Behind the Scenes of a Coastal Development: What I Learned About Building for Vacation Rentals
By Meredith Amon, Licensed In Alabama and Florida
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Property Development on the Gulf: What You Need to Know About Vacation Rentals in Today’s Market
Not every coastal development idea translates easily into reality—especially in Orange Beach, Alabama, where city regulations, shifting tourism patterns, and insurance challenges can complicate even the most promising plan.
This week, I sat down with a developer, city planning contacts, and stakeholders to evaluate the feasibility of building townhomes for vacation rentals on a multi-lot property just steps from the Gulf. Here's what I walked away with—and what it could mean if you're considering a similar investment.
Development Roadblocks: Access, Parking & Setbacks
From the very beginning, we hit some hurdles. While the property had potential for 16 units, the city capped it at 14 due to access limitations and tight parking allowances. The buildable footprint—around 30 by 45 feet—leaves little room for flexibility. With 25-foot front setbacks and 30-foot rears, we’re squeezed on every side. And let’s not forget the Coastal Construction Line—nothing can cross it.
Orange Beach’s planning department has already fielded 10–15 conversations on this parcel. They’ve expressed a preference for vacation rentals over commercial development, but parking remains the #1 concern.
Even staircases and porches must follow strict setback rules. We’re also still working to clarify whether a pool can be included in the front setback—a key feature buyers want when investing in beach-area vacation homes.
A Tougher Rental Market and Insurance Reality
Here’s something that might surprise you: the vacation rental market—especially for condos—is softening. Condo inventory is sitting at around 14 months. Houses are holding value better, but insurance is causing serious concern. Flood and hurricane policies both cap out at $250,000, and claims often take years to resolve due to disputes between wind and water damage.
Some homeowners are choosing to self-insure altogether. If you’re planning to build, I suggest weighing these long-term insurance realities before committing to condo-style development.
Seller Insight: Pricing and Property History
The owner of this property originally bought nine lots prior to the nearby Ocean Edge development. He’s kept a duplex and is now ready to sell the rest—currently priced at $4.7 million (about $600K per lot). But based on today’s climate, the property may be realistically valued closer to $500K per lot.
Previous contracts fell through. One buyer estimated the site was overpriced by as much as $1.2 million, especially without beach access. To gain access, two lots might need to be sacrificed—driving up the cost per remaining lot even further.
Tourism, Airport Growth & the Bigger Picture
The newly expanded airport in Gulf Shores is a wildcard. Currently, only Allegiant Airlines flies in, primarily serving Midwest states. Only about 2% of vacationers fly in right now, but that could change.
Orange Beach is growing, and more people are discovering it—just like they did Fairhope a few years ago. The tourism board is investing heavily in marketing. And while it’s less crowded than Destin, we’re quickly becoming a major destination.
Alabama vs. California: A Reality Check for Builders
One of the more refreshing takeaways from the meeting was how much easier it is to build in Alabama compared to California. While it can take over a decade to get a coastal building permit in California, Alabama permits are processed much more efficiently—making our coast an appealing option for builders seeking quicker ROI.
But three-story builds come with extra commercial code requirements, adding roughly $43,000 in compliance costs. So, keep that in mind if your design includes elevated townhomes.
What’s Next? Action Items in Motion
We’ve already set follow-ups to investigate the viability of placing pools in front setbacks, revisit previous site plans, explore potential variances, and meet with city planners to better understand how this project could move forward.
These are the kinds of behind-the-scenes steps that are often invisible to buyers and investors—but they’re critical. If you’re looking at land with development potential on the Gulf Coast, this is where the real work begins.
If you have your eye on a site and want help evaluating its potential, I’d love to offer my perspective. With over 20 years of experience in luxury home sales and deep knowledge of Gulf Coast building regulations, I can help you take the next step with clarity.
Explore More Gulf Coast Development Opportunities →
Meredith Amon is a Gulf Coast Expert Real Estate Advisor, licensed in Alabama and Florida. She specializes in helping buyers and sellers navigate the buying and selling of homes along the Gulf Coast.
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