Thinking about buying a beach rental in Brunswick County and wondering what a “good” cap rate looks like? You’re not alone. With strong summer demand, higher coastal expenses, and shifting town rules, it can be tough to compare properties with confidence. In this guide, you’ll learn what cap rate is, how to estimate it using local assumptions, and how to stress-test your numbers for Holden Beach, Ocean Isle Beach, and Sunset Beach. Let’s dive in.
Cap rate basics, plain and simple
Cap rate is the annual net operating income (NOI) divided by the purchase price. It shows an unlevered yield so you can compare properties without factoring in your mortgage.
- Formula: Cap rate = NOI / Purchase price
- NOI is your gross rental income minus operating expenses. It excludes mortgage payments and capital expenditures.
- For vacation rentals, cap rates can get skewed by seasonality, owner usage, and higher operating expenses. Use consistent, realistic assumptions when you compare options.
Build your Brunswick County NOI
Your NOI starts with revenue and ends with operating expenses. Being realistic here is what makes your cap rate meaningful.
Estimate revenue by season
Short-term rentals on the Brunswick coast are highly seasonal. Summer weeks often carry the highest average daily rates (ADR) and occupancy. Spring and fall can bring steady shoulder demand, while winter is typically slower.
- ADR varies by proximity to the beach, bedroom count, condition, and amenities like a pool or modern interiors.
- Occupancy is concentrated in peak months and around holidays and events.
- Other income can come from cleaning fees, pet fees, late check-ins, parking, or reservation fees.
Build a monthly revenue model that reflects peak, shoulder, and off-season expectations. Use conservative, base, and upside scenarios so you understand your range of outcomes.
Include realistic expenses
Beach rentals carry more line items than many long-term rentals. Budget them one by one.
- Management fees: 15–35% for full-service vacation rental management. Many local managers fall around 20–30%.
- Platform and booking fees: Often 3–15% depending on channels and who pays which fees.
- Cleaning and turnover: Priced per stay. You may pass fees to guests, but include occasional unpaid or discounted cleanings and supplies.
- Maintenance and repairs: Consider 2–5% of gross revenue or a reserve. Salt air increases wear on decking, HVAC, and exterior finishes.
- Utilities: Owners usually pay electricity, water, and internet for short stays. Expect higher usage during peak months.
- Property taxes: Use the Brunswick County tax bill or assessor data for accuracy.
- Insurance: Budget for homeowners plus wind or hurricane coverage, and often separate flood insurance. Costs are higher on the barrier islands and vary with elevation and flood zone.
- HOA dues: Confirm whether short-term rentals are allowed and whether there are special assessments.
- Reserves for replacement (CapEx): Set aside funds for big-ticket items like HVAC, roof, and appliances.
- Licensing and occupancy taxes: Confirm town registration, inspections, and local occupancy or “bed” taxes. Ensure proper collection and remittance.
Local checklist for Holden, Ocean Isle, and Sunset:
- Confirm municipal short-term rental rules and registration steps for the specific town.
- Pull the current property tax bill and parcel history from the county.
- Get quotes for wind, hurricane, and flood insurance. Verify flood zone and elevation.
- Account for salt-air maintenance and potential storm-related expenses.
Sample cap rate calculation (illustrative)
Below is a simple example to show how the math works. These numbers are hypothetical. Always replace with real quotes, comps, and property specifics.
- Purchase price: 700,000 dollars
- Estimated gross rental income: 80,000 dollars
- Operating expenses: 40,000 dollars
- NOI: 40,000 dollars
- Cap rate = 40,000 / 700,000 = 5.7%
If you plan to finance, your cash-on-cash will depend on your mortgage. For example, with 25% down and annual debt service of 40,000 dollars, pre-tax cash flow would be 0 dollars and cash-on-cash would be 0%. Again, this is illustrative. Use your actual mortgage quote and real revenue and expense inputs.
Step-by-step: Evaluate a beach rental
Use this simple workflow when you analyze a property in Brunswick County.
- Gather facts: price, beds/baths, age, distance to beach access, parking, pool, HOA, elevation and flood zone, and recent renovations.
- Build your revenue model: estimate monthly ADR and occupancy by season. Add other income where applicable.
- Build your expense model: plug in actual taxes, insurance quotes, HOA dues, and manager quotes. Include utilities, repairs, cleaning, platform fees, and reserves.
- Calculate NOI for conservative, base, and upside scenarios.
- Compute cap rate: NOI divided by purchase price for each scenario.
- If financing, run cash-on-cash: subtract annual debt service from NOI and divide by your total cash invested.
- Stress-test: reduce ADR and occupancy and increase insurance or maintenance to see where cash flow turns negative.
Local factors that move your cap rate
Brunswick County’s coast has unique drivers that can shift returns meaningfully.
- Flood and storm exposure: Flood zones, elevation, and historical storm impacts influence insurance costs and expected reserves.
- Insurance dynamics: Coastal insurance can be costly and volatile. Obtain quotes early and confirm deductibles for wind and storm surge.
- Town regulations: Rules differ by municipality. Verify registration, minimum stays, occupancy limits, parking, and noise policies for Holden Beach, Ocean Isle Beach, and Sunset Beach.
- Location features: Proximity to beach access, walkability, private pools, and updated interiors can lift ADR and occupancy.
- Competition and listing mix: Professional management and guest expectations in your micro-market affect achievable rates.
- Occupancy tax compliance: Know which party collects and remits taxes and confirm you are set up correctly.
What is a “good” cap rate here?
It depends on your goals and risk tolerance. A cap rate around 5% on a coastal vacation home may be reasonable if you value personal use and expect long-term appreciation. Investors focused solely on income often target higher unlevered yields and may adjust their offers to hit a desired cap rate. Compare at least three properties on a like-for-like basis and review both base and downside scenarios.
Stress-test your numbers
Your plan should hold up if a storm hits or bookings soften. Try these quick tests:
- Cut peak-season ADR by 10% and occupancy by 10%.
- Add 15–25% to insurance and maintenance.
- Remove one or two peak weeks to simulate an unexpected repair.
If your model still produces acceptable cash flow and a cap rate that meets your target, your deal is more resilient.
When to bring in local pros
You can save time and avoid costly surprises by looping in experts early.
- Ask a local agent for recent comparable sales, active listing context, and short-term rental performance ranges.
- Request a 12–36 month rental projection that shows monthly ADR and occupancy by season, with fee assumptions.
- Confirm municipal short-term rental rules, registration steps, and any required inspections for the property address.
- Get introductions to licensed property managers for fee quotes and expected occupancy.
- Line up insurance brokers for accurate wind and flood quotes and to review deductibles.
If you want a second set of eyes on a property or a tailored projection, connect with the local team at Tatum Realty LLC. We can help you validate comps, model NOI, and coordinate the right coastal experts so you can buy with confidence.
FAQs
What is cap rate for a Brunswick County beach rental?
- Cap rate is your property’s net operating income divided by the purchase price. It shows an unlevered yield to compare rentals in Holden Beach, Ocean Isle Beach, and Sunset Beach.
How do I estimate NOI for a Brunswick vacation rental?
- Start with seasonal ADR and occupancy to build annual revenue, then subtract operating expenses like management, platform fees, cleaning, utilities, insurance, taxes, HOA, maintenance, and reserves.
What expenses are higher on Brunswick County barrier islands?
- Expect higher wind and flood insurance, increased exterior maintenance from salt air, and potentially more frequent deck and HVAC upkeep compared to inland homes.
How do town rules affect beach rental cap rates?
- Municipal rules on registration, minimum stays, occupancy limits, parking, and noise can influence achievable nights and costs, which directly affect NOI and cap rate.
What is the difference between cap rate and cash-on-cash return?
- Cap rate ignores financing and compares properties on an unlevered basis. Cash-on-cash includes your mortgage and shows your return on the actual cash you invested.
How should I stress-test a Brunswick beach rental deal?
- Lower ADR and occupancy in your model, increase insurance and maintenance, and remove peak weeks for potential repairs to see if cash flow still meets your goals.
