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Renting Your Northwest Florida Beach Home

If you’ve purchased or are considering purchasing a vacation home on 30A or elsewhere along the Emerald Coast, congratulations! You are entering a market consistently ranked as one of the best places in the nation to buy a vacation rental property.

Luxury homeowners have typically shied away from the short-term rental market, but a shift in this thinking is underway as property owners recognize the myriad benefits that come from renting their home.

According to InvitedHome, a good model resulting in long-term preservation of and satisfaction with your home might work like this:

  • Put together a rental strategy that strikes the ideal balance between nightly rate, occupancy, personal use, and length of guest stay. This ensures the lowest wear and tear along with maximum revenue.
  • Reinvest profits back into your home, which serves both you and your guests. You get to create the dream home you’ve always wanted through upgrades and improvements while increasing your nightly rate along the way.
  • Allocate revenue toward preventive maintenance and professional cleaning to preserves your home so it will continue to be a cherished asset for you, your family and friends.
  • As you continue to make upgrades, get bookings, and receive strong reviews, you can increase your nightly rate. At this point, you could shift the balance to lower occupancy while maintaining the same revenue. This results in even less wear and tear, and more time for you to spend in the home.

This cycle can repeat itself over and over, resulting in sustained rental income and long-term fulfillment through your vacation home.

Using Vacation Rentals to Lower Cost of Ownership

At Scenic Sotheby’s International Realty, we’ve had many homeowners in the process of buying a vacation home inquire about the impact short-term rentals could have on their annual cost of ownership. Here’s a simple example to illustrate. The down payment, mortgage rate, and PITI shown are examples, and rates and fees are subject to change.

Home Price: $2.3 million
Down payment: 35%
Mortgage: 4.5%
Principal, Interest, Taxes, Insurance (PITI): $9,969.95

Without renting the home, your annual payment to own would be $119,639 (PITI x 12 months). However, with a projected gross rental income of $114,700, the annual cost of owning your dream vacation home drops to $4,000 – 97% lower. Upon this realization, a $2.3 million vacation home becomes much more attainable.

Taxes in Florida

The tax situation in Florida is extremely favorable for vacation homeowners. While it’s widely known the state collects no income, estate or inheritance taxes, its property and sales taxes are also close to the national average. There is also no tax on Social Security retirement benefits, pension income or income from IRAs or 401(K)s.

Currently, Florida’s state property taxes stand at $1 for every $1,000 of the home’s value. However, because Florida counties can levy their own taxes, your county may be even lower. For example, in Rosemary Beach, taxes are only .678% of the assessed value. So, for a $1 million home, you can expect to pay about $6,780 per year in property taxes – lower than both the Florida and national averages.

If you’re hoping to choose a home that’s your primary residence that can be rented out when you’re away for half the year, you’ll also be eligible for the Florida Homestead tax exemption. Through this, the growth rate of your home’s taxable value is limited, and the increase in its market value will outstrip growth in its taxable value.

What makes the Emerald Coast such a great market?

Aside from its sugar white sand, clear water and plentiful sunshine, several of the communities along Florida’s Gulf Coast have been lauded as top vacation rental markets.

In 2019, rated Panama City Beach as one of the top three places to buy a vacation rental property. And, it’s not the first time a community in our area has made the list. In 2017, Destin was ranked No. 2 and, in 2016 and 2018, Panama City Beach topped the list as the best performing location for return on rental investment. rankings are based on factors ranging from real estate prices, local rental rates, maintenance costs and the popularity of the destination. And, speaking of rental rates, the average estimated rental income in Panama City Beach in 2018 was $26,301, with an average home price of $246,400, according to figures from Zillow. But these excellent vacation rental conditions are nothing new. In 2017, the same study determined that Destin, just one hour west, was the second-best short-term rental market in the country, with an estimated rental income of $46,141. Even back in 2016, PCB made the number one spot on the list with an estimated rental income of $28,800.

However, these averages don’t reflect the typical home prices and rental revenues in our inventory. The average value of a Scenic Sotheby’s International Realty property is $2.3M, and in the luxury home space, owners can generate up to $125,000 annually, thanks to Northwest Florida’s high demand for week-long stays, the gorgeous appeal of the homes, their location, and the provided amenities. And if the predictions are true, demand for high-end accommodation in the area will only increase.

Not all properties can be rented short-term. If you’re purchasing with the intent to rent, understanding your options is a critical first step, as is choosing a management company, such as InvitedHome, to ensure your investment’s success. If you have additional questions about the short-term rental market from Panama City Beach to Destin, contact your Scenic Sotheby’s International Realty agent today.