VACATION RENTAL INVESTMENT PROPERTIES
When investing in a rental property, there are always a lot of factors to consider. If the market in your area does not seem to offer the kind of investment opportunities you are seeking, you might find yourself thinking about investing out of state. Many investors look to Florida as a premier investment opportunity due to its pristine-white-sandy beaches, tourism popularity, favorable weather year-round and no state income tax.
The Emerald Coast, from Pensacola to Destin/Panama City Beach, is continuously rated in the Top 5 of vacation destinations by travelers, year after year. Panama City Beach, Florida hosts 20 million visitors a year, bringing billions into the local area. Destin, a 45-minute drive west of Panama City Beach on HWY 98, hosts 19 million visitors a year. Since 2017, property values have increased between 5%-7% per year. Most notably, property on the beach is a limited resource and the demand for these properties continue to grow year over year. Ever growing demand for this finite resource is a recipe for much higher ROI than other real estate opportunities.
VACATION RENTAL OWNERSHIP IS A GREAT INVESTMENT
Imagine having a luxury vacation rental home or condo on 30A, generating enough income to cover your annual ownership expenses, having something you can use personally for family vacations so you don’t have to pay someone else to vacation.
Then imagine holding the property for 5 years, covering your ownership expenses along the way and selling it for a handsome profit, filling your checking account with a cash surplus you can use for additional wealth creation.
Let’s run through some math:
Example purchase price: $650,000
Estimated down payment: $130,000
Est. monthly payment (principle, interest, insurance and tax): $3,500/mo
Estimated HOA payment: $250/mo
Estimated Utilities: $400/mo
Estimated TOTAL monthly outflow: $4,150
Estimated TOTAL annual outflow: $49,800
Estimated annual rent revenue on a home in that valuation: Approximately $60,000-65,000, depending on the property, less management and operating fees.
As you can see, in this example, you can mostly cover all ownership costs, STILL have personal usage (read: you don’t have to pay someone else to stay in their vacation rental) and little or no cost, AND you earn all the appreciation and benefit from the potential tax breaks.
Of course, there are variables – you should buy the best home, in the best location, that is the newest you can afford in your budget. Additionally, we can help you determine if something will generate the income you need in which to make the math work for you.
INVESTING OUT OF YOUR STATE
Whether you made a deliberate choice to expand your investment portfolio, or you inherited a property you want to rent out, if your property is located outside of your hometown, you will find additional challenges as you take on the role of long-distance landlord.
One of the biggest challenges for long distance landlords involves the hands-off approach you will be forced to take. Living far away means you won’t be able to make regular visits to your property to ensure your tenants are taking care of the unit and following lease terms. If a maintenance “emergency” comes up, you can’t pop over to assess the severity and potential damage it may cause. You must trust your tenants and trust your vendors to not take advantage of your distance.
OVERCOMING POTENTIAL ISSUES
While out of state investing can be a lucrative opportunity–especially in comparison to your local real estate market. If you are looking into investing in a rental out of state, there are a few unexpected potential complications that you may encounter, and a few ways to overcome the issues.
1. State-Specific Laws
New laws are being passed constantly which can create a big headache to try to keep up. If anything requires a vote to be passed, tax levy increases, for example, you are not a resident and will not have input. Distance is a big barrier, and when you don’t follow local news or routinely check for new laws in the state(s) you own property in you can end up unintentionally on the wrong end of the law.
2. Developing a Team is Hard
Assembling the perfect team is hard under the best of circumstances. It can feel impossible when you aren’t local. Finding a great real estate agent, reliable vendors, and/or an excellent property management team can be significantly more challenging when you don’t have local connections who can provide you with references.
3. Need to travel
Even if you decide to have a property manager handle your property’s day-to-day management tasks, it is important to periodically assess your property and ensure that your management team is properly caring for your rental. Additionally, if a large problem like a natural disaster occurs at your rental, you may take an emergency trip to assess any damage.
4. Potential for Higher Expenses
Investing out of state can increase your management expenses significantly if you are used to self-managing your property. You will either need to pay property management fees or will need to plan to travel very frequently.
5. Finding a Property is Harder
When investing locally, you have the assistance of a real estate agent with whom you have built up a relationship. If you don’t have any local community connections who can provide you with the inside scoop on deals or good neighborhoods, and you don’t have a relationship with an investor-friendly real estate agent, it can be harder to find properties at first.
FIND A GREAT REALTOR AND PROPERTY MANAGEMENT TEAM
To find a great deal and a good property, you will need the insight of a local realtor. Establish a relationship with an investor-friendly real estate agent who can guide you through the ins and outs of the area. This will help you if you decide to invest in another property there, and they may also provide referrals for excellent property managers or vendors that you can rely on.
A lot of the headache of owning an investment property comes from the day-to-day management tasks. These tasks can take time, money, and an infinite amount of patience. If you are attempting to complete them from a distance, they become exponentially more difficult. Instead, consider hiring a property manager who can be trusted to look after your property when you are not there to oversee it. Property managers are responsible for ensuring the right rental price, screening tenants, property maintenance and repairs, owners, landlord-tenant laws, business operations, property records and accounting, and taxes. Since many of these responsibilities require insight to the local area’s market and legal requirements, a property manager can be a worthwhile investment.
Invest with Confidence
Steve Warren, founding partner and CEO of Pineapple Realty Group, based in Panama City Beach, Florida is a real estate veteran with a long record of successfully guiding local, national, and multi-national clients in their real estate acquisitions, asset reposition and dispositions.
His previous experience as a Title Insurance Executive and Mortgage Loan Originator, coupled with his active Property Management and Real Estate Investing experience, offer clients a uniquely valuable advantage, of which garner results that consistently exceed the goals of his clients.
An expert in digital marketing, I will help owners develop a sustainable online marketing strategy delivering maximum property exposure and listing performance across all booking channels. When it is time to sell your property, you will receive the full service in which to ensure you are connected to your customers looking to purchase your property.
Real Estate Investor
If you are going to invest in real estate, trust someone who has been successful investing in real estate. We can back up our talk with tangible numbers and revenue data so that you know what is possible with our advice. We know the ins and outs of Real Estate investing and we can be a valuable asset to your team.