The Sunshine State is synonymous with two things: vacations and retirement. With an endless array of attractions, theme parks, and gorgeous beaches spanning almost 1,350 miles of coastline, selecting the best area for your next investment property could be challenging. Consider the Emerald Coast of Florida.
From the sugar-white sand beaches to the small-town feel and Southern hospitality, the Emerald Coast is consistently ranked one of the best places in the U.S. to buy vacation rental property.
Google, “Best Florida Beaches,” and communities such as Destin, Pensacola, Ft. Walton Beach, Santa Rosa Beach, and Panama City will be among the top of the search results.
However, a beautiful beach alone isn’t enough to justify a hefty long-term investment. A savvy investor will ask themselves:
- What does the real estate market look like?
- What is the cost of living?
- How is the job market?
- What do unemployment rates look like?
In this article, we’ll help you discover the value the Emerald Coast has to offer for your next investment property.
Emerald Coast Communities: Pensacola
The Emerald Coast consists of several communities, including Pensacola, which continues to grow in popularity. U.S. News analyzed 150 metro areas in the U.S. to find the best places to live based on the quality of life, the job market, and the value of living there.
The results? Pensacola ranked:
- #26 Best Places to Live
- #10 Best Places to Retire, and
- #5 Best Places to Live in Florida
Pretty impressive, right? Let’s take a closer look at what the numbers tell us. The average annual salary is $43,920 compared to the national average of $53.490. While that is lower, it’s also important to note that the unemployment rate for Pensacola is 6.2% versus 8.1% nationally.
Overall, the cost of living in Pensacola is about 8% lower than the national average.
Pensacola is a Seller’s Market
From an investor’s perspective, Pensacola is a seller’s market. As of January 2022, the inventory of homes is considered very low, and the average residential price is around $339K.
Additionally, Pensacola’s monthly average residential sales price has seen a steady increase in the appreciation rate in 2021.
Comparing January 2021 to January 2022, there is a 16.1% average appreciation rate. Over the past six years, that appreciation rate has increased by 11.8% a year.
Sales and market trend data support the claim that the real estate market continues to run hot with sales substantially greater than the past ten years proving Pensacola is a great investment opportunity.
Emerald Coast Communities: Destin
Known as the “World’s Luckiest Fishing Village,” Destin is another sparkling gem of the Emerald Coast. As a vacation hotspot, it ranks number 10 on the list of “12 Best Places to Buy a Beach House in 2022.”
RocketHomes.com sums it up nicely, providing informative and relative data for how Destin’s real estate marketing is doing as of February 2022:
- Median Sold Price: $490.1K for an increase of 19.2%
- Number of Homes for Sale: 411 for an increase of 2.8%
- Number of Homes Sold: 86 for an increase of 11.7%
- Average Sale Time: 59 days for a decrease of 36%
Simply put, those numbers tell us that more homes are being sold at higher prices faster.
Cost of Living in Destin
Being a beach resort town, it should be no surprise that the cost of living in Destin is 18% higher than the U.S. average, driven mainly by the fact housing costs are a whopping 62% above average ($490K Destin versus $291K U.S.).
The average income levels in the area are 25% higher in Destin versus the national average, which helps offset the increased costs a bit.
Destin Has a Strong Rental Economy
Deciding where to buy a vacation rental investment property means considering various factors, but for most people, it’s all about location, location, location. For this and many other reasons, Destin is one of the top destinations where buyers look to invest in a vacation home or rental property.
However, when buying a vacation home to be used as a short-term rental (STR) in Florida, it’s not all about warm ocean waters and proximity to Mickey Mouse. Factors including cap rate, median home sale price, and net operating income come into play, and navigating short-term rental regulations can be challenging.
Destin, Florida, was profiled for having the following features:
- Market annual gross rental revenue: $44,199
- Median monthly rental revenue: $3,671
- Cap rate: 4.7%
- STR market size: 4,072
The Benefits of Florida Tax Law for Real Estate
Real estate powerhouse Zillow ranked the Florida real estate market as “very hot,” and its experts predict that home values there will rise 7% over the next year alone. The many tax advantages available to savvy investors combined with the state’s steady growth make Florida a no-brainer.
No Personal Income Tax
Florida is one of just seven states in the country that does not impose a personal state income tax on its residents. Nor do individual cities in Florida impose city taxes on income. In contrast, high tax states, such as California, levy up to 12% state tax on their residents.
No Capital Gains Tax
Florida also has no state tax on capital gains. Capital gains are defined as the value difference between the initial purchase price of a home and the subsequent sale price.
Florida residents only have to worry about the federal capital gains tax, and if the property is a primary residence, they are eligible for a federal exemption of $500,000 (for joint filing) or $250,000 (individual), just as long as they have physically lived there for at least two of the past five years.
If you’d like to learn more about what the Emerald Coast has to offer, then contact aDoor Real Estate. Our experienced agents are ready to answer any questions you may have. Call us today!