SFR and small multi-family no longer viable?

Question

I just read the article by Stephen Sorensen on the BP blog about vacation rentals.  He made the following surprising statement:

“So, today as real estate markets all over the country are approaching market highs, prices have risen to the point that both single family residential and small multifamily residential properties are no longer viable investments for just anyone. Instead they’re limited to those with the deepest pockets. As such, the vacation rental space is quickly becoming a popular place for investors to look for the returns they need.”

So I guess all of us looking to begin investing with SFR or small multi family just need to give that idea up, unless we have the “deepest pockets”??  Thoughts from the more seasoned pros here?

Mike Lattier · Answer

@Michael Seeker  thanks Michael. I thought that what the writer said didn’t ring true. Thanks for your insight and taking time to reply.

Michael Seeker · Answer

@Mike Lattier - that is nonsense.  Overall, the RE market is hot so good deals are harder to come by.  We operate in the small multi space and have continued to find deals that meet the same criteria we used 3-5 years ago.  They are fewer and farther between, but they still exist if you're patient and know what you're looking for.

I suspect returns in the SFR space are getting crunched due to being in a sellers market (higher sales prices = lower returns for investors) along with the added demand from investors who are buying SFR's to use as short-term rentals.

The vacation rental model is sexy on the surface, but most people ignore the fact (or simply don't understand/know) that these are very cyclical.  Everybody thinks AirBnB's will always make more than a comparable long-term rental, but that completely discounts the cyclicality of that business model, not to mention glossing over the much higher operational costs and efforts.

Times are certainly interesting, but to say that SFR's and small multis are not viable is a very broad and incorrect statement.