Rental Property Investor · Wantagh, NY · Member since 2019 · 30 posts · 8 votes
My STR market has appreciated significantly due to Covid and I am trying to evaluate the best way to move forward. I bought a STR in January 2020 for $170k. Since Covid, the area has exploded in STR rentals and home values since it close to several major cities. We did $60k in revenue in the first year and are happy with the monthly cashflow. Our goal was to continue to save to purchase another one in the community, but not at these current market top prices. Since it is more of a vacation area, the prices have sky rocketed (bidding wars,etc) and units identical to mine (townhouses all connected) have been selling around $350k - my realtor thinks we might be able to push it to $400k. I'm a bit torn because these prices are unsustainable, but I don't know what the next move should be. Take the money and wait/go to another area or stick with the cashflow and see the prices come back closer to value.
@Matthew Malley if you do sell what will you do with the capital? What next? You can Consider a 1031 if you have your next market/acquisition planned so you don’t give the government a big chunk of your profit. And a cash out refi is always an option. Of course if you sell you lock in a great gain but imo prices will continue to rise in 2021. Good luck with whatever you decide!
This cash flow seems to be great for the purchase price, and it is even better that you have good appreciation rate. Would like to know which areas do you invest your STR?
@Matthew Malley have you ran the numbers on buying another property at the current prices? $60k sounds like a great gross revenue to me. My market is inflated as well but there is still a great profit that I can make even with the current prices. Just remember, asking a realtor if you should sell is like asking a barber if you need a haircut! Before selling, consider your alternatives, ie cash out refi, etc. Make sure you make the right decision for you. Good luck!
@Brian Gerlach thanks for the response and lol to the barber reference! She actually sounded hesitant since I brought it to her.
There is very limited inventory in the communities that we want and the prices have sky rocketed due to the demand from NYC and Philly people looking for vacation homes. The numbers don’t make sense right now for another place IMO.
Debating on the best course of action regarding the current place.
IMO you should keep the house at least for 1-2 years. That is a great cashflow. In that period of time you can appreciate the behavior of the market after pandemic and make a rational decision. Anyways, I am no expert nor successful real estate businessmen atm. It is just my humble opinion. Good luck!
@David Vélez great advice David, thanks. My issue is in more rational times, people will not be willing to pay these amounts for my unit. But the cashflow is good.
@Matthew Malley if you do sell what will you do with the capital? What next? You can Consider a 1031 if you have your next market/acquisition planned so you don’t give the government a big chunk of your profit. And a cash out refi is always an option. Of course if you sell you lock in a great gain but imo prices will continue to rise in 2021. Good luck with whatever you decide!
My STR market has appreciated significantly due to Covid and I am trying to evaluate the best way to move forward. I bought a STR in January 2020 for $170k. Since Covid, the area has exploded in STR rentals and home values since it close to several major cities. We did $60k in revenue in the first year and are happy with the monthly cashflow. Our goal was to continue to save to purchase another one in the community, but not at these current market top prices. Since it is more of a vacation area, the prices have sky rocketed (bidding wars,etc) and units identical to mine (townhouses all connected) have been selling around $350k - my realtor thinks we might be able to push it to $400k. I'm a bit torn because these prices are unsustainable, but I don't know what the next move should be. Take the money and wait/go to another area or stick with the cashflow and see the prices come back closer to value.
Any input is appreciated!
Man this is a NO BRAINER! Do not sell. You paid 170k and it produces 60k. The effects of Covid will be around for the next 3-5 years for sure. If your worried about holding use the 3 years to pay it fully off or be a smart investor and put that 60k to work in another property.
If you sell your will flip and make a quick buck but you will give 40% of the gain to uncle Sam. If you 1031 exchange I don't think you will get as much cash flow your getting based on the amount of money you will net from the sale.
@Brian Gerlach Great question. I don't know what the next move would be. If I were to sell I'd probably have to look into new areas to STR. The area I'm currently in is overpriced and going through a ton of regulation/ordinance changes so a 1031 would be very difficult.
This definitely helps put things into perspective.
@Joe Edwards I appreciate the advice! It seems to me that is probably the best way to go. I’m going to continue to search the area for another deal that might fit and put that money to work. I’ll keep you posted.
@Joe Edwards I appreciate the advice! It seems to me that is probably the best way to go. I’m going to continue to search the area for another deal that might fit and put that money to work. I’ll keep you posted.
Awesome! Maybe search for more distress properties that you can grab on the cheap and fix. If you can put together a good fixer team you can do really well. Most people in the mark now aren't patient at all for the project purchase.
Also, I took a look at some of the other forums that include the Poconos. Wow! I am happy I didn’t actually read those last year or maybe I wouldn’t have done this deal. If you’re looking at the Poconos or anywhere, do your own research! Or take market research from larger companies.
We bought the STR in the Poconos because of the influx of companies that are investing in the area and the potential of all year round rentals. Large companies don't pour billions of dollars into an area if they think it's not going to produce. Camelback, Khalahari, Vail, KSL Resorts, Pocono Springs (coming soon) - we're trying to eat their crumbs - 2 hours from NYC & Philly. Ultimately it's up to you to manage and run your STR for it to be successful.
Get a STR real estate agent in the area to navigate the regulation/ordinances and find the right property, in the right area, for you.
If you kept it for 2 years and the prices went down a bit, how far ahead would you be? You'd still have 2 years of $60k/yr income (assuming that is net??).
If you sold and bought another property, where would you be with that in 2 years' time?
Think longer term and include the rental income, not just the equity in the house (especially if you won't be able to buy something when you sell).
Also, I took a look at some of the other forums that include the Poconos. Wow! I am happy I didn’t actually read those last year or maybe I wouldn’t have done this deal. If you’re looking at the Poconos or anywhere, do your own research! Or take market research from larger companies.
We bought the STR in the Poconos because of the influx of companies that are investing in the area and the potential of all year round rentals. Large companies don't pour billions of dollars into an area if they think it's not going to produce. Camelback, Khalahari, Vail, KSL Resorts, Pocono Springs (coming soon) - we're trying to eat their crumbs - 2 hours from NYC & Philly. Ultimately it's up to you to manage and run your STR for it to be successful.
Get a STR real estate agent in the area to navigate the regulation/ordinances and find the right property, in the right area, for you.
Agreed...We bought our STR in the Poconos in October 2018 and I didn't understand why so many forum posts were saying to stay clear... Our property hasn't appreciated as well as yours has but still has gone up significantly as well. Our plan is to cash out refinance and invest the money in a different area. Good luck with whatever you decide!
@Matthew Malley - am in the same predicament with 2 STRs in the poconos - my 2 cents : purchasing a property above 350k imo will at a some point return very less cashflow . Both my properties are around250k purchas price and both are well on track for beyond 70k revenue . However I don’t think the numbers will last more than another year . The regulations which are popping up are also keeping my anxiety levels high..
@Gururaj Iyer yes, exactly. Anything over $250 makes the numbers a bit more difficult to work. I’m probably going to be keeping an eye out there but also looking at new areas.
My STR market has appreciated significantly due to Covid and I am trying to evaluate the best way to move forward. I bought a STR in January 2020 for $170k. Since Covid, the area has exploded in STR rentals and home values since it close to several major cities. We did $60k in revenue in the first year and are happy with the monthly cashflow. Our goal was to continue to save to purchase another one in the community, but not at these current market top prices. Since it is more of a vacation area, the prices have sky rocketed (bidding wars,etc) and units identical to mine (townhouses all connected) have been selling around $350k - my realtor thinks we might be able to push it to $400k. I'm a bit torn because these prices are unsustainable, but I don't know what the next move should be. Take the money and wait/go to another area or stick with the cashflow and see the prices come back closer to value.
Any input is appreciated!
That is an incredible appreciation rate. Vacation and resort property does tend to be the most volatile.
I'd wait until fall at least. I'm considering selling a basic LTR house that just came vacant but all indications are 2021 should be another low inventory, high demand year.
Timimg the market is risky, plus I just sold one Jan 4th. Tax implications come in to play of course.
Transaction costs, taxes, where to re-deploy. Where are you at with those?
@Steve Vaughan yeah I think that’s where I currently stand. The market changed so quickly that Im not prepared, at the moment, to make those decisions. Collecting information now, seeing what the options are and starting to analyze/plan.
@Erik B. Thanks Erik - regulations and ordinances are not an issue. Were in the Jackson township which already implemented their ordinance. We essentially pay a hotel tax.
Interested in the HELOC - how would this be more beneficial in our situation to a cash out refi?
@Ola Dantis that’s definitely another great question that remains to be seen. Precovid we were still renting out well but Covid has definitely played a part in the increased rev and demand in the area. Since we’re so close to NYC & Philly, I think this area will still be a quick getaway & strong alternative to flying within the next couple of years.