Where to invest for STR and MTR
Member since 2021 · 101 posts · 55 votes
Where to invest for STR and MTR
Most Popular Reply
Investor · Minneapolis · Member since 2023 · 265 posts · 162 votes
2yAnother thing to notice is who the experts say are making money in 2024, which are luxury and eco/experience type properties. Don't be just another vanilla (forgettable) $190 ADR listing with cell phone pictures, no SEO and the same hot tub and fire pit as everyone else. You can do something simple like transform a garage or unfinished basement into a "wellness center" for about $10K and then make business connections with local yogis, wellness practitioners, hold meditation retreats and specialized events. Upcharge for spa boxes, maybe a massage or concierge services, etc...Those marketing strategies will boost your bookings and top line revenue, plus make you more memorable. Think a bit like a boutique hotel owner. The stay is just the beginning of the revenue stream, like a base line. It gets a guest in the door and you build the experience from there.
Be creative and see what's missing from the market you're interested in, fill the gap and think of it as a business, not just an Airbnb.
35 Replies
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hi @Ivan Aldana, so you are a not really informed based on some of you statements.
First off, COVID drove people to vacation at STRs all over the place, but especially in more rural areas where they can get away from it all. Most of us saw record occupancy and nightly rates during the pandemic.
Urban STRs were hit harder due to the heavier restrictions in larger cities.
Regarding the rural vs urban, I believe in beaches, lakes and mountains for any STRs I look at. I almost never look at urban places.
In an urban/city you can expect STR restrictions, unreasonable regs (sometimes) and an overall dislike of STRs in general.
In a rural area, you can expect more acceptance due to the distances between homes, the taxes STRs bring in can make a real difference (plus the places people visit drive revenue) etc.
There are a ton of folks converting their STRs to LTRs due to outright bans in the bigger cities.
Buying your STR in the right area will be important. Plan ahead if you buy in a seasonal area. We are very seasonable and planned accordingly. No problems making a profit.
- Member since 2021 · 101 posts · 55 votes2y
Quote from @Michael Baum:
Hi @Ivan Aldana, so you are a not really informed based on some of you statements.
First off, COVID drove people to vacation at STRs all over the place, but especially in more rural areas where they can get away from it all. Most of us saw record occupancy and nightly rates during the pandemic.
Urban STRs were hit harder due to the heavier restrictions in larger cities.
Regarding the rural vs urban, I believe in beaches, lakes and mountains for any STRs I look at. I almost never look at urban places.
In an urban/city you can expect STR restrictions, unreasonable regs (sometimes) and an overall dislike of STRs in general.
In a rural area, you can expect more acceptance due to the distances between homes, the taxes STRs bring in can make a real difference (plus the places people visit drive revenue) etc.
There are a ton of folks converting their STRs to LTRs due to outright bans in the bigger cities.
Buying your STR in the right area will be important. Plan ahead if you buy in a seasonal area. We are very seasonable and planned accordingly. No problems making a profit.
Helps out a lot, very informative! Thank you.
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votesYou are welcome. Sorry if I came off a bit rough. I didn't mean to be that way. :)
Quote from @Ivan Aldana:
Quote from @Michael Baum:
Hi @Ivan Aldana, so you are a not really informed based on some of you statements.
First off, COVID drove people to vacation at STRs all over the place, but especially in more rural areas where they can get away from it all. Most of us saw record occupancy and nightly rates during the pandemic.
Urban STRs were hit harder due to the heavier restrictions in larger cities.
Regarding the rural vs urban, I believe in beaches, lakes and mountains for any STRs I look at. I almost never look at urban places.
In an urban/city you can expect STR restrictions, unreasonable regs (sometimes) and an overall dislike of STRs in general.
In a rural area, you can expect more acceptance due to the distances between homes, the taxes STRs bring in can make a real difference (plus the places people visit drive revenue) etc.
There are a ton of folks converting their STRs to LTRs due to outright bans in the bigger cities.
Buying your STR in the right area will be important. Plan ahead if you buy in a seasonal area. We are very seasonable and planned accordingly. No problems making a profit.
Helps out a lot, very informative! Thank you.
Anyways, take a look at what you want out of the STR. Is it something for pure profit? Do you want to be able to use it occasionally?
That is something that can make a difference. What do you think your profit threshold is? Some folks don't get out of bed for less than 20%. That is pretty tough in today's market. Are you happy with 10%. It will all depend! - 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Quote from @Michael Baum:
Hi @Ivan Aldana, so you are a not really informed based on some of you statements.
First off, COVID drove people to vacation at STRs all over the place, but especially in more rural areas where they can get away from it all. Most of us saw record occupancy and nightly rates during the pandemic.
Urban STRs were hit harder due to the heavier restrictions in larger cities.
Regarding the rural vs urban, I believe in beaches, lakes and mountains for any STRs I look at. I almost never look at urban places.
In an urban/city you can expect STR restrictions, unreasonable regs (sometimes) and an overall dislike of STRs in general.
In a rural area, you can expect more acceptance due to the distances between homes, the taxes STRs bring in can make a real difference (plus the places people visit drive revenue) etc.
There are a ton of folks converting their STRs to LTRs due to outright bans in the bigger cities.
Buying your STR in the right area will be important. Plan ahead if you buy in a seasonal area. We are very seasonable and planned accordingly. No problems making a profit.
Exactly. We killed it during Covid at out lake house as people had a safe place to have fun away from the crowds.
- Investor · Minneapolis · Member since 2023 · 265 posts · 162 votes2y
Another thing to notice is who the experts say are making money in 2024, which are luxury and eco/experience type properties. Don't be just another vanilla (forgettable) $190 ADR listing with cell phone pictures, no SEO and the same hot tub and fire pit as everyone else. You can do something simple like transform a garage or unfinished basement into a "wellness center" for about $10K and then make business connections with local yogis, wellness practitioners, hold meditation retreats and specialized events. Upcharge for spa boxes, maybe a massage or concierge services, etc...Those marketing strategies will boost your bookings and top line revenue, plus make you more memorable. Think a bit like a boutique hotel owner. The stay is just the beginning of the revenue stream, like a base line. It gets a guest in the door and you build the experience from there.
Be creative and see what's missing from the market you're interested in, fill the gap and think of it as a business, not just an Airbnb.
- Investor · Cincinnati/Fort Thomas, KY · Member since 2015 · 206 posts · 183 votes2y
@Ivan Aldana
I have LTRs in a metro area, an STR in rural hiking/rock climbing area and an STR in a beach area next to a large metro area.
I will say we have so many more hoops to jump through and regulations at the beach STR even though most of the area is STR's and welcomed. So many more eyes trying to hinder my operation.
The rural one has zero STR regulations or code enforcement but is a regional and attraction and driveable from several airports. Much easier to do business there in terms of regulation but harder to come by a reliable cleaning/handyman/PMteam and smaller pool of contractors.
You need to decide what is important to you.
- Member since 2021 · 101 posts · 55 votes2y
Quote from @Theresa Holl:
Another thing to notice is who the experts say are making money in 2024, which are luxury and eco/experience type properties. Don't be just another vanilla (forgettable) $190 ADR listing with cell phone pictures, no SEO and the same hot tub and fire pit as everyone else. You can do something simple like transform a garage or unfinished basement into a "wellness center" for about $10K and then make business connections with local yogis, wellness practitioners, hold meditation retreats and specialized events. Upcharge for spa boxes, maybe a massage or concierge services, etc...Those marketing strategies will boost your bookings and top line revenue, plus make you more memorable. Think a bit like a boutique hotel owner. The stay is just the beginning of the revenue stream, like a base line. It gets a guest in the door and you build the experience from there.
Be creative and see what's missing from the market you're interested in, fill the gap and think of it as a business, not just an Airbnb.
Very helpful insight! Definitely got to do something different to stand out. Thanks!
- Member since 2021 · 101 posts · 55 votes2y
Quote from @Sandra Morrison:
@Ivan Aldana
I have LTRs in a metro area, an STR in rural hiking/rock climbing area and an STR in a beach area next to a large metro area.
I will say we have so many more hoops to jump through and regulations at the beach STR even though most of the area is STR's and welcomed. So many more eyes trying to hinder my operation.
The rural one has zero STR regulations or code enforcement but is a regional and attraction and driveable from several airports. Much easier to do business there in terms of regulation but harder to come by a reliable cleaning/handyman/PMteam and smaller pool of contractors.
You need to decide what is important to you.
Just what I needed! Thanks for the helpful insights on your experiences.
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
I want to point out something about what @Theresa Holl said.
All those things are very cool and would be nice to offer, but they would constitute significant services which will change your taxable status.
So you really have to balance those sorts of special experiences or offerings. Many things listed would be considered significant services and would have you losing much of your tax deductions.
I know of a couple of STR owners who had to eat a big tax bill due to this and they had to nix those sorts of offerings.
That doesn't mean you can't create the wellness space, golf simulator, upscale game room, etc to enhance the space. You just don't want to bring in people to train folks or do yoga or whatever.
That means even if you don't pay them but created a relationship. It isn't the same as us telling folks where to rent a boat.
- Rental Property Investor · south carolina and michigan · Member since 2023 · 348 posts · 226 votes2yWe have 18 ltrs in a metro area scattered throughout, have had since 2010. We have 2 str in ocean lakes resort and campground which is a Beachfront resort- because it's a campground it's str are pretty much invincible and protected against str rules.
Quote from @Ivan Aldana:
Hey BP fam! I'm still doing market research and can't decide what would be a less riskier option for me, is it better to find a property in a vacation destination that's more rural and outdoors or a property in a more urban/metro area? I'm thinking that in more rural areas there's less exit strategies, like what happened when COVID hit, everybody stopped taking vacations. So since it's not really in a metro area you can't really convert it to an MTR or LTR if you had to. The only exit strategies I see is only STR, sell, or go through reserves until vacations would pick back up.While in a more metro area you can convert to MTR or LTR if need be. What do you guys think? Do you any of you guys have properties in both kind of markets? If so, which are performing better in your experience?
did 140k last year out of those two houses.
my advice is metro for ltr, we have had almost 100% occupancy even through covid - we are not a slum lord. As far as str, get in an area like ours where you have sun, sand, no str restrictions and a water park doesnt hurt either( as we also have that) and you will be successful as long as you buy them right. - New to Real Estate · Northern Kentucky · Member since 2024 · 8 posts · 3 votes2y
Quote from @Michael Baum:
I want to point out something about what @Theresa Holl said.
All those things are very cool and would be nice to offer, but they would constitute significant services which will change your taxable status.
So you really have to balance those sorts of special experiences or offerings. Many things listed would be considered significant services and would have you losing much of your tax deductions.
I know of a couple of STR owners who had to eat a big tax bill due to this and they had to nix those sorts of offerings.
That doesn't mean you can't create the wellness space, golf simulator, upscale game room, etc to enhance the space. You just don't want to bring in people to train folks or do yoga or whatever.
That means even if you don't pay them but created a relationship. It isn't the same as us telling folks where to rent a boat.
Michael - Curious what part of taxable status would be affected here. Are you referring to property tax classification, as in it moves you from residential to commercial, or are there income tax remifications?
- Realtor · St Augustine, FL · Member since 2023 · 111 posts · 87 votes2y
I think less about exit strategy and more how you will pivot. ie: move from STR to MTR, or LTR. Example: If there are too many STRs and you can't get the occupancy high enough then you could switch into MTR. If it makes sense financially converting it into a long term rental could be the way to go. People always need housing and speaking of MTR there will always be insurance claims and traveling medical professionals. In the case of a nationwide shut down like we saw, if that happened again, I personally don't think we'd see a such a massive pent up demand from vacationers, and could see people operating as normal if any more mandates are imposed, but it's hard to say. There are places that are constantly popular with tourists. For example here in St Augustine, most of the year is steadily busy. I think you want to pick markets which have a strong following and year round tourism, that you know and have visited and that have clear demand. We have already seen a cull in STR as a lot of people pivoted in the last 18 months, so I think what you'll see in the market now are people that are serious about this business.
- Investor · Minneapolis · Member since 2023 · 265 posts · 162 votes2yI respect that position, but it depends on your priorities and financial goals. My business group did this and booked solid for 18 months out in a crowded market. So our business priority is to maximize top line revenue and bookings. Retreats and events were central to our marketing strategy and we did very well.
Quote from @Michael Baum:
I want to point out something about what @Theresa Holl said.
All those things are very cool and would be nice to offer, but they would constitute significant services which will change your taxable status.
So you really have to balance those sorts of special experiences or offerings. Many things listed would be considered significant services and would have you losing much of your tax deductions.
I know of a couple of STR owners who had to eat a big tax bill due to this and they had to nix those sorts of offerings.
That doesn't mean you can't create the wellness space, golf simulator, upscale game room, etc to enhance the space. You just don't want to bring in people to train folks or do yoga or whatever.
That means even if you don't pay them but created a relationship. It isn't the same as us telling folks where to rent a boat.
- Rental Property Investor · south carolina and michigan · Member since 2023 · 348 posts · 226 votes2yAgree, do what works. In str there is no right or wrong as the spectrum of items in this area is vast- location, type, size, etc etc etc.
Quote from @Theresa Holl:
I respect that position, but it depends on your priorities and financial goals. My business group did this and booked solid for 18 months out in a crowded market. So our business priority is to maximize top line revenue and bookings. Retreats and events were central to our marketing strategy and we did very well.Quote from @Michael Baum:
I want to point out something about what @Theresa Holl said.
All those things are very cool and would be nice to offer, but they would constitute significant services which will change your taxable status.
So you really have to balance those sorts of special experiences or offerings. Many things listed would be considered significant services and would have you losing much of your tax deductions.
I know of a couple of STR owners who had to eat a big tax bill due to this and they had to nix those sorts of offerings.
That doesn't mean you can't create the wellness space, golf simulator, upscale game room, etc to enhance the space. You just don't want to bring in people to train folks or do yoga or whatever.
That means even if you don't pay them but created a relationship. It isn't the same as us telling folks where to rent a boat.
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Quote from @Mike Clary:
Michael - Curious what part of taxable status would be affected here. Are you referring to property tax classification, as in it moves you from residential to commercial, or are there income tax remifications?
It changes your taxable status for income tax. You will have to file under a schedule C vs schedule E.
It isn't necessarily a worse situation, but it usually means that you will not get the same tax deductions. You will have to pay self employment taxes etc.
Check out this article from our own @Avery Carl - https://theshorttermshop.com/is-short-term-rental-schedule-e... - 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Quote from @Theresa Holl:
I respect that position, but it depends on your priorities and financial goals. My business group did this and booked solid for 18 months out in a crowded market. So our business priority is to maximize top line revenue and bookings. Retreats and events were central to our marketing strategy and we did very well.Thanks @Theresa Holl. I am not saying that it is a bad idea or not worth it.
It appears that you are doing just fine. You are in a different situation. You have an investing group, which I assume means an LLP of some kind which means you are paying the self employment taxes etc because you are not an individual. You have to run this way, but you are paying more in taxes over an individual with passive vs active investment.
Seeing as most folks who visit here are small, self managing folks, it is important that people are aware of the differences. That is why I pointed it out.
As with anything like this, get help from your CPA on what way to go.
- 2ySarah KensingerPro MemberReal Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
I always like to tell people to start in a place that draws them. Make sure the numbers work but also find a place that makes you passionate about offering a STR to guests. No matter what happens in the future, if your strategic and hanging out in the right groups, you'll find a way to continue being profitable!
- Member since 2021 · 101 posts · 55 votes2y
Quote from @Michael Baum:
I want to point out something about what @Theresa Holl said.
All those things are very cool and would be nice to offer, but they would constitute significant services which will change your taxable status.
So you really have to balance those sorts of special experiences or offerings. Many things listed would be considered significant services and would have you losing much of your tax deductions.
I know of a couple of STR owners who had to eat a big tax bill due to this and they had to nix those sorts of offerings.
That doesn't mean you can't create the wellness space, golf simulator, upscale game room, etc to enhance the space. You just don't want to bring in people to train folks or do yoga or whatever.
That means even if you don't pay them but created a relationship. It isn't the same as us telling folks where to rent a boat.
Thanks for your input and advice. Definitely will keep all those things in mind.
- Member since 2021 · 101 posts · 55 votes2y
Quote from @Nathan M kiefer:
We have 18 ltrs in a metro area scattered throughout, have had since 2010. We have 2 str in ocean lakes resort and campground which is a Beachfront resort- because it's a campground it's str are pretty much invincible and protected against str rules.Quote from @Ivan Aldana:
Hey BP fam! I'm still doing market research and can't decide what would be a less riskier option for me, is it better to find a property in a vacation destination that's more rural and outdoors or a property in a more urban/metro area? I'm thinking that in more rural areas there's less exit strategies, like what happened when COVID hit, everybody stopped taking vacations. So since it's not really in a metro area you can't really convert it to an MTR or LTR if you had to. The only exit strategies I see is only STR, sell, or go through reserves until vacations would pick back up.While in a more metro area you can convert to MTR or LTR if need be. What do you guys think? Do you any of you guys have properties in both kind of markets? If so, which are performing better in your experience?
did 140k last year out of those two houses.
my advice is metro for ltr, we have had almost 100% occupancy even through covid - we are not a slum lord. As far as str, get in an area like ours where you have sun, sand, no str restrictions and a water park doesnt hurt either( as we also have that) and you will be successful as long as you buy them right.Great advice Nathan! Just what I needed, the inside scoop of your personal experience, really appreciate that!
- Member since 2021 · 101 posts · 55 votes2y
Quote from @Mindy Nicol:
I think less about exit strategy and more how you will pivot. ie: move from STR to MTR, or LTR. Example: If there are too many STRs and you can't get the occupancy high enough then you could switch into MTR. If it makes sense financially converting it into a long term rental could be the way to go. People always need housing and speaking of MTR there will always be insurance claims and traveling medical professionals. In the case of a nationwide shut down like we saw, if that happened again, I personally don't think we'd see a such a massive pent up demand from vacationers, and could see people operating as normal if any more mandates are imposed, but it's hard to say. There are places that are constantly popular with tourists. For example here in St Augustine, most of the year is steadily busy. I think you want to pick markets which have a strong following and year round tourism, that you know and have visited and that have clear demand. We have already seen a cull in STR as a lot of people pivoted in the last 18 months, so I think what you'll see in the market now are people that are serious about this business.
Yeah sorry that's more what I meant is how to pivot if needed and not an exit strategy, but thanks for your insights!
- Member since 2021 · 101 posts · 55 votes2yGood starting point. Great advice thanks!
Quote from @Sarah Kensinger:
I always like to tell people to start in a place that draws them. Make sure the numbers work but also find a place that makes you passionate about offering a STR to guests. No matter what happens in the future, if your strategic and hanging out in the right groups, you'll find a way to continue being profitable!
- 2yAndrew SteffensBusiness MemberTampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
Agreeing with most here - but with some things to add. First off, you do paint sort of worst case scenarios. There are no investments that are immune to risk in general.
I like to invest in growing markets that also have traditional tourism draws, but that is my preference. I plan for the first time to buy something outside that box this year as a second home/cabin somewhere in Appalachia. Stepping outside of my comfort zone but I understand the risks and I am not depending on that investment to perform.
I think you should invest somewhere in your comfort zone, whatever that may be.
Vacation Rentals of Florida53 Reviews - Rental Property Investor · south carolina and michigan · Member since 2023 · 348 posts · 226 votes2y
Quote from @Ivan Aldana:
Quote from @Nathan M kiefer:
We have 18 ltrs in a metro area scattered throughout, have had since 2010. We have 2 str in ocean lakes resort and campground which is a Beachfront resort- because it's a campground it's str are pretty much invincible and protected against str rules.Quote from @Ivan Aldana:
Hey BP fam! I'm still doing market research and can't decide what would be a less riskier option for me, is it better to find a property in a vacation destination that's more rural and outdoors or a property in a more urban/metro area? I'm thinking that in more rural areas there's less exit strategies, like what happened when COVID hit, everybody stopped taking vacations. So since it's not really in a metro area you can't really convert it to an MTR or LTR if you had to. The only exit strategies I see is only STR, sell, or go through reserves until vacations would pick back up.While in a more metro area you can convert to MTR or LTR if need be. What do you guys think? Do you any of you guys have properties in both kind of markets? If so, which are performing better in your experience?
did 140k last year out of those two houses.
my advice is metro for ltr, we have had almost 100% occupancy even through covid - we are not a slum lord. As far as str, get in an area like ours where you have sun, sand, no str restrictions and a water park doesnt hurt either( as we also have that) and you will be successful as long as you buy them right.Great advice Nathan! Just what I needed, the inside scoop of your personal experience, really appreciate that!
your welcome and best of luck on your journey!
- Member since 2021 · 101 posts · 55 votes2y
Quote from @Andrew Steffens:
Agreeing with most here - but with some things to add. First off, you do paint sort of worst case scenarios. There are no investments that are immune to risk in general.
I like to invest in growing markets that also have traditional tourism draws, but that is my preference. I plan for the first time to buy something outside that box this year as a second home/cabin somewhere in Appalachia. Stepping outside of my comfort zone but I understand the risks and I am not depending on that investment to perform.
I think you should invest somewhere in your comfort zone, whatever that may be.
Great advice! Appreciate it!
- Investor · Minneapolis · Member since 2023 · 265 posts · 162 votes2y
Quote from @Michael Baum:
Quote from @Theresa Holl:
I respect that position, but it depends on your priorities and financial goals. My business group did this and booked solid for 18 months out in a crowded market. So our business priority is to maximize top line revenue and bookings. Retreats and events were central to our marketing strategy and we did very well.Thanks @Theresa Holl. I am not saying that it is a bad idea or not worth it.
It appears that you are doing just fine. You are in a different situation. You have an investing group, which I assume means an LLP of some kind which means you are paying the self employment taxes etc because you are not an individual. You have to run this way, but you are paying more in taxes over an individual with passive vs active investment.
Seeing as most folks who visit here are small, self managing folks, it is important that people are aware of the differences. That is why I pointed it out.
As with anything like this, get help from your CPA on what way to go.
Totally agree Michael. I have an LLC, so don't want to give tax advice to anyone who doesn't run their investments like a business. My recommendation is to hang out with Alchemy of Money for a CPA and Engineered Tax Services for additional tax strategy. They are my go tos.
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