Last updated on October 20th, 2024 at 02:38 pm
By now you have probably rented a vacation rental property so some of what you are about to read may sound familiar. It’s the part you don’t know about that I am hoping you will find interesting. Perhaps it’s time to invest in a vacation rental on the Gulf Coast. I mean the Mississippi Gulf Coast. Read on for some real experiences. Investing in a vacation rental is not much more than just buying a second home. When you are not there, a property management company rents it and this helps you cover the cost.
Many years ago, my wife and I owned multiple vacation rental properties along the Mediterranean coast of Spain. We started by buying a vacation home and decided later to rent it when we were gone. We loved going to the area and our guests were equally pleased with our property. I always felt good after reading comments from guests. This was our first real experience owning a vacation home and earning some income from it.
My wife and I were feeling the need to be near water
Fast forward a few years later, we were taking a trip to Florida to start looking for our “new” retirement home. At this point, you are probably thinking “Wow”, that was my expression as well. We were watching those buy property on the water shows and well you know that led to our trip. My wife and I were feeling the need to be near water.
Getting back to my coastal vacation rental, you now know how we happened to be living on the Mississippi Gulf Coast. I have always been a real estate investor buying my first property at age 23. My plan was not to retire but to find something else to do having sold my business to Waste Management some years earlier. As an entrepreneur, I have started several successful businesses and then moved on.
Since arriving in Ocean Springs, Mississippi, I have obtained a real estate broker’s license, started a real estate brokerage Gulf Coastal Realtors (a Logan-Anderson LLC company), a property management company Gulf Coast Property Management LLC which brings me to Christiesgulfbeachrentals.com a subsidiary of Gulf Coast Property Management.
Ok, the above paragraph is full of links and plugs, I admit, I would like you to visit one of those sites. Back to my story about my coastal vacation rental.
I started to acquire properties again
I started to acquire properties again after moving to the Mississippi Gulf Coast and noticed the demand for vacation rental properties. Also, I noticed something different about the Mississippi Gulf Coast compared to Alabama and Florida. The majority of vacationers were families and people here for events as compared to most young people at popular beaches in Florida and Alabama.
The Mississippi Gulf Coast is not a popular spring break destination for hordes of college students. At the same time, we do receive many visitors from colder states for spring break but they are primarily families as I mentioned. In the summer months which are the most popular, there tend to be more families visiting. I asked around and found that my observations were correct.
I looked into the possibility of buying a vacation rental property and found some difficulty in obtaining reliable data on profitability. This created a challenge for me which I relished so I created a financial model and went in search of a property to acquire.
I found the ideal vacation rental property
After doing extensive research on which properties would generate the highest income and yet be located in a legal zone, I found the ideal property. A beautiful turn-of-the-century house one block from the beach with a beach view from the porch. The house was completely furnished and tastefully decorated in a beach theme.
Some of my friends and associates had expressed an interest in buying vacation rentals so I put together a group, formed an LLC, and bought this beautiful property. Two days after closing we had guests and after 14 months it generated an impressive profit.
This property happens to be a full-time vacation rental, it is not a second home. Buying it right and property management means it can make money as a full-time business.
The majority of people were buying vacation rental homes
My research told me that there was a very limited supply of properties that could sustain themselves as full-time rentals and that the majority of people buying vacation homes had to support them to some extent. Buying a vacation home as a real vacation home and renting it when you are not there could work well and there would be a greater number of properties to choose from.
The story does not end here. A few months later a property popped up on my radar, a referral from a friend. This was a townhouse less than a block from the beach in a unique setting. Just four units in the building by itself with a large parking area. There is a house on each side of the property and there is a view from the second-floor deck.
I asked a friend if he wanted to go in on the investment with me and he agreed. As it happened, this was an existing vacation rental property so we bought it complete with all furniture and furnishings. The previous owners gave us no referrals, nonetheless, we had it rented within a week and with more than one year of experience with the property, it too has been a moneymaker.
A rare stand-alone property
This townhome is also a unique property in that the numbers worked for it to be a rare stand-alone profit-making entity. As I mentioned above there are few that are so while I continue to look for similar properties for investors, most people buy a vacation home and have Christie’s Gulf Beach Rentals manage it when they are not there.
My final example is my favorite and I will explain why. The other two properties were fully ready to be vacation rentals at acquisition. Yes, there were a few minor things to do at each but they were fully ready to start earning income as soon as the ink was dry on the deed. This other property I call the “Coastal Cottage” was a complete start-up.
I intended my vacation rental to be a full-time source of income
As with the others, I intended it to be a full-time source of income. A three-bedroom home built in 1950 a block from the beach close to the other two was a joy to work with. I bought it from a friend who told me about it just before his wife listed it. I had to act fast as they had inquiries immediately. The real story here is that he has several vacation rentals and this was an exception. A couple had rented it for 15 years and decided to move.
He was considering creating it as a vacation rental but wanted to use the money from the sale for another project. He told me about it, I looked at it and took no action for a week or so as I contemplated offering it to clients as a vacation rental. At literally the last minute, I bought it. Keep in mind that while I acted fast, I took time to analyze it which is another reason for my delay in buying.
The house was in good condition but it was not ready to rent. It had been renovated in the mid-2000s bringing it up to modern standards, double pane windows, etc. I hired my contractor who works at other properties I own to renovate it. New flooring, counters, kitchen cabinet refacing, new entrance doors, fixtures, new bath fixtures, and much more inside.
I landscaped the property with new sod, a new fence in the back of the house, and a white picket fence in the front. Installed a wood-burning fire pit, bbq area, and horseshoe pit. Created a four-car driveway and fixed some other items on the house.
After two months of work, the house was listed
After two months of work, Christie’s Gulf Beach Rentals listed the house on the typical third-party websites and their website. Bookings started coming in fast and they continue to come in. The property was occupied nearly full-time through the summer months.
It’s one thing to be a real estate agent or broker and sell a client property that may make a good vacation rental, it’s another thing entirely to do it yourself multiple times and know through analysis what the client should expect with a specific property. I have always been the type of person who wants to do it first and then talk about it. There is nothing like the feeling of success.
Just as I thought it was time to take a break, I was presented with an opportunity to buy two houses side by side only one block from the recent one described above. I snapped up both houses which were exactly 10 years old and in great condition. One of the houses had smokers and that one required lots of work to “de-smoke” the house. We painted the inside of both and cleaned and sealed the concrete floors.
Just as with the last one, they were rented immediately
After replacing all of the blinds, and a few appliances and fully furnishing both, they were put on the market. Just as with the last one, they were rented immediately. I wish that I had put it on the market in the Spring but we just got it done by early September. We already have bookings for the next year.
All three of these properties are profitable and have paid their way since they were put on the market as rentals.
My Coastal Vacation Rental is not just a story, I live this every day. When I owned properties in Spain and at a distance read what people had to say that was great. Now that I have created something and get to on occasion meet the guests, it’s an even better feeling.
Most people will not find a property that will earn enough to pay 100% of the income for their vacation property but some will come close. I strongly suggest that prospective buyers of vacation properties on the Mississippi Gulf Coast consider their value as a vacation getaway and then as a secondary reason to acquire is the income that the property can earn when they are away.
Don’t forget to hire a professional property manager. Trying to manage vacation rental property from a distance is problematic. Those Internet property managers are also ineffective. I use Christies Gulf Beach Rentals on the Mississippi Gulf Coast.
Updated 2024
Wow, so many things have happened since this article was written. Let me start by saying that the value of the houses above that were purchased and leveraged have done well on the vacation rental market. I had to rebuild the floors in the first house because of moisture damage. The property managed to make a profit even with those expenses.
The two houses purchased side by side had a great first year and continue to be rented. The value of all three houses has increased significantly nearly doubling in value. That said, the number of rental nights has fallen off as of late 2022. This is a national trend. People all went on vacation during COVID and spent their Federal government handouts.
I sold my first vacation rental property (part of a 5-year buy and sell plan) in late 2023 to a person who is living in it full-time. Removing one property from the vacation rental market means more income for other investors. My investor group involved in the sale of the property did very well on the sale. In addition to the income earned during the previous years, the investors benefited from the rapid increase in values from a couple of years ago.
Bookings were lower in 2023 than in 2022 due to the two primary reasons quoted by investors nationwide. Increased inventory of short-term rentals and fewer guests due to the higher prices for fuel, food, and almost everything else.
Forecast for 2025
No one has a crystal ball to know for sure what will happen except to say that there are three things certain in life. Death, taxes, and vacations. The following is likely to happen:
- The vacation home inventory should drop as investors who bought late into the vacation expansion phase and can not afford to retain them. People will buy them to live in reducing the number available to be rented.
- Demand for vacations is growing, people have been postponing because of inflation and job security.
- Security issues in Mexico may cause fewer people to go there and more to vacation in the U.S.
- Inflation seems to be somewhat stable, still far too high but people are getting used to higher prices for everything.
- Travel to vacation destinations in the U.S. is still less expensive than a long trip to Europe or elsewhere. Cruise prices are increasing indicating that a beach stay may be less expensive.
If you have a vacation rental property and it is not cash-flowing, you may want to take some action. Read this article.
A footnote
As a footnote with more information to be found on Logan-Anderson, Gulf Coastal Realtors, you are permitted to deduct expenses for a second home even if you do not rent it. You can obtain financing for a second home at attractive rates now. Call 228-215-3234. Perhaps it is time for you to buy a vacation/second home on the Gulf Coast.
I recommend that you visit Christies Gulf Beach Rentals to get an idea of a fully furnished and decorated vacation home. In concept, one of these could be your second home that earns income while you are away.
Please read other articles on our site about vacation rentals and the Mississippi Gulf Coast. Two of our most popular articles are: “Why you need to retire on the Mississippi Gulf Coast” and “Why I decided to retire in Ocean Springs, Mississippi.
