Vacation Rental Investment Properties

Posted by Destin Real Estate Sales on Thursday, October 17th, 2013 at 9:41am.

A majority of tourists arrive to Destin and the Emerald Coast for the first time and immediately fall in love with the dazzling sugar white sand beaches and glistening jewel toned waters of the gulf. Paradise is found! The exhilaration of such a discovery brings serene happiness with a desire to return again and again. Some visitors are so excited that they start looking for real estate almost immediately. For others who make Destin their favorite vacation spot, a few years may pass until they decide to own a piece of paradise as property owners instead of renters, often seeing a raise in purchase price. The question many potential buyers encounter is whether or not it's worth the cost of ownership. The answer is YES, as long as you use it yourself for family and friends. After all, genuine contentment of heart and soul is priceless as are the wonderful memories cherished forever. Many who decide to purchase an investment vacation rental own it for many years and pass it down to future generations. The advantage is that property will appreciate over time and income can be made to help offset ownership costs and on some occasions permit cash flow. In fact according to most recent informal surveys, the vast majority of those who have purchased properties in Destin and surrounding areas plan to keep them for their family's use as well as for rental income the rest of their lives. Many more plan to eventually retire along these breath-taking white sand beaches. This has greatly reduced available real estate property inventories and prices have started to rise.

If you are contemplating such a purchase you need to analyze the cost. For non-cash buyers, banks can now require at least 20% down and you have to have a decent credit rating. Monthly outlays for the purchase should not exceed 36% of your regular income. The good news is that mortgage rates still remain near record lows. Your main costs are related to monthly mortgage payments, insurance, property taxes, maintenance and possible association fees. Insurance can vary substantially based upon hurricane and flood coverage. As an example, regular flood insurance is an “add on” to regular coverage and may not cost more than $400 annually, but in flood prone areas may cost up to $8,000 or more per year. Annual standard property taxes are based upon a percentage of the purchase price for the property but vary somewhat from county to county. Maintenance costs apply to single family or attached single family homes but are usually minimal for condominiums since association fees usually cover these costs as well as exterior insurance. However, you still are responsible for the interior maintenance and furnishings. The safest way to do this is to budget out all of these costs and consider rental income as a plus not a “given.”

Selecting the right area is also very important but remember, your family has to like it best. Basically there are three main markets here which include Destin, Miramar Beach and South Walton.  All of them have their perceived advantages and disadvantages but it is based upon individual preference. As an example, many desire Destin Real Estate because it has more activities and is close to all the action while others prefer the more laid back scenic life along 30A in South Walton. Miramar Beach Real Estate offers a little bit of both. Most visitors want to be on or at the beautiful beach which is a main draw. Therefore beachfront properties receive premium rents with a second tier having “gulf views” within easy walking distance and a third tier being minutes away by car. Resorts are another consideration verses neighborhoods. Resorts offer more amenities for visitors like golf, tennis, boating and nightlife. Resorts have higher association fees due to these amenities and they vary.

The “season” here peaks during June and July when rental rates are highest due to the popular demand as a family summer vacation spot. The spikes in demand of the rental year occur Memorial Day, Independence Day and Labor Day Weekend. Spring breaks have the second biggest demand from early March through mid April and peaks at Easter. Thanksgiving and New Years is also a popular time of the year but winter months have the lowest rental rates which are often calculated monthly not weekly or daily. At this time of year there is an influx of “Snowbirds” who traditionally stay for two or three months. You need to determine which times of the year and what holidays want to reserve your property for family use. Some rent their properties out during the busy summers and chilly winters but retain use for themselves in lovely springtime and fall. Many vacation rental investment owners use reputable rental management companies for a percentage of the gross rent and Ocean Reef Resorts has a fantastic record representing such properties for over thirty years. This way advertising, housekeeping, toiletries, accounting, reservations and even maintenance issues are handled on your behalf.

Are you considering owning a piece of paradise? If so, one of our Ocean Reef professional realtors can help you by providing answers to many of your questions and offer experienced guidance during your property search. Ocean Reef Resorts can also provide you with outstanding rental management services to maximize your investment. It is always our great pleasure to serve you and yours.

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