$40,976 a year on $205,750 in, a 16.3% cash-on-cash return

Erwin and Lilyana bought in Florida Panhandle (30A), the 30A corridor, one of the highest average daily rate coastal markets in the country. The purchase closed at $560,000.

Getting in cost $205,750. That is $56,000 of down payment, $13,200 in closing costs and $162,950 of furniture, linens, photography and everything else that has to be in the house before the first guest arrives.

The design budget is the line most buyers underestimate. It is not decoration, it is the difference between a property that books at the market rate and one that sits below it, and it has to be funded at closing rather than out of the first season's revenue.

Against that entry cost the property returns $40,976 a year after management, cleaning, supplies, utilities, insurance, property tax and debt service, which is a 16.34% cash-on-cash return.

For context on the market rather than this property: Destin entry prices run $600,000 - $1,400,000, average daily rates $290 - $540, occupancy 56% - 65%, and gross revenue $78,000 - $175,000. March through August, with spring break and summer carrying most of the year. Those are estimates assembled from closings and active comparables, not a projection for any specific house.

The tax position is where a purchase like this earns its keep for a high earner. A cost segregation study reclassifies part of the purchase price into five, seven and fifteen year property, which under current bonus depreciation rules produces a large first-year deduction. Whether that deduction offsets W-2 income depends on the seven day average stay test and material participation, both of which are facts about how the property is run.