My First Year Owning a Beach House Vacation Rental: A Case Study and Detailed Look at Finances

2021 was a crazy year to do it, but I bought a beach house on a family friendly North Carolina island! It's a popular vacation destination, particularly in the summer. This is my only house- I travelled frequently for work this year and didn't want to leave it sitting empty. If you're considering investing in a vacation rental, here's my experience and recommendations:

My House: It's on the middle row (between the main road and the ocean) and is a 2 minute walk to the public beach access. It's 1650 square feet with 3 bedrooms and 2 full bathrooms. Two of the bedrooms have queen beds and one has a queen and twin bunk beds, so it sleeps 8. It has wonderful views of the beach from the porch. Purchase price (in an insane real estate market) was $560,000 and I closed on it early March.

Management: I rented it through a vacation rental property management group. I had a generally positive experience with them, and would definitely recommend a manager at least for your first year. They cost me a lot in fees, but they handled all the work requests, booking, billing, and cleaning. It was nice to sit back and collect a check!

Vacancy: My house was available for vacationers to rent from mid-March until mid-December. It booked 14 weeks: the weeks before and after Easter and late May until mid-August. It was unfortunately vacant the remaining weeks, including over Labor Day. I think my vacancy rate could have been better if I managed through Airbnb- my property manager only rents weekly and I would like to offer a nightly option during the off-season.

Income: It rents for $1050/week in the off-season and $2400/week during peak season. Gross revenue for the 14 weeks it rented in 2021 was $29,913.

Expenses: Owning a beach house is expensive!

  • Mortgage & Escrow: $18731 ($8248 towards principle)

  • Insurance: $2322 (Basic homeowner's is paid through escrow. This expense was for a rider for rental liability and windstorm coverage)

  • Utilities (power and water): $1258

  • Internet, TV: $760 (I cancelled cable TV and only offer Netflix, Hulu and Prime Video)

  • Cleaning Fees: $2173

  • Linens: $1820

  • Property Management: $2980 commission, $1750 in "Hospitality Service Fees" billed to me, $806 credit card fees

  • Work Orders: $254 (The majority of this was $40/month trash hauling. I also had a coffee maker break and require replacement)

  • Miscellaneous: $376 (There were a few Lowe's runs to grab salt for the water softener, air filters, a grill that my renters absolutely destroyed after one season, new locks and a ring camera to look at the driveway)

Cashflow: Negative $3317. Not bad- as this is my primary residence, I would have spent $20k+ this year on the mortgage, insurance, utilities, and internet.

Damages: There were a few minor damages that my management company refused to fix- drywall dings behind the recliner, someone yanked on a coax cable so hard the plate came out of the drywall, one of my couch cushions appeared to have suffered some stab wounds. When I returned, my HVAC return was missing a filter. This was frustrating, as they require the "Hospitality Service Fee" which is supposed to cover incidental damages.

Will I do it again: Yes! For 2022, I'll be travelling less for work, but will intentionally be gone from Memorial to Labor Day. It's a bit of a hassle to move all my personal items into storage, but I think it's well worth it. If I wasn't living here full-time in the winter, spring, and fall, I'm not sure the income would justify purchasing a vacation rental solely as an investment.