When to consider purchasing vacation STR

Question

As the rental season for a beach area such as Panama City Beach or Myrtle Beach is nearing the end, do prices for properties drop going into the off season?

If you were considering a property, would it be best to wait until say January, so that you dont carry a mortgage into the offseason without much rental income, but enough time to ensure it is set up and ready to go.

Daniel Murphy · Answer

This is a tough question to weigh.  Ideally, you have cash reserves to float your new purchase through the slow season.

We just purchased our first STR in Jan. We were lucky enough to hit the end of the peak season & were booked for the first few months.  Not only did it help financially, but very quickly we ramped up to 30+ five star reviews.  I think that and a combination of other things really helps us to navigate our first slow season.

Starting out during the slow season would mean reviews come slower. This isn't necessarily horrible, it's just something to factor in.  We're a review society...

The pro's > You'd have more time to get your place set up & dialed in.  There are also a lot of learning opportunities during those first few months of being a host. Any "mistakes" could be amplified during the peak season, but they could be relatively minor if you experience them during the slow season.

Ultimately, if you have cash reserves to float you through your first slow season, I would be more focused on finding the right deal & the right property over the seasonality of the purchase...

Real Estate is a long term game...

Collin Hays · Answer

I would be much more concerned with the value of the buy rather than what season it is.  You will probably have it for a number of years, so a few months either way shouldn't move your needle.  Focus on the quality of the property, rather than macro events.

Michael Weigum · Answer

@Trent Reeve

Great question. I agree with most have said here. I've had this conversation with investors in Myrtle Beach quite a bit lately, do you wait for the prices to come down a little more and risk the interest rates going up, or do you buy now and lock in your rate but maybe pay a little more on the purchase price? It's all personal preference.

Five months ago prices were climbing and we had to put offers in right after it hit the MLS and there were multiples most times. Now, we have a lot of inventory and as @Myrtle Mike Thompson said, average days on the market has gone up and pricing has pulled back. Much more room to negotiate with sellers and get a good deal. I'm focusing on units in the resorts that have done the best revenue this year for our company and help our investors find the right deal. If the strategy is to buy and cashflow for 3 to 5 years and move on, buying now versus in December isn't really that important. My personal units did very well last year in the off season. So well I had a hard time getting in to do the upgrades I wanted. Good problem to have I guess.

Kevin Pillow · Answer

There are pro's and con's to buying in the off season vs the on season depending on the condition of the property. Here are some observations I've seen clients have to deal with when buying in the off season.

1. Easier to get into properties for showings/inspections/repairs during the contract to close phase.2. Sellers a bit more flexible on pricing/contingencies. I think it's because many of them want to 1031 into something else. 3. Don't have to worry about losing out on the most profitable time of the season due to getting a property ready if it is not turnkey.

When clients buy in the on season they can step into a great cashflow situation where they are making profits right away but that usually only works out best when the property is already furnished and is already being used as an STR. A perk of being in a vacation market is many of the properties used as vacation rentals, the sellers are willing to let the furniture convey.

John Underwood · Answer

A beach front property should still do pretty well in the off-season. You just have to buy right.

Scott E. · Answer

The same seasonality exists in most markets. Out here in Phoenix people aren't visiting much during the summer months when the weather regularly gets above 110 degrees. But October - May the STR business is booming.

My recommendation is to keep your eyes out and when you find the right deal, in the right location, at the right price, you buy it.

If you buy a deal on the off-season it might actually be a good thing. This will give you time to furnish the unit, get the listing up, and get yourself some 5 star reviews. That way when the busy season returns, you will have an established listing that will rank higher on airbnb's algorithm.

Nathan Gesner · Answer

I can't speak to those specific markets, but property prices generally don't adjust much based on seasons. With a vacation rental, you're purchasing based on summer performance, not the performance of the current month.

The bigger issue is that real estate prices are unhinged from reality. The income doesn't justify the price the same way it did two years ago. I think this is particularly true in markets that are hot for short-term rentals. I would wait to see how far the market drops before jumping in.

Brandon Labordus · Answer

I would not buy at all based on seasonality. Most people who are selling in those areas know the stats as well as you; they are more inclined to dump a property after summer season, and far less inclined to sell immediately before high season.

Know what the numbers are in the down months, and work this into your purchase decision. Have cash reserves to get thru low season and relax with the knowledge that you will not make serious money until the next high season. If one low season will break this deal, it might not be a deal you worth doing.

Jossalyn Wallace · Answer

Hi! Im in the Florida Panhandle and as Kevin said, there is Pros and Cons in each scenario. If I were considering a property here, I would not wait until a certain time or season. You can find good deals no matter what the climate. I would always be on the look out and if the numbers make sense, they make sense!  Also, the last couple of years the vacancy remains low here even in off season.

Myrtle Mike Thompson · Answer

@Trent Reeve here in the Myrtle Beach market list prices aren't really affected by seasonality.  Last year was an anomaly but we saw pricing actually increase rapidly through the off-season with multiple offers on almost every listing.  I think we hit the peak last month.  Average days on market has shot up and pricing has pulled back a percentage point or two.  A lot of investors are now in a 'wait and see' holding pattern, cautious about the economy in general and hoping to snag a deal in the winter if prices drop.  The potential problem I see with that is if everyone jumps back in at the same time, and inventory is somewhat diminished from owners having already cashed out, it may become quite difficult to secure a property.

When to consider purchasing vacation STR

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