St George vs Mesquite for my first vacation home?

Question

Hello!  I live in Salt Lake City and purchased myself a new townhome to live in personally (Dec 2021).  HOA allows short term rentals, so I thought, once I move out, I can rent this on airbnb!

For fun/money/testing purposes, I decided to rent my spare bedroom out... ITS GOING GREAT!  I'm having a lot of fun with this and learning how to manage this listing...  Which brought me to this idea.

I want a vacation home that I can use during the winter months, then rent out spring/summer/fall.  A mix use of investment and personal use...

Living in Salt Lake City, the warm cities that are drivable come to mind is St. George / Kanab / Mesquite / Las Vegas. (4-6 hours).

I've narrowed it down to 2 properties.

St. George = EXPENSIVE. 4 bed townhome brand new is going for $730k. LOTS of competition. Airdna / awning.com / simply looking at calendars on airbnb... I'm predicting $5-$7k a month.  Averaging out 8 similar townhomes, I get $6.3k a month.

$374ish x 30 days @57% occupied = $6395

Mesquite = Initially was not on my radar.  Small retirement city, with 7+ golf courses.  I know they have a decent amount of softball/soccer tournaments going on here (I'd imagine fall/spring time).  I can get into a new 3 bed SFH for $385k.  I'm predicting $4k a month.  I do think adding a pool in the backyard launches me to $6k a month.  Not a lot of competition here.  Airdna shows extreme demand from end of September to mid April.  I'll admit I am a little worried about the hot summers here...  I think a pool would help me here.

$239ish x 30 days @ 56% occupied = $4015.

I'm stuck in analysis paralysis mode.  I could see myself really getting into this and buying a bunch of vacation homes to self-manage... I just don't know which one to start with.

Which would you recommend for a rookie?  Starting in an expensive city (St George) with 2500ish Airbnbs nearby, or start in a small town (Mesquite) with 150ish Airbnbs.

Thank YOU for your thoughts and advice! I really want to make this work!

Ryan Moyer · Answer

I'm up in Ogden and have looked at these markets.

When I underwrote it, the numbers didn't work well in St George.  Also be careful there, in many of the areas you have to use the city's preferred property manager (you can't self manage), which is going to be 30% of your revenue and demolish any hope of returns, so double check that on the property you're looking at.

On the flipside, St George is an awesome place and people love going there, so if you have goals outside of cashflow like appreciation or personal use it could be good to get a hold of something there.

Mesquite is interesting, we've been looking there as well.  People basically go there to play golf when it's too cold up here.  Less competition there for sure.  My main concern would be that it may end up being a bit of a covid market, where visitation was higher than usual the last couple years with people just looking for somewhere safe to drive to when they couldn't fly, which increased STR returns in the area temporarily and drove up prices a bit.  So now that people can go back to Hawaii and Europe and all that jazz, is Mesquite going to be on their radar.  So probably better returns in the short term, but the question is will the market really drop off there in the near future?

Thomas Bailey · Answer

I appreciate the comments.

St George is tough.  Essentially dedicated airbnb neighborhoods, most requiring you to use the city preferred property manager (30%. Ouch).  The $730k townhome allows owners to manage... I do worry it's kind of randomly off the freeway in the middle of nowhere... 6.5% interest gets me ~$5.8k plus utilities.  My numbers seem slightly optimistic (or maybe I'm getting pessimistic) at $6.3k

I do think Dec & Jan are low months for St George (simply not enough tourism for all the airbnbs available), which would align better with me on using it during the cold months.

Mesquite simply cash flows better.  You may be right that covid helped this city temporarily... Although golfers should keep golfing.

Maybe I end up getting properties in both cities... For now, I choose Mesquite :)

Kyle Bergren · Answer

I prefer St George because the economy there is a bit more well rounded whereas Mesquite is mostly a tourist town. I've never really had a hard time finding good subcontractors out of St George. Overall, there both great location for long term growth.