With around 6 million tourists visiting Saint Augustine each year, investing in a vacation rental property in “America’s oldest city” might sound like a no-brainer. The city offers visitors warm weather all year round, sun-drenched beaches, kid-friendly attractions, and Spanish colonial architecture you won’t find anywhere else in the U.S.
But investing in a short term rental is a lot more work than you might think. To help you make a more informed decision on whether investing in the Saint Augustine vacation rental market is right for you, we’ve complied market data from industry monitoring sites and analyzed how new local regulations are impacting the market.
Note: In this article we use short-term rental and vacation rental interchangeably. While not all short-term rentals are vacation rentals, in Saint Augustine, they basically are.
All right, let’s dive in!
Important Questions to Ask Yourself First
Do you plan on using the place yourself for part of the year and renting it out the rest of the year, or do you expect the property to generate income?
It’s important to be realistic about your motivations for buying a beach (or beach adjacent) house. If the plan is to use the property as a family vacation home and rent it out some of the year to offset the purchase costs, that’s great! Just don’t call it an investment.
If you expect the property to generate income, consider renting elsewhere when you want to get away for a few weeks, and focus on maximizing your ROI.
Do you live in Saint Augustine or out of town?
If you live out of town, hiring an experienced local property management team to take care of at least some of the work that goes into maintaining a short term rental is a must.
Even if you live in town, you may want to save yourself some hassle by hiring a property management team to list the rental on Airbnb and other platforms, keep it in great shape, and provide your guests with great customer service.
We cover that in depth later in this article. First, let’s take a high-level view of the short term rental market in Saint Augustine, and general tourism trends in Florida.
Local Market Conditions
According to Airdna, a website that compiles global Airbnb market data, Saint Augustine’s travel demand score is in the top percentile for Florida cities. Rental demand describes how often rentals are booked throughout the year by using a combination of annual occupancy and listing growth rates.
Saint Augustine’s rental demand score is a 79 out of 100. To put that into perspective with other comparably sized beach towns, Saint Augustine falls between Daytona Beach (73/100) and Key Biscayne (85/100), which enjoys the unfair advantage of being a dang island.
Saint Augustine has a high year-round occupancy of 71%, with a solid off-season rate of 52% that skyrockets to 94% in July.
96% of listings in Saint Augustine are for entire homes. (In Daytona Beach it’s 85% and in Key Biscayne it’s 95%.) The typical rental is a 2 or 3 bedroom with an average of 6 guests.
Saint Augustine has seen strong and sustained rental growth between Q3 of 2018 and Q3 of 2021, with only a slight dip during the pandemic. In other Florida vacation destinations, short term rental growth dipped lower and has not recovered as quickly.
Keep in mind that these numbers are for Airbnbs. VRBO and other booking platforms have been cutting into Airbnb’s market share of late, and traditional short term rentals still claim 10 % of the market. That said, we think Airbnb demand is a pretty good proxy for short term rental demand.
Trends in Florida Tourism
Florida tourism has been down overall since the pandemic began, but St. Johns County has been recovering faster than the state as a whole. That’s because tourism in Saint Augustine is focused mostly on leisure as opposed to business conferences and trade shows. Another reason St. Johns County is doing better is that you get more tourists arriving by car from other parts of the region/country.
The Florida Legislature’s Office of Economic & Demographic Research expects tourism to fully rebound by 2024. When that happens, Saint Augustine is poised to continue enjoying the upward trend it had been enjoying prior to 2020. (Florida saw a 5.6% increase in tourism between 2019 and 2018.)
Where To Invest
The best neighborhoods to invest in a vacation rental are undoubtedly on the beach. Crescent Beach, Butler Beach, Saint Augustine Beach, Anastasia Island, and Vilano Beach are some of our favorites.
Rentals in the Historic District and adjacent neighborhoods also enjoy good cap rates and low vacancy rates, and are close to beaches or on the water. A balcony apartment overlooking Saint George St (“America’s oldest street”) or a Lincolnville cottage on the riverfront could fetch just as much as a beach house. Heck, a farm house west of I-95 could perform really well on Airbnb, given the right marketing approach and wow factor.
Be aware that buying a home in a highly residential area for the purposes of renting it out short term could be a source of friction with your homeowner neighbors, especially if you open the home to large groups, or free on-street parking is scarce in the area.
Earlier this year, St. Johns County passed new rules regulating vacation rentals to address those homeowner concerns. Among the new rules are a ten-person cap on the number of occupants and the provision of at least one dedicated on-site parking space.
You can learn more about the new(ish) short term rental rules in Saint Augustine here.
What Is the Ideal Property Size?
The prevailing wisdom in the vacation rental industry is bigger is better. But is that true in Saint Augustine?
Saint Augustine doesn’t have the infrastructure to support huge conferences and showcases. It’s also worth mentioning again that St. Johns County recently capped the number of people who can occupy a single-family house at 10, to address homeowner concerns about noise and parking.
Homes with 5-bedroooms and up are typically going to be the top-earners in a variety of vacation rental markets. However, they make up a small share of the market. The prevalence of two and three bedrooms in the Saint Augustine vacation rental market suggests that they are a safe bet, and far more affordable to most investors.
Traditional or Airbnb?
Nowadays, more than 90% of reservations take place on vacation rental platforms like Airbnb, VRBO, HomeAway, Booking.com, etc. In terms of bookings, a traditional independent operator is going to have a hard time competing with the billion dollar ad budgets of the big platforms.
You could go the more traditional route and rent to a handful of tenants for a few months of the year. Your involvement in managing the property would be less intensive, though you may not turn a profit.
On the other hand, if you want to take advantage of the more lucrative returns of a solidly booked Airbnb rental, your expenses may be higher, and you will have to put in way more effort.
To stand out amid crowded listings sites, you will also want to invest in high-quality furniture, décor, appliances and amenities, including Cable TV, Wi-Fi and more. In Florida, central air is a must have amenity, followed closely by an outdoor pool with mosquito netting or some other type of enclosure.
A competitive Airbnb needs to be kept in tip-top shape all the time. Guests also expect immediate communication throughout the process, and getting good reviews is paramount to success.
If all of that sounds like too much work, you may want to hire a property manager to take care of day to day operations. However you plan on handling guest interactions and maintenance, keep in mind that success will be gradual.
Know the Laws Regulating Short Term Rentals in Saint Augustine
The laws regulating short-term rentals apply equally to traditional vacation homes and Airbnbs. We’ll start with recent laws specifically targeting the Airbnb market.
As of September 2020, Airbnbs in Saint Augustine must now register their properties and pay a fee. As with traditional short-term rental property owners, they must adhere to zoning, parking and inspection requirements.
The fee structure is based on the number of bedrooms, with a base rate of $294 plus $73 per bedroom.
Short-term rental operators, including Airbnbs, must also adhere to the following zoning requirements:
- RS-1 & RS-2 Zoning: These properties may be rented for periods of one week or longer with approved registration. No nightly rentals.
- HP-1 Zoning: may be rented on a monthly or greater period of time with approved registration.
- All other zoning districts: may rent on a nightly basis with approved registration.
If you’re planning on operating an Airbnb catering to very short stays, make sure you’re in an area that is zoned for nightly rentals.
You can find a property’s zoning here.
All of the legal information a short-term operator needs to know can be found here.
HOA Payments and Restrictions
Many neighborhoods in Saint Augustine are governed by homeowners associations. Do your homework before buying a property so you know what level of upkeep is required, and whether there are restrictions on what you can do with the property. Homes in Historic Preservation districts, for example, all have restrictive covenants.
In St. Johns County, the average effective property tax rate is 0.96%. Property tax rates are applied to the assessed value, not the appraised value of a home. Assessed value takes into account exemptions, including the Save Our Homes assessment limitation.
Property Management Fees
The typical range of property management fees for a beach rental is 25 to 40 percent of the monthly rental income. It really depends on how much of the work you’re outsourcing. For a full-service agreement, the property manager’s monthly fee may cover marketing, a cleaning service, and maintenance and repair. Some property managers may charge additional fees for booking, maintaining external amenities, and guest communications. Be sure to negotiate all of that upfront so you know what services are included and what costs extra.
A short term rental in Saint Augustine can be lucrative, especially if you are patient and willing to do the work to attract renters and keep them happy. Saint Augustine enjoys strong travel demand and relatively low property taxes. When searching for a property to buy, look at the rental rolls of other nearby rental properties. If they have good cap rates, then it’s a probably a good investment idea.