24204 Caribbean Ct Lot 5, Rodanthe, NC 27968

# Deal Memo: 24204 Caribbean Ct Lot 5, Rodanthe, NC 27968 --- ## Executive Summary **Verdict: 🔴 PASS — Confidence: High.** The projected revenue of $172,324 is catastrophically disconnected from actual comparable performance. The five closest comps (all 6BR properties in the immediate market) show TTM revenues ranging from $19,135 to $69,776 — meaning the projection exceeds the *best-performing comp by 146%* and the comp median by approximately 270%. This deal's headline metrics are fiction until proven otherwise. --- ## Financial Snapshot | Metric | Projected Value | Adjusted Estimate* | Benchmark | Assessment | |--------|----------------|-------------------|-----------|------------| | Cap Rate (STR) | 15.83% | ~3.2% | >8% target | 🔴 | | Cash-on-Cash | 42.45% | Negative | >10% target | 🔴 | | DSCR | 2.61 | ~0.56 | >1.25 target | 🔴 | | Monthly Cash Flow | $6,469 | -$2,460 | Positive | 🔴 | | GRM | 4.6 | 17.4 | <100 target | 🟢 | *\*Adjusted estimates use $45,700 annual net revenue (comp-aligned gross ~$55,000, 83% net ratio), same debt service assumptions.* **The projected metrics are meaningless.** When recalculated using comp-supported revenue, every critical metric fails. The DSCR of ~0.56 implies the property **cannot service its debt** — the investor would need to subsidize the mortgage by approximately $2,400/month. --- ## STR Income Analysis The projections assume ~$14,604/month net revenue, implying roughly $172K gross annually. This requires roughly $1,066 ADR at 44% occupancy — the *market averages*. However, the actual comps tell a devastating story: - **Comp median TTM revenue: ~$37,446** (5 direct 6BR comps) - **Comp average occupancy: ~19%** (not the market-wide 44%) - **Comp average ADR: ~$529** (not $1,066) The market averages are heavily skewed by a small pool of 25 listings where top performers (likely premium oceanfront or highly-reviewed properties) pull the mean far above what a new, unreviewed listing can achieve. A new listing in Rodanthe should conservatively plan for **p25 performance ($89,938 gross)** for Year 1, with p50 ($141,186) as an optimistic Year 2+ target. Yet even the p25 figure appears generous given the actual comp TTM data showing revenues far below that. **Platform fees** (Airbnb ~15% host+guest combined, cleaning, property management at 20-25% for OBX market) would reduce a realistic $55,000-$70,000 gross to $40,000-$55,000 net. Annual debt service on $636K at ~7% is approximately $50,700. **The math does not work.** --- ## BRRRR Assessment The BRRRR metrics are weak even on paper — 15.9% equity recaptured and $153,733 cash remaining in the deal is poor capital recycling. At a realistic ARV of $914,250, the 75% LTV refi yields $685,688, barely covering the $636K existing loan and closing costs. More critically, **no lender will approve a DSCR refi on a property generating sub-1.0 DSCR.** DSCR loan products in the STR space require 1.0-1.25 minimum coverage. This BRRRR is dead on arrival. --- ## Market Context Rodanthe sits on Hatteras Island in the Outer Banks — a **highly seasonal, storm-vulnerable barrier island** market. Demand is concentrated in June-August (12-14 weeks), with shoulder seasons offering minimal bookings for non-premium properties. The area gained cultural cachet from *Nights in Rodanthe* but remains a tertiary OBX market behind Corolla, Duck, and Nags Head. The $795K purchase price for a 6BR on a lot (likely new construction or recent build) is in line with OBX pricing, but rental demand increasingly favors oceanfront over soundside or interior lots. Median home values and income data are unavailable, which limits deeper market analysis, but the competitive set of 25 active listings with chronically low occupancy (15-34% for comps) signals **oversupply relative to demand in this micro-market.** --- ## Risk Factors - 🔴 **Revenue Overstatement** — Projections exceed comp-verified performance by 2.5-9x. No verified actuals provided; AirROI market averages are misleading for this micro-market. - 🔴 **Debt Service Coverage Failure** — Realistic revenue cannot cover ~$4,225/month mortgage, creating immediate negative cash flow. - 🔴 **Hurricane & Erosion Exposure** — Rodanthe is among the most vulnerable locations on the East Coast; insurance costs are escalating rapidly (often $8,000-$15,000/yr for coastal OBX), and properties have been condemned due to shoreline retreat. - 🟡 **Seasonality Concentration** — 70%+ of annual revenue likely compressed into 14 weeks; one poor summer (weather, pandemic, road closure on NC-12) devastates annual returns. - 🟡 **New Listing Ramp-Up** — With 0 reviews, expect 6-12 months of sub-market ADR and occupancy to build traction, further depressing Year 1 returns. --- ## Recommendation **Do not proceed at $795,000.** The revenue assumptions powering this deal are contradicted by every available comp. To achieve a 10% cash-on-cash return with realistic revenue of ~$55,000 net, the purchase price would need to be approximately **$325,000-$375,000** — a 50%+ reduction that reflects the actual income this property is likely to produce. Alternatively, the investor would need to bring the property to consistent p75+ market performance ($194K+ gross), which requires premium amenities, oceanfront positioning, and a mature review profile — none of which are guaranteed. **Conditions to reconsider:** (1) Seller provides verified trailing 12-month revenue from an existing STR operation showing $140K+ gross; (2) Purchase price renegotiated below $475,000; (3) Independent insurance quote confirms annual premiums under $10,000. **Ideal investor profile:** This deal, as presented, suits no prudent investor. At a corrected price, it would fit an experienced OBX operator with an existing property management infrastructure and high risk tolerance for coastal assets.