When you think of real estate investing, you might think of Airbnb, single family homes and multifamily, but what if you want to make more money and have more to invest? Let me give you an overview of the grand cru of vacation rentals: ocean front homes here in Northeast Florida.
Beachgoers come year-round to stay on the beach either at Ponte Vedra Beach, Vilano Beach and St. Augustine Beach. So why are these vacation rentals such a good opportunity for investors?
- At under $2m it’s still a deal. The starting point for a vacation rental property on the beach in South Ponte Vedra and Vilano Beach is under $2M. For prime beachfront, you’ll pay less for the property than comparable beachfront vacation markets. For example:
- Malibu,CA – starting from $10M on PCH
- Maui, HI – starting from $3.5M on Front St, Lahaina
- Cape May, NJ – $1.7M – $4.7M
- Oak Island, NC – $1M-$1.4M
- Ft Myers Beach, FL -$1.4M-$5M
- Tybee Island, SC – $1.2-$2.4M
- Ocean front property is in limited supply. The market for these homes will stay strong despite what other home prices may do.
- Property revenue. Generally we see nightly rates of $500-$1,200 night. These properties tend to sleep anywhere from 6 to 20 guests and produce an annual revenue of $150,000-$300,000 per year.
- Flexibility on your own vacation. Many investors will block a week or two are year to enjoy their own beach vacation.
- Guaranteed bookings: We have a flourishing year-round tourism in Northeast Florida. With 6 million annual visitors to St. Augustine alone, we not only have a huge pool of tourists, but there really is no low season. There are many popular beach hotspots that close for the winter and do not enjoy year round tourism, such as the Jersey Shore, the Hamptons and Cape May. There are also key events like the TPC that mini high seasons. Occupancy rates average around 80%, and this could be higher if the owners chose to make the properties available all the time.
- Defer taxes on capital gains. As an investment property, should you want to sell and buy another, you can take advantage of a 1031 exchange. This enables you to defer taxes on capital gains. More info here.
- Management companies will take care of the operations. Beachfront vacation rentals can really be a passive income revenue opportunity. Popular management companies here are Wren Beachfront Rentals and Vacasa. Wren, for example, handles everything from emergencies to maintenance, transactions, bookings and advise on what owners need to do for the best guest experience. This is really important as these beach homes do get hit by weather events and things like AC or TVs can break down. They also can advise on what you need to do for St. Johns County’s short term vacation rental ordinance.
- Return on investment: With inflation and instability in the markets, investment real estate can produce a cap rate of 5-10%, maybe even more. If you have never thought about owning a property like this, reach out and I will walk you through options. There is no better time to invest in prime beachfront in Florida.