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Second Home Investment Properties

from Andy Hunt | Jamie and I bought a condo at the beach in December 2021, and the biggest reason for doing this is we realized we couldn’t swim in our IRA. We’ve been fans of the 30A strip in Santa Rosa Beach, FL for years, and since Real Estate is consistently considered one of the top investment vehicles, it made sense for us to explore this option to help save for our family’s retirement goals.

Here are the Numbers:
• Purchase Price: $609K
• Gross Rental Income 2021: $50K
• Monthly Gross Rental Income: $4,167
• Monthly Expenses: $1,209.94
• Net Rental Income: $2,857.06/Month, or $34,284.72/Year

My Thoughts:
Knowing this Market, I felt the Gross Annual Rent was low, and one of the advantages of purchasing an Income Producing Property is Sellers typically have records of their Rental Income. After reviewing the Seller’s Records, I noticed she only used VRBO, had several “owner” days/nights, and blocked out Spring Break, and most of March.

When I asked about this, the Seller indicated she didn’t want Spring Breakers in her Condo. I get it, but for us, we wanted it to be wide open and ready for anyone. Next, I looked at her Average Nightly Rate or Base Rate. This number also felt low to me. I like Gross Annual Rental Income to be 8-10% of the Purchase Price at the Beach (in Gatlinburg/Pigeon Forge, I like 10%).

Our goal is to increase revenue by placing the property across multiple channels, like VRBO and Airbnb (and others), increase the Rate, open up availability, and thereby, see a greater return. Keep in mind, all of this due diligence and discovery was done Under Contract and during our Inspection Period. With the Market as it is, we needed to act fast, and this might mean doing some homework while Under Contract to avoid missing the opportunity.

Since purchasing, we are self-managing, have increased the Base Rate, and are seeing great bookings across multiple channels with a projected 30% Gross Annual Rent increase from 2021.

Bottom Line: Let us know if you want to do something similar. Our Team has helped several families do the same in the 30A/Santa Rosa Beach area (as well as Pigeon Forge/Gatlinburg). Email or call if you want to talk about this as an option for yourself or your family.

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