Last week I bought a short-term rental! Read below to see why this made sense, but first I want to correct the noise in the media about Airbnbs not making it and this whole sector being a bad choice for investors.
We are seeing a natural cull of vacation rental properties that should have never been. The past two years was like a gold rush. With the influx of people moving here, homeowners were enticed by the thought of making extra money for a room or home which was never really was designed for visitors. Some of them would not even make good long-term rentals. We will now see those that are dedicated to this market become more successful, and a cull of those properties that just aren’t great visitor experiences.
Nobody can deny Downtown St Augustine is thriving. Florida’s Historic Coast 2022 study* shows annual visitors to St Augustine and Ponte Vedra Beach at 3.2 million with overnight visitors making up 2.25 million of this annually. While it means more traffic, the record $2.4 Billion generated for St Johns County, along with over 30,000 jobs means this seriously adds to our economy and the tourist amenities (including restaurants!) we have here. Without the severe ups and downs in seasonality like other markets can have, investors can create a year-round income opportunity if you can execute on a guest experience.
The same study provides an average length of stay at 7 nights for STR and 5.5 nights for hotels – significantly more than a simple overnight. Our top feeder markets for visitors continue to be Jacksonville, Orlando, Atlanta, New York and Miami/Ft Lauderdale.
Investors are in the market, so now is the time to look at this.
Now, let me introduce you to my latest purchase, Casa Lovett. This is a 1920s 2/2 bungalow in St Augustine’s Lincolnville neighborhood. This little gem has been gradually renovated over the years and has shown steady bookings as a vacation rental.
This is where my mind was at:
- Location – key spot in St Augustine’s historic Lincolnville
- Quintessential architecture – 1920s bungalow
- Smaller size of 2/2 means lower rent than the bigger houses, higher occupancy
- Zone X – No flooding on the property unlike the rest of the street
- Walking distance to restaurants and downtown
- Strong rental track record – earnings of $3,600/$6,500 from one booking platform only
- Revenue more than pays for a DSCR loan with 30% down
- Obvious opportunity to rebrand / stage / market
- Turn key and came with all furniture
- Cap rate conservative 8%, potential 13%
So is it your year to think about what kind of investment property might be best for you? Where are the opportunities? I do think that what St Augustine needs are more upscale options. I see a lot of investment properties, and many are worn out, full of old-time knick-knacks, and could definitely be more appealing. I think where the opportunity lies is in blending the old with new. Making it a place to stay that people will come back to, but with a contemporary twist.
What you’ll want to know when looking at these properties is the STR zoning, nightly vs weekly vs monthly allowances, and any STR permits required.
Whether you are interested in Short Term, Long Term or a flip, let me know what I should have on my radar!
*Source: Florida’s Historic Coast Economic Impact Study 2022 (St Augustine, Ponte Vedra Beach)
