Get Out Now

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Andrew SteffensBusiness Member

Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes

2y

I think it is a market correction talking on the macro level. A lot of our clients who were with us since 2018 are cashing out now or have cashed out as they have serious equity and the cashflow is not as high as it was for them. The new people buying are typically not trying to get rich, they expect small cashflow or even breakeven and are in it to offset cost of a 2nd home and/or appreciation over the long term which is solid. There are opportunities even at 7% to cashflow over $1000 a month here. The people who bought in 21/22 expecting to get rich quick had their bubble burst already and have already moved to LTR or liquidated at a small loss. This is all market dependent obviously but in general I think this is just a correction not unlike corrections in any other market - people adjust and things move on, just not in the same way.

Vacation Rentals of Florida53 Reviews

Jon Martin

Member since 2022 · 1k+ posts · 1k+ votes

2y

My market is showing increased revenue and ADR YOY going into late 2023 and 2024. 75% occupancy for my place last year that went strong all the way through the holidays. January was not great at ~40% but it at least it covered the PITI, and February will finish around 60ish%. March is already booked to 45% and I expect that to fill in given how February did. Feeling pretty good about it.

As for people who piled and overpaid in a small handful of markets based on herd mentality and "only invest in vacation markets" advice, yeah, I agree with this post. I personally like the exit plan options and alternate job creating industries of college/mid sized towns as long as the regulatory environment is favorable.

[email protected]267-767-0111

Bryan Keller

Member since 2023 · 16 posts · 14 votes

2y

Quote from @Andrew Steffens:

I think it is a market correction talking on the macro level. A lot of our clients who were with us since 2018 are cashing out now or have cashed out as they have serious equity and the cashflow is not as high as it was for them. The new people buying are typically not trying to get rich, they expect small cashflow or even breakeven and are in it to offset cost of a 2nd home and/or appreciation over the long term which is solid. There are opportunities even at 7% to cashflow over $1000 a month here. The people who bought in 21/22 expecting to get rich quick had their bubble burst already and have already moved to LTR or liquidated at a small loss. This is all market dependent obviously but in general I think this is just a correction not unlike corrections in any other market - people adjust and things move on, just not in the same way.

This. Thank you.

I'm an investor in South Florida. I bought my first property in March 2023, put the property on Airbnb back in November - it gives me cashflow of over 2k a month after the expanses. I invested in the décor, the amenities, and it works out fine!

4 Reply

Alan AsriantsBusiness Member

Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes

2y

I think the mistake came from investors who were valuing properties for their AirBnB returns. Not a steady rate and can change all too quickly with recessions, trends, seasons, etc.

If it doesnt work as an LTR, don't buy it as an STR!

Alan Asriants - New Century Real Estate 590 Reviews

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6 Reply

Michael SmytheBusiness Member

Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes

2y

@Alan Asriants exactly what we were going to say!

@Collin Hays great post! Waiting to read the comments from the ostrich-type investors...

Logical Property Management4.9445 Reviews

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Andrew SteffensBusiness Member

Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes

2y

Quote from @Bryan Keller:

Quote from @Andrew Steffens:

I think it is a market correction talking on the macro level. A lot of our clients who were with us since 2018 are cashing out now or have cashed out as they have serious equity and the cashflow is not as high as it was for them. The new people buying are typically not trying to get rich, they expect small cashflow or even breakeven and are in it to offset cost of a 2nd home and/or appreciation over the long term which is solid. There are opportunities even at 7% to cashflow over $1000 a month here. The people who bought in 21/22 expecting to get rich quick had their bubble burst already and have already moved to LTR or liquidated at a small loss. This is all market dependent obviously but in general I think this is just a correction not unlike corrections in any other market - people adjust and things move on, just not in the same way.

This. Thank you.

I'm an investor in South Florida. I bought my first property in March 2023, put the property on Airbnb back in November - it gives me cashflow of over 2k a month after the expanses. I invested in the décor, the amenities, and it works out fine!

Sounds like you have a nice, well appointed house in a desirable location which is the recipe for success!

Vacation Rentals of Florida53 Reviews

Amit Shukla

Beaverton, OR · Member since 2017 · 37 posts · 21 votes

2y

@Collin Hays what is your recommendation for first time STR investors in 2024?

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Collin HaysBusiness Member

OP

Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes

2y

Quote from @Amit Shukla:

@Collin Hays what is your recommendation for first time STR investors in 2024?

I can’t speak with knowledge of any market besides the Smokies. I have 19 years of experience there. Deals are still out there and always will be. I’m still very bullish on the Smokies as a long term investment. I began investing there in 2005, a few years prior to the financial crisis.

SMOKY MOUNTAIN FALLS INC.51 Review

Podcast Guest on Show #121

Michael BaumPro Member

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

2y

For some areas, this is right on the money. I think there are still some areas where you can do well or OK. It all comes down to your tolerance for lower profit numbers.

If you are trying to hit that 25% that seems to be a lot of folks' benchmark, then you will be looking for a long time. If you are willing to settle for 15% or thereabouts, you might find a deal that works.

In my area, we are steady. Nothing really fluctuates too much. We are on target for another solid year. But we did buy in 2017 and if I had to buy this lake house now, it would be 400% more.

Appreciation has been outta sight.

2 Reply

Nathan M kiefer

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

2y

This all comes down to how you buy. We closed on a 4 bed 4 bath stilt house in 2022 for 375k, it appraised at 575k.

i won't crush someone's dream of being a str investor, if you do your diligence there are still deals to be had and success to be made.

We're a buy and hold, not a quick dump or when the market jumps investor. Rei is long term game.

3 Reply

Andrew SyriosPro Member

Moderator

Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes

2y

I'm not a STR investor, but isn't there a decent market for selling STR to home owners (people who either want to live in those areas or own a vacation property themselves)?

Overall the real estate market is still appreciating despite the high rates, albeit slowly. While I completely agree that the STR is oversaturated, but I don't think they're going to become illiquid or crash in price.

2 Reply

Jon Martin

Member since 2022 · 1k+ posts · 1k+ votes

2y

Quote from @Andrew Syrios:

I'm not a STR investor, but isn't there a decent market for selling STR to home owners (people who either want to live in those areas or own a vacation property themselves)?

Overall the real estate market is still appreciating despite the high rates, albeit slowly. While I completely agree that the STR is oversaturated, but I don't think they're going to become illiquid or crash in price.

I've seen a few STRs sell for 20-30% higher than neighboring comps. They were listed as an operating STR with furnishings included and seemed to be based on a multiplier of past revenue. One of them sold in days because it is along a major bike path but was otherwise a dated house on a rough street.

Guessing that you would have to bring a lot of cash to the table because I doubt the banks care about its performance as an STR, or go the DSCR route which is also a higher DP.

Zachary Cain Humphrey

Investor · KY · Member since 2022 · 204 posts · 77 votes

2y

Quote from @Collin Hays:

I've been thinking about expressing my sentiments for several weeks on this forum. As a Property Manager and STR investor, it's a hard thing to do. I still feel like investing in vacation rentals can be an outstanding investment, but you've got to score a good deal when you buy, and you cannot be counting on a fresh buy for much, if any, positive cash flow unless you scored a crazy good buy.

This is post is intended for 90 percent of the investors out there that bought a vacation rental in 2021 and 2022. Most paid way too much, based on multiples that were based on weird years. You are going to have an opportunity this spring and early summer to GET OUT. Things are NOT going to be getting better in this space for a while. Here is where we are:

1. Extreme oversupply of STRs in a bunch of markets, due to irrational exuberance and massive overbuilding in 2020, 2021, and 2022.

2. Lower volumes, retreating to 2018 and 2019 levels.

3. Investors are in a huge squeeze right now because the "new normal" numbers aren't working.

4. High(er) interest rates are way exacerbating the problem - if the numbers aren't working for YOUR deal at 3.5% APR, they sure don't work for anyone else looking to buy your home at rates that are twice that.

5. As the pinch hits harder, investors trying to sell are going to find themselves deep underwater - owing money at closing and a whole lot of it.

6. Many of these houses will either be sold short, or go back to the bank, 2010-11 style. They will eventually end up in the hands of an investor, at a price where the dollars DO work. And that new investor is going to be able to rent his/her rental at rates way lower than the previous owner could afford to do. This will put FURTHER pressure on the owners who paid way too much.

So...if you are NOT in a good financial position with your rental - if you are relying on it for INCOME and things have gone sideways, GET OUT THIS SPRING OR EARLY SUMMER. Prices are going to do nothing but go south for a while. It's going to be 2027-28 before things are sorted out.

That's my two cents. Sorry guys. Just telling how it is from my view.

Before getting out, each investor needs to take a long look at the underperforming property to see what can be done to make it perform. If you invested 10-20k back into the property how much better would it perform on gross revenue?

If the answer is you can do nothing to make it better... then most certainly get out.

Your post is spot on for where the STR market is for majority of the country.

KY is still one of the best places in the country right now, where despite interest rates being what they are.... purchase prices are low enough and revenue high enough to make cash flowing rentals.

Again, you got to know where and WHY your investing there (make it about the numbers).... as any business model should be.

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

2y

Quote from @Collin Hays:

I've been thinking about expressing my sentiments for several weeks on this forum. As a Property Manager and STR investor, it's a hard thing to do. I still feel like investing in vacation rentals can be an outstanding investment, but you've got to score a good deal when you buy, and you cannot be counting on a fresh buy for much, if any, positive cash flow unless you scored a crazy good buy.

This is post is intended for 90 percent of the investors out there that bought a vacation rental in 2021 and 2022. Most paid way too much, based on multiples that were based on weird years. You are going to have an opportunity this spring and early summer to GET OUT. Things are NOT going to be getting better in this space for a while. Here is where we are:

1. Extreme oversupply of STRs in a bunch of markets, due to irrational exuberance and massive overbuilding in 2020, 2021, and 2022.

2. Lower volumes, retreating to 2018 and 2019 levels.

3. Investors are in a huge squeeze right now because the "new normal" numbers aren't working.

4. High(er) interest rates are way exacerbating the problem - if the numbers aren't working for YOUR deal at 3.5% APR, they sure don't work for anyone else looking to buy your home at rates that are twice that.

5. As the pinch hits harder, investors trying to sell are going to find themselves deep underwater - owing money at closing and a whole lot of it.

6. Many of these houses will either be sold short, or go back to the bank, 2010-11 style. They will eventually end up in the hands of an investor, at a price where the dollars DO work. And that new investor is going to be able to rent his/her rental at rates way lower than the previous owner could afford to do. This will put FURTHER pressure on the owners who paid way too much.

So...if you are NOT in a good financial position with your rental - if you are relying on it for INCOME and things have gone sideways, GET OUT THIS SPRING OR EARLY SUMMER. Prices are going to do nothing but go south for a while. It's going to be 2027-28 before things are sorted out.

That's my two cents. Sorry guys. Just telling how it is from my view.

I don't disagree. But this is why IF you invest, you always view it as a long-term play--10 years + ideally.

With that said, I am interested in the Smokies market as we get closer to spring. It may be the only market I buy into this spring due to other obligations, but I am valuing it as a long-term investment per usual. I've seen a lot more interest since the last week of January than I did almost all of H2 2023 combined when I first took a (distance) look. I don't think I'll strike just yet, but I have felt more sellers being amicable. But then there's some other markets which are still ridiculously stubborn, or maybe I am the ridiculous one.

[email protected]806-672-7102

Collin HaysBusiness Member

OP

Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes

2y

Quote from @V.G Jason:

I don't disagree. But this is why IF you invest, you always view it as a long-term play--10 years + ideally.

With that said, I am interested in the Smokies market as we get closer to spring. It may be the only market I buy into this spring due to other obligations, but I am valuing it as a long-term investment per usual. I've seen a lot more interest since the last week of January than I did almost all of H2 2023 combined when I first took a (distance) look. I don't think I'll strike just yet, but I have felt more sellers being amicable. But then there's some other markets which are still ridiculously stubborn, or maybe I am the ridiculous one.

The Smokies market is a fantastic long-term play. My comments were more directed to those that simply paid too much, are under current financial pressure, and not sure what to do next.

SMOKY MOUNTAIN FALLS INC.51 Review

Jon Martin

Member since 2022 · 1k+ posts · 1k+ votes

2y

The majority of the country? Really? Specific high dollar markets that are saturated with people who overpaid and overleveraged, I 100% agree. Not sure if that's the majority of markets though.

I agree with your point about whether you could improve revenue with $10-20K invested, I think that's a framework to decide if it's worth it to keep going or get out.

Podcast Guest on Show #121

Andrew SyriosPro Member

Moderator

Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes

2y

Quote from @Jon Martin:

Quote from @Andrew Syrios:

I'm not a STR investor, but isn't there a decent market for selling STR to home owners (people who either want to live in those areas or own a vacation property themselves)?

Overall the real estate market is still appreciating despite the high rates, albeit slowly. While I completely agree that the STR is oversaturated, but I don't think they're going to become illiquid or crash in price.

I've seen a few STRs sell for 20-30% higher than neighboring comps. They were listed as an operating STR with furnishings included and seemed to be based on a multiplier of past revenue. One of them sold in days because it is along a major bike path but was otherwise a dated house on a rough street.

Guessing that you would have to bring a lot of cash to the table because I doubt the banks care about its performance as an STR, or go the DSCR route which is also a higher DP.

Yeah, everything I hear is that banks won't give you anything for STR performance, in fact they'll be more strict knowing it's an STR.

And that's a good point regarding sales prices being higher than non-STRs. Furthermore, people renting STRs have a lot of furniture and what not in those properties; an investment they won't be able to recoup by having a garage sale.

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

2y

Quote from @Collin Hays:

Quote from @V.G Jason:

I don't disagree. But this is why IF you invest, you always view it as a long-term play--10 years + ideally.

With that said, I am interested in the Smokies market as we get closer to spring. It may be the only market I buy into this spring due to other obligations, but I am valuing it as a long-term investment per usual. I've seen a lot more interest since the last week of January than I did almost all of H2 2023 combined when I first took a (distance) look. I don't think I'll strike just yet, but I have felt more sellers being amicable. But then there's some other markets which are still ridiculously stubborn, or maybe I am the ridiculous one.

The Smokies market is a fantastic long-term play. My comments were more directed to those that simply paid too much, are under current financial pressure, and not sure what to do next.

Even if they paid too much, if they valued it as a long-term play and were able to withstand that volatility then it would not matter. Everyone investing, STR or LTR, needs to be ready to hold this for 10 years. This means expect tax increases, expect HOI increases, expect tenant issues, PM issues, capex issues, everything in between. If you can barely handle 1 rough patch, it'll mean 2 will tap you out. You can't be an REI in today's environment if that's your struggle, as appetizing as it sounds to be one it's just not practical.

[email protected]330-557-3021

Sarah KensingerPro Member

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

2y

Could also hire a good STR company that can market the property better, price strategically, and offer better guest experience since the owner emotions are moved, which in turn ups the revenue.

Dale BertrandPro Member

Member since 2021 · 41 posts · 17 votes

2y

Quote from @Michael Baum:

For some areas, this is right on the money. I think there are still some areas where you can do well or OK. It all comes down to your tolerance for lower profit numbers.

If you are trying to hit that 25% that seems to be a lot of folks' benchmark, then you will be looking for a long time. If you are willing to settle for 15% or thereabouts, you might find a deal that works.

In my area, we are steady. Nothing really fluctuates too much. We are on target for another solid year. But we did buy in 2017 and if I had to buy this lake house now, it would be 400% more.

Appreciation has been outta sight.

@Michael Baum based on all of the equity you have accumulated in your lake house, do you think you could get a better “return on equity” by diversifying into other real estate assets?

Michael BaumPro Member

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

2y

Hey @Dale Bertrand, it is possible I could do more with that equity. It is just sitting in the house at the moment.

Overall we are pretty diversified across a number of different asset classes. Especially some that are outright weird to some folks, but those have some of the best returns.

Dale BertrandPro Member

Member since 2021 · 41 posts · 17 votes

2y

Quote from @Michael Baum:

Hey @Dale Bertrand, it is possible I could do more with that equity. It is just sitting in the house at the moment.

Overall we are pretty diversified across a number of different asset classes. Especially some that are outright weird to some folks, but those have some of the best returns.

@Michael Baum Thanks for your response. I’d love to hear what weird asset classes you a in?