Vacation Rental Investment Budget

Step 2

A big step towards determining if an Anna Maria Island Vacation Rental is a good investment for your expectations.

Over the last 15 years Anna Maria Island real estate has appreciated about 6-7%. This is for all Anna Maria Island property. So there is plenty of property above that rate of return and lots of property below. Rather than establish budgets here it is best I provide an indicator that will stand the test of time. For example a direct Gulf Front 50'X 100' parcel in Holmes Beach 10 years ago was about $1,000,000. Today it can push well over $2,000,000 and likely in a few years that estimate will be wrong.

Most of the time the amount of money you feel comfortable putting down on your Anna Maria Island Vacation Rental dictates the type of property you can afford. If you visit our Anna Maria Island Real Estate listings do you see properties you can afford?

Home, Duplex, Land

For this category of property it is critical to understand the land value. Location, Location, Location. The Closer to the water the more the land value which dictates 75% of the price. Want a shack on the beach? Likely more than a mansion in the 4th block because LAND VALUE is the first price to understand.

Condominium

Condominiums are consistently lower in price because the land value is spread across more properties. More specifically when you purchase a condominium you do not own the land the condo sits on. Collectively all owners of the condominium owns the land the resort sits on and therefore the land value is spread over many more properties.

An indicator Island Real Estate of Anna Maria Island sales professionals have used in the past is a measure of gross income as it relates to purchase price. In most cases there is a ratio that can be used to determine expected gross income of an Anna Maria Island Vacation Rental.

The ratio is relatively easy. 10+ years ago with less vacation rentals and less demand for real estate our investment ratio was 10 X. More specifically if a person was purchasing an Anna Maria Island Vacation Rental for $600,000 they could anticipate $60,000 gross rental revenue. *

Today our gross income to capital cost is more like 9 X. That is you purchase a vacation rental for $1,000,000 you can expect $90,000 in gross rental revenue.

If you find an investment property that provides a 10 X ratio be suspicious the rental income has been elevated to enhance a potential real estate sale. In addition the capital cost is not the purchase price. It can sometimes be the purchase price however the total capital required is the cost to be used. For example if you purchase a $500,000 vacation rental which needs $250,000 in renovations then the total capital cost of the investment is $750,000 and the buyer should expect an estimated $67,500 gross rental revenue for the Anna Maria Island Vacation rental. $750,000 X 9%

Please note, the above figures are not exact and are not meant to provide any consideration of return on investment but just a general indicator of gross rental revenues as compared to total capital cost.