Another one bites the dust
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votesAnother one bites the dust
Most Popular Reply
Andrew FreedBusiness Member
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votesPersonally, I wouldn't touch STR's with a 10 foot pole right now. In an upcoming recession, people travel less so the demand will be lower. Combined with a ridiculous influx of supply due to everyone and their mamas wanting to get into STR. Sounds like a recipe for a majority of negative cash flowing assets. That is why it is imperative to underwrite a STR to still work as a LTR. You could always fall back to just throwing in a tenant if the demand isn't there.
41 Replies
- 3yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Man I don't know. Maybe this fall? We will see!
I love Table Rock Lake. Love the area in general.
- 3yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @January Johnson:
Quote from @Andrew Freed:
Personally, I wouldn't touch STR's with a 10 foot pole right now. In an upcoming recession, people travel less so the demand will be lower. Combined with a ridiculous influx of supply due to everyone and their mamas wanting to get into STR. Sounds like a recipe for a majority of negative cash flowing assets. That is why it is imperative to underwrite a STR to still work as a LTR. You could always fall back to just throwing in a tenant if the demand isn't there.
This all depends on your market. In my regional, drive-to market, even if people have to spend LESS on vacation, they can still rent smaller places. We are not feeling any kind of recession here, and I doubt we will. We are all about STRs.
Also, "the housing market" ≠ "the STR market". You didn't say it did, but I'm saying it. : )
Did you have STRs at the Great Recession (GR)? I did in an area that currently has a population in excess of 20 million within less than 2 hour drive. I can state at the GR every size/price STR in my market had a significant reduction in occupancy and rent. The STRs I owned at the GR were established in 1999 and had high occupancy rate prior to the GR. Their occupancy fell enough that we converted them to student housing in the school year and STR in the summer high season.
I see people make the claim about STRs being recession resistant and drive to STRs being even more recession resistant. However, I have yet to hear anyone that had STRs at the GR make this claim. It is hard to know whether subsequent recessions will behave like past recessions, but I can say with a lot of confidence that STRs are not recession resistant (even in drive to locations) and in my market they were more impacted by the GR than LTRs (which had very little impact in my market due to so much housing sitting empty - rents stayed the same and vacancy rates did not increase in the San Diego market). I recognize some LTR markets had large impacts (detroit, Las Vegas, many Arizona cities, etc).
- 3yLuke CarlPro MemberRental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votesAll of this over one person that is getting out? According to David Greene, 50% of all investment properties are sold in 12 months or less. I see 20 people commenting here that are not getting out of their STR. I think we're doing just fine.
- 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Wont be just STR's. Will be the market in general.
Lot's of buying opportunities for wiser investors.
Logical Property Management4.9458 Reviews - Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes3yAre you seeing a higher number of people wanting to list relative to last year? Have you seen a seller writing a check to close yet?
Quote from @Leslie Anne Morris:
Ouch that stinks! I’m seeing this quite a bit right now with folks wanting to list their cabins.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes3y
Quote from @Dan H.:
Quote from @January Johnson:
Quote from @Andrew Freed:
Personally, I wouldn't touch STR's with a 10 foot pole right now. In an upcoming recession, people travel less so the demand will be lower. Combined with a ridiculous influx of supply due to everyone and their mamas wanting to get into STR. Sounds like a recipe for a majority of negative cash flowing assets. That is why it is imperative to underwrite a STR to still work as a LTR. You could always fall back to just throwing in a tenant if the demand isn't there.
This all depends on your market. In my regional, drive-to market, even if people have to spend LESS on vacation, they can still rent smaller places. We are not feeling any kind of recession here, and I doubt we will. We are all about STRs.
Also, "the housing market" ≠ "the STR market". You didn't say it did, but I'm saying it. : )
Did you have STRs at the Great Recession (GR)? I did in an area that currently has a population in excess of 20 million within less than 2 hour drive. I can state at the GR every size/price STR in my market had a significant reduction in occupancy and rent. The STRs I owned at the GR were established in 1999 and had high occupancy rate prior to the GR. Their occupancy fell enough that we converted them to student housing in the school year and STR in the summer high season.
I see people make the claim about STRs being recession resistant and drive to STRs being even more recession resistant. However, I have yet to hear anyone that had STRs at the GR make this claim. It is hard to know whether subsequent recessions will behave like past recessions, but I can say with a lot of confidence that STRs are not recession resistant (even in drive to locations) and in my market they were more impacted by the GR than LTRs (which had very little impact in my market due to so much housing sitting empty - rents stayed the same and vacancy rates did not increase in the San Diego market). I recognize some LTR markets had large impacts (detroit, Las Vegas, many Arizona cities, etc).
I know @Collin Hays owned several During the GR in the smokies. I recall a post he made showing values plummet 60-70 percent from the peak.
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Luke Carl:
All of this over one person that is getting out? According to David Greene, 50% of all investment properties are sold in 12 months or less. I see 20 people commenting here that are not getting out of their STR. I think we're doing just fine.
are you saying or is DG saying that 50% of investors that buy rentals sell within 12 months ? or that rental properties on MLS sell in 12 months or less no matter market conditions.. just trying to understand the comment ! - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
@John Underwood
It's not only STR but seeing it a lot in MF
Anyone who got variable rates are hosed and are doing cash calls right now with investors or telling them they may be forced to sell and get 50 cents on the dollar.
Some of these deals are kicking the van down the road as the expenses they are spending now even if they can refinance in several years is not going to make up the difference and possibly may eventually get to even but it will take a long time. If they had an exit cap or refinance that started with a 4 then they are in real trouble if it’s not class a.
If you do have a sponsor doing a cash call make sure to look at the numbers as some may delay the inevitable.
7e investments53 Reviews - Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes3yI have people specifically being referred to me to get themselves out of a pickle. I’ve been mentoring them and encouraging them to hold the properties.
Quote from @John Carbone:
Are you seeing a higher number of people wanting to list relative to last year? Have you seen a seller writing a check to close yet?Quote from @Leslie Anne Morris:
Ouch that stinks! I’m seeing this quite a bit right now with folks wanting to list their cabins.
- Investor · Raleigh, NC · Member since 2022 · 112 posts · 71 votes3y
Ill be the guy who says I do believe STR is still doable in some markets.
If I were to rent out a condo at the beach or a place in Las Vegas, I know I would still be fine for the long term even if demand goes down for the next 1-2 years.
Still worth the long term investment if you're doing your research into the market you are deciding to invest in.
Due diligence before buying a place is key.
Don't follow the masses just saying to buy in an area.
Do your own research. - Sacramento · Member since 2019 · 54 posts · 24 votes3y
Quote from @Andrew Freed:
Personally, I wouldn't touch STR's with a 10 foot pole right now. In an upcoming recession, people travel less so the demand will be lower. Combined with a ridiculous influx of supply due to everyone and their mamas wanting to get into STR. Sounds like a recipe for a majority of negative cash flowing assets. That is why it is imperative to underwrite a STR to still work as a LTR. You could always fall back to just throwing in a tenant if the demand isn't there.
I agree with this perspective. I think there is still a place for low end strs in many areas, touristy or not. I had one near tahoe that easily got 50/night into the beginning of the pandemic. I had it operating since 2017 at a minimum of 30/night and it was 80 percent occupied. I liked it much better than the 700 I was getting as an ltr. I think the mega 300 dollar a night str market is gonna take a hit.
- Sacramento · Member since 2019 · 54 posts · 24 votes3y
Quote from @Ace Kaspar:
Ill be the guy who says I do believe STR is still doable in some markets.
If I were to rent out a condo at the beach or a place in Las Vegas, I know I would still be fine for the long term even if demand goes down for the next 1-2 years.
Still worth the long term investment if you're doing your research into the market you are deciding to invest in.
Due diligence before buying a place is key.
Don't follow the masses just saying to buy in an area.
Do your own research.I agree with this but no amount of due dilligence can make you immune from large market shifts. And I don't want to put words in your mouth, because you didn't say otherwise. I owned rentals during the GR in Sacramento. It stung like hell, haha. That said, I just made an offer on a property last night.
- Investor · Raleigh, NC · Member since 2022 · 112 posts · 71 votes3y
Quote from @Ryan Rock:
Quote from @Ace Kaspar:
Ill be the guy who says I do believe STR is still doable in some markets.
If I were to rent out a condo at the beach or a place in Las Vegas, I know I would still be fine for the long term even if demand goes down for the next 1-2 years.
Still worth the long term investment if you're doing your research into the market you are deciding to invest in.
Due diligence before buying a place is key.
Don't follow the masses just saying to buy in an area.
Do your own research.I agree with this but no amount of due dilligence can make you immune from large market shifts. And I don't want to put words in your mouth, because you didn't say otherwise. I owned rentals during the GR in Sacramento. It stung like hell, haha. That said, I just made an offer on a property last night.
Oh of course no one can predict big market swings but I don't see things dropping by 30% or anything nuts like that but hey we never know!
The trend as seen to be that real-estate generally goes up in value over the long term.
Now if were talking pure demand, yeah that's truly unpredictable. - Sacramento · Member since 2019 · 54 posts · 24 votes3y
Yes it does go up in value over the long haul. The rule of thumb used to be 6 years. The GR changed that to 10. Ten years is get married, have two kids, get divorced and pay alimony type of time, haha. In 2006 I paid 350 for a house outside Sacramento. In 2011 it sold for 137. Another one i paid 272 in 2007 that sold for 67 in 2011. It took 11 years for those to come bak. 11 years. I'm not joking you.
People say I'll bet you wish you had hung onto those. Nope, not at all. I short sold those two then bought two more in 2012 for 44k and 49k. In 2014 I bought another for 255. Those sold for 140 after 4 years, 250 after 8 years and 350 after 4 years. Timing the market turned an alimony paying math teacher into a dude with a net worth of 380 by 2020. I owned 4 houses outright in the last decade. That never would have happened in my life if I had stuck with the buy and hold no matter what approach.
I'm not saying I'm all that smart. I'd rather be lucky than good, as the saying goes. I'm being very cautious right now, perhaps too cautious. I see these mixed market signals and wonder if housing might shrug off the inflation numbers, just like it did the pandemic, and keep heading up. On the other hand, housing prices cannot outpace wage growth over the long haul. All condo complexes, neighborhoods, cities, states and countries want a high percentage of homeowners. The US government will do what it needs to do to make home ownership attainable.
On the topic of inventory, I believe the use of that term in real estate parlance is a measure of demand vs houses for sale. It is not a measure of whether or not humans can find shelter. The number of people per housing unit in this country has remained relatively stable over time. In fact, last year it was tied with the all time low of about 2.6. There is not a nationwide housing crisis in terms of there being enough places for people to live. Regionally of course there probably are.
Sorry to be so long winded!!
- Member since 2022 · 1k+ posts · 1k+ votes3y
You could probably rent a dog house for $50/night in Tahoe. You could probably 2x that without even seeing a single digit dip.
- Sacramento · Member since 2019 · 54 posts · 24 votes3y
Quote from @Jon Martin:
You could probably rent a dog house for $50/night in Tahoe. You could probably 2x that without even seeing a single digit dip.
I was fudging on the Tahoe part, for the benefit of the out of the area flatlanders and unwashed masses. It was actually in Pollock Pines, 1/2 way between Sacramento and Tahoe. 4000 feet elevation, plenty of snow. All of the bad parts of Tahoe with very little of the good, haha.
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