All Forum Posts by: Villy Ellinger

@Aria Sabour I lived in Memphis for over 20 years (college, work, real estate, the whole thing) before moving to the Panhandle of Florida in 2017. I would agree that Memphis is a great rental market. STRs are a bit trickier there, but can also be a good option. I would suggest that you consider places that a close and with easy access to the main attractions of the area: Midtown for live music, restaurants, the eclectic experience AND also if you can provide rentals to the many parents and families for Rhodes college and Christian Brothers College in Midtown. Parents come many weekends for sports events, etc. Also in Midtown is the Liberty Bowl for U of M football. The U of M area in East Memphis is also an option.

Another location would be downtown and Mud Island - close to the Pyramid, the Forum for sports and concerts, Beal Street for music events. There is the trolley in downtown which allows for some public transportation as well. And that area is somewhat walkable for restaurants, bbq, etc. 

Yet another option, if you decide to specialize your STR in renting to traveling nurses and medical professionals, there is a huge medical area close to downtown and the Uptown area of downtown. Families of patients who come for treatment to the many excellent Memphis hospitals also need places to stay.

Good luck.

@Mike Wilcher Jr first off, I would strongly suggest you use a local (I mean hyper-local) lender specializing in the exact location you decide to buy. Those are the lenders that will have the best conventional options and also various portfolio loans. They may also offer DSCR loans. If you decide that you have to use a DSCR loan definitely keep in mind that interest rates for those are higher than other loans and also they may have a pre-payment penalty. So when interest rates begin to fall and you decide to refinance to a better lower rate (which you will need to do if you get much better options), then you will have a penalty with the DSCR loan. Not necessarily a deal breaker, but something to figure in your calculations.

Another item to point out for DSCR.... considering the current market in FL is still adjusting after the post-Covid craziness, finding properties that will meat the ratio requirements for DSCR loans may disqualify some otherwise good properties with great potential. For example, if you buy a townhouse that has history as a long term rental and want to turn it into a short-term rental the income "history" for the DSCR qualification ratios might be the long-term rent, which would be lower. Again, might work out, but something to consider. Same with properties you plan to remodel to maximize rent.

If you are looking on the Emerald Coast of Florida/Pensacola/Destin/PCB, I can suggest several local lenders who can assist with various loan options or just provide professional insights.

Good luck!

@Matt "Roar" Gardner about Gulf Terrace... that's a tricky one. I had a client who really wanted to buy there but ended up buying in PCB instead because of concerns on the possibility that vacation rentals may not be allowed or future restrictions being implemented. I'm aware that many units at Gulf Terrace openly do vacation rentals and some are very successful. But technically, apparently, the complex falls in the zones of TCMU and ROI-VR of the Destin zoning map, which does not appear to allow for short term rentals. I would love to know if there is some legislation or legal proof that can be used to assure buyers that short-term rentals are not in any question there. It would certainly help in marketing the units. One of the very few affordable condo complexes in Destin proper, so would be very helpful.

@Sarah Kensinger the gross rental revenue inland is definitely lower but so is the price per sq ft. So cash on cash return might be the same or even better. Considering the current post was asking about purchasing in a lower price range and with less $$ down, the higher priced properties near the beach will not be in that range and there is no reason why investors should be excluded from the STR market or have to wait years until they can "save up" for a large down payment. The best way to save that may be to start up a bit further from the beach, then capture growth through equity and 1031 into a larger beachfront property later. There is also better versatility of use in the non-condo properties and future resale is easier.

@Jamie Clayton I would suggest look into single family homes in Fort Walton Beach to use as vacation rental/STR. They can be very successful as vacation rentals. Here are the reasons why I would suggest that over other options in your case:

1) I agree with some of the advice above that finding a warrantable condo that also allows STR on the Panhandle will be really difficult if not impossible. The one complex someone mentioned above in Destin, Gulf Terrace Condos, technically does not allow STR. Yes, people break that rule, but you can get in trouble or worse, be stuck with a property that you cannon use as intended.

2) Yes, in PCB you will find properties more affordable. Yes, townhouses are a good option and there are more of those there. Do keep in mind that most townhouses in PCB are older, built in the 80s, etc. So while they may come with no HOAs and better financing options, they also come with more expensive maintenance requirements like having to replace roofs, dealing with plumbing issues, etc. With no HOA, all of these items fall on the owner. Also, single family homes and townhouses will have significantly more expensive insurance than a condo and may require flood insurance as well.

3) If you want to be under $400k and want to use the property as a vacation rental close to the beach, Fort Walton Beach can offer some very good options where you can use conventional financing with 10% down. You will still have to take care of ongoing maintenance expenses and insurance needs for the property. That will be the case in PCB or anywhere you choose to buy a townhouse or SFR. The reason I like Fort Walton better for using a single family home as vacation rental is because in Fort Walton THERE IS EASY ACCESS TO THE PUBPLIC BEACH WITH LOTS OF FREE PARKING. The is key when trying to attract guests to book a vacation rental that is not directly on the beach. In PCB the beach access points have no parking. So if you buy a SFR or townhouse that is not right by the beach your guests will have to do quite a lot of walking or have trouble finding parking to go to the beach. 30A is even worse. If you have ever tried any type of public parking or beach access at 30A you will know what I mean. There is better beach access in Destin and Miramar Beach, but there are rental restrictions for STRs in the residential areas there. So you are back to the non-warrantable condos and the 25% down.

If you need proof of what I wrote :-), go on Airbnb, look into vacation rental house in Fort Walton Beach that are further into town (not on Okaloosa Island) and read the guest reviews. You'll that if a rental is well managed tourists really like those :-).

Look into TurnoverBnb and sync it to your Airbnb and VRBO calendars or whatever else you have. It can automatically send updates on reservations, scheduled cleans etc and other features. Even better, get some property management software. I use OwnerRez and it's great, especially if you have less than 20 properties. It will also allow you to get a direct booking website. There are other programs like Guesty that people like to use. I understand what you mean by "property manager". Sounds like you are using a limited local assistant manager/inspector. That can be helpful. But definitely no need to have to manually send them info. 

Another option would be, if your manager does this service for other owners as well, for them or the cleaners to add you to their software communication. Many use ResortClean or similar ones. All of these sync with booking calendars almost instantaneously.

@Dave Villa I'm going to agree with some posters above that Panama City Beach is a great option to look at. I would also suggest looking into the Fort Walton Beach area of the Emerald Coast of FL. As for your budget, I actually thing that you can find an STR property in the $200Ks or so that does very well. The market is somewhat oversaturated in 2/2 condos. But there are small 1 bedroom and studio units that do really well. I personally have two such units in Fort Walton Beach - one at Pirates Bay and one at El Matador. Pirates Bay grossed over $36K last year and the Matador unit did about $42K (just rent, no cleaning or fees). Other similar units do that well too. Mind you these are studios. There are quiet a few such options in PCB as well. The advantage you might have in purchasing a studio is that you are coming in with cash from a 1031. Studios are extremely hard to finance, so sellers are a lot more willing these days to consider price concessions for solid cash buyers.

I also use OwnerRez. I also got a private domain for the website (very inexpensive). You get a hosted website as with OwnerRez. I use Stripe for the credit card processing. I know there are cheaper options but I like that Stripe is bigger and well knows and I like the dashboard. Also, different properties can be tied to different accounts. OwnerRez works great with Stripe. I don't have the QuickBooks interface enabled even though I do use QB for my accounting, but you can add that feature to OwnerRez as well.

OwnerRez

@Joshua Larson I'm not sure what you should do. That is only for you to decide based on your finances and your financial goals. But.... here are some of my observations:

1) The location of your property is really not optimal. Very far from the beach and the main tourist attractions. PCB has plenty of beachfront condos and single family STRs that are very close to the beach. 

2) Airbnb is a great advertising site, but if you are not listed on VRBO, list there as well. Also, your particular property may benefit from being listed on a direct website of a rental management company and being marketed directly to their prior guest base. A person randomly searching for a property in PCB will not think to look that far out from the beach unless there is a specific attraction associated with the property or a specific reason to look at that particular property.

3) Considering the location of your property your pricing seems high, especially for the current slowing down in the STR market (post the Pandemic peak). I only spot-checked a few dates in February. The price per night comes up at $350. When you add the taxes, the cleaning fees and the Airbnb fees on top of that, the property becomes very expensive. It says it sleeps 12, but that is how many can sleep in a number of other properties much closer to the beach, including some 3 bedroom condos on the beach with bunks beds, etc. If you look at other properties and their pricing, you will see that $350 in Feb is high regardless of the property location. I can't see your pricing for later in the year because the later months are not open for rent.

4) The property is nice and the space is great. The Florida room is definitely a great bonus. That said, it is pretty dated, especially the bathrooms. You will be competing with much nicer properties, so pricing needs to reflect that. 

5) I glanced through the rules on your Airbnb listing. I'm not sure if you've read those yourself. I'm guessing they are based on your manager's requirements. Allowing pets is an excellent idea for the property. However, some of the other rules, like don't spray sunblock inside the house, don't sit on the furniture with sunblock on, extensive quiet hours, etc.... make your rental unappealing. It is unreasonable to expect that a family with children would rent a place not only far from the beach but also where they have to worry if their kids sit on the furniture with sunblock on :-). Yes, sunblock ruins the furniture. It's cost of doing business. There are very nice washable couch covers that can be put on the furniture cushions. Amazon has some that don't really look like couch covers at all.

Overall, tough call here. It's not really a great time to sell either. So... if you can find a niche to market to that would be your best bet. Find out if there is a specific attraction near your property. Honestly, I've never sold that far away from the beach in PCB to be very helpful in that respect, but look for gold courses, nature activities, other things. If there is a gold course, may be offer some sort of discounted package for that. Or if fishing/boating is an option nearby.

Good luck!