Secrets to Buying a Profitable Condo Rental on the Florida Gulf Coast
Anyone can buy a Destin or 30A condo as an investment rental, but not everyone can find a profitable condo rental. The kind that practically rent themselves, and consistently produce a strong gross income. This guide offers secrets to buying a profitable investment condo in Destin or the Florida Gulf Coast. This area has some unique qualities that make investment rentals especially lucrative. Many of these suggestions apply to Destin investment homes as well. Below are a few key factors that will help you make a successful choice and turn your condo investment into a profitable one.
1. Price/Gross Rents
This simple ratio is useful for identifying potentially good condo rentals. For example, if a condo generates $30,000 per year in gross rents with a purchase price of $300,000, the ratio would be 10. The smaller the ratio, the better. For condos located in Destin and 30A, ratios of below 10 indicate good rental but are hard to find.
The following two items are the largest expenses associated with condo ownership:
Property Taxes - Property taxes are a function of value only. If you purchase a $1,000,000 condo on the beach, you will pay the same amount of taxes as if you purchased a $1,000,000 home on Holiday Isle.
Condo Association Fees- Condo Association Fees are greatly misunderstood. At first glance, the amounts seem high and discourage many investors and buyers. But, the fee includes insurance for the building and common areas, maintenance for the building and common areas, some utilities (most include water, sewer, and basic cable), trash removal, and routine maintenance of the building and grounds. If you compare those expenses to a home, there isn’t much difference in many cases. Lower fees are better if the condo is well managed and in good condition. Beware of low fees that result from underfunded reserves or neglected maintenance.
3. Condo Amenities
Whether your goal is short term vacation rentals or long term, amenities are important. Tenants and vacationers love properties that have swimming pools (bigger and luxurious is better), weight rooms, cardio rooms, cabana bars, spas, restaurants, and other onsite amenities. Condos at Silver Shells Resort and Sandestin are two of the areas' most amenitized properties.
4. Scarce Units
Generally, the best condos are those that have low supply relative to rental demand. This means that low-rise condos are generally better than high rise. However, if you can find a popular high rise condo that has a low number of a particular floor plan, that can be a great rental as well. For example, Island Princess has over 137 units in total, but only seven, 1-bedroom units. As a result, there is very high demand and those units rent extremely well.
While cliche, is so very true. Since everywhere in the Destin area is pretty great, you are well ahead of the curve if you are looking in Destin or at condos on 30A. Condos that are located near tourists traps generally rent better than those that aren’t. Watercolor Condos are in high demand, not only because of WaterColor amenities, but also because of their close proximity to Seaside’s towne center.
6. Management Fees
This aspect of the business has become very competitive over the past 5 years. For short term rentals, most companies charge 15%-25% for a turnkey solution. Rates for long term rentals are 8-10% and would be applicable to condos at One Water Place.
7. Watch the Market
Great deals come up every day, but if you aren't watching the market, the perfect opportunity could easily pass you by. Keep up to date with the comings and goings in your purchase area, or enlist the help of a professional who can. Take the first step by having listing updates sent to you automatically. You'll be notified the minute a property hits the market. Register Here
Buying a condo can be a tedious process but can be simplified by paying attention to the factors identified above. My website, BrowseDestin.com is a great resource and will help you get started with research. OR, you can CALL ME at 850-259-4133 and I will gladly share my experiences directly with you.