BEST AREAS FOR STR's!?!?!?
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.
Most Popular Reply
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
My Michigan properties did better than my Florida property and that can be for a variety of reasons. I'll reach out to you and would be happy to look into different STR markets.
Lol fair!! haha. That's why I am asking here though. Curious to see if that's common or if maybe I just happened to stumble into an expectational market.
Do you have any STR's?
Awesome! Shot you a message! :-)
Well thank you Will!!! I'm curious, what was your old job?!? lol
I'll add those to my investment market possibilities!
I was a Home Buyer Consultant for Vacation Rentals with Evolve Vacation Rental. I consulted thousands of people doing STR's all over the country.
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#1 Short-Term & Vacation Rental Discussions Contributor
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Any STR's what?
- Collin Hays
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- 806-672-7102
#1 Short-Term & Vacation Rental Discussions Contributor
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#1 Short-Term & Vacation Rental Discussions Contributor
- Property Manager
- Gatlinburg, TN
STR's what?
- Collin Hays
- [email protected]
- 806-672-7102
Wow good for you! I'd love to grab coffee if possible and discuss more about your successes and insights! Let's connect! :-)
Sadly that is common. Well said and thoughtful insight! Thanks for your thoughts!
Where are you seeing the profitable markets in Cali these days?
Well said Jason! Thanks for your thoughts! :-)
We got 6 STR under our management in the Great Orlando area (Davenport, Kissimmee, and Clermont). To be honest, you would never feel low seasons in the area like Disney/Universal Studios. To our experience, Single Family House with a private pool in a 10-15 min distance from Disney would be a good spot for travelers all over the world, especially UK, Canada people. Layout-wise, the STR with 5-6 bedrooms resulted in the best ROI.
When considering in investing in STR in Orlando area, one thing needs an attention, which is the zoning. HOA really is strict on STR. Make sure the STR be allowed in the community. Also, the community with massive resort-style amenities is a good way to invest (like Champions Gate, Storey Lake, Windsor at Westside, etc) since most of the travelers like to stay in those types of communities. The STR in those communities appeared to rent really high night rate during the high seasons. The drawback is guests tend to be more critic to the STR in those communities.
Interesting. Where do you own in Michigan and is there much of a shoulder season there? Any winter bookings?
Wow! Great information! Thanks for that insight and stats Mike!
Curious, where did you get those travel stats?
Northern Michigan is great too because there's skiing and winter activities making it more of a year-round destination.
Wow, thanks for that insight Eric. And best wishes to your family in your move! :-)
Thanks Eliott! I'll have to look into that area!
STR's (Short term rentals)
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Gotcha. STRs.
- Collin Hays
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That data for Kansas City comes from the Kansas City Convention and Visitors Association now called Visit KC. Most cities will have a visitors bureau where you can get this kind of info. People travel to cities for all different reasons, not just vacation. A good example, 35M people visit Chigaco a year. Chicago isn't known as a ressort/vacation destination but those 35M still need somewhere to stay and more and more people are staying in Airbnb's instead of hotels. Airbnb is a disruptive industry just like Uber has been to the cab business. In my opinion, markets like Kansas City are ideal for STR because of the high number of visitors, it is not oversaturated and unlike resort destinations, it is not real seasonal.
@Mike D'Arrigo Chicago is great on paper for Airbnbs/STRs, but unfortunately the regulations are too restrictive for it to make sense for most investors. Please see my article on considerations for STRs in Chicago here: https://www.biggerpockets.com/...
Cheers!
Tom, that's not surprising. I wasn't advocating for Chicago as a STR market. Just using it as an example of a market that has a lot of vistors even though it's not a vacation/resosrt destination.
I totally get the logic Ryan, from my side if you're getting a similar return w/ a market that is slow for part of the year then you have less moving parts and less work. However, any natural problem that can disrupt that can turn a winner in to a loser quickly. Whereas, your Orlando will just come out ahead and be steady. Currently we own 3 STR in the Fort Lauderdale area ourselves.
When this becomes the case, we want to build out Risk Models with our growth rates (i.e. you'll see someone who is only putting down 10% of their net worth with a 20% ROI wanting to actually head to the less saturated markets. The inverse becomes true as someone's net worth drops as your Risk of Ruin (RoR) flies up exponentially when you're dropping a lot of your bankroll on one wager). Your RoR is your chance at bankruptcy or any figure you want to put at the bottom (You can put in a 0% chance of going below $100k Net Worth etc).
When I played high stakes poker, there was a well known story of Poker "Bob", aka Haralabos Voulgaris who was finally hired to the be the analytics director for the Dallas Mavericks. He ended up as one of the best sports bettors of all time, his return on each game bet was >10% for a solid few year window. Nowadays almost zero people can gain a significant advantage at sports betting (his edge went to under 1% after building out a computer for >$3MM), and he was also unable to place his own bets due to his reputation as a crusher. Anyhow, when he had around $400,000 to his name he bet almost his entire net worth on the Los Angeles Lakers to win the World Championship. They were trailing big in game 7 to the Trail Blazers and ended up coming back to win. He didn't bet that large portion of his bankroll because of Risk of Ruin criteria, but because of Kelly Criterion. He knew that the edges on sports betting would go off a cliff shortly and that he could make $5MM+ a year if he doubled his bankroll in that very moment. If he didn't, his growth would be extremely capped during those years. After Mark Cuban hired him finally, Luka Doncic hated him, so now he is out and owns part of a European soccer team where he does the analytics.
TLDR: Your gambles should go along with the math of your life and your family. Someone single and young with a job cushion should be gambling much more than most do in the real estate market and taking chances at up and coming markets. This is because their upside of growing now can really alleviate later life stress and they can recover easier from losses. While the person with 3 kids and a small skill set work wise to be able to be promoted or start a new company should be making a lot more passive bets.
Fwiw, currently I have not taken enough gambles in real estate myself, and plan to scale up that level shortly! GL all!
Add up mortgage, taxes, increased insurance, CAPEX, maintenance, furnishings replacement, increased wear and tear, utilities, and property management (even if you are doing it yourself, it takes your time which is worth something), you'd be shocked how much it takes for an STR to be profitable.
Take into consideration that STVR are more like businesses than they are like long-term rentals. How competitive you are in regard to other market players really matters.
You could have two properties in the same market that are similar (3 bed / 2 bath - house) and based on the design, location, listing quality, amenities, distribution strategy, host quality, etc these two properties could perform totally differently
An example from my portfolio is in Scottsdale, AZ. I have a 2-bedroom apartment with a yard and a pool that only does 7% better than a 1-bedroom apartment with zero amenities. These properties are only 1 mile apart. The reason for the difference? The 1 bedroom apartment is within walking distance of the major nightlife center in Scottsdale and people seek it out specifically for the "Walkability."
So the property's competitive position in the market matters a lot!
That said, when looking at a market, you should be looking at demand and supply for the market. Is tourism growing (the government tourism office will know) is the *supply of STR, hotels, and motels growing at the same rate? Or is there an imbalance? If tourism only grew by 5% but the supply of listings in the market grew by 35% you're going to have issues regardless of how well-positioned your property is!
Hope this adds some dimension to your search!
*For help with understanding STR supply look at Airdna for help with hotel and motel supply look at STR (a research company that just happens to be named STR)