Getting Started with Florida Vacation Rental Properties
By Oscar T Blasingame, Esq., St Petersburg, Florida
Since the inception of sites like Airbnb, Home Away, and VRBO (Vacation Rental by Owner) the Florida vacation rental property business has taken off. Prior to these new resources, Florida vacation rental properties were limited to Condo-Hotels and a few individual condo or single family homeowners who rented out their properties by advertising in the local classifieds, church newsletters, or craigslist often in violation of local ordinances and with increased risk to both owner and their guest.
These early types of short term vacation rentals were not well organized nor focused on making actual profits. Casual at best and not focused on guest comfort, relations, or convenience the first generation of Florida vacation rental properties were a grab-bag. You took your chances often with great disappointment; vacation ruined.
Now with new internet marketing resources like Airbnb in place for a number of years the opportunities for individual success with vacation rentals has opened the doors to a new era for income property owners. Florida vacation rental properties have become a new and significant economic stream throughout the state. But, many clients ask me, “Why is now a good time to enter the market and buy Florida vacation rental properties and how do much money can I make?”
First, the current market is still recovering from recession lows and significantly below pre-recession highs. Second, the private, Florida vacation rental property business is still in its initial growth phase. A unique situation exists where both supply (of properties for sale) is high keeping property prices in check and guest demand is high
The new internet based resources for self-managed Florida vacation rental properties include:
Vacation rental management companies and in-house Cond-Hotel management take the work and worry out of managing vacation rental properties, but at a cost. That cost, however, may be well worth it for those who seek truly passive income. Vacation rental management companies provide individual property owners a number of advantages.
First, the opportunity to pool their property with many others together thereby increase exposure. Second, professional marketing a good management company will have a professional marketing strategy that exposes your property to more potential tenants. Third, increased revenue. Management companies usually get higher rates for the units they manage because their customers expect to pay a premium for their services. Finally, and probably most importantly is the ability to be hands-off and realizing a truly passive income from your property.
The problem is finding the right management company. I guarantee you it is not the one that charges the least. The current going rate in Florida is between 18% and 25% of the gross income with 20% being the most common. In addition, managers charge a variety of other fees for property maintenance, bookkeeping, etc. After all, they are there to make a profit. I discuss vacation rental property managers in greater detail in my upcoming free guide, Getting Started with Income Properties: An Introductory Guide to Success and Profits, and my upcoming book, The Complete Guide to Income Property Success.
Types of Florida Vacation Rental Properties
There are a numerous Florida Condo-hotels, especially along the coast. Condo-hotels are excellent starter properties for anyone new to income properties. In addition, they offer the advantage of resort style properties with in-house management. This makes these properties ideal for out of state owners. A well-managed Florida Condo-hotel will have a CAP rate of between 7% and 12% with the average at around 8%. Even at the average rate, the owners should see a net income of $14,000 to $18,000 per year on a $200,000 investment. That’s an excellent return on an asset that should be appreciating at about 6-10% annually in addition to the net profit. The only real drawback to condo-hotels is that many, but not all, limit owner use to 28-30 nights per year and often have owner blackout dates. Make sure you thoroughly understand your ownership rights prior to a Florida Condo-Hotel unit.
Condominiums are a significant part of the private vacation rental industry. They are easier to maintain than single family homes. The primary difficulty is finding condos that allow for short term rentals. Most condominium associations require tenant application and approval along with at least a minimum three-month lease. There are, however, are a good number of vacation rental friendly condominiums that allow for 1-30 day minimum stays. A few of these are Condo Resorts which I discuss below. Like condo-hotels, a a well locate, nicely appointed condominium will have a CAP Rate of 7% – 12% plus long-term property value appreciation.
While this category is essentially the same as the Condominium category, I identify them differently through the experience of owning and managing both. The essential differences are the 1. The number of amenities and 2. the Owner’s Association’s focus on promoting both long term residents and transient guests; a cross between a condo-hotel and a straight condominium. Very few properties like this currently exist, however, I predict that as the tourist industry evolves and the number of independent vacation rental owners increases the number and popularity of Condo Resorts will increase as well.
Single Family Homes
Single family homes make excellent vacation rental properties if they have the location and amenities that that your target market in looking for. Additionally, tend they increase in value at a higher rate than condominiums and condo-hotel. The June 2016 year over year percentage price change in Pinellas County Florida was +15.4% for non-foreclosure, single family homes and +9.8% for non-foreclosure condominiums according to statistics published by the Pinellas Realtor Organization. Both single family homes and condominiums offer significant long-term increases in equity and the potential for income profits when used as vacation rentals.
In summary, the advent of property sharing resources like Airbnb has transformed into a new vacation industry which has seen incredible growth in Florida. There are a variety of property types available across the state with the potential to turn an immediate profit. While everyone will experience different rates of success, a well-informed and careful buyer can easily self-manage one or more of these properties and realize a significant return both from increased equity, through increases in property value over time and an almost immediate and continual profit. If you can’t or simply aren’t interested in managing the properties, then there are experienced, specialized vacation rental property managers available to do it for you along with condo-hotels with in-house management.
This is just a brief introduction to our growing Florida vacation rental properties market. Bookmarks this site and keep checking back for more information, guidance, and statistics.
WARNING: Always seek the advice and assistance of a professional Realtors® and attorneys who specialize in income properties and Florida vacation rental properties.
Please contact me if you are interested in purchasing Florida vacation rental properties in Pinellas, Hillsborough or Manatee county, Florida or if you would consultation or property management assistance.
I hope you enjoyed this article, Getting Started With Florida Vacation Rental Properties. Feel free to contact me if you have any questions!
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