Buying a Second Home in St. Augustine: Vacation Rental Potential and Tax Tips

St. Augustine has a way of getting under your skin. Cobblestone streets, salt air, the Castillo de San Marcos glowing at sunset — it's no wonder so many of my clients fall in love on their first visit and start asking the same question: What would it take to own a second home here?

The good news is that America's oldest city is one of the most rewarding second-home markets in Northeast Florida. Between strong year-round tourism, a manageable cost of entry compared to Ponte Vedra, and Florida's tax-friendly climate, the math often works beautifully. Let's walk through what you need to know about vacation rental potential, the best areas to buy, and the tax angles that can make (or break) your return.

Why St. Augustine Works So Well as a Second-Home Market

St. Augustine pulls in more than 6 million visitors a year. That tourism engine — fueled by historic landmarks, Flagler College, wedding venues, and the beaches of Anastasia Island — keeps short-term rental demand high in nearly every season. Unlike some Florida markets that swing wildly between peak and off-peak, St. Augustine enjoys steady bookings thanks to mild winters, spring break crowds, summer beachgoers, and the famous Nights of Lights from November through January.

For buyers comparing coastal options, St. Augustine often offers a lower entry price than nearby luxury markets. If you're weighing your options, my guide to the best beachfront neighborhoods in St. Johns County for luxury buyers is a helpful next read.

The Best St. Augustine Neighborhoods for a Second Home

Historic District (Old City)

If you want a true vacation rental cash cow, the Historic District is hard to beat. Bed-and-breakfast-style homes near St. George Street and Aviles Street command premium nightly rates. Just know that historic homes come with quirks — older systems, preservation rules, and parking challenges. I dive deeper into this in my St. Augustine Historic District buyer's guide.

Anastasia Island & St. Augustine Beach

For beach lovers, Anastasia Island offers single-family homes, condos, and townhomes within walking distance of the sand. Rental demand here is incredibly consistent, and St. Johns County's short-term rental regulations are more flexible than in the city limits.

Davis Shores

Just over the Bridge of Lions, Davis Shores gives you waterfront and water-view homes minutes from downtown. It's a favorite for buyers who want walkability to restaurants without paying historic district prices.

Crescent Beach & Vilano Beach

Quieter, more residential, and often more affordable per square foot. Great for buyers who want a personal retreat that doubles as a rental during peak weeks.

Understanding Short-Term Rental Rules

This is where many out-of-state buyers get tripped up. Rules vary based on whether your property sits inside the City of St. Augustine, St. Augustine Beach, or unincorporated St. Johns County.

• City of St. Augustine: Short-term rentals (under 30 days) are restricted in most residential zones unless the property is grandfathered or located in specific commercial/transient zones.
• St. Augustine Beach: Allows short-term rentals with registration and a local business tax receipt.
• Unincorporated St. Johns County: Generally the most permissive, but you'll still need to register with the state and collect tourist development tax (the "bed tax").

Before you write an offer, verify the zoning and rental history of any specific property. This is one of the biggest reasons buyers reach out to me directly — a beautiful home in the wrong zone can derail your whole investment plan. Feel free to contact Drew if you want me to vet a specific listing.

Tax Tips Every Second-Home Buyer Should Know

I'm a realtor, not a CPA — so always confirm strategy with a tax professional. That said, here are the angles smart buyers explore:

1. The 14-Day Rule

If you rent the home for 14 days or fewer per year, the rental income is completely tax-free. This is a popular play for owners who want personal use plus occasional high-dollar rentals (think Players Championship weekend or Nights of Lights).

2. Mortgage Interest & Property Tax Deductions

If you use the home personally for more than 14 days (or more than 10% of rental days), the IRS treats it as a second home rather than a rental property. You can typically deduct mortgage interest and property taxes, similar to your primary residence.

3. Treating It as a Rental Property

If personal use is minimal, the home qualifies as a rental property. That opens up deductions for depreciation, repairs, management fees, cleaning, supplies, insurance, utilities, and even travel to check on the property.

4. Florida's Tax Advantages

Florida has no state income tax — a huge advantage for rental owners. However, you'll collect and remit Florida sales tax plus the St. Johns County Tourist Development Tax (currently 5%) on short-term stays.

5. 1031 Exchanges

If you eventually sell and want to defer capital gains, a 1031 exchange into another investment property can be a powerful tool — but the property must be held primarily for investment, not personal enjoyment.

What About Hurricanes and Insurance?

Coastal ownership comes with coastal responsibilities. Insurance costs in St. Augustine have climbed, and flood insurance is essential for many properties. Before closing, get firm insurance quotes — don't rely on the seller's old policy. My hurricane season home prep checklist walks through what every coastal owner should have in place.

Is a Second Home in St. Augustine Right for You?

The buyers who do best here approach it with clear eyes: they understand the zoning, run conservative rental projections, budget for insurance and maintenance, and choose neighborhoods that match how they actually plan to use the property. Done right, a second home in St. Augustine can deliver lifestyle, income, and long-term appreciation all at once.

When you're ready to start touring properties or want a custom rental projection on a specific listing, I'd love to help you buy a home in Northeast Florida that fits both your lifestyle and your investment goals.

Frequently Asked Questions