Previously this week, we discussed how the housing market in South Padre Island could really give vacation home seekers a lot of bang for their buck.
Today, we’ll look at how that bang can become a boom — if you’re willing to jump through a few hoops the city says are designed to protect renters, landlords, and make sure city resources are allocated wisely.
With South Padre appearing regularly on lists of best beaches for families and best Spring Break beach destinations, it stands to reason that there are a fair amount of people looking for the freedom and room a condo or beach house might offer, as opposed to a hotel.
“Spring break brings 50,000 to 60,000 people in at one time — and the population of South Padre is only 2,800 or so,” said Gary Tate of Keller Williams Lynne Tate South Padre Island.
“South Padre Island does a great job of protecting the residents, the spring breakers, and the people that visit,” Gayle Hood, a Realtor with Padre Elite Team with RE/MAX Elite who has been on HGTV’s Beachfront Bargain Hunt and Island Life, said.
But given the disparity between locals and visitors in that one season alone, the city had to start making some changes regarding its short-term rental market to help make sure they had resources to address all those needs.
A short-term rental is considered anything less than 30 days.
Plus, as the city found, it was missing out Hotel Occupancy Tax income because the short-term rentals weren’t collecting and paying it.
“This is a push toward compliance,” city spokesman Adrian Rodriguez told area newspaper The Monitor in 2015, when the city passed its first ordinance requiring all short-term rental homes be registered with the city. “Some of these have never paid taxes.”
“The registration also is intended to bring credibility to the rental marketplace by deterring fraudulent listings and help the city enforce quality of life ordinances such as noise, disturbance, and fire code occupancy,” the newspaper wrote.
A newer, more recent ordinance will require those listing short-term rentals to word leases in such a way that an owner or owner representative can enter the home at any time. Owners (or their representatives) will also be required to be able to respond to a police call within an hour, with a copy of the rental agreement in hand.
“If police get a call about the noise ordinance because stereo is too loud and nobody will let them in or open the door, the owner or a representative can enter and take the police with them,” Tate explained. “That’s going to almost require you to have some kind of representative here in town.”
“At first I thought it was it was a little heavy-handed, but after listening to the presentations by the police and fire departments, I realized it was necessary,” he added.
“If you were someone looking to buy a home and rent it out for vacations, you would want these rules in place,” Hood agreed. “You wouldn’t want 200 kids in your house tearing it up. You’d want the police to be able to come in.”
“It’s a protection for owners,” she added. “And situations like large parties can be a real drain on city resources, too.”
“As Realtors in the area, we hope there’s a better solution out there, and we’re going to help find that solution, but in the meantime, this is protection,” Hood, who has also been president of the South Padre Island Board of REALTORS, said.
“We don’t object strongly to what has just passed.”
Have these rules dampened the ardor of people looking to own or invest in homes in South Padre? “It hasn’t,” Hood said. “There have been some comments to that effect — that it would discourage it, but the very truth is sales are up.”
So what should you know if you want to invest — or if you just want to buy in South Padre and occasionally rent out your home to other vacationers?
For one, Tate says, don’t necessarily count on rental income paying a mortgage on that home.
“What we normally say, you can count on it defraying the cost of the home,” he said. “If you have a full mortgage, I would not plan on cash flowing.”
All that is not to say that it’s not a profitable enterprise, but experts say you probably want to pay cash for the property or have a reserve to pay the mortgage on leaner months.
“Some years you can even make a little money,” Tate said. “But it’s not recommended to buy a piece of property counting on the rental income.”
The vagaries of the peak travel seasons can sometimes hinder rental opportunities, too. “Storms, hurricanes, and red tides can take a chunk of your rental time in the summer,” he said.
“Having a reserve is recommended,” Tate added. “Summertime you’ll make more money, and in Spring Break, but definitely, have a reserve.”
We also reached out to a veteran vacation home investor Cheryl Hopwood. Hopwood had a lot of great advice for those looking to dip their toes in the rental market.
Hopwood said she has been renting her South Padre condo for about six years on sites like Home Away and VRBO.
“This is the only property I rent in the area although I just started renting a property in the Outer Banks, N.C., through the sites as well,” she explained.
What got her into the short-term rental scene? Dissatisfaction, she says.
“I got started because I was displeased about how the management company was handling the renting of my home and also the percentage they charged,” Hopwood said. “I had a friend who had rented their home in Georgia, who assisted me in the process of renting through these sites.”
But Hopwood said she still was a little jittery about the DIY nature of sites like VRBO and Airbnb.
“Naturally I was quite nervous but with knowledge from a friend, it made the renting of this condo go much more smoothly,” she said.
What has she learned in the past six years?
“I’ve learned to continually check competitive rates when I receive an inquiry to make sure I’m maximizing my rental rates and also occupancy since this particular area fluctuates quite a bit both up and down,” she said. “This has worked quite well.”
Hopwood recommends road testing various sites as a renter first, to get an idea for which ones will make the experience the best for you and your potential guests.
“People trying to rent on their own should try using the site for a trip themselves to see what they like or don’t like in the process,” she said.
Hopwood said that having lawyers check your rental contracts is also a good idea — especially since requirements can vary from city to city.
“They should check with lawyers regarding the rental contracts and other issues depending on their property,” she said.
She eliminates the need for key drop offs smartly, too. “I use a Schlage lock so that there are no key exchanges,” she said. “This way guests can arrive whenever they want and there aren’t keys to lose.”
And Hopwood’s most important piece of advice whether you’re looking in South Padre, where it’s required, or anywhere?
“Finding reliable cleaning and maintenance people if you don’t live in the area — as I don’t — is also very important since they will be the people in the area that will represent you if there is an issue,” she said.