homes and REALLY difficult to get for STR houses, HOA fees don't seem so scary any more, lol. Also, the amenities are a big appeal to guests.

Used to be that Sandestin was difficult to self-manage or to have other mgmt company outside of the in-house Sandestin management. That is no longer the case. Yes, there are some small discounts that guests get on renting bikes or carts if the owner uses the in-house management, but that does not seem to impact whether or not guests book with you. So you can self-manage or use whichever company you choose just fine.

I would suggest you look into Luau on the beach/south side of the Sandestin resort. It's newer, very nice and there are great studios there. Depending on your budget, the lock-out units (two bedroom unit that splits into a one bedroom and a studio and can be rented either way) are a great option. You are basically buying two condos and only paying one HOA fee. I currently have a client who is trying to buy one of these units. Amazing views too and walking distance to the beach (super plus).

If you are looking on the Bay side of Sandestin, there are some more cost effective options there. The studios/one bedrooms there also benefit from some conference and conventions traffic in off-season. Gross rent will probably not be as high as on the beach side, but considering the prices (many are in the mid $250K and under $300K with rental projections over $30K). In Sandestin on the Bay side, some of the buildings I like are Bayside Condo (incredible water views of the bay), Bahia and Lasata (studios are bigger here and can do in the high $30K or more).

I've always been a huge fan of small units (you will probably find numerous posts from me about that, lol). I used to not be that big of a fan of Sandestin, but with the shift of prices on the market (many areas being really high and somewhat oversaturated in rentals) and with the flexibility of managing in Sandestin now, I'm spending a lot of time with clients there. I am also considering buying something (studio) there myself. One great thing about Sandestin is that locals go there as well for weekend staycations :-).

Good luck on your property search. If you have any questions about studios/small unit STR or Sandestin and the area around, definitely let me know. I'll be happy to answer. I try to be as objective and straightforward as possible.

@Ben Adamo

It's a great area to invest. I moved here from Memphis 6 years ago. You'll find more real estate agents than properties though, lol, so I suggest do your own math and double-check all projections from independent/uninterested sources. Yes, I'm an agent too, but I try to not be "salesy" when on Bigger Pockets. I know people are here for independent advise and not sales pitch :-).

I have 4 short term rentals in Fort Walton Beach that I manage myself and they are doing well. However, there is definitely a slowdown since 2021-22 and rents are down back to more normal 2019 levels. There is also some oversaturation of vacation rentals all over the Emerald Coast. That is not to say getting an STR is not a good idea. In fact, now might be a good time to get a very reasonable deal as long as you are not expecting some crazy immediate cash on cash return :-). Also, I would suggest consider properties with a move versatile function. For example SFR or townhomes that can pivot from STR to LTR if needed and that would be easier to resell if needed. Location and proximity to the beach and attractions is definitely critical. Another thing that you need to check very, very carefully is to make sure that the area where you buy allows STR and there are no upcoming restrictions being considered (like in Mary Esther). Don't rely only on hearsay or an agent. Do your own due diligence research.

Good luck!

@Michael Junior well you definitely have a lot of option and advice, lol. Check out Northwest Florida. We have a house shortage and lots of people moving here. Also, lots of military needing housing. The last two years have seen a huge surge of investors buying short-term vacation rentals, but in the actual housing rental market there is still a lot of demand and very insufficient housing. A bunch of military bases here too -- so lots of resale demand for residential homes. And, you know, you'll be by the beach :-)