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Buying condo to do short term rental?

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jimtroch
(@jimtroch)
New Member

Hi All. First time user. Coming to STX in a couple days for our 3rd USVI visit. Looking at buying a condo unit to have as a VRBO/vacation place/PMV rental. Any VRBO etc people on this site with unbiased advice on location, prop. management people and condo associations good or run from? Still five years from retirement and want to plant some seeds. Also, is that new ferry up and running yet?

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Topic starter Posted : October 20, 2016 3:16 pm
Steve L
(@Steve_L)
Active Member

We have done this - bought at Colony Cove 3-4 months ago as a preparation for moving permanently in 2-3 years.

There are some issues...

Firstly - and most importantly, DO NOT buy if you need to make money from your apartment immediately. There is plenty of STX property on VRBO and elsewhere, and it takes time to build a rental following. Make sure you can pay the outgoings out of your normal income for at least the first year (and maybe longer).

Secondly - get a good agent and do your research. Some condos have 'issues'. There are rumored structural issues at Mill Harbor (so I am told), Sugar Beach is not mortgageable due to the insurance arrangements in place, etc..

Thirdly - look at the condo accounts and check reserves for hurricane catastrophic funds and general maintenance. Try to stay on a complex for at least 10 days before you buy and just watch what goes on (levels of garden and pool maintenance, activity, etc.).

Finally - negotiate hard (through an Agent), but bear in mind that condo inventory on STX is tightening, and there are not as many real bargains as there were.

If you want to talk, we can arrange this...

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Posted : October 23, 2016 5:03 pm
Scubadoo
(@Scubadoo)
Trusted Member

You can check current condo sales listings on the MLS at most realtor web sites. These will also give you the basic fees for the unit.

To get serious you will need to do all your due diligence which includes getting the by-laws (which will include a definition of common and non-common elements, HOA management structure and any restrictions on renting,) previous and current annual budgets, reserves, financial audits, common area insurance coverage, property manager's reports, regular maintenance schedules for common elements if they have them or wait until repairs are needed, etc. from the listing realtor.

You will want to find out what the previous capital assessments have been, any planned major capital repairs or improvements, age of the buildings and common areas, expected end of life dates for common element infrastructure, when the most recent updates were done to common elements (doors, windows, pool systems, security, lighting, water systems, etc) as well as the in-unit specific appliances etc so you have an idea of the short term and long term financial commitments.

This will tell you what to run away from.

Keep in mind high season when most rentals occur is relatively short and you will be lucky to get 12 weeks of vacation rental a year after you've established a track record.

The ferry is still going through coast guard approvals.

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Posted : October 23, 2016 11:27 pm
speee1dy
(@speee1dy)
Expert

i had not heard about structural issues at mill harbor. interesting.

at one time they had an HOA of about 1,200. i think one of the highest on island

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Posted : October 24, 2016 10:49 am
Rowdy802
(@Rowdy802)
Trusted Member

i had not heard about structural issues at mill harbor. interesting.

at one time they had an HOA of about 1,200. i think one of the highest on island

As a resident of Mill Harbour (F.Y.I. first floor apartemnt) I had to chime in. The apartment I rent has had issues with spalling at the bathroom ceiling and isolated discoloration at areas of the upper part of the walls. Also, and possibly a contributing factor, some buildings have rain drainage issues, ie. the drain outside of the first floor apartments may overflow during heavy rain and run its course into both apartments. We have our rain drain plugged with a tennis ball.

All three first floor apartments I've lived in at Mill Harbour towards the beachfront of the property have had said issues.

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Posted : October 24, 2016 11:41 am
speee1dy
(@speee1dy)
Expert

we lived in a 3rd floor 2 story unit, the only problem we had was that after a heavy rain the tap water tasted salty

sorry to hear about your issues there

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Posted : October 24, 2016 3:19 pm
rmb2830
(@rmb2830)
Advanced Member

Mill Harbor had structural issues that were a bit apparent when we looked at units that were for sale.

This was in 1984.

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Posted : October 24, 2016 5:15 pm
LuckyGirl56
(@LuckyGirl56)
Advanced Member

Agree with what everyone above has said. Make sure the condo complex allows short term rentals. Check the monthly association fees, some condo fees are high. Also, do research on housekeeping (in/out) for arriving guests. Factor this cost into your equation. Also, if doing VRBO, how will your rental guests get the keys to the unit? Where will they leave the keys upon departure. Who will check (on-island property manager) on property after each departing guest for wear/tear/damage/missing items? Who will guests contact if during their stay they have a problem? i.e. tv doesn't work, ran out of water, etc.? Homework, homework, homework. Some waterfront properties are "cash only" as you cannot get a mortgage. Check cost of rental insurance for inside the unit.

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Posted : October 24, 2016 7:11 pm
vicanuck
(@vicanuck)
Expert

Keep in mind also that there are now several hundred short term rentals on St. Croix being offered on various sites like AirBNB so there is a lot of competition in the short term rental market.

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Posted : October 25, 2016 11:17 am
FLLisa
(@fllisa)
Advanced Member

Does anyone have insights about either St. C or Cruzan Princess? Reserves, structural issues, etc?

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Posted : October 25, 2016 1:52 pm
watruw8ing4
(@watruw8ing4)
Trusted Member

If you're getting a mortgage, and want to make sure you're on the up and up, make sure your fine print doesn't exclude short term vacation rentals. Mine does, and we got a slightly lower interest rate because of it. It made no difference to us, because we can only rent 6 months minimum where we live, but just thought I'd throw that out there. I can't see how they'd find out, but . . . .

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Posted : October 25, 2016 2:15 pm
LuckyGirl56
(@LuckyGirl56)
Advanced Member

Does anyone have insights about either St. C or Cruzan Princess? Reserves, structural issues, etc?

Cruzan Princess requires "cash". You cannot get a mortgage. This property has very low association dues and require, I think, individual owners to carry their own storm insurance. There are several issues with "spauling" (sp) in the concrete. Several of the stair cases have broken concrete steps and the re-bar is showing thru. You also cannot have A/C. It is not allowed as the wiring is so old. I know this for a fact as I know someone who owns a unit there.

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Posted : October 25, 2016 5:50 pm
vicanuck
(@vicanuck)
Expert

Here's an interesting and related article from the WSJ:

http://www.wsj.com/articles/how-to-finance-a-vacation-home-thats-also-a-short-term-rental-1470238062

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Posted : October 25, 2016 6:53 pm
Alana33
(@alana33)
Expert

Here's an interesting and related article from the WSJ:

http://www.wsj.com/articles/how-to-finance-a-vacation-home-thats-also-a-short-term-rental-1470238062/blockquote >

From the article:

"Local regulations. Some counties and municipalities consider vacation-home rentals the same as hotel stays and require owners to collect occupancy or lodging taxes from guests."

The VI Government regulations now requires 12.5% Room Tax for hotel and vacation rental stays. It used to be 10%. Plus one must submit an occupancy form, monthly, along with payment to VIIRB.

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Posted : October 25, 2016 9:44 pm
East Ender
(@east-ender)
Expert

The VI Government regulations now requires 12.5% Room Tax for hotel and vacation rental stays. It used to be 10%. Plus one must submit an occupancy form, monthly, along with payment to VIIRB.

I wonder how they enforce that.

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Posted : October 25, 2016 10:43 pm
Scubadoo
(@Scubadoo)
Trusted Member

All they have to do is look through the VRBO, airbnb listings etc to find what's being rented.

Yup, it's a pain, a business license is also required, and for that there must be a VI resident identified as responsible for it so they have someone to chase after if there are complaints along with a host of other requirements, police check, fire inspection (we had another thread just on that a while back), of course fees to go with all of that.

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Posted : October 25, 2016 11:34 pm
vicanuck
(@vicanuck)
Expert

The VI Government regulations now requires 12.5% Room Tax for hotel and vacation rental stays. It used to be 10%. Plus one must submit an occupancy form, monthly, along with payment to VIIRB.

I wonder how they enforce that.

They don't and I can't see where the GVI would get the manpower or systems required to to enforce either.

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Posted : October 26, 2016 12:08 pm
buds4u
(@buds4u)
New Member

so what you're saying is to get a property manager?

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Posted : November 10, 2016 3:54 pm
stjohnjulie
(@stjohnjulie)
Trusted Member

The VI Government regulations now requires 12.5% Room Tax for hotel and vacation rental stays. It used to be 10%. Plus one must submit an occupancy form, monthly, along with payment to VIIRB.

I wonder how they enforce that.

Yeah, they don't really. I know at one time there was some interest from the government types about enforcing that, but I haven't seen any progress. It irked me so bad when they bumped the hotel tax up 2.5% that I contacted Tourism Department and voiced it. Feel like its a punishment to those who are doing things correctly instead of the government taking the time to enforce the law for the many hundreds, or thousands, of people who are flying below the radar by not getting a business license or paying hotel tax when they should. I have also found that a lot of the management companies who pay hotel tax for their villas don't do it correctly either. Just lazy on the governments part in my opinion, but not surprising.

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Posted : November 11, 2016 7:55 am
soilguy
(@soilguy)
New Member

We are considering a similar idea. Are there different things to be mindful of on STT? Is the short term rental market better? Making our first visut to the islands and a scouting mission at the end of the month. Staying at Sapphire Beach and we have an appointment with a realtor mostly just to ask questions and learn more about price ranges, positives and negatives of being a mainlander but owning a short term rental there while we do PMV's and prep for the jump. Not planning on seeing properties, unless it's just to get an idea of what can be had at different price points.

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Posted : April 10, 2017 1:01 am
Scubadoo
(@Scubadoo)
Trusted Member

The general issues and concerns and advice would apply STX or STT. STT rental market is probably a little better than STX, there is simply more tourists and airlift to STT. YOu can get on the realtor web sites and look at current listings and prices to give you an idea of what's on the market now.

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Posted : April 10, 2017 1:33 am
vicanuck
(@vicanuck)
Expert

The AirBNB and VRBO market is even more competitive now that it was a year ago. Short term rental prices have dropped as a result.

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Posted : April 10, 2017 11:22 am
soilguy
(@soilguy)
New Member

Thanks for the replies. We booked using VRBO, and I could see how competitive the pricing was. Hoping that a smaller unit with lower HOA fees may help the bottom line? And also something with beach access?

We are at least a year out from potentially buying, and we hope to do a ton of research and at least one other visit before pulling the trigger.

We are 5-10 years out from a potential relocation to the islands, and our plan would involve being part time residents to start with anyway. Seems to me that investigating buying an "investment" condo the we can also stay in prior to the big move would be a sensible action. But maybe not... These are some of the things we hope to learn from our realtor meeting.

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Posted : April 10, 2017 11:55 am
Afriend
(@afriend)
Trusted Member

One thing to consider, if you buy now and rent out for 10 years you'll be moving into a unit that is 10 years older and well "used" than when you purchased it.

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Posted : April 10, 2017 1:38 pm
Alana33
(@alana33)
Expert

If you can't absorb the losses without even breaking even, don't do it.
Consider ALL expenses.
Make a list.
What's the bottom line?
It may be cheaper to rent a vacation unit for a month than support the expenses, mortgage, business license, insurance, maintenance, utilities, advertising, cleaning, upgrades, taxes, etc., over the course of the year.

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Posted : April 10, 2017 5:40 pm
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