Is anyone still buying STVR's
Cole SchlackPro Member
Realtor · Hawaii, HI · Member since 2015 · 145 posts · 95 votesIs anyone still buying STVR's
Most Popular Reply
Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votesWe are actively looking for our next property finally. So far what I have seen hasn't penciled out as well as I had hoped, but the higher interest rates don't bother me much. Waiting until the prices drop more is the trick. When to buy at a good price is more important than the rate. You can refi at the lower rate when they come down, but the purchase price is what it is.
Maybe what keeps folks from buying in HI is the difficult nature of the rules and regulations in Hawaii. Everything seems to be fluctuating and changing. You can do it here, but not here. No wait, not here but over there. Nope now nowhere near, but maybe waaay over there.
Plus the COVID lockdowns were among the most restrictive and long lasting which shows how difficult it could be with a STR there.
45 Replies
- 3yRyan MoyerBusiness MemberProperty Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 993 posts · 1k+ votes
Covers the mortgage/expenses or cash flows well over it? Running an STR is a lot of work and a lot of money out of pocket to just break even.
If that market is just breaking even then maybe that's why. Seems there are still buyers in markets that are still producing nice cash flow.
Cosmic Vacations4.9172 Reviews - 3yLuke CarlPro MemberRental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
Things are very much alive and well for us. I feel like I’m not dating out of my league anymore with these sellers. They actually call back.
- 3yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
We are actively looking for our next property finally. So far what I have seen hasn't penciled out as well as I had hoped, but the higher interest rates don't bother me much. Waiting until the prices drop more is the trick. When to buy at a good price is more important than the rate. You can refi at the lower rate when they come down, but the purchase price is what it is.
Maybe what keeps folks from buying in HI is the difficult nature of the rules and regulations in Hawaii. Everything seems to be fluctuating and changing. You can do it here, but not here. No wait, not here but over there. Nope now nowhere near, but maybe waaay over there.
Plus the COVID lockdowns were among the most restrictive and long lasting which shows how difficult it could be with a STR there.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Cole Schlack:
I am an agent in Hawaii and we have seen a massive drop of STVR buyers since rates when up, Rental income still covers the higher interest rates but seems buyers are gone. Just wondering if there are buys still out there? and if so where are you looking?
Tough economy, higher rates, record prices, and Hawaii is really cracking down with regulations. It's a tough time.
The DIY Landlord Book4.7248 Reviews - Real Estate Agent · The Short Term Shop / Florida Emerald and Forgotten Coasts · Member since 2022 · 217 posts · 126 votes3y
Here's a great way for you to push your sales with the current interest rates. Tell them to re-run their numbers with the predicted FED hike numbers, compare them to current rates, and ask them which is a better time to buy.
- Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes3y
Quote from @Napoleon DeCiutiis:
Here's a great way for you to push your sales with the current interest rates. Tell them to re-run their numbers with the predicted FED hike numbers, compare them to current rates, and ask them which is a better time to buy.
So...a lot of realtors do this, this is just FOMO. The prices will come down as interest rates rise and unaffordability increases. This is literally what is happening right now. It's going to take 6 months at least since a lot of comps are ran 6 months back. That's part of the problem now, running comps to prices 6 months ago, but interest rates are double and people wonder why their places don't sell. Priced too high.
There are a TON of people buying STRs (or have bought) that simply ran their numbers wrong. If you're not calculating repairs/maintenance/Cap Ex and especially the cleaning fee into your ROI then you are doing it wrong. You see this so often. People THINK they made a lot, then you take a look at their books and they actually lost a couple thousand in cashflow (yes you still get the tax benefit and hopefully equity paydown, but you're still losing because that money would have done better somewhere else). Even the STS calculator doesn't calculate cleaning costs - you're talking probably 7-8k a year in cleaning on a basic STR.
That being said - I'm not buying into the hype. If there's a good deal - then great. If there's not, then great - it doesn't make a difference to me.
The people that are doing well are those that bought in early early 2021 and prior - right before the run up. You see them now essentially trying to "flip" their places for almost double what they were bought for 2 years ago. Yea you get awesome cashflow buying a cabin at 350k - not so much at higher rates and at 650k. It's still a sellers market imo, but the tide has definitely shifted.
And remember - there is a sucker born every minute. There's tons of suckers buying STRs and doing horribly and think they're doing well - this is because 1 they bought at too high of a price and 2 they are not educated on RE enough to even run basic calculations.
- 3yDave StokleyBusiness MemberProperty Manager · Cleveland, OH · Member since 2015 · 704 posts · 799 votesDefinitely still buying. I still see tons of opportunity in local micro-markets, but you have to have to know your market and your numbers. I'll buy anywhere within an hour of Cleveland and I still so see much opportunity.
- East Texas · Member since 2018 · 206 posts · 138 votes3y
Quote from @Jeremy Horton:
Quote from @Napoleon DeCiutiis:
Here's a great way for you to push your sales with the current interest rates. Tell them to re-run their numbers with the predicted FED hike numbers, compare them to current rates, and ask them which is a better time to buy.
So...a lot of realtors do this, this is just FOMO. The prices will come down as interest rates rise and unaffordability increases. This is literally what is happening right now. It's going to take 6 months at least since a lot of comps are ran 6 months back. That's part of the problem now, running comps to prices 6 months ago, but interest rates are double and people wonder why their places don't sell. Priced too high.
There are a TON of people buying STRs (or have bought) that simply ran their numbers wrong. If you're not calculating repairs/maintenance/Cap Ex and especially the cleaning fee into your ROI then you are doing it wrong. You see this so often. People THINK they made a lot, then you take a look at their books and they actually lost a couple thousand in cashflow (yes you still get the tax benefit and hopefully equity paydown, but you're still losing because that money would have done better somewhere else). Even the STS calculator doesn't calculate cleaning costs - you're talking probably 7-8k a year in cleaning on a basic STR.
That being said - I'm not buying into the hype. If there's a good deal - then great. If there's not, then great - it doesn't make a difference to me.
The people that are doing well are those that bought in early early 2021 and prior - right before the run up. You see them now essentially trying to "flip" their places for almost double what they were bought for 2 years ago. Yea you get awesome cashflow buying a cabin at 350k - not so much at higher rates and at 650k. It's still a sellers market imo, but the tide has definitely shifted.
And remember - there is a sucker born every minute. There's tons of suckers buying STRs and doing horribly and think they're doing well - this is because 1 they bought at too high of a price and 2 they are not educated on RE enough to even run basic calculations.
I bought my STR in December 2020 and sold mine in Jan of 2022. I flipped it for 2x what I bought it for and with dealing with all the stupid people, I was more than happy to offload it.
I don't think people who are trying to get into the STR game realize just how stupid people can be. You will receive 2 am phone calls over the stupidest of things like, "there is a small blue flame in the fireplace. We didnt want to blow up and die so we turned the gas off." Yea, that's the pilot light for the fireplace dipstick.
I have so many stories banked up in just the one year of ownership that it will be forever seared into my brain just how stupid and careless people will be with your stuff.
- 3ySimmy AhluwaliaPro MemberLender · Atlanta, GA · Member since 2015 · 1k+ posts · 200 votes
Per above, just like any other type of real estate deal, you make your $$ on the purchase. These over-inflated purchase prices are going to start to normalize and some of those who have overpaid, might be in a position to unload at a discount if business starts to decline. Of course, as we all know, real estate is all local.
We finance STR's nationwide, and many of our latest closings opt for full-term interest-only loans with a very short pre-pay penalty. This allows for stronger cash-flow and the ability to refinance once rates do come down.
- Investor · Greater Cincinnati · Member since 2018 · 25 posts · 12 votes3y
Yes people are definitely still buying them but I see way too many people only analyzing them as Short term rentals. With everychanging markets and regulations, run your numbers for both long term rentals and short term rentals. If the numbers work for long term rentals they will always work for short term!
- Investor · TX NC, AR · Member since 2017 · 26 posts · 55 votes3y
Hawaii is tough. First it is harder cashflow in Hawaii than some of the other states, then often times the condos are on a land lease which makes it less desirable from a purely investment perspective, finally HI (from my limited understanding) has enacted increasingly strict STR regulations in many of the major tourist hubs. Seems like an overall anti-str tone from the local governments.
If I ever invest in HI it would be on hotel deals (STR regs will not apply), but even then often the numbers don't make as much sense as secondary and tertiary markets. I love hawaii as a destination and I will still go, but I will invest in hotels and STRs elsewhere. - 3yDave StokleyBusiness MemberProperty Manager · Cleveland, OH · Member since 2015 · 704 posts · 799 votes
Lol, who would have thought a hospitality business required… hospitality? I think a lot of gurus have been out there selling products that only made money if you self-manage, so they’ve convinced everyone it’s easy peasy. Kind of a bummer when you find out you’ve actually purchased a job rather than an investment property, isn’t it?
- Rental Property Investor · Member since 2019 · 276 posts · 235 votes3y
Closing on our 7th STR (6th in the Smokies) tomorrow. That said, it took nearly a year of actively looking to find the deal we wanted so that it matched the deals we got in 2020. Lots of negotiating with the seller but we got what we wanted. It'll take some work to get it now we like it but it will be worth the wait.
- East Texas · Member since 2018 · 206 posts · 138 votes3y
Quote from @Dave Stokley:
Lol, who would have thought a hospitality business required… hospitality? I think a lot of gurus have been out there selling products that only made money if you self-manage, so they’ve convinced everyone it’s easy peasy. Kind of a bummer when you find out you’ve actually purchased a job rather than an investment property, isn’t it?
Hahaa! I figured out that I am the last person that needs to be in the hospitality industry. I self-manage 10 rentals and that one property, even with all the automation, was 100x more work. Again, it was the stupid you had to deal with and the level of it is what got me. Someone who gets royally ticked at you because you have the gas turned off to the fireplace in the summer in Oklahoma....Yea because I love heating the property with a fireplace and you running the a/c at full blast to offset the added heat you are adding into the property. Oh, which I clearly stated in the listing that the fireplace was not operational between the months of May-October and they just happened to not read that part, and "we wouldn't have booked your property if we knew the fireplace wasn't going to work."
- Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes3y
With underwriting tight we are seeing investors drop out. Also folks seem to be waiting and watching. I’m trying to coach that if the underwriting works and your individual investing goals are met then don’t wait.
- 3yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Yeah @Jeremy Horton, I am not going to agree with some of what you said.
Regarding cleaning fees, I don't work that into my expenses seeing as it is a pass through cost. I am fairly certain that every STR owner passes through the cleaning costs so the guests pay it. The only time would be if you have no cleaning fee and put the charge in the nightly rate. 7-8k a year in cleaning fees is really high. Our 4/3 2700sqft costs about $3300 a year in cleaning that the guests pay for. Cleaning supplies are less than $200 a year.
I don't disagree with the cashflow on 650 vs 350. Hard to argue with that math.
I don't think most STR owners are so ignorant of the math as you think.
- Realtor · Hawaii, HI · Member since 2015 · 145 posts · 95 votes3yThere is so much misinformation out there about Hawaii, This post has been good insight that I need to start with an information campaign. Hawaii is really no more complex that any other state but I think people just lump it into single place. Just like other states we have areas with more restrictions and areas with less. We have cities, resorts and rural areas. The restrictions have been in Residential zones as the state tries to get the housing shortage under control. The resort zones have not faced any changes or restrictions which has drive up night rates making properties in them more profitable and sellers less likely to sell, thus pushing prices. For beach properties Hawaii has some good stats, for a $1m you can get a 3 bed/2 bath Condo walking distance to the beach, with 80-90% occupancy . I do think our rates are still low as that unit would rent for $400 per night, but we are seeing a steady increase as the world starts coming back to Hawaii.
Quote from @Diya L.:
Hawaii is tough. First it is harder cashflow in Hawaii than some of the other states, then often times the condos are on a land lease which makes it less desirable from a purely investment perspective, finally HI (from my limited understanding) has enacted increasingly strict STR regulations in many of the major tourist hubs. Seems like an overall anti-str tone from the local governments.
If I ever invest in HI it would be on hotel deals (STR regs will not apply), but even then often the numbers don't make as much sense as secondary and tertiary markets. I love hawaii as a destination and I will still go, but I will invest in hotels and STRs elsewhere. - Realtor · Hawaii, HI · Member since 2015 · 145 posts · 95 votes3y
Quote from @Michael Baum:
We are actively looking for our next property finally. So far what I have seen hasn't penciled out as well as I had hoped, but the higher interest rates don't bother me much. Waiting until the prices drop more is the trick. When to buy at a good price is more important than the rate. You can refi at the lower rate when they come down, but the purchase price is what it is.
Maybe what keeps folks from buying in HI is the difficult nature of the rules and regulations in Hawaii. Everything seems to be fluctuating and changing. You can do it here, but not here. No wait, not here but over there. Nope now nowhere near, but maybe waaay over there.
Plus the COVID lockdowns were among the most restrictive and long lasting which shows how difficult it could be with a STR there.
There is so much misinformation out there about Hawaii, This post has been good insight that I need to start with an information campaign. Hawaii is really no more complex that any other state but I think people just lump it into single place. You would not make a blanket statement about Washington State being easy or tough, Im sure some County's , City's and Towns are easy and some are tough. Seattle like Honolulu I assume it tough and working to make sure there are enough units for residents most of what people are hearing is about Honolulu. Every Island is its own county and has it own regulation but the common rule is STVRs are allowed in the resort zones, unlike most mainland states we actually have a clearly allowed area. There have been no changes to these areas but they are limited in size and there is no new rezoning to Resort zones in the foreseeable future. I consider this good as it keeps supply limited and drives up appreciate and rental rates. We are getting 80-90% occupancy rates which I don't think many locations get. - 3yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Well @Cole Schlack, I can't disagree but I will say that I won't buy there my self. I don't invest in WA state either for much the same reasons.
I don't lump all of Hawaii into the same pile, but there has been multiple changes to regulations over the last few years. I know a guy there who invests in STR and that is what he reports.
If things are stable and great there, why are STR places not selling there as you stated? If you are seeing 90% occupancy and nightly rates are OK, then the interest rate increase isn't too big a deal. Are the prices over inflated? Rates will eventually come down but purchase price is what it is.
I was just pointing out that MAYBE the problem is what I stated.
- Rental Property Investor · Marietta, GA · Member since 2017 · 131 posts · 101 votes3yHow many turns do you have in a year? How long are your average stays? $3300 for a year seems very low. I know our cleaner is not the cheapest. We pay $175 per turn which we pass on to guests; however, even just 1 per week is $9100 per year... and we average a little over 1 turn per week.
Quote from @Michael Baum:
Yeah @Jeremy Horton, I am not going to agree with some of what you said.
Regarding cleaning fees, I don't work that into my expenses seeing as it is a pass through cost. I am fairly certain that every STR owner passes through the cleaning costs so the guests pay it. The only time would be if you have no cleaning fee and put the charge in the nightly rate. 7-8k a year in cleaning fees is really high. Our 4/3 2700sqft costs about $3300 a year in cleaning that the guests pay for. Cleaning supplies are less than $200 a year.
I don't disagree with the cashflow on 650 vs 350. Hard to argue with that math.
I don't think most STR owners are so ignorant of the math as you think.
- 3yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hey @Andrew Simms, so we usually get longer stays and our season is shorter than others. We are solid from May to Oct, then Thanksgiving and Christmas/New Years then done. Maybe get a Valentines day but not always. Sometimes we go over to fix things and do the cleaning ourselves.
We paid our cleaner $3300 for her services so far this year. Our average stay is 13 days.
So you are booked 100% all the time? That is really great.
- 3yRyan MoyerBusiness MemberProperty Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 993 posts · 1k+ votes
Quote from @Andrew Simms:
How many turns do you have in a year? How long are your average stays? $3300 for a year seems very low. I know our cleaner is not the cheapest. We pay $175 per turn which we pass on to guests; however, even just 1 per week is $9100 per year... and we average a little over 1 turn per week.Quote from @Michael Baum:
Yeah @Jeremy Horton, I am not going to agree with some of what you said.
Regarding cleaning fees, I don't work that into my expenses seeing as it is a pass through cost. I am fairly certain that every STR owner passes through the cleaning costs so the guests pay it. The only time would be if you have no cleaning fee and put the charge in the nightly rate. 7-8k a year in cleaning fees is really high. Our 4/3 2700sqft costs about $3300 a year in cleaning that the guests pay for. Cleaning supplies are less than $200 a year.
I don't disagree with the cashflow on 650 vs 350. Hard to argue with that math.
I don't think most STR owners are so ignorant of the math as you think.
Yea $3300/yr is insane. I have individual months where I get near that with some of my properties. They must either be cleaning it themselves or have very low occupancy.
Cosmic Vacations4.9172 Reviews - 3yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
So I think I answered the question @Ryan Moyer. We are not at 100% occupancy like @Andrew Simms rentals, but we do well.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Cole Schlack:
True. In fact the acts of HI local gov. only giving STVR permits into the resort zone only is a very good thing as makes less competition.
Mine has full book until April next year.
What recession ? There's no recession when the tidepool is in front of your home lol. If folks want cash flow just increase the downpayment. I may want to buy more but there's almost no supply. - 3yDave StokleyBusiness MemberProperty Manager · Cleveland, OH · Member since 2015 · 704 posts · 799 votes
Lol, who would have thought a hospitality business required… hospitality? I think a lot of gurus have been out there selling products that only made money if you self-manage, so they’ve convinced everyone it’s easy peasy. Kind of a bummer when you find out you’ve actually purchased a job rather than an investment property, isn’t it?
Hahaa! I figured out that I am the last person that needs to be in the hospitality industry. I self-manage 10 rentals and that one property, even with all the automation, was 100x more work. Again, it was the stupid you had to deal with and the level of it is what got me. Someone who gets royally ticked at you because you have the gas turned off to the fireplace in the summer in Oklahoma....Yea because I love heating the property with a fireplace and you running the a/c at full blast to offset the added heat you are adding into the property. Oh, which I clearly stated in the listing that the fireplace was not operational between the months of May-October and they just happened to not read that part, and "we wouldn't have booked your property if we knew the fireplace wasn't going to work."
Yeah man it's not for everyone, and there's nothing wrong with that! Most people that invest in traditional real estate don't work as the landlord - not sure why they'd operate differently on an STR.
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