Recently, I asked whether I should buy a Vacation Rental. I wondered if it made more sense to buy a second home versus a vacation rental. The vacation rental would strictly be an investment property requiring a hefty 20% down payment (minimum). Even if I chose the vacation rental route, the next logical question would be where should I make such a purchase? Since I’m mainly interested in beachfront property, I’ve considered such areas as: Virginia Beach, Panama City Beach, Destin area, Myrtle Beach, and even Miami Beach. After careful consideration, I’ve decided to buy a vacation rental and focus my attention on one area: Panama City Beach, Florida. Let’s examine why.

Weekend Trip With My Mom

So, I’ve never been to Destin or to Panama City Beach before. So, I decided to visit the area. My mom decided to come with me. After meeting up with my mom, we drove nearly six hours to get to Destin.

Prior to making the trip, I had arranged to meet with a Realtor. I met with the realtor and he showed us four condos in Okaloosa Island. Out of the 4 condos, the two best ones that I liked were priced at about $520,000 and $475,000. They both had great views and there were pros and cons to each unit. Each was a 3 bedroom 2 bathroom condo around 1300-1400 square feet.

For clarity, the goal was never to make a purchase. I just wanted to see what a condo would actually feel like. There’s only so much you can get from looking at a picture or even video of the unit online. It’s definitely important to actually visit a unit to get the appropriate feel.

We only had a weekend. So, we drove down on a Friday, looked at properties on a Saturday and drove back home on a Sunday. It was very efficient, and also very productive.

I Didn’t Like Destin

I know that the Destin area is a popular vacation spot, but I actually didn’t like it. I’m defining the Destin area as Destin, Miramar Beach, Okaloosa Island, Fort Walton Beach, etc. It’s really unfair to judge a city after only one day, but this is more first impression than anything.

Fort Walton Beach was very congested. There was only one main road and it was constantly backed up. I would be very frustrated if I had to travel on that road often. Okaloosa Island was much less busy and felt more private. I could see myself living on Okaloosa Island. I wasn’t impressed with how the outside of the condo’s looked, but once you got inside, the condos there were adequate.

Overall, I’m glad I went.

We stayed at the Sundestin Beach Resort, which was rated as a 4-star hotel on Hotwire. I wanted to stay someplace nice because my mom was with me and I also wanted to experience a vacation rental myself. So, we actually booked a studio. It overlooked the pool (not the beach), so I was very happy with our accommodations. I just didn’t like how everything felt congested on that one road.

Panama City Beach Fluke

While I was doing research on Destin, I came across Panama City Beach. According to rented.com, Panama City Beach was the number one rated vacation spot in 2018. So, as you can imagine, I was torn between both cities.

I had only arranged to see a Realtor in Destin. I didn’t arrange to see one in Panama City Beach. Quite honestly, I didn’t realize it was so close – only 40 minutes drive. Anyway, I asked the realtor if he had a referral, as I only had that one day to check things out. Well, after he tried 3 separate realtors, the gentleman I was working with said he didn’t have any because it was so last minute.

So, my plan was just to drive to Panama City Beach anyway just to check out the area. During the drive there, I randomly called two realtors to see if they could fit me in their schedule. The first guy blew me off, but the second one was able to meet. We met with him at his office, and he was able to show us one unit in one of the biggest condos around.

Survey Says!

All I can say is, I LOVED IT!!! It was love at first sight. It was EXACTLY what I imagined I would own. The views were spectacular. It was a corner unit, so that was a plus. The size was closer to 1500 square feet, etc. And the price was around $420,000!!! So, if I was in a position to buy, I would get a bigger condo, with better views and cheaper price in Panama City Beach than the two I liked in Okaloosa Island.

Obviously, when I’m ready to go shopping for a condo, I’ll be doing much more research and seeing many more properties. But, the feeling I had with this condo is exactly the same I had when I bought my first house three years ago. I told the realtor that, if I ending up using him (after more diligent consideration than randomly picking someone online), he is going to have a hard time because I would be judging every future unit against the one he showed me. He was ready for the challenge.

So What Now?

Now, I don’t have to spend my time trying to decide which area to invest in or whether I should buy a second home or vacation rental. The weekend trip to Panama City Beach and Destin was so successful, that I’ve actually decided to buy a vacation rental as my next property in Panama City Beach, Florida.

If it wasn’t clear, I’m having a very emotional reaction to these condos, as if I was buying another primary home to live in. I do recognize that I am buying an investment and thus I should not disregard a condo because it doesn’t meet my definition of a dream condo.

Truth be told, while the main focus of this vacation rental will be investment oriented, it’s important to get something I like myself because I may very well use that condo from time to time as a vacation spot myself.

Finally, I’ve asked the realtor to send me income projections for that unit, and I will try to compare the potential income I could receive against the cost of owning the property using a full-time property management company. No matter how much I like it, I have no intention of buying a property that costs me money every month. If the numbers don’t work, I’ll move on.

Because I’ve now decided to go forward with this purchase. The next thing for me to do is save that hefty down payment and potential closing costs. I’m still several months away before I am even in a position to buy anything. But, having my goal narrowed will be very helpful. As of right now, I still plan on maintaining my current contributions to my taxable account. But I’m exploring withdrawing from an old 401K to help me afford the financing. This may be instead of or in addition to withdrawing from my dividend portfolio, which is something I never thought I would consider doing before retirement. But, if I did, it’s not like I was taking the money to go buy a car.

Conclusion

Purchasing an investment Condo for $420,000 is both exciting and scary. Whenever I’m ready to buy, hopefully, I find something cheaper. But, either way, it’s going to be scary. I’m concerned about hurricanes. Specifically, I’m concerned that if a hurricane hits, the unit might be uninhabitable for a while. This would force me to pay that mortgage all on my own.

I’m also concerned about rising sea levels and the thought that in 20 years, my condo would be worthless.

Regarding financing, I can be approved for a $400,000 loan according to a mortgage broker. Obviously, the cheaper the Condo, the less money I need for down payment and so I’m going to try to spend as little money as possible, but within reason of my desires to own a beachfront condo.

I’m very excited right now, but I will be doing a lot of soul searching, and researching to see whether this is the right move for me. I might even consult a financial and tax adviser before making such a hefty purchase. After all, I want to ensure that I am making an informed decision and not just an emotional one.

What do you think of this post? Let me know by commenting below.

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