Judging the difference between a good/bad vacation rental can be INCREDIBLY difficult. Vacation rentals are a totally different breed of investment compared to more traditional assets. Wilmington, NC is known as a major beach destination and has no shortage of vacation rentals to choose from. Before investing in vacation rentals in Wilmington, make sure you know these things:
- Vacation rentals are VOLATILE
Of all real-estate assets vacation rentals have by far the most volatile cash-flows. This is due simply that they are seasonal (obviously). But also due to the fact that during an economic downturn, people take less vacations.
- Big expenses
Everything from property taxes to furnishings, vacation rentals have big expenses. Imagine having to re-roof your vacation rental during winter when cash-reserves are low AND during an economic downturn. Does the thought bring shivers down your spine? Realize that the wild swinging cash flows can hit you at the worst times.
- Hurricane, floods, and private insurance
Wilmington, NC does have hurricanes and they can be devastating. In Wilmington, there is something called a COBRA Zone and this means that anything within the zone requires big insurance premiums.
Overall, if you want a solid performing investment, I would steer more towards a traditional buy-and-hold or maybe even a college rental, which Wilmington has plenty of! Make sure to check out my blog on finding a college income property in Wilmington. But if you are still interested in a beach rental here are particular areas to check out.
Wrightsville Beach has a reputation for it’s beach houses, but it does have the garden variety of investment condos! When people consider investing on Wrightsville, I usually suggest condos. Of the long-term rentals (that I can get accurate data on), Condos on Wrightsville have cap-rates of around %3.
NOTE: “Condotels” typically have the highest cap-rates of any property on Wrightsville Beach!
- No maintenance
- Can be left for longer periods vacant and easier to manage.
- HOA usually covers the insurance
- Cheap and closer to the beach
Be sure to check out these condos If you’re interested in something that may produce a real return:
2. Beach Houses
Beach house investments on Wrightsville vary drastically. If I can give anyone a piece of advice if they’re interested in investing on Wrightsville:
- Make sure house is not in the luxury category (unless returns are less important and luxury is!)
- Homes closer to the beach and that have nice interiors will command the highest vacation rents!
- The smaller the better *usually*
As a whole, Carolina Beach has FAR greater returns on beach rentals due to the lower property prices and the ability to rent out units long term!
Condos in Carolina Beach can be incredibly affordable AND your overall dollar can go way further in Carolina Beach.
- Beach Houses
Carolina Beach has an almost endless supply of affordable beach houses. Like Wrightsville Beach, try to stay out of luxury! There are also many VERY small houses on Carolina Beach. Make sure to buy houses in the 3bed/2bath, because they have higher sell-ability.