Honest Discussion on STRs

Member since 2022 · 1 post · 1 vote

2y

I am also wondering about short term rental planning strategies. Is there an easy way to see where people are staying other than checking the prices on VRBO or paying for some subscription software? I want to understand the demand for various locations and home styles.

1 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

2y

There is always money to be made doing anything. STRs got off to a great start, then the market got way oversaturated. And then local governments got involved and cracked down in certain areas. These two factors give the whole industry a bad name, and with good reason I guess. But, if you buy the right property, in the right location, in the right neighborhood, in the right City, and give it the right amenities and run it properly you will do fine.

8 Reply

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

2y

It depends:

On property

on location

on amenities

on view

on management type

on local regulations

on purchase price

on interest rate

on downpayment

probably some other stuff too.

You can still make money if you make smart decisions.

It's not like shooting fish in a barrel anymore.

16 Reply

Ricardo Hidalgo

Real Estate Agent · Member since 2019 · 569 posts · 257 votes

2y

Quote from @Derek Fike:

Hey Everyone,

I know that there has been quite a bit of conflict as to whether an STR can be profitable or not, so I figured that coming to this community for perspective would be best. I keep hearing that STRs are dead and that Airbnb/Vrbo will be a bust, but I can't help but think that there are other factors that are somewhat contributing to this thought, such as people getting into the STR game not know what they are doing, defaults due to communities putting in heavy restrictions on STRs, etc. It seems like this could have been avoided if people did more research before purchasing a property for an STR.

I personally believe that this is still a sound business idea if executed properly, however, whenever I talk to family and friends about this, most of them "down" this idea saying that there is no money to be made. For example, I have a connection in Dallas, TX who purchased multiple STRs in Miramar Beach, FL and claims to only be breaking even, which I found extremely difficult to believe because I also have a connection who owns a one bed, one bath condo in Destin, FL who made $78K in rental income, including the lodging tax and cleaning fees, and was still able to net approximately $35K in 2023. Therefore, I can't help but think that my connection in Dallas executed their STR in the wrong manner, but at the same time, they are having others pay for their condos which isn't bad either!

I've been highly interested in investing in a condo to advertise as an STR in Gulf Shores/Orange Beach, AL, Pensacola, FL, Okaloosa, FL, or Destin, FL, but have been lacking internal support and confidence to pursue this. I know that this is a personal flaw and that I should go for it if it makes sense to me after doing my own research, however, I can't help but think that it may not work out the way I believe it could based on all of the negative sentiment I have received from family and friends. Therefore, I figured I would come here to engage with professionals who actually do have a good amount of experience and/or success/failures in this area for any guidance, advice, etc.

Thanks everyone and I look forward to engaging in a productive discussion!

Destin to 30A is mostly break even and all appreciation. Secured investments tend in luxury markets tend to be wealth builders for equity purposes which is why people buy in those areas since typically returns have been over 10% a year for equity growth. PCB and Navarre beach on the other hand may produce 4-8% cash on cash returns for income and appreciate between 6-8%. It just depends on the type of investor that you are.

I've owned in miramar beach, 30A and Panama City beach for STR. I can attest that he was accurate on break for the luxury markets or more affluent areas of the emerald coast.

1 Reply

Derek Fike

OP

Member since 2022 · 26 posts · 26 votes

2y

Thanks everyone for all of the information so far! I saw a recent report from AirDNA that showed Gulf Shores, AL having one of the highest ROIs and CoC returns in the short-term rental space, which is where I have been spending the most of my time searching, but also, building wealth through equity growth in Destin, FL doesn't seem like a bad option either!

1 Reply

Derek Fike

OP

Member since 2022 · 26 posts · 26 votes

2y

I've also thought about simple things to give the beach front STR a competitive advantage over others. One idea was that my STR listing would come with the rental of chairs and an umbrella on the beach through one of those rental companies onsite.

0 Reply

Glen Wiley

Investor · Richmond, VA · Member since 2023 · 459 posts · 474 votes

2y

We are in our 3rd year operating an STR and have made money every year.

There is plenty of money to be made running STRs, you need to understand the market, the deals, the local issues - just like any real estate segment.

Folks who think they can just buy a house in a saturated market and watch the checks roll in are going to be disappointed.

1 Reply

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

@Derek Fike

Goes back to the #1 rule of real estate - location

We saw FOMO and everyone throwing a STR up even in residential neighborhoods which are bedroom communities. Not really a great place for one whereas if you are near water/entertainment or something worth while then it can be a great investment.

7e investments53 Reviews

Website View Page

0 Reply

Derek Fike

OP

Member since 2022 · 26 posts · 26 votes

2y

Quote from @Chris Seveney:

@Derek Fike

Goes back to the #1 rule of real estate - location

We saw FOMO and everyone throwing a STR up even in residential neighborhoods which are bedroom communities. Not really a great place for one whereas if you are near water/entertainment or something worth while then it can be a great investment.

I agree with you! This is what is drawing me to Gulf Shores/Orange Beach, AL. This is a hot spot for tourism with beautiful beaches and great entertainment/events. I live in Colorado and would like to purchase my first rental here, but it seems too risky with all of the upcoming restrictions and potential quadrupling of lodging taxes.

0 Reply

Sarah KensingerPro Member

Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes

2y

You're on a good track...it does all depend on the host/owners and what they know and understand about the market they purchased into. Some believe that is the biggest problem with low numbers and hosts feeling like STR is a dying strategy, they never did understand the market they were buying into. Also, I scroll through the OTA and see hundreds to thousands of bland listings with seriously dated decor and properties. It's easy to pass them all by and find one with amazing ocean views and bad decor, or better yet a STR with modern decor and close to the ocean. People want an experience not just a place to sleep.

Four things to remember...location, proximity, knowing your market and guest avatar, and design/amenities can make or break a STR.

[email protected]330-557-3021

2 Reply

Candace PfabBusiness Member

Realtor · Orange Beach AL · Member since 2018 · 150 posts · 125 votes

2y

Quote from @Derek Fike:

Quote from @Chris Seveney:

@Derek Fike

Goes back to the #1 rule of real estate - location

We saw FOMO and everyone throwing a STR up even in residential neighborhoods which are bedroom communities. Not really a great place for one whereas if you are near water/entertainment or something worth while then it can be a great investment.

I agree with you! This is what is drawing me to Gulf Shores/Orange Beach, AL. This is a hot spot for tourism with beautiful beaches and great entertainment/events. I live in Colorado and would like to purchase my first rental here, but it seems too risky with all of the upcoming restrictions and potential quadrupling of lodging taxes.

Hi Derek! We started investing in STRs in the Gulf Shores/Orange Beach area in 2009 & have helped many BP members buy their first one here. Happy to walk you through the market details here if you want to send me a message or reach out. You can check our reviews & properties we have sold here by clicking on the Reviews & Deal tabs at the top of our company profile:

Pfabulous Real Estate/eXp Realty | BiggerPockets

2 Reply

Sean O'KeefePro Member

CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes

2y

Interesting thread

[email protected]628-241-0888

0 Reply

Michael BaumPro Member

Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes

2y

Meh, it is just like anything else. Plan, research, double check it all and go.

I have made money in a lot of different areas. Cars for example. I have bought and sold quite a few interesting rigs over the years and made money on each one. Contrary to what people said.

There are so many people out there with podcasts, channels, followings etc saying all sorts of things. Take everything with a grain of salt. Read everything here.

6 Reply

Justin BrickmanBusiness Member

Realtor · San Antonio, TX · Member since 2021 · 502 posts · 274 votes

2y

It's important to understand that you won't be able to do everything perfectly from the start and you won't get rich quickly. For me, there were many lessons learned that helped me along the way which also helped me build systems to help them run smoother. If you want to run an STR and continue to buy, just expect some bumps and bruises. Just part of the journey.

[email protected]210-827-6020

Justin Brickman Realty4.9144 Reviews

Website View Page

3 Reply

Teren Hooper

Member since 2020 · 1 post · 3 votes

2y

Hello fellow member! My name is Teren Hooper, I am a realtor in the North Ga Mtns. I had a STR in 2018 and did very well. I was only renting out one bedroom at the time, but I was bringing in on average 1000-1200 per month. I was in college and it was a great way to help keep me afloat and make a house payment. Fast forward 6 ish years, My wife and I decided to rent out the home as a STR. I had done minimal research however felt it would be a great opportunity mostly because of the success I had when renting out one bedroom in the home in 2018. I was mistaken. The home is paid off but it still took over 6 months just to break even on what we had bought in materials etc for the rental. When researching the numbers seemed to add up but there was one key problem I did not take into account. The market was completely flooded. It is my observation that this is currently the growing problem. Too many STR and not enough long term housing. My wife and I decided to turn the home into a long term rental and have not looked back since. We have a huge housing problem in our area and we have been very successful in filling that gap.

Hope this helps!

3 Reply

Nathan M kiefer

Rental Property Investor · south carolina and michigan · Member since 2023 · 348 posts · 226 votes

2y

We were going to buy in Florida and decided to buy in South Carolina.

The area really comes down to where your passionate about and love to go to.

We love where we're at for our family and is a resort that is gated 318 acres straight to the ocean.

Like others have said it's all about location and restrictions. We have the best of both of these worlds.

As far as making money, immediately after the crash of 2009 etc REI was a business for 3-5 years now RE is back to being an investment.

Ours both cash flow because we basically cashed In almost all equity with very little finance.

Wr don't personally consider 6-10% to be a good roi.

If you have the mindset that you break even and have someone paying for a investment for you then go for it! It's not a bad long term plan. If you want that larger cash flow then you have to go larger cash in upfront.

All in all it's still a good investment but differentiation of cash flow and return on cash depends on what you put in it plus a lot of the factors others have mentioned.

Our decision came down to do we want to go heavy finance and little cash in with little cash flow or little finance and heavy cash flow with heavy cash in.

We did the latter and works great for us- more stress initially(because it's a lot of cash out lol) but long term we don't sweat the ebb and flow of the market as much as others that have more leverage.

Good luck on your journey!

2 Reply

Steven Goldman

Lender · PA · Member since 2019 · 533 posts · 461 votes

2y

Quote from @Pierce Mooney:

I am also wondering about short term rental planning strategies. Is there an easy way to see where people are staying other than checking the prices on VRBO or paying for some subscription software? I want to understand the demand for various locations and home styles.

Check Airdna statistics they are usually a good guide and the benchmark that most STR lenders use to determine DSCR!

1 Reply

Steven Goldman

Lender · PA · Member since 2019 · 533 posts · 461 votes

2y

Quote from @Derek Fike:

Hey Everyone,

I know that there has been quite a bit of conflict as to whether an STR can be profitable or not, so I figured that coming to this community for perspective would be best. I keep hearing that STRs are dead and that Airbnb/Vrbo will be a bust, but I can't help but think that there are other factors that are somewhat contributing to this thought, such as people getting into the STR game not know what they are doing, defaults due to communities putting in heavy restrictions on STRs, etc. It seems like this could have been avoided if people did more research before purchasing a property for an STR.

I personally believe that this is still a sound business idea if executed properly, however, whenever I talk to family and friends about this, most of them "down" this idea saying that there is no money to be made. For example, I have a connection in Dallas, TX who purchased multiple STRs in Miramar Beach, FL and claims to only be breaking even, which I found extremely difficult to believe because I also have a connection who owns a one bed, one bath condo in Destin, FL who made $78K in rental income, including the lodging tax and cleaning fees, and was still able to net approximately $35K in 2023. Therefore, I can't help but think that my connection in Dallas executed their STR in the wrong manner, but at the same time, they are having others pay for their condos which isn't bad either!

I've been highly interested in investing in a condo to advertise as an STR in Gulf Shores/Orange Beach, AL, Pensacola, FL, Okaloosa, FL, or Destin, FL, but have been lacking internal support and confidence to pursue this. I know that this is a personal flaw and that I should go for it if it makes sense to me after doing my own research, however, I can't help but think that it may not work out the way I believe it could based on all of the negative sentiment I have received from family and friends. Therefore, I figured I would come here to engage with professionals who actually do have a good amount of experience and/or success/failures in this area for any guidance, advice, etc.

Thanks everyone and I look forward to engaging in a productive discussion!

STR's are still viable in good locations with friendly municipal governments. All of the general principles applying to other types of real estate are applicable to STRs. If the location is good, your purchase at the right price and are capable of properly managing the properties, you will be successful.

2 Reply

Jeff Moore

Real Estate Agent · PCB/30A Florida and St. Thomas USVI · Member since 2015 · 36 posts · 18 votes

2y

I own 6 properties in Panama City Beach and one in Puerto Rico and I'm also a Realtor in PCB. I started buying my properties back in 2011 so it is a lot easier for me to turn a profit. But, you can still make money in PCB with STRs. There is a lot of good advice in this thread already. The key is to be able to stand out. The markets are over saturated and most of the properties all look the same. Asking if you can make money with a STR is like asking "how much does a house cost in Florida?"... It depends. I'd be careful with high rise condos in FL right now. Things are a bit tricky with new regulations on older buildings. I'd be sure I know how much insurance costs if I'm looking at a SFR. All of my properties are houses and my insurance has doubled in the past couple of years, and I wouldn't be surprised if it doubles again in the next five years. I would recommend getting a Realtor that owns STRs themself. They have a better idea of what to look for and what to expect and how local laws work than someone who doesn't actually own rentals. Last year was a tough year for STRs everywhere. So the people who just bought expensive properties panicked and lowered their prices and they are competing with people that have owned their properties for years and have higher profit margins. I worry it could be a race to the bottom if things are slow for several years. But, I think if we have a good couple of years rental prices will come up to accommodate the new prices people have to pay now to get in the game. There is no secret get rich quick scheme out there. Returns are going to be lower in real estate for the next couple of years but I think returns on the stock market are also going to be lower over the next couple of years. I have a condo listed for $275K and a house listed for $750K and they can both turn a profit you just have to be efficient and work a little harder than you used to.

3 Reply

Stuart UdisPro Member

Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes

2y

If the STR strategy is the only strategy that makes the property pencil, be sure to purchase in a market where the use is allowed, the use requirements are protected by in place permitting and licensing and the permissions are transferable through a sale. If the property does not provide for all three, you should not underwrite or make investment decisions based on the property operating as an STR. It's that simple.

[email protected]

3 Reply

Nick BelskyBusiness Member

Residential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes

2y

@Derek Fike

I work with quite a few STR investors. One thing they all have in common is they focus on Location, Tourism, Amenities, local government, and costs. Lots of great info in this thread already but another obvious hot spot I haven't seen mentioned yet are National Parks. Several of my clients focus on properties near Yellowstone, Smokies, Yosemite, etc... there is a tremendous amount of tourism near the Parks and I've seen some of my clients be fully booked 18 months out at times.

AirDNA is a solid resource but also lacks data in some markets. Say Vail, Colorado for example. Many of the property management companies don't use AirBnB or VRBO to list their STRs. They use their own sites or services. AirDNA relies on AirBnB, VRBO, and three other sites I don't recall, but they don't capture a large part of that market. AirDNA showed a projected income of $22k/month on a property we helped finance, but when we got with the appraiser and showed them comps from the private listings, we got a 1007 with well over $35k/month, which was much more inline with what the property managers were seeing with similar, active properties. We often see AirDNA under project is certain markets, such as luxury homes in Vail/Breckinridge, Sevier County, TN, etc...

All data has some limitations. So be sure to check multiple sources. Property managers are great resources and can show you historical info to back up what you find.

Cheers!

[email protected]

Belsky Mortgage, LLC527 Reviews

Website View Page

2 Reply

Travis TimmonsPro Member

Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes

2y

Find your subject matter expertise and unfair advantage. Here's a random example - know a guy that has gone on ice fishing trips in New England for 15 years. He bought an ice fishing cabin for pennies in a location that you, I, and all the other clowns talking about real estate on the internet would never know about. I don't know his in depth numbers, but I'd venture to guess he made over 50% cash on cash.

Looking on a map or an online forum to find a location is a good way to eek out a modest return if managed well. The outsized returns that make an STR worth the hassle are found in niche categories and locations now. National Parks are mentioned above - everyone knows the Smokies, Yosemite, Yellowstone, Zion, Grand Canyon, but have you heard of New River Gorge, Mammoth Cave, Pictured Rocks National Lakeshore, or other lesser known but very well visited national park sites?

A short time ago, it was an IQ test. If you could look on a map and do basic math, you could make a 20-50% cash on cash return. The market has matured and margins have compressed.

3 Reply

James Carlson

Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes

2y

Quote from @Derek Fike:

I agree with you! This is what is drawing me to Gulf Shores/Orange Beach, AL. This is a hot spot for tourism with beautiful beaches and great entertainment/events. I live in Colorado and would like to purchase my first rental here, but it seems too risky with all of the upcoming restrictions and potential quadrupling of lodging taxes.

Seems like commercial taxation of Colorado STRs might be amended pretty heavily. (And it seems there's at least some chance it doesn't pass at all, based on the opposition they're setting.) I've got several clients wanting a vacation rental in Colorado who are watching closely.

2 Reply

Derek Fike

OP

Member since 2022 · 26 posts · 26 votes

2y

Quote from @Sarah Kensinger:

You're on a good track...it does all depend on the host/owners and what they know and understand about the market they purchased into. Some believe that is the biggest problem with low numbers and hosts feeling like STR is a dying strategy, they never did understand the market they were buying into. Also, I scroll through the OTA and see hundreds to thousands of bland listings with seriously dated decor and properties. It's easy to pass them all by and find one with amazing ocean views and bad decor, or better yet a STR with modern decor and close to the ocean. People want an experience not just a place to sleep.

Four things to remember...location, proximity, knowing your market and guest avatar, and design/amenities can make or break a STR.

Than you Sarah! I totally agree with you!

1 Reply

Derek Fike

OP

Member since 2022 · 26 posts · 26 votes

2y

Quote from @Candace Pfab:

Quote from @Derek Fike:

Quote from @Chris Seveney:

@Derek Fike

Goes back to the #1 rule of real estate - location

We saw FOMO and everyone throwing a STR up even in residential neighborhoods which are bedroom communities. Not really a great place for one whereas if you are near water/entertainment or something worth while then it can be a great investment.

I agree with you! This is what is drawing me to Gulf Shores/Orange Beach, AL. This is a hot spot for tourism with beautiful beaches and great entertainment/events. I live in Colorado and would like to purchase my first rental here, but it seems too risky with all of the upcoming restrictions and potential quadrupling of lodging taxes.

Hi Derek! We started investing in STRs in the Gulf Shores/Orange Beach area in 2009 & have helped many BP members buy their first one here. Happy to walk you through the market details here if you want to send me a message or reach out. You can check our reviews & properties we have sold here by clicking on the Reviews & Deal tabs at the top of our company profile:

Pfabulous Real Estate/eXp Realty | BiggerPockets

Sounds great!

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Honest Discussion on STRs

Honest Discussion on STRs

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