BEST AREAS FOR STR's!?!?!?

[Brandon Elliott]

I have a question for my fellow STR specialists. First thought a story! :-)I recently traveled to Omaha NE and found out the Airbnb I was staying at was clearing $50K/ year!!! (It was a SFH with 4beds and 2 baths). I live in CO and have a friend whom is STR'ing a triplex and is clearing $50K! A triplex vs a SFH!!!! That is Crazy to me how big of a difference between the two properties but getting essentially the same dollar return. :-D

With that context my question is, where are you invested in and what kind of ROI are you getting from your investment (in dollars).

(If you are comfortable please comment answers to these questions below).

- Style of home.

- The ROI in dollar value.

- The city or area where your property is located.

- How you chose that location and what research you did before buying.

[Michael Baum]

We look in areas I would like to vacation. The area will dictate the style. We are looking for around 20% give or take. We have a lake house in Harrison ID. I grew up there. Lake Coeur d'Alene is a fantastic lake and getaway. We get people from all over the US to stay.

[Ryan Ridge]

I might be biased, but as close to a year-round attraction as possible. Try to avoid markets with off-seasons or at least ones with shorter seasons. There's some seasonality here in Orlando with back-to-school, but it quickly picks up again near the holidays.

[William Beck]

I'll copy / paste from a former thread I replied to a year and a half ago with some updates.

I answered this question and analyzed vacation rentals almost every day for a few years in my former job. Based on that experience I would consider the following places to look.

My personal top picks:
top 3 investor markets - Pigeon Forge/Gatlinburg, TN; Poconos, PA; Branson MO (I own here and I'm a realtor here). 

Then the rest:

Hot Springs, AR.
Broken Bow, OK 
Destin, FL
Cape Coral, FL.
Blue Ridge, GA.
Phoenix Metro, AZ

I personally plan to own in the above mentioned areas

Honorable Mentions:

Hilton Head, SC

Myrtle Beach, SC

Massanutten, VA

Killington or Southern, VT by ski areas

Granby/Grand Lake, CO

Lake Travis or Lake Granbury TX

Lake Havasu City

Cocoa Beach, FL

Traverse City, MI

Black Hills, SD

Island Park, ID

[Monica Mejia]

Hi Brandon!! So cool to hear, I recently traveled to Omaha myself and stayed in an amazing Airbnb - It definitely sparks some great questions like these ^

I personally own/ operate 2 short term rentals in CO. One is an Arvada property that I lease for Airbnb arbitrage and the other is in Westminster which I purchased specifically for Airbnb. These have collectively brought in about $104k in revenue YTD. The legislation in CO differs from county to county so it's super super important that you check what the location ordinances are.

I personally chose those cities because they are STR friendly, only requiring either a permit or license. I initially wanted to be in Denver county but STR's are not allowed unless the intent was for it to be my primary residence, which it was not. For market research I used softwares like AirDNA and Mashvisor to look at average occupancy rates, revenue projections, comps, and market grades. Both Arvada and Westminster are given A's in the Airbnb market.

One thing to note is that seasonality is very normal. In Colorado it is actually a lot less because for example, the "slow" months are considered to be from Dec-March. Within this time frame, my Airbnbs each did about 8-13k/month because of the Skiing season. I got lots of guests who wanted to Ski in the mountains but also be near the city of Denver which meant that Arvada & Westminster were almost like a middle point between the two. Really catering to all types of traffic there(:  Hope this provides a bit more insight!!

[John D.]

Lake Havasu is down huge from last summer, with lots of new listings and less demand.......hoping some folks get out of the STR biz by next summer or none of us will be making money....or at least no one that's bought in the last year or two. Crazy how a number of markets that were doing well a year ago have changed drastically.

@Brandon Elliott what do you mean by "clearing"?

[Collin H.]

The "best place" to invest is highly subjective.  That's like asking where the "best place" is to invest in the stock market.  In real estate, whether it be LTRs, STRS, or commercial, the "best place" is the one you are intimately familiar with.  If you aren't, you are setting yourself up for failure.

I recently talked to someone that got caught up in the craze of buying a Smoky Mountains cabin rental.  They live in CA.  A realtor talked them into one @ $380K, projecting it would do $60K a year.  

We went and looked at it.  It is on a mountain top with zero views.  The exterior is eaten up by carpenter bees.  It needs $50K of work just to be a safe place to stay.  Needs another $50K to look presentable.  Needs a new well dug - water is brown.  Can't reasonably access the house in rain or snow without four wheel drive.  The place will never do more than $30K.  Meanwhile, they bought it in December and it still hasn't rented a single night.  

They're in deep, with no way out.

Know thy market.  Rely on no one to tell you how good the market is.  They probably have ulterior motives.

[John Carbone]

Quote from @John D.:

Lake Havasu is down huge from last summer, with lots of new listings and less demand.......hoping some folks get out of the STR biz by next summer or none of us will be making money....or at least no one that's bought in the last year or two. Crazy how a number of markets that were doing well a year ago have changed drastically.

@Brandon Elliott what do you mean by "clearing"?

I've been saying this for the past year. Covid created short term rental markets out of nowhere, and now reality is setting in. If there wasn't a solid STR market before Covid, it won't last post Covid. Also, having STR within a reasonable distance of major cities is ripe for saturation. People with money means more opportunities to buy a STR that is more "locally". Before Covid this happened with people renting apartments in major cities, and ADU's on the west coast in major cities. History is and will continue to repeat itself.

[Brandon Elliott]

Quote from @John Carbone:

Quote from @John D.:

Lake Havasu is down huge from last summer, with lots of new listings and less demand.......hoping some folks get out of the STR biz by next summer or none of us will be making money....or at least no one that's bought in the last year or two. Crazy how a number of markets that were doing well a year ago have changed drastically.

@Brandon Elliott what do you mean by "clearing"?

I've been saying this for the past year. Covid created short term rental markets out of nowhere, and now reality is setting in. If there wasn't a solid STR market before Covid, it won't last post Covid. Also, having STR within a reasonable distance of major cities is ripe for saturation. People with money means more opportunities to buy a STR that is more "locally". Before Covid this happened with people renting apartments in major cities, and ADU's on the west coast in major cities. History is and will continue to repeat itself.

 All great and sound thoughts! Thanks for the input John!

And when I wrote clearing I meant earnings above debts service and other expenses.

[Brandon Elliott]

Quote from @John D.:

Lake Havasu is down huge from last summer, with lots of new listings and less demand.......hoping some folks get out of the STR biz by next summer or none of us will be making money....or at least no one that's bought in the last year or two. Crazy how a number of markets that were doing well a year ago have changed drastically.

@Brandon Elliott what do you mean by "clearing"?

 It is quite interesting to see what happened pre covid and post covid now. 

And when I wrote "clearing" I meant earnings after all debt services and expenses.  

[Collin H.]

Quote from @Brandon Elliott:

Quote from @John D.:

Lake Havasu is down huge from last summer, with lots of new listings and less demand.......hoping some folks get out of the STR biz by next summer or none of us will be making money....or at least no one that's bought in the last year or two. Crazy how a number of markets that were doing well a year ago have changed drastically.

@Brandon Elliott what do you mean by "clearing"?

 It is quite interesting to see what happened pre covid and post covid now. 

And when I wrote "clearing" I meant earnings after all debt services and expenses.  

The Gatlinburg fire caused a market imbalance that was equal to or greater than the market imbalance created from COVID:  Several thousand structures burned to the ground.  Not enough builders were available to replenish the inventory. Rebuilding costs doubled overnight (ask me how I know). Meanwhile, the same guest demand was chasing far fewer properties.  Values, prices, and rents exploded.  Then buying decisions began to be based on those new levels "or maybe a 10 percent drop."  Wrong.  The market is reaching balance again, and as the tide goes out, it's interesting to see who's got their swim trunks on.

[Brandon Elliott]

Quote from @Ryan Ridge:

I might be biased, but as close to a year-round attraction as possible. Try to avoid markets with off-seasons or at least ones with shorter seasons. There's some seasonality here in Orlando with back-to-school, but it quickly picks up again near the holidays.

That is well said Ryan! Have you personally invested in any STR's there and if so what's he gerneral cash flow and ROI like?

[Lake Lutes]

The Emerald Coast of FL has been flooded with short term rental investors the past few years - and for good reason. Our CoC and gross rent numbers to purchase price as some of the best there are.

[Peter Brown]

Quote from @John D.:

Lake Havasu is down huge from last summer, with lots of new listings and less demand.......hoping some folks get out of the STR biz by next summer or none of us will be making money....or at least no one that's bought in the last year or two. Crazy how a number of markets that were doing well a year ago have changed drastically.

@Brandon Elliott what do you mean by "clearing"?

 How's the water level in Lake Havasu?  Could it have anything to do with bad publicity over western drought?  

[Greg R.]

Quote from @William Beck:

I'll copy / paste from a former thread I replied to a year and a half ago with some updates.

I answered this question and analyzed vacation rentals almost every day for a few years in my former job. Based on that experience I would consider the following places to look.

My personal top picks:
top 3 investor markets - Pigeon Forge/Gatlinburg, TN; Poconos, PA; Branson MO (I own here and I'm a realtor here). 

Then the rest:

Hot Springs, AR.
Broken Bow, OK 
Destin, FL
Cape Coral, FL.
Blue Ridge, GA.
Phoenix Metro, AZ

I personally plan to own in the above mentioned areas

Honorable Mentions:

Hilton Head, SC

Myrtle Beach, SC

Massanutten, VA

Killington or Southern, VT by ski areas

Granby/Grand Lake, CO

Lake Travis or Lake Granbury TX

Lake Havasu City

Cocoa Beach, FL

Traverse City, MI

Black Hills, SD

Island Park, ID

Surprised not to see any CA locations on your list. California has some of the most profitable (both cash flow and appreciation) STRs in the country. 

[Greg R.]

Quote from @Collin H.:

The "best place" to invest is highly subjective.  That's like asking where the "best place" is to invest in the stock market.  In real estate, whether it be LTRs, STRS, or commercial, the "best place" is the one you are intimately familiar with.  If you aren't, you are setting yourself up for failure.

I recently talked to someone that got caught up in the craze of buying a Smoky Mountains cabin rental.  They live in CA.  A realtor talked them into one @ $380K, projecting it would do $60K a year.  

We went and looked at it.  It is on a mountain top with zero views.  The exterior is eaten up by carpenter bees.  It needs $50K of work just to be a safe place to stay.  Needs another $50K to look presentable.  Needs a new well dug - water is brown.  Can't reasonably access the house in rain or snow without four wheel drive.  The place will never do more than $30K.  Meanwhile, they bought it in December and it still hasn't rented a single night.  

They're in deep, with no way out.

Know thy market.  Rely on no one to tell you how good the market is.  They probably have ulterior motives.

Wow... I remember all the "get rich quick" and insane profits talk about the smoky mountains a while back. Too bad it didn't work out for them, that's an expensive lesson to learn. 

[William Beck]

@Greg R. I used to include the Coachella area but that whole state is a regulatory minefield and not super owner-rights friendly... and taxes. I know some people who've crushed it in Joshua Tree too so it's not a no-go zone, it's just harder. 

[Jason Kudo]

I own an STR in the Joshua Tree area and it is doing well. We aren't a full year in so I can't give you accurate ROI but tentatively looking at CoC of 12-15%. We do have one of the nicer properties in the area

I have clients doing well in the JT area, Idyllwild, Palm Springs, Bermuda Dunes, and Julian.

With Cotino by Disney and the slew of surf parks coming into the Coachella Valley, this area is being primed for a large uptick in visitors and with Rancho Mirage (where Cotino will be located) being unfriendly to STRs, the surrounding cities that are STR-friendly stand to benefit from this pending uptick.

Saying the whole state is a regulatory minefield is a bit of an exaggeration. Are there regulations? Yes. Can they be navigated successfully? Yes.

[Greg R.]

Quote from @William Beck:

@Greg R. I used to include the Coachella area but that whole state is a regulatory minefield and not super owner-rights friendly... and taxes. I know some people who've crushed it in Joshua Tree too so it's not a no-go zone, it's just harder. 

California is obviously a massive state. Very different environments and markets in the bay area, northern CA, Palm Springs/ JT, LA, Orange County, Tahoe, Big Bear/ Arrowhead, San Diego, etc. 

I don't have knowledge about most of those locations. However, some San Diego coastal communities are free to operate SRT. Others not so much, e.g., Coronado Island. With that, the ones that are able to operate freely are generally legitimate cash cows - I'd put them up against any other STR market in the country.

[Jason Kudo]

Oceanside, CA, Long Beach, CA, and parts of Newport Beach, CA are also STR-friendly.

[Michael Baum]

There is just no way I would try and do anything in CA. I hear what @Jason Kudo is saying but it is like navigating a mine field but it is constantly changing. You never know when a city or county will just ban STR altogether. I wouldn't want to live with that kind of uncertainty.

[Lindsey Johnson]

@Michael Baum Facts!!

[Michael Baum]

Hey @Lindsey Johnson, you are saying what I said are facts or do you want facts?

[Lindsey Johnson]

@Michael Baum What you are saying is facts! Sorry about that lol. 

[Mya Toohey]

@Brandon Elliot

Tampa, Clearwater, St Pete, I can find Great ones with 20-50% COC conventional 20-25% cash down.

[Michael Baum]

Hehe @Lindsey Johnson! Ok, I feel better now. I did go take a look at some decision changes and there are quite a few. Some positive (Manhattan Beach) some negative (San Diego).