Are STR Recession proof

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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y

Not if it doesn't cash flow as a LTR. 

6Reply
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  • Paul De Luca
    Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
    3y

    @Andrew Chime

    Based on recent data about STRs from companies such as AirDNA, many people are bearish or cautious about investing in STRs partly due to the large increase in supply of new listings. But if you have a specific market in mind the fundamentals there will be the important thing.

    No investing strategy can be fully "recession proof" since there will always be macro market forces that will affect your investments, which you can't control. But sure, you can choose strategies that are lower risk but that also generally means lower reward/return. 

    Assuming you've done your due diligence and found a deal with potential, pull the trigger if it makes sense for you.

    4Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    AirBnB came out during the recession. There's no way to tell if they are "recession proof". 

    It's the biggest pile of ******** someone can sell. Anyone saying that with such strong conviction is probably selling the STR.

    No recession is the same, so take that's for what it's worth too. Buy an STR with the understanding of it's risk; regulations changing, variance in cash flow, tenant instability for better or worse, competition in near market, etc.

    5Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    3y

    They are not, but if you buy right you will be fine.

    5Reply
  • Brooklyn McCarty
    Investor · Member since 2022 · 1k+ posts · 754 votes
    3y

    I think this largely depends on what market you are in & how you manage. 

    1Reply
  • Andrew Chime
    OP
    Member since 2023 · 19 posts · 9 votes
    3y
    Quote from @Paul De Luca:

    @Andrew Chime

    Based on recent data about STRs from companies such as AirDNA, many people are bearish or cautious about investing in STRs partly due to the large increase in supply of new listings. But if you have a specific market in mind the fundamentals there will be the important thing.

    No investing strategy can be fully "recession proof" since there will always be macro market forces that will affect your investments, which you can't control. But sure, you can choose strategies that are lower risk but that also generally means lower reward/return. 

    Assuming you've done your due diligence and found a deal with potential, pull the trigger if it makes sense for you.


     Any thoughts on Austin,TX?

    0Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    3y

    Nothing is recession proof as others have said.

    Here are the rules around STRs in Austin - https://www.austintexas.gov/pa...

    There are quite a few restrictions.

    0Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Andrew Chime:

    I've been getting mixed answers about STR during a possible recession. Is it smart to buy in 2023 and 2024 despite the status of the economy?

    Are houses painted white? Yes and no. Some are, some aren't and it depends on what "white" is.

    It's always smart to buy the right property in the right location for the right reasons. People continued to use STRs during covid. My wife and I spent 6 weeks traveling the USA staying at STRs. The areas we stayed at in Santa Fe NM, Branson MO, Nashville TN, Gatlinburg TN, Charleston SC, Inlet Beach FL all were packed, restaurants were busy, traffic was heavy and beaches were filled with frolicking familes.

    Now, I can't speak for where we didn't go, crime infested Seattle WA, crime infested San Francisco CA, Memphis, St Louis, Chicago, New Orleans LA, Atlanta GA, you know, the usual hell holes.

    STRs good in nice places, STRs not good in crime infested places. Pretty simple actually.

    5Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Andrew Chime:

    I've been getting mixed answers about STR during a possible recession. Is it smart to buy in 2023 and 2024 despite the status of the economy?


     anything you ask about investment, the answer is always mixed. Because the question itself could be inaccurate. 

    STR is one thing. Recession is different thing.

    If you ask which business got impacted heavily by recession ? then the answer, would be, the business that relies on debt and doesn't generate cash flow. 

    Now, is the STR going to create cash flow ? that all depends on so many factors, even in good times STR could lose money. 

    There's no guarantee in business, except FDIC insured, and that's if gov. doesn't collapse :-)
    Can gov. collapse during recession ? yes, but not in USA....

    1Reply
  • Marcus B Hsu
    Rental Property Investor · San Diego CA · Member since 2019 · 68 posts · 51 votes
    3y

    Not recession proof...but i think it's more so dependent on location, i.e. if there is too much competiton with other STRs in the area or not, which is the case that i've been seeing. There's been a lot of STR purchases in last few years and demand for STR is not keeping up with the number of STR in the area I invest in.

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    3y
    Quote from @Andrew Chime:

    I've been getting mixed answers about STR during a possible recession. Is it smart to buy in 2023 and 2024 despite the status of the economy?

    We had 2 beach STRs at the Great Recession (GR) and I can say they were not recession proof.  Those that indicate otherwise did not have STRs at the GR. 

    how about drivable STRs as is claimed by at least one couple on this site?   My STRs are less than 2 hour drive from current population in excess of 20 million (not sure of population at GR).  

    how bad were we impacted?  Our STRs were well established (started in 1999) with a high occupancy rate before the GR.  we had such low occupancy that we converted the STRS to LTR in the non-summer months and STRs only during the summer months.  

     
    No one knows what will happen with STRs at the next significant recession, but I am very familiar with what happened to STRs at the GR and STRs were heavily impacted.  

    1Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Not if it doesn't cash flow as a LTR. 

    6Reply
  • Luka Milicevic
    Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
    3y

    Is it smart to buy in 2023? No one can actually answer this question for you. 

    If you are in it for the long term, which you should be-- when you enter the market cycle shouldn't matter. 

    Timing the market is a fools game. 

    1Reply
  • Lindsey Johnson
    Realtor · Charleston, SC · Member since 2021 · 170 posts · 58 votes
    3y
    Quote from @Eliott Elias:

    Not if it doesn't cash flow as a LTR. 


     There it is ^^^ ! That is how you hedge your bets. 

    1Reply
  • John Mullen
    Member since 2021 · 64 posts · 68 votes
    3y

    There have been other good forum posts on STR bull/bear talk lately. Check those out! And here's a recent podcast episode discussing the topic:

    https://podcasts.google.com/?f...

    Short story: the easy money boom time of 2020-2021 is over.  And borrowing from Brandon borrowing from the Oracle of Omaha, “when the tide goes out you see who’s been swimming naked.”

    1Reply
  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    I think, as most point out here, that it depends on the individual situation.  If you bought the property right (preferably where it can cashflow as LTR), and are in the right market, you should be fine.

    We are in FL, and we are of the opinion that people will always want to visit Florida beaches.  In 2008 tourism went down 13% or so.  If you are in a position where you can stay in business with a 10-15 decline, then you should be fine.  Also, According to Zillow, Tampa area real estate will appreciate slightly.  If you are in other markets it could be vastly different.

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    1Reply
  • Andy Whitcomb
    Investor · Black Diamond, WA · Member since 2016 · 123 posts · 127 votes
    3y

    I wouldn't use the word "recession proof" for any investment, especially not for STRs. However, if you buy right and operate your business right, you should do fine. When I say "buy right" I don't just mean get a good deal. It's more about having a good strategy and buying in accordance with that strategy.

    0Reply
  • Cassidy BurnsBusiness Member
    Investor · Alexandria, VA · Member since 2016 · 859 posts · 460 votes
    3y

    Location is recession proof. 

    [email protected]540-960-1507
    1Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Cassidy Burns:

    Location is recession proof. 


    Detroit begs to differ on that. 

    What seems a "recession proof" market today, may in years to come, be the next "getto". 

    STRATEGY, and only strategy, can defend against recession. All else can be changed by various factors. Strategy IS change. 

    Real Estate is a river. It is constantly flowing, cutting new bank, ever changing. Anything of stillness will at some time be great, horrible, and all points in between. 

    0Reply
  • Jake Browning
    Real Estate Agent · Fort Pierce, FL · Member since 2022 · 44 posts · 11 votes
    3y

    The biggest thing for this is what market are you involved in. The market is going to go up and down throughout the years no matter what. If you are in a growing market and the numbers fit your profits in an STR, you should consider buying in that community. You can shoot for the 1% rule to help you decide.

    Good luck!

    0Reply
  • Ed Neuhaus
    Real Estate Broker · Austin, TX · Member since 2014 · 97 posts · 26 votes
    3y
    Quote from @Michael Baum:

    Nothing is recession proof as others have said.

    Here are the rules around STRs in Austin - https://www.austintexas.gov/pa...

    There are quite a few restrictions.

    I totally agree with Michael; Nothing is really recession-proof. STR's need disposable income for travel. So I would expect the higher-end properties may see a pull back.  But lower-end or more-value STRs may do well.  For example, a 4 bedroom that sleeps 8 at the same price as a single hotel room, should do well as a value play to those people who still need to travel.  And unique properties will always do well. 

    Austin is a hard market to make work because of the rules. Look just outside of the city.  There are plenty of profitable areas.

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    3y

    The rich will always have money, so invest in luxury STR's

    [email protected]248-209-6824
    Logical Property Management4.9458 Reviews
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    0Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    3y

    @Andrew Chime- it seems that the  generic  consumer  might  finally  be tightening their spending  belts  in reaction to the  rate increases  in the  past  10 months to combat  the inflation  and  try to  avoid recession   .....this likely  will  affect   STRs   until these get  handled ....this  doesn t mean that there  arent  proeprties that  will  still be  great  opportunities  now 

    0Reply
  • Daniel PurcellPro Member
    Rental Property Investor · New Orleans, LA · Member since 2018 · 66 posts · 41 votes
    3y

    @Mike Hern

    With all due respect this is a generalization. Majority of my STR's are in NOLA and cash flow very well. We also bring quality and treat the ones we own as a business. We have cleaners and managers that walk through the properties after every stay. We do our best to create a safe, clean, and great experience. We also are working on QR codes that guests can follow for discounts at nearby restaurants or codes that lead to videos of us explaining why we did things and the process go doing so.

    I understand cities have issues, New Orleans being one of them, but there are great areas to STR. If you're smart and live by location it is a great experience.

    0Reply
  • Daniel PurcellPro Member
    Rental Property Investor · New Orleans, LA · Member since 2018 · 66 posts · 41 votes
    3y

    @Eliott Elias

    Best answer yet

    0Reply
  • Leslie Anne Morris
    Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
    3y

    STR is another asset class in real estate. Same rules in regards to recession apply.

    0Reply
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