Denver, CO · Member since 2017 · 102 posts · 48 votes
Who here is making 2-3x returns on their STR? I want to know what areas in the U.S. are hot. I have a full condo of furniture and have to move it somewhere to STR! Obviously I want it to be fully legal and licensed. I would love your experiences because my alternative is to spend a ton of money on airdna data! Thank you in advance!!!
I also have 3 small billboards in and around the contractor parking lot.
Every spring I send flyers to every welding school in Kansas, Oklahoma, Arkansas, Texas and Louisiana.
Every fall I send calendars of scantily clad women with my advertising to the H.R. dept of every contractors company that has rented from me.
There are magnetic signs on my truck.
I have a side job. It's doing the pre-access drug screens for new contractors starting their jobs at the refinery. Every contractor gets a nice metal pen with my contact info. There are about 3000 pens floating around the Midwest.
Craigslist and my side job account for 75% of my first time rentals. First time rentals are about 33% of my total rentals. 66% of my total rentals are repeat rentals.
@Julie Hill Atlanta is hotel rich. Airbnb returns here are just ok. There's also a glut of Airbnbs after the Superbowl and the threat of near term regulation. Atlanta would not be high on my list.
Crazy coincidence - a contractor working in Texas City reached out to me because he saw my Craigslist add for my vacation rental the morning after I asked you about marketing. He was looking for a place through at least July or August that he’d only be staying at during the week in the $1200/month range. That won’t work for the summer months on my vacation rental, but it did make me thing about finding some cheap 2/1...
@Edward Lui. Again how are you figuring cash on cash? You can get into a cabin in East Tennessee with a purchase price of 500k for 50 grand already furnished. Gross 85 grand your first your and have a COC return of 50% or higher.
Hey, honest question - if the Pigeon Forge / Gatlinburg / Sevierville area has such high cash on cash returns, then why are there 100+ houses listed for sale right now? Why would anyone want to sell an asset that’s earning them so much money every month? Just genuinely curious - I don’t know too much about the market there.
Hi @Eric P.! I can answer that. This market is a true vacation rental market. 90% of the owners here are not investors like you and I are, they are just people who vacationed to the area and thought "I can have a cabin in the mountains and throw it on a local property manager so I don't have to pay my mortgage out of pocket." Those people just put their cabin on whichever local PM gave them the best sales pitch, and most of them charge 40% (although now they are doing "introductory" lower rates for the first year if you sign a 2 year contract. The least I have heard is 20%). So most of them aren't concerned with cash flow and are frankly lucky to break even on these local programs. If you look at the listings most of the homes listed are with local PM's. You don't run into self-managed sellers as much, because those guys are cash flowing.
Also, keep in mind, not all of the properties that are currently for sale would make good rentals. When a really desirable one hits the market, it's usually gone within a few days, sometimes hours. There are exceptions and diamonds in the rough, but for the most part the good ones are gone very quickly.
@Eric P. Just to add to Avery’s point there are also thousands and thousands of these things. Folks not familiar with the area tend to think there’s only a few log cabins to pick from, but the number is closer to 10,000. So of course there are always people looking to sell. Most of which, as Avery said, are using PMs and not making any money.
@Bruce C. I'm not sure how much you get for your vacation rental in Texas City, but I'm guessing it's more than $1200/month. Personally, I would have taken the contractors money and let him stay until July or August. It'll be steady money and you don't have to pay to have it cleaned/stocked between occupancies.
2 years ago I was in a similar situation. I ended up renting a guy and his girlfriend a $10,000 house for $200/week. He ended up staying 81 weeks. That's 81 weeks I didn't have to clean or stock it. I could have turned him away and rented it intermittently to 2 or more guys for $400/week, but more work would have been involved. How much would I have made in 81 weeks if I did this? I'd like to say right around $16,000.00, but it would need cleaning and stocking between occupancies.
I'd like to think I made the same amount of money in the same amount of time with zero extra work.
To add to the good answers from Avery, Lucas, and the others...
The market has seen SUBSTANTIAL appreciation and many non-investors are also now looking to take that $$ and run. For example, an employee of mine bought a cabin to live in in 2014 for $42K. She only did maintenance, but did replace the roof and AC condenser after the fires in 2016 (insurance paid). She sold that 2 BDRM in December for $288K, then moved into a rental apartment for $700/mo including utilities.
And vacation homes owners (not investors) are doing the same. When you can pocket $100K+, you can pay for a lot of other kinds of vacations and rent a lot of cabins. You will also find a pretty decent percentage of these vacation home owners are getting up in age and no longer make as many trips nor are as interested.
Hi @Eric P.! I can answer that. This market is a true vacation rental market. 90% of the owners here are not investors like you and I are, they are just people who vacationed to the area and thought "I can have a cabin in the mountains and throw it on a local property manager so I don't have to pay my mortgage out of pocket." Those people just put their cabin on whichever local PM gave them the best sales pitch, and most of them charge 40% (although now they are doing "introductory" lower rates for the first year if you sign a 2 year contract. The least I have heard is 20%). So most of them aren't concerned with cash flow and are frankly lucky to break even on these local programs. If you look at the listings most of the homes listed are with local PM's. You don't run into self-managed sellers as much, because those guys are cash flowing.
Also, keep in mind, not all of the properties that are currently for sale would make good rentals. When a really desirable one hits the market, it's usually gone within a few days, sometimes hours. There are exceptions and diamonds in the rough, but for the most part the good ones are gone very quickly.
Thanks @Avery Carl@Luke Carl - was hoping y'all would respond! Makes total sense. Since Avery said that only a small percent of the available properties would make desirable rentals, I'm curious: What are some of the key traits that make a property desirable as an STR in Pigeon Forge / Gatlinburg / Sevierville?
@Eric P. When people come to vacation in the mountains, they want it to feel like they are in the mountains. So as cabin-y of a vibe as possible. Cathedral ceilings/windows, tongue and groove walls, etc. I recommend as little drywall as possible, although there can be exceptions.
@Bruce C. I'm not sure how much you get for your vacation rental in Texas City, but I'm guessing it's more than $1200/month. Personally, I would have taken the contractors money and let him stay until July or August. It'll be steady money and you don't have to pay to have it cleaned/stocked between occupancies.
2 years ago I was in a similar situation. I ended up renting a guy and his girlfriend a $10,000 house for $200/week. He ended up staying 81 weeks. That's 81 weeks I didn't have to clean or stock it. I could have turned him away and rented it intermittently to 2 or more guys for $400/week, but more work would have been involved. How much would I have made in 81 weeks if I did this? I'd like to say right around $16,000.00, but it would need cleaning and stocking between occupancies.
I'd like to think I made the same amount of money in the same amount of time with zero extra work.
The rental is in Galveston, not Texas City, and I’m getting about 700 a week after paying to have it cleaned during May - August. A vacation rental in Texas City would be...interesting. :)
Pigeon Forge / Sevierville / Wears Valley Owner of 3 cabins here. The Smoky Mountains are a great place to invest but care must be taken in current market conditions due to the high prices in the area. Between the Gatlinburg fires, cheap property tax, and the increased popularity of vacation rentals, the values are skyrocketing and is certainly a sellers market. Again, deals can be found but care must be taken. I’ve been away from bigger pockets for a while as there weren’t many owners of short term rentals in the past but it seems as though there are several now which makes for great discussion! Can’t wait!
@Eric P. Again, Avery nailed it. Also watch for access and parking. Specifically, really steep roads will interfere with your Winter-season rentals and can even be an issue in the Autumn with the rains and leaves. You want to be sure the parking area and/driveway is also not too steep.
Also, as evidenced by the last 10 days in the area, be wary of anything on or near a water source or low bridges and such to get to it. Many small creeks and babbling brooks turn into torrents when the heavy rains arrive, like they just did. That can either lead to possible damage OR merely make your place inaccessible.
@Julie Hill if your unit's not apart of an HOA, there can be major reward. Unfortunately, our HOA's trying to enforce STR restrictions so we'll see how that goes. If you can avoid that part then the permitting will be the least of your worries!
@Julie Hill Since it looks like no one's mentioned it yet, this might give you a quick insight into good markets. Scroll down the page and look for cities above the line for good performance.
@Julie Hill Since it looks like no one's mentioned it yet, this might give you a quick insight into good markets. Scroll down the page and look for cities above the line for good performance.
A word of warning - from someone who’s spent waaayyyy too long playing around on the AirDNA web site: they measure profit as revenue minus mortgage.
In many cities, a large chunk of the high airbnb revenues come from very specific highly desirable properties in highly desirable areas (e.g., baller properties that are downtown or oceanfront or lakefront, etc). But the data they use to estimate property cost for mortgages includes homes of all sizes & conditions & includes homes from all over the city.
So glancing at AirDNA you may think “OMG, I could make $50k+ per year AFTER making my mortgage payments!!!” But in actuality to buy one of the baller properties in those highly desirable areas that generate the strong airbnb revenues will cost you like triple the mortgage that AirDNA’s data indicates.
As an example, click on Destin - AirDNA estimates profits of $56k/yr after you pay that piddly $21k/yr mortgage ($1750/mon) on that low low home purchase price of $357k. Now go over to Airbnb & you’ll notice that most of the highly desirable (aka high revenue generating) homes are baller properties on the south shore of Destin. Now go over to Zillow & tell me how many of those baller south shore Destin homes you can get for $357k (or even for under $1 million!). Sadly, not too many.
So triple your estimated mortgage pymts from $21k/yr to $63k/yr to be more accurate. Which knocks $42k off your estimated annual profits & brings them down to a piddly $14k/yr. And that’s before utilities, flood insurance, maint & repairs, etc etc etc. That’s not to say that there’s not great opportunities in Destin, just that it’s not quiiiite as easy as AirDNA makes it seem.
Not to rain on anyone's parade... but be very very careful with the AirDNA data and never take it at face value without explicitly digging down and doing your own detailed research on any area that you're seriously considering for STR!
TL;DR: AirDNA isn’t a substitute for doing your own research! :-)
My 2 cents, maximizing your multiplier is not going to be the best long term strategy. The highest multipliers tend to be in the cities with the largest amount of regulatory scrutiny. I think the optimal strategy will be to find cities that have good returns, maybe not the highest, but that also have minimal regulatory risks.
Nashville, Charleston & Asheville are great examples of cities that have some of the highest returns, but the regulatory risk is so high that it might not be your optimal city to invest. What you'd really need to do is calculate a risk adjusted return for the city, and see what cities are best from there.
@Eric P. This is super helpful! I've always thought airdna is a bit inflated but now I know why! But how in the heck do you do you're own due diligence? Obviously research on the actual airbnb platform but the rates fluctuate so much and it doesn't even show most of the properties! I couldn't even find MY OWN LISTING in a search the other day. Even when I zoomed in on the map where it is and put in dates that I KNEW it was available! So frustrating.
@Eric P. very very good point. This is why when talking about vacation rentals I prefer to speak in gross annual income terms only. Net can be so different from person to person and situation to situation. Gross numbers are the only way to compare apples to apples. I can tell you my net numbers on my properties, but that doesn't mean the next guy's net on a comparable property will be the same.
@Account Closed yes, Poulsbo is super-cute! (I live here, so a bit biased). It's a very popular area for weddings, with Bainbridge Island close by, Kiana Lodge (Poulsbo) and Port Gamble. This area is also the stepping stone for all sorts of outdoor activities on the Kitsap Peninsula. Very busy in summer, for sure. Plus, Poulsob is very popular with cruisers who stop here while cruising Puget Sound in the summer months. Sometimes they may want to get off the boat for a night or two. ;-)
The Kingston fast ferry also launched November 18, which makes getting over to this side from Seattle very quick and easy, at least on weekdays.
Recent (last 12 months) articles on markets. Note some are based on other articles but still have some unique info. Keep in mind that there ARE different ways to measure returns, but these are still helpful.
@Nathan Ownby - I saw a similar (maybe the same) article. In it, I recall that they they included East Tennessee in the Nashville area. That is like including Miami in the Panhandle area or combining New York and Boston. Most of these seem to have it right -- at the moment, the Smokies are smokin'.
Also consider that we use "AirBNB" as a somewhat generic term for STR. In the Smokies, AirBNB has about 15% of the total rentals; VRBO is king with about 60%; and the remainder is split between other OTAs and Property mgmt companies (many of whom list on OTAs as well).