What’s the good, the bad, and the ugly of owning a vacation rental? Considering buying something, either a condo or house, from Gulf Shores to Destin area.

Also tossing around the idea of a local long term rental, but I’m leaning more towards the vacation rental.

Everyone you know will expect you’ll let them use it at their convenience.

Aside from the initial cost….?

The insurance is a beast, if you buy a house. Rental market is strong now due to pandemic and peoples ability to go other places worldwide, but once the world reopens the rental market will be very seasonal. I say if you want to use the money as a diversification tool for investment then it is hard to loose on real estate. But anyone going to look and make money on the rental side is wishful thinking. If you “need to “ rely on the rental money to make the payments for the note, then it isnt a wise decision.

Add to that, the constant maintenance, renos, revitalization, furniture expenses and you easily lose 10-20% annually on those “unexpected” costs.

If it can break, it will break. If it isn't broke, it is about to break.

I agree with TB, though if your buying it for your family, and only intend on rentals paying for insurance and maintenance, then it’s not awful.

Get you a RV and go when and where you want to. There's upkeep on those also but we always enjoyed the Freedom. Sold this bad boy a month ago that we had owned for 12 years and will buy another when the prices go down. Right now , like everything else, prices are cra cra.

It’s kinda scary, but I wish you the best if you decide to do it. We’ve thought about doing the same a few years back around Destin/Miramar Beach area (I think you and I even talked about it onetime). It can be a hassle because people don’t treat things right when they don’t own it. I would say get a good management company and don’t put anything in it you don’t expect to not to be stolen or get broken.

We have friends with a lake house on Quitman that tried renting it out for a while and people treated it like crap. Broken beer bottles all around the dock where the kids “used to” swim and play …drugs… you name it. They aren’t renting it out anymore.

Several friends of mine have them...I looked at buying one last year in same area you are considering, along 30A.

One friend bought in Destin in 2018 for $630k, now worth $1.2Mil and makes $115k a year in rental income.
Another friend bought one in Hot Springs for $250kish, spent around $80kish on remodel...makes about $60k in rental income.
Another neighbor bought in Watercolor several years ago and they stay around 6 weeks a year....told us the rental income pays for it so about a break even for them, they are not on the water. We have stayed at their house twice, $3300 for a week in off-season.

If you are going to buy one that will stay rented, in a good location that will appreciate, and nice enough that people won't trash it, you will need to spend a lot.

Like any rental you will have maintenance and upkeep. In general, the nicer the property is, the better people will take care of it.

It’s a diversification tool, either one we choose (short vs long term), as long as we can keep the mortgage under $1500 a month we will be comfortable if it doesn’t lease. Nice thing about the vacation rental is our ability to use it.

That will never happen. Wife hates road trips

Watercolor would be awesome but outside of my comfort zone price wise.

In the areas you are looking is there anything worth investing in that is around a 1500 monthly payment? I have kept my eye on the gulf shores area and anything i would personally rent goes above 500,000 to 1M. A decent 2 br condo is still in the 300-400 range and anything less than that and you are looking at serious remodelling costs and low rental use/revenue.

Another thing to remember about the areas you are looking is storm damage has been bad over the last couple years. Gulf Shores got hit with a decent storm that wrecked a lot of condo complexes. Make sure you do your due diligence on any purchase!

The price only gets higher the more east you go. And the more east you go the less likely you will have anything close to the beach which drives prices down but also drives revenues gained down.

The thing about coastal property is there never is a great time to buy one, but usually never a bad time either.

For our first property, I’m not wanting to spend over $400k, and I’d like to be lower than that. I know full well it won’t be a beach front house, but a condo would be fine. I’m also not looking to tap into our investment accounts, just going to use cash in hand for the down payment. We could stretch the monthly to $2000, but I’m very conservative when it comes to spending.

One thing to think about. A long term rental is subject to the whims of the CDC and other government agencies in regards to eviction for unpaid rent. You could get stuck for months with a deadbeat tenant that you can't get rid of.

Vacation rentals - VRBO, AirBnB, etc - have no such obstacles. You get paid upfront, and if they don't leave, you have alot more flexibility on giving the boot (have a solid contract!).

Good buddy paid for his PK place in one year. Grant it that was 2020. At $2500 a night he did well

In that price range I'd be looking for a duplex in DFW rather than a beach condo unless you are going to spend at least 6 weeks a year there.

I’ve been looking at duplex, triplex, and quads. There was a bunch a few weeks ago, not so many now

I’d look at what it takes to be on vrbo. We did a beach front rental spring break and it was nice. Plus side owners were local. Don’t recall what it cost but it wasn’t cheap. Maybe 4k for the week or something around there. For the entire family of 11 it wasn’t bad. That was in Mississippi. I’m sure you’ve done the research and know what insurance cost alone in a beach area.

Have a nephew that does quite well with lake property rentals.

Vacation rental strictly as an investment would challenging if it was further than driving distance. Relying on a management company and having that cut into the profit, might not be worth the headache. If it was close and you could manage the properties yourself, then it might be worth the squeeze if it didn't absorb all your time.

Vacation rental that is going to be rented and used by me...that isn't going to happen. People trash vacation rentals, and I don't want randos humping in my bed!

An acquaintance has a $1MM+ rental condo in Destin. Towels, linens, silverware, etc go "missing". Wall decorations don't any longer since being better secured to the wall.

In other news, Monday I returned from five days in Destin. Was my first time there and I can now scratch that off my list. Had a good time, but I'll not pick to go back there as there are plenty of better places.

Just remember to pay the bills, you are going to have to go during the "Off Season," I have a vacation home in Pagosa Springs, Co. and
we don't ski, so it works out well for us. We spend the summer there and rent it out a few weeks during the winter to skiers.
Skiing is an expensive sport, so most of the people who rent from us are middle to upper class. And I'm being very general here,
but what I have observed is that people with money usually take better care of your property than those without.
Been doing this for 11 years. I don't advertise anywhere except on here every now and then. I am only trying to pay the bills,
The more you rent it out the more wear and tear everything will take. At $2,000 a week the fewest weeks rented in a year was 5, the most
16. But then it's paid for and so I am not worried about making a house payment every month and I get to enjoy being out of the Texas
heat for 8 weeks a summer.

Long term or short term, you make your money on property at the time of purchase. Keep that in mind.

Great, honest, reliable management companies are key. A clear contract, operating on an up to date platform, aggressive marketing strategies are all key in being successful.
Google management companies in the area and see who comes up first. Read the reviews. Try to get references. Make sure your management company understands they’re working for you or at least a partnership where you have the upper hand, and not the other way around. And never hesitate seeking out another management company if you see any red flags. Oh the stories I could go into.

Know that renters don’t take care of your things like you would. I think that’s a given but the smallest of scratches, the noticeable wear and tear when you visit every couple months can take its toll. You’ll find broken utensils shoved in the back of drawers, broken chairs, doors not closing right, you’ll be replacing things like sheets, towels, bed linens quite often because they’re obviously washed after each rental.
Be ready to replace big items with little to no warning. If a fridge breaks down in prime rental season, your management company is probably going to try and resolve before you have a chance to “shop around”.

The good. I think it’s obvious that you have access to a vacation spot and some flexibility on use. You have a good chance at building equity in the right market vs spending 5k a week on rental in the destin area.

If that was mine I would put some side pipes on it.

We have one in Broken Bow, OK currently and we are knocking the cover off the ball with it. We are currently looking to add 2 or 3 more in some other hot areas of the country. Biggest hurdles are the "boots on the ground" support because I don't want to deal with that crap. We also price ours REALLY high to keep the riff-raff out.

We were thinking about the Colorado area, southeastern part of the state of the Table Rock Lake near Branson. Kinda hoping for a real estate crash so we can get in at a lower entry point. Stuff right now is stupid high.