A Class Luxury Vacation Rentals in Resort Areas

19 Replies

Hey Ya'll,


Does anyone have experience with A class luxury vacation rentals in resort areas?  Particularly owning and running these at scale (10+)?

I've googled and surfed the forums but haven't found much discussion on these types of rentals.

I've got 3, and one under management. It's not yet 10+, but I'm getting there.

@Lucas Carl - OK, let's see if this is specific enough

- A set of 10 townhomes have come on the market in a resort area that I already own one property in
- They are class A luxury homes with long range views, they are built on a ridge

-They come fully furnished and are about 10 years old

- The resort area has winter recreation and a small amount of summer recreation so there is year round draw

I'm interested in building out a business case on these and running them as short term vacation rentals but haven't found a lot of others discussing these exact type of rentals.  My initial searching shows that running short term rentals like this is quite a bit more expensive than traditional long term rentals.  I'm also concerned about other elements of the deal - lack of control of the surrounding area (other HOAs, the local ski resort, etc) and also that high end rentals like this will probably suffer mightily during a downturn.

I'm wondering if anyone has particular experience with this type of situation such that they could share their lessons learned and best practices.

@Josh Stack    I own and self manage 5 vacation rentals on the TN side of the smokys. They are not “high end” but some of them have stainless lol. All of them have nothing but raving 5 star reviews but that boils down to great management. 

First thing I would do is get on AirBnB and obsess. You’ll be able to tell within an hour or so research if they’re worth your time. And you’ll be able to tell with 2 days or so of research how much money you can make. 

Personally I wouldn’t touch them If  they’re not year round. In my market I look for 83% occupancy year round. Jan/feb can be a bit slow but I can put butts in seats if I try hard. The other 10 months people are begging for my cabins. Occupancy is of course market specific. 

Start with AirBnB and see what you find and let us know how it goes! 

I can help you with an assessment if you'd like. There are economies of scale that come with owning multiple properties especially in one area. There is also some risk involved with "all your eggs in one basket".  

Hi @Lucas Carl ,


That's the thing, I don't think there is enough utilization to keep  the occupancy up near that high.  I'll have to dig into the numbers a bit more to be sure though.  The other issues, and I think perhaps the biggest is that the local political climate is pretty volatile so that would be a big risk, it's not like these are houses sitting just outside Smokey Mountains National Park, there isn't much of a draw to the area except recreation and relaxation.

Class A properties, vacation or otherwise, are highly unlikely to have positive cash flow. You will need deep pockets to carry the investment to a payout You will need to concentrate on speculating on appreciation when you purchase. These types of investments are primarily a place to park excess cash.

A down turn in th eeconomy will not only impact value it could also dry up your client base.

@Josh Stack if you want to self manage vacation rentals pigeon forge gatlinburg can’t be beat.  If you don’t want to self manage it’ll never work. 

@Josh Stack are you looking for money or are you looking for occupancy??? You don’t sound very convinced of the amazing potential of the TN side of The Smokies even after @Lucas Carl detailed explanation and with all due respect, you sound ignorant of the market conditions. I also own and self manage a very successful vacation rental in Gatlinburg and agree with and back up what Lucas has explained. Again, do your research and if you have no interest in profiting by all means hire a property management company. If on the other hand you want to watch the money roll in, self manage on the various booking sites like Airbnb where you can literally manage while sitting on the John!

@Josh Stack I think you've made your own case against buying.  

- My initial searching shows that running short term rentals like this is quite a bit more expensive than traditional long term rentals. Yes, though this is true of all STRs

- The resort area has winter recreation and a small amount of summer recreation so there is year round draw This doesn't sound year-round to me, and later you say you don't think you can get nearly the occupancy that true year-round locales can and do

high end rentals like this will probably suffer mightily during a downturn. Yes indeed - high end rentals will be the first to feel any economic squeeze

the local political climate is pretty volatile so that would be a big risk This is a HUGE red flag to me

Do you really still want to buy them?  Especially 10 of them?  It sounds like a really great way to lose a whole lot of money.

@Josh Stack it all comes down to the numbers through exhaustive research. It doesn’t matter where the property is as long as it cash flows. I am not a fan of having others control expenses i.e. HOA fees, assessments, etc.

Best Regards,
Eric

Good stuff guys, thanks for all the input.

Originally posted by @Jeff Piscioniere :

Josh Stack are you looking for money or are you looking for occupancy??? You don’t sound very convinced of the amazing potential of the TN side of The Smokies even after Lucas Carl detailed explanation and with all due respect, you sound ignorant of the market conditions. I also own and self manage a very successful vacation rental in Gatlinburg and agree with and back up what Lucas has explained. Again, do your research and if you have no interest in profiting by all means hire a property management company. If on the other hand you want to watch the money roll in, self manage on the various booking sites like Airbnb where you can literally manage while sitting on the John!

  Hey Jeff,


To be clear these townhomes that I'm looking at are not in Tennessee and not near the Smokeys or Gatlinburg, they are on the NC side of things and in an area that's much less dynamic and tourism driven than the areas you are referring to.

@Josh Stack I don't own any short term rentals. I know there are sites dedicated to the rental of luxuy short term rentals, but not a lot of investors here specializing in them. I've considered turning my house into a short term vacation rental. It's 4600 sq. ft. with a guest house on 20 acres with built in pool in Redding CA. Close to lakes, rivers, mountains, etc. Plus college, private university and a thriving ministry school, Bethel School of Supernatural Ministry, which draws people from around the world. 

It would be great for families, family reunions, wedding parties, etc. However; trying to find info to determine the feasibility is hard. 

Originally posted by @Karen Margrave :

@Josh Stack I don't own any short term rentals. I know there are sites dedicated to the rental of luxuy short term rentals, but not a lot of investors here specializing in them. I've considered turning my house into a short term vacation rental. It's 4600 sq. ft. with a guest house on 20 acres with built in pool in Redding CA. Close to lakes, rivers, mountains, etc. Plus college, private university and a thriving ministry school, Bethel School of Supernatural Ministry, which draws people from around the world. 

It would be great for families, family reunions, wedding parties, etc. However; trying to find info to determine the feasibility is hard. 

 I remember you talking about your property in previous threads, and I think it's intriguing.  I'd recommend contacting your zoning commission to see what the rules are for events on your particular property.  If there's nothing on the books restricting it, I think there's a world of potential there.  (and you yourself wouldn't have to do that much work - just market it as an event site, and the renters are responsible for bringing an event planner, renting extra equipment, etc. etc. etc.  You'd just want a manager to make sure nothing gets out of control)

I'd kind of love to take on a project like that, but Redding is nowhere near me, alas.

@Josh Stack  I have managed multiple Class A units in one complex but not owned so can only speak from the management side. 

1. Considering you already have one there have you rented it out as STR before?
2. Are there any restrictions from your HOA? 7 night min/30 night min etc.
3. How many townhomes in that resort area? If there are hundreds renting out to guests you will be competing with who can offer the cheapest rate just like the Disney resort area in Orlando.
4. Do they allow property managers not affiliated with the resort? If yes, I would search all of them on VRBO and shoot them a message. Tell them you noticed they managed a few townhomes in that community and you are interested in purchasing one with the intent to use their service. What are the pros/cons and the average returns they are seeing?

I would request what kind of occupancy they have seen year round and if all the numbers work go right ahead.
Personally, I would only purchase multiple in the same community if it's a boutique development aka making me the majority owner. When there are too many voices the dynamics of the resort area can change really quick.

@Julie McCoy  That's my house in Redding. Unfortunately Shasta County doesn't really have a zoning that allows for events, unless it's in a commercial zoning. My property probably could be rezoned to commercial, as part of it actually adjoins a commercially zoned parcel on the west side of it, across a small creek, where there is a small convenience store, but I don't want a commercial zoning, as it puts the residence into non conforming, etc. 

However; if someone were to do a Bed and Breakfast (it's allowed with a use permit) and people were to rent out the entire property and hold a wedding as part of their stay, that's allowed. 

They're also going to begin allowing agritourism (meaning someone could have organic garden, vineyard in conjunction with some type of VR or B&B with roadside stand, or  ? I have a million ideas, just not the money to do them right now. 

In addition, the County in May (hopefully) will begin allowing boarding houses on property such as mine. Which opens even more possibilities. 

@Karen Margrave What a beautiful property!  I'm sure you'll come up with something fabulous to do with it.  

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