Investing in the Vacation and Short-Term Rental Market on the Mississippi Gulf Coast

As of August 1, 2023

The vacation rental market has always held an attractive allure for investors, promising high yields, strong demand, and the potential for substantial appreciation. In this post, we’ll delve into the investment opportunities in the vacation and short-term rental market on the Mississippi Gulf Coast, with a focus on the charming cities of Ocean Springs, Bay St. Louis, Biloxi, Gulfport, and Long Beach.

The Lure of the Mississippi Gulf Coast

The Mississippi Gulf Coast, a glittering string of coastal cities nestled against the Gulf of Mexico, has a unique charm that has attracted visitors for generations. It boasts a vibrant blend of southern hospitality, rich history, a unique art scene, delectable seafood, sandy beaches, and a thriving casino industry that is the 5th largest in the nation. Notably, the region has become a year-round vacation destination, meaning a steady stream of tourists for potential short-term rental owners.

Ocean Springs: A Fusion of Culture and Nature

Known for its thriving arts scene and natural beauty, Ocean Springs is a mecca for culture lovers and outdoor enthusiasts alike. The town hosts several festivals throughout the year, like the Peter Anderson Arts & Crafts Festival, which draws large crowds and creates high demand for vacation rentals. With its historic downtown district filled with shops, galleries, and eateries, Ocean Springs offers a charming Southern experience that keeps visitors returning.

Bay St. Louis: Quaint and Historic

Bay St. Louis, a small town with historic appeal and distinctive architectural styles, is another great choice for investors. It’s known for its resilience post-Hurricane Katrina and has since become a booming hub for tourists. The unique combination of history, beauty, and modern amenities makes it an attractive destination for vacationers, increasing the demand for short-term rentals.

Biloxi and Gulfport: Gaming and Beachfront Leisure

Biloxi and Gulfport, famous for their casinos and expansive beachfront, attract tourists from all over the country. Biloxi’s Beau Rivage Resort & Casino and Hard Rock Hotel & Casino are significant tourist draws, as is the Island View casino in Gulfport, creating a consistent demand for nearby accommodations. These cities also offer a variety of water sports and fishing opportunities, making them popular vacation spots, especially in the summer months.

Long Beach: A Quieter Beach Town

Long Beach, a quieter, more residential community, offers a peaceful beach experience. It’s an ideal destination for families and people seeking a low-key vacation away from the crowds, enhancing its appeal for short-term rentals.

The Pros of Investing in the Mississippi Gulf Coast

1. High Demand: The aforementioned cities’ unique offerings ensure consistent demand for vacation rentals. From cultural festivals to beachfront activities and the thriving gaming industry, there’s always something drawing visitors to the area.

2. Attractive Return on Investment (ROI): Given the high occupancy rates, especially during peak seasons, investors can expect an attractive return on investment. One event example is Cruisin the Coast. This event is held during the first week of the October and draws a very large crowd for an entire week. There were 9,600 classic cars registered in 2022.

3. Diversified Investment: The area’s mix of beach towns, gaming hubs, and cultural hotspots provides a diversified investment opportunity.

4. Rising Property Values: Property values along the Mississippi Gulf Coast have been rising steadily over the past few years. This trend is likely to continue, suggesting promising appreciation potential for real estate investors.

The Cons of Investing in the Mississippi Gulf Coast

1. Seasonal Fluctuations: While these cities attract visitors year-round, there are still peak and off-peak seasons. Occupancy rates can drop during the quieter months, impacting short-term rental income. The high season runs from Memorial Day weekend to Labor Day weekend, with the aforementioned Cruisin the Coast event being the exception to the low season. Many short-term rental investors rent to snowbirds coming south in the winter at reduced rates.

2. Maintenance Costs: The Gulf Coast’s climate can take a toll on properties, and maintenance costs may be higher than in less harsh environments.

3. Regulatory Changes: As with any short-term rental market, there’s always the potential for changes in regulations. While the current regulatory environment is generally favorable, changes could impact future profitability. Every city on the coast has a different view of vacation rentals, and thus each has its own rules and regulations. Due diligence is a must.

4. Potential for Natural Disasters: The Gulf Coast is prone to hurricanes, which could lead to property damage and interruption of rental income.

A Look at the Data as of August 2023

AirDNA Study on Top Vacation Rental Markets

According to a study conducted by AirDNA, the Gulfport-Biloxi region has been recognized as one of the top spots in the United States for vacation rentals according to a Sun Herald travel article The study evaluates vacation rental markets based on rental demand, revenue growth, and “investability,” which measures the expected income of a property relative to its cost.

AirDNA’s investor score for the Gulfport-Biloxi region is an impressive 88, indicating a strong potential for profitability in short-term rental investments. The study highlights several factors contributing to the area’s high score, including a desirable Gulf of Mexico location, numerous casinos, excellent restaurants, and other attractions that draw tourists to the region.

The average home value in the Gulfport-Biloxi area is around $155,000, and the occupancy rate stands at 70%. Based on these figures, property owners could potentially earn a profit of around $44,000 annually at a daily rental rate of $196 according to AirDNA. In our opinion, the average price cited is for vacation rental properties because the average home price for the area is over $275,000.

Demand and Revenue Figures

The AirDNA study reveals that Gulfport rentals experience high demand, with an average monthly rental home revenue of $3,106. In Biloxi, the annual rental occupancy rate averages 69%, with revenue reaching an average of $2,425 per month. Additionally, the study identifies Ocean Springs and Long Beach as areas experiencing high demand, with the highest short-term rental occupancy rate in the past year standing at 68%, according to the Sun Herald.

Comparison to Other Top Rental Markets

The Sun Herald article goes on to state that, when compared to other top vacation rental markets in the U.S., the Gulfport-Biloxi metro area holds its own. It ranks among the Top 5, alongside Slidell, Louisiana; Chattanooga, Tennessee; Kenai Peninsula, Alaska; and the No. 1 spot, Maui, Hawaii. While Maui leads the list with an investor score of its own, the Gulfport-Biloxi region’s performance remains competitive, making it an attractive option for those looking to invest in short-term rentals.

Local Planning and Zoning Initiatives

WLOX news reported that the city of Biloxi is actively looking into the future of its approach to short-term rentals. The Biloxi Planning Commission is considering the creation of overlay districts along Highway 90, which is a major commercial quarter in the city. The aim of these zones would be to regulate and facilitate short-term rental operations in specific areas, reducing the number of individual STR applications the city receives.

However, residents have expressed concerns about the proposal, stating that some of the designated areas for short-term rentals are already heavily residential and that the plan should be implemented on a more limited scale. The Biloxi Planning Commission is yet to approve any changes, and the city intends to host a public hearing to gather community input before finalizing any decisions.

Conclusion

In conclusion, the Mississippi Gulf Coast offers a compelling opportunity for vacation rental investors. Despite the potential downsides, the combination of a thriving tourism industry, rising property values, and a diversified range of investment opportunities across different cities makes it an investment opportunity well worth considering. Data indicates a strong demand for short-term rentals in the region, with the potential for profitable returns on investment. Call us at 228-215-1861 for more information on short-term investment opportunities.

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