Do you see short term rentals as a long term investment strategy?

28 Replies

Originally posted by @Troy Larson:

I am researching investment strategies and keep getting pulled back to STRs. I know many large tourist towns and cities have/are enacting regulations that may make STRs out of reach for a single investor or company.

Still, I can't help but to think that properly placed and finished STRs aimed and marketed to select guests could make for nice long term holds.

I.E...

Homes near schools for families during visits for athletic, arts or cultural event or graduation. Condos near military bases, or other large business concentration for short term business associates.

Where do you see your STR investment portfolio in ten or twenty years?

I Personally I Would never buy a rental whose business model required me to do STR's.

1) you never know what the state and/or local government will do to stop Short term rentals in the area, one negative city ordinance and you could be bankrupt.

2) I believe that Air BNB or VRBO is a different business model.  You are in the hospitality business, catering to the public.  It requires consistent access to those who can perform maid service, providing keys, stocking the room etc.  High touch vs a more passive regular long term rental.

IMO I think you evaluate a property as a long term hold, and then if it makes sense, doing a short term rental can get you some extra money.  

That way if you ever change your mind, or want something more passive, you can get out of the Airbnb/VRBO market.

@Julie McCoy I like what you said about putting your stamp on your STR properties. That’s something that i look forward to doing as well What cities do you have your properties in that have consistent tourism markets?

@Cheryl Vargas The most consistent market I'm in is Gatlinburg/Pigeon Forge.  Jan/Feb is the low season and one of my cabins doesn't have an empty night until January 22.

Originally posted by @John Underwood:

Yes I think STR's can be a long term strategy. As Paul said you can always outsource more or all of it if needed.

The biggest problem to this strategy is changing rules and laws. They could start heavily taxing these type properties to or just outlaw them as they have in many locations.

I wouldn't advise putting all your eggs in one basket. Have a mix of long term rentals or other real estate so that if something changed you wouldn't be out of business with no income.

One obstacle I see in the future is competition driving prices down. I'm in Austin and thinking of buying a home with the prospect of making supplemental income with STR and eventually retiring. Home prices are high in Austin compared to the rest of Texas, so supplemental income is an attractive idea. STR is popular in Austin. I reviewed prices being charged on Airbnb, and currently there are 300+ active listings, with the average being around $80 a night for 1 or 2 BR. I did the math, and it would be a tight budget. You have to leave room for a day of cleaning and prep between visits. Also, I see the competition only growing as more people want to depend on this as side income. So then do you reduce your price to stay competitive and do people even see your ad with so many others out there? I guess it's a little extra income, but it's no retirement income. And yes, it's taxable. In order to apply any deductibles, you have to have a dedicated room for it. Other people mentioned increasing regulations in the future. That's possible too. It's still an interesting idea, though.