Where to buy vacation rental

[Papa bear]

Family is working a 1031 exchange (not one of my properties) and will need to identify a new rental property by March.

Local places are, like everywhere else, overpriced and not very exciting.  While not being ruled out for buying a local rental, we’ve talked about a vacation rental property as another option.

Meeting the prior rental returns isn’t the top priority in a vacation house.  But location?  We could use some help identifying some locations where we may not have visited before. 

A couple of criteria that we need to consider.

1) close to a beach
2) east coast
3 warm climate
4) little to no short term rental restrictions

Anyone have a place they love to go or would consider for a vacation rental? 


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[waltworks]

I'd personally take the tax hit and the cash over 1031 right now, but that's just me.

Is there such a thing as East Coast and warm climate? Or do you mean the entire Atlantic/Caribbean side of the lower 48?

-W

[Papa bear]

I'd personally take the tax hit and the cash over 1031 right now, but that's just me.

Is there such a thing as East Coast and warm climate? Or do you mean the entire Atlantic/Caribbean side of the lower 48?

-W

Entire east coast Atlantic, all the way down, hell even north side of gulf coast.

Not my money or property, it was one of my dad’s early rentals, so 100% depreciated and cap gains and recapture will get ugly.  If we stay local in one of our 2 markets, we’re looking for a similar rent to price replacement. But if it’s a vacation rental, this isn’t going to be a total financial decision.   Any time I’ve looked at places, condo fees, resort fees, whatever you want to call them, absolutely kill your return.   This will honestly be a placeholder that makes a few bucks where family can go visit a couple times a year.  But damnit I want to make a few bucks!

Basically, we don’t know the markets there at all outside of a few that we’ve visited.  Hilton head island is the initial search area because of distance and familiarity.  But like I said, there are 0 returns here.  Prices inflated, crazy resort fees, etc. 

If we could narrow it down to a few places, we could do some more targeted searches and hope to snag something as it comes up.

Place was a headache rental, B - area, was a in a 1%+ area as recently as last year. Bonkers market and the under contract sale price is 25% higher than we would have valued it.  It was time to go. 


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[Archipelago]

I'd personally take the tax hit and the cash over 1031 right now, but that's just me.

Is there such a thing as East Coast and warm climate? Or do you mean the entire Atlantic/Caribbean side of the lower 48?

-W

Entire east coast Atlantic, all the way down, hell even north side of gulf coast.

Not my money or property, it was one of my dad’s early rentals, so 100% depreciated and cap gains and recapture will get ugly.  If we stay local in one of our 2 markets, we’re looking for a similar rent to price replacement. But if it’s a vacation rental, this isn’t going to be a total financial decision.   Any time I’ve looked at places, condo fees, resort fees, whatever you want to call them, absolutely kill your return.   This will honestly be a placeholder that makes a few bucks where family can go visit a couple times a year.  But damnit I want to make a few bucks!

Basically, we don’t know the markets there at all outside of a few that we’ve visited.  Hilton head island is the initial search area because of distance and familiarity.  But like I said, there are 0 returns here.  Prices inflated, crazy resort fees, etc. 

If we could narrow it down to a few places, we could do some more targeted searches and hope to snag something as it comes up.

Place was a headache rental, B - area, was a in a 1%+ area as recently as last year. Bonkers market and the under contract sale price is 25% higher than we would have valued it.  It was time to go. 


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You already operate in 2 markets - why not acquire another property in one of those markets that you already know well?

[Papa bear]

That’s option 1a and 1b. But inventory is tight and the available places out there right now are pretty garbage.  We’ve gone to look at a couple of places that we would never have considered if not for the 1031.


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[sammybiker]

@Papa bear   tbh Destin, FL popped in my head after reading your post.  But no clue what fits your/your family's profile.

Nice problem to have though!

[Papa bear]

@Papa bear   tbh Destin, FL popped in my head after reading your post.  But no clue what fits your/your family's profile.

Nice problem to have though!

Have heard good things about that area.  Have a buddy that used to go there a lot.  Good option. I’ll add it to the list and take a look what’s there. 


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[NonprofitER]

Gulf Shores, AL and surrounding areas?
Much of the appeal of Destin but less built out - so perhaps it might be easier to get a deal?

I've been to both and both are great for a family beach vacation.

[uniwelder]

Do you want a place at the beach or just within a short bike/drive to it?  I think coastal living is short sighted and not mustachian.  At some point, the government will stop subsidizing flood insurance (particularly vacation homes), banks will no longer provide mortgages, and beachfront/flood-prone properties will lose tremendous value. 

My advice is to buy in a location that will still be around 30 years from now.  Lakefront property perhaps?  Smith Mountain Lake and Claytor Lake are two near me (rural southwest Virginia) that are quite popular as vacation rental spots.

[Papa bear]

Do you want a place at the beach or just within a short bike/drive to it?  I think coastal living is short sighted and not mustachian.  At some point, the government will stop subsidizing flood insurance (particularly vacation homes), banks will no longer provide mortgages, and beachfront/flood-prone properties will lose tremendous value. 

My advice is to buy in a location that will still be around 30 years from now.  Lakefront property perhaps?  Smith Mountain Lake and Claytor Lake are two near me (rural southwest Virginia) that are quite popular as vacation rental spots.

Does not need to be beachfront. Walk/bike or short drive is ok.  I know this is not traditional mustachian; this chunk of their portfolio is fluff and not needed.  So they were potentially looking for something more fun.

I would LOVE something closer to the Appalachians, rural property, etc. That’s not my call though! I’ll certainly push for it again.  Thanks for the recommendation. 


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[Papa bear]

Gulf Shores, AL and surrounding areas?
Much of the appeal of Destin but less built out - so perhaps it might be easier to get a deal?

I've been to both and both are great for a family beach vacation.

Any particular area around gulf shores you’d look at? I had a friend recommend it too.


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[NonprofitER]

I'm definitely not an expert, but when we've gone we've stayed closer to the Fort Morgan side, which seems less built out than the side going towards Orange Beach. But honestly that whole area is lovely. There did seem to be a lot of available lots and beach-houses that were affordable (for beachfront) on the West side of Gulf Shores. I was last there in 2018, so take that into consideration.

[Jon Bon]

Re: Gulf Shores

I forget which is which but be sure to check into the taxes on the property if its Florida versus Alabama. One I think is way higher then the other? I dont remember and am too lazy to look.

The whole area is typical beachy build out. The one main drag with houses on either side of it. Last year I went there were still a bunch of houses being built/empty lots. I heard that the 2010 oil spill ended up being a bunch of publicity for the area making it actually more popular long term.

I think its about 1-1.5 hours from the airport though which I guess is not all that bad compared to some places. Again im too lazy to look it up!

[katsiki]

Since short drive is not an issue, check out Foley AL.  Near Gulf Shores/etc beaches.

[freedomfightergal]

Have you seen the 30A area East of Destin?   Really gorgeous area eg Seaside (where The Truman Show movie was filmed with all super pretty pastel homes), or Alys Beach which looks like a piece of heaven, all white stucco & gorgeous gardens, then there's Rosemary Beach too.  Lot's of variety in neighborhoods with different styles and costs.  We bought a great house & can walk/bike to the beach, restaurants etc and a quick car ride to all big stores in Destin or Panama City Beach.    It's a low key family friendly area with lots of biking, heavenly beaches etc

[Papa bear]

Have you seen the 30A area East of Destin?   Really gorgeous area eg Seaside (where The Truman Show movie was filmed with all super pretty pastel homes), or Alys Beach which looks like a piece of heaven, all white stucco & gorgeous gardens, then there's Rosemary Beach too.  Lot's of variety in neighborhoods with different styles and costs.  We bought a great house & can walk/bike to the beach, restaurants etc and a quick car ride to all big stores in Destin or Panama City Beach.    It's a low key family friendly area with lots of biking, heavenly beaches etc

Thanks! Will check it out.  On the clock for finding a place.   Less than a month left!


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[freedomfightergal]

You'll be blown away I promise :)