ERP — The One Number
What ERP is
Section titled “What ERP is”ERP (Estimated Rental Performance) = gross annual rent ÷ purchase price. It’s the first number every OBX agent and property manager quotes. A $1M home grossing $100k = 10% ERP.
- 10%+ — “pretty darn good” in local parlance.
- 7–9% — solid, common on well-run event homes.
- 5–6% — typical of pretty oceanfront trophies.
- <5% — a lifestyle purchase wearing a rental costume.
HIGH
ERP vs. yield — don’t confuse them
Section titled “ERP vs. yield — don’t confuse them”ERP is a gross number (before costs). Your unlevered yield is ERP after the ~55% cost stack — roughly ERP × 0.45. So:
| ERP | ≈ Unlevered yield | vs. 8% constant |
|---|---|---|
| 6% | ~2.7% | deep negative leverage |
| 8% | ~3.6% | negative leverage |
| 10% | ~4.5–5% | negative, but reachable at ~25–30% down |
| 11%+ | ~5.5–6.5% | near-neutral at ~20% down |
The models bear this out with live data: the ERP ~10.6% Nags Head oceanfront nearly pencils at 20% down; the ERP ~6.7% Duck oceanfront needs ~60%.
Why bedrooms are the cheat code
Section titled “Why bedrooms are the cheat code”ERP is a ratio, and its two halves are driven by different things:
- The numerator (rent) is driven by capacity — how many families/heads the house sleeps. A home that sleeps 24 commands multiples of one that sleeps 8.
- The denominator (price) is driven mostly by land and location — the oceanfront lot.
Adding bedrooms to an interior or soundside lot is cheap relative to adding oceanfront. So you can pump the numerator without proportionally pumping the denominator → ERP rises with bedroom count. That’s why 8–12BR event homes out-yield small oceanfront trophies, and why they’re the easier cost-neutral target. MED
The caveat: occupancy is roughly similar across sizes, so the win shows up as higher rate per booking, not more bookings. And past a point, the ultra-trophy ($4M+) reintroduces a big denominator — note in the Corolla models how the $2.25M 10BR out-yields the $4M 11BR.
Next: the three markets, mapped →.