Hello! We are seriously considering buying a small house (3 bed/2 bath) in Avon. We spend about 2-3 weeks a year on Hatteras, but only in the shoulder and off seasons. We would probably spend more if we owned. So, we would be looking to rent during the high season and into the shoulder seasons (May, September and October), with a few weeks we would keep for ourselves in May and October.
My biggest concerns are probably the typical ones:
(1) Can we make enough in rental income to significantly offset the price of the house and the repairs/maintenance we know we’ll have to cover;
(2) Are prices inflated after COVID? Will they come down in a few years?; and
(3) With a good rental management company, how tough is it being an Owner for a short-term rental? Is it mostly hands-free, as long as you pay your management fee?
Any input, guidance, warnings, encouragement is welcome!
And, if anyone knows a good realtor for the area, I would appreciate the referral!
I was seriously considering the same, but a larger property that was ocean front. I spend about 3-6 weeks in obx mostly September and October. Unless you're paying cash for a property you're unlikely to cash flow after all expenses. I think when I ran the numbers on a $1.2M property owned out right, it would cash flow around 5% assuming it's occupied every week from May through Aug. I was negative like $30-35k a year with a mortgage. Most property values come strictly from it's rental income.
It's more cost effective for me to rent for 6 weeks a year than have all that capital tied up that could be earning more in other investments. If I was going to live down there 3 months out of the year, then ya, it might make sense but you're still going to be paying for that experience rather than the investment in the house paying for your time there. I invest in real estate for a living and own quite a few properties that I self manage. I don't think the headaches of short-term high maintenance beach rentals are really worth it unless you spend at least 3-6 months down there. I am also worried about asset values being stagnant or decreasing due to access issues to the island and erosion.
Thank you. This is really something to consider. The investment gains on the down payment could probably cover the rental fees for the weeks we’d like to spend on Hatteras.
mortgage interest is tax deductible, but you still have to pay it, so it's not really a straight benefit compared to otherwise not having that expense. You'd also get depreciation, but you'd have to recapture that when/if you sell the property in the future, so it's really a deferred tax.
Owner since since 2001, plus a house in the family since the early 90’s. I knew 25 years ago this is where I want to retire. To your questions specifically:
No. You won’t cover your mortgage. It won’t even be close. Although houses are relatively inexpensive between mortgage, maintenance and utilities, once the management company takes their bite you will be paying in every month. Our house started turning a profit after around 20 years. Now that the mortgage is paid, it’s a modest income generator, but it’s also a 40 year old house so we put it all back in maintenance. If you can pay cash you may be okay.
It’s very tough to find a 3/2 profitable rental. Most people want 4-5 bedrooms and lots of amenities. Again, given the age of our house it’s not really feasible to give people the amenities they want for the price they are willing to pay. This year we’ve also had an extremely soft year. Our rentals are off by half. The rental company says it’s a combo plate of people not having any money and foreign tourists not wanting to be here. I will say, i have a bunch of Canadians that typically rent my place every year (we email back and forth occasionally) and they said they have no intention of coming back anytime soon.
The prices are settling. But in general, real estate here is pretty flat. Since I’m keeping my house until my daughter inherits it, it’s not a deal breaker for us. I don’t think you would see a huge drop, but beachside is a relative bargain here compared to most coastal areas.
You can do it hands-free. But it will definitely take away from your margin. Lots of things go wrong in a rental property because people are generally very hard on the houses, and unlike, say a hotel, houses are used to normal people, not party animals. I come for a month in the spring, a month in the summer, and a month in the fall and do a boatload of maintenance each time. I like it, it’s a hobby. But if I were paying for all that, it would severely impact my profit. I can give examples, but suffice to say there’s a lot of minor stuff that can be done by either you or the realty company, but you pay a good chunk of change when they do it.
My advice, if you come 2-3 weeks a year I would rent not own. If I had taken the money I spent on my house in Avon and invested it, I would have come out far ahead. But it was a lifestyle choice for me, and since the early 2000s, my family has spent at least two months a year in our 3/2.
Last thing to remember. If you’ve got it set up as a rental property it’s not “your house’. It’s a rental property you enjoy. It takes some getting used to. I retire next year and I’m looking forward to leaving behind that aspect. As my wife says, the first two hours of every visit is me walking through the house and ranting about the damn renters.
Thank you. This is very, very helpful. I appreciate the time you took to share this. I think we are better off renting than owning. This is such a special place. There’s nothing I love more than walking the path over a beautiful dune, only to be met by the sun shining brilliantly on the ocean. And the ease of cruising down Hwy 12 to Buxton and Frisco with the dunes on one side and the sound on the other just can’t be found anywhere else.
Glad you’re enjoying it. I never like to dissuade anyone from following a dream. But if you’re really only consistent on a handful of weeks a year, you’re buying a lot of work with little return. Let the masochists like me own the place. You come and enjoy. Posted this earlier today.
Also, for what it’s worth, we treat our rentals like our own house. We never pour oils or grease down the drains! 😄 In fact, even though we bring our black lab, who sheds like crazy, I like to think we leave the place cleaner than we found it.
Thank you! Here’s a funny story. In 2010 we were keeping a weather eye on hurricane earl from our house in Florida. It was headed for OBX, basically Avon. My realty company called me with gloom and doom. I look on the front page of USA Today the next day and this picture is there. That’s literally my third floor deck and those were my sheets. Also, my house is a 3/2 that sleeps six and there’s ten people if you count the babies.
Get quotes on insurance, that is likely to be sky high. How far are you from Avon now? I’d be nervous to own a property there if I was say, 10 hours drive from it. Yes, prices are inflated since covid and the new 7.5% interest rates could cool the market down more. If you are getting a mortgage on a second home, rates are typically half a percent or so higher. I’d probably wait another year or so to see if the market dips a bit.
I have a friend who lives there. She used to do the Airbnb thing but switched to long term rentals recently. Apparently it’s becoming increasingly difficult to deal with the renters and make a decent profit with the short term rentals. She did well for years though. The other part is the constant washout of highway 12 and resulting increase in taxes and insurance.
You can obviously contact the rental companies down there to get an idea on rental rates for your prospective property as well as the percentage they take to manage all that. I believe it’s around 15 percent and they dictate the time period by which the property needs to be available for rent. Generally they allow two weeks during that period for owners to block off for personal use.
One thing that people leave out of their calculations often is the maintenance costs surrounding these coastal properties. If the house doesn't have new decks and siding, it's a fair bit that you'll have to do that in the first several years of owning the house. Those will cost you close to 100k when you're all said and done
We are building in Avon and will use 6 months a year, not renting. Good news for you is market is soft - a buyers market. Bad news in rental market seems a bit soft also.
As an earlier poster said, I bet the numbers don’t work if you’re taking out a mortgage. If you’re not you can earn 5% on a bond on your cash and use the income to rent for a number of weeks with no hassle.
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u/Scrace89 2d ago
I was seriously considering the same, but a larger property that was ocean front. I spend about 3-6 weeks in obx mostly September and October. Unless you're paying cash for a property you're unlikely to cash flow after all expenses. I think when I ran the numbers on a $1.2M property owned out right, it would cash flow around 5% assuming it's occupied every week from May through Aug. I was negative like $30-35k a year with a mortgage. Most property values come strictly from it's rental income.
It's more cost effective for me to rent for 6 weeks a year than have all that capital tied up that could be earning more in other investments. If I was going to live down there 3 months out of the year, then ya, it might make sense but you're still going to be paying for that experience rather than the investment in the house paying for your time there. I invest in real estate for a living and own quite a few properties that I self manage. I don't think the headaches of short-term high maintenance beach rentals are really worth it unless you spend at least 3-6 months down there. I am also worried about asset values being stagnant or decreasing due to access issues to the island and erosion.