First time STR, where is everyone investing in next??
Realtor · Gilbert, AZ · Member since 2021 · 42 posts · 18 votes
First time STR, where is everyone investing in next??
Most Popular Reply
Realtor · Branson, MO · Member since 2018 · 274 posts · 283 votes
5yThere should also be a "Worst places to purchase a vacation rental investment" thread. Even purely for entertainment purposes. I'm sure some will find this educational, but i'm writing this post because it's a bit cathartic and fun! I consulted thousands of people looking all over the US for: where should I buy a vacation rental? There were definitely cases of people trying to put a round peg in a square hole. I'm sure there are creative real estate investors on BP could find some individual one-off cases to prove me wrong, but for the most part these are not recommended spots to get into the STR investment space. Especially if someone isn't really familiar with the market and are newish to Short term rentals. The key word is investment because there are a few markets where you can own an oceanfront property, or a ski property that makes a ton of money as a vacation rental... but not a good return on investment. Anyways, here we go....
There's obviously places that are in the middle of nowhere and no tourism flow to speak of (North Dakota comes to mind, no offense to any highly successful vacation rental investor there *crickets*) so those are not great places to start a vacation rental if there is not something nearby for people to go visit. Pretty much a logical "Duh" statement right there so there could be a few one off people that say "Hey my Podunk town has a refinery so I get tons of business" or "We have a great college football team so we're going to crush it on game days." But for the most part, if the town has less than a hundred people and you pop on Airbnb or Vrbo and you see less than 2 or 3 vacation rentals in a 10 mile radius, it really begs the question "Why would someone go here?" The answer is "There isn't a reason... ."
I'm all for people trying new things, but Bigger Pockets isn't the place to test new creative ideas. The closest we're starting to see in 2021 is a migration of deals to periphery markets that are near highly successful vacation rental hotspots. With the price appreciation in the major areas, there is something to be said about nearby spots where property values haven't skyrocketed as high.
I'm going to start trashing some of the WORST places to get a vacation rental based upon my time working with vacation rental buyers all across the country. These are not in any particular order and these opinions are purely my own so don't get too butthurt if you want to argue.
1. Big Cities - LA/Chicago/NYC - great places to visit, Amazing food & entertainment, BUT regulations are murderous for Airbnb and vacation rentals. People can justify ADU's and renting out bedrooms, but for traditional standalone vacation property after factoring in the already high cost to purchase and the incredibly difficult regulations.... just go somewhere else. I didn't even bring up Covid and travel lockdowns but just add that on top of the trash bin.
2. Las Vegas - Read: Casino lobby doesn't like the vacation rental business eating into their market share. Heavily regulated and super challenging to get started there. I probably worked with 100 people that tried to buy something there. I didn't have one successful person that went through all the hoops. I feel like I might get whacked even just talking about Vegas. For STR investors? Avoid.
3. California - Taxes, Regulations, Property values. With 40 million people and tenant friendly anti-landlord legislation it's already not looking good. San Diego is probably one of the better big cities there to do it. The Coachella Valley (La Quinta, Palm Springs, Palm Desert, Etc.) is pretty seasonal and regulations are starting to get ugly. Big Bear/Lake Arrowhead: Saturated. Coastal cities, mostly regulated. San Fran: 30 day min restrictions. Tahoe: regulated, pricey. If someone held a gun to my head and forced me to invest in a short term rental in California, I'd pick something along the edges of Yosemite like in Arnold, CA but then you run into issues with local cleaner options. After visiting San Francisco a few years back for a real estate investor conference, I definitely came away thinking that the traditional vacation rental property was something that not many people got or wanted to get into when I was there and based upon the state's natural barriers to entry it makes sense.
4. Breckenridge/Vail/Aspen/Park City/Tahoe/Insert other major ski area - Ski areas are highly seasonal. When there is snow, people go. No snow? No go. That's making it a case where you have a vacation rental that is needing to pay you money where it's getting rented for 3-4 months solid in peak season... then 2-3 months in the summer.... and then... not at all. Combine that with the fact that they also tend to be very expensive. Those two factors combined make most ski property "Non investment grade". There are some one-off places where buying near a ski area where you can find a deal could work but epicenter of these major ski areas is a recipe for offsetting some costs and not generating major ROI.
5. Residential Property on Hawaii - Hawaii is some of the best occupancy month over month vacation rental real estate out there. 300+days booked a year on average is doable! Just don't buy a house in a non-resort zoned area on big island. Locals will despise you and the fines there are obscene for running an illegal vacation rental. Quoting from Honolulu Council: Oahu property owners who illegally use their units as short-term vacation rentals could face fines of up to $10,000 a day under a bill passed unanimously by the Honolulu City Council... PER DAY?! Yeah that's right.
6. Northeast USA Beach Property - Anything basically north of Virginia along the coast is seasonal. VERY seasonal. Cape Cod, Hamptons, Jersey Shore. The rental season in this part of the country is a few months during summer each year. I've had the pleasure of speaking to people that knew of a "Friend that rents his vacation home for $10,000 a week!" That's phenomenal! How much did he/she pay for his place? <insert 7 figure answer> Oh. So after expenses they're making how much? OK. yeah, that's not that great. Bottom line, if you have 3-4 months to make a years worth of money to offset your offseason of 8-9 months - good luck have fun!
7. Portland - Regulations. Airbnb has a page on how to get yourself legal and it involves the words, permit, license, rules, registration. But I just remember when our company I worked for had to kick out almost every property we worked with because of the new law that was passed and it basically became a no-go zone. Again, I'm sure someone has a workaround but for most folks that are looking for a place they can buy, furnish and set up as a nightly rental, you're going to have to climb a mountain to get the property legal to do what you want to do.
8. South Padre - Hurricane insurance, not many people are visiting here anymore. Spring breakers are drunken wild children that have a penchant to destroy things while inebriated. These properties don't make much money so all hassle and no reward.
9. Florida Keys - Once again, the regulators have made this idea a bust. There are a few spots where you can get something that's zoned or a property might be already operating as a vacation rental, but the likelihood of getting it grandfathered in is very very challenging. (Too bad, my first time visiting a Vrbo was in Key Largo but the regulations are a deal killer)
10. Kissimmee/Davenport - I'm really going to stir up some annoyed property managers, realtors, investors and the like with this pick. But I have to say it because it's a true warning for anyone looking to make serious money with a vacation rental investment. What can't be argued with is that this market is the most saturated vacation rental market in the entire country. Possibly the entire world. Sure there's international interest for this area for tourism and I've seen some highly successful properties here that I'd even consider buying. However, this is a perfect case of where everyone has the same idea and there are thousands upon thousands of competitors all vying for the same tourist business. You can be successful but it's a hyper-competitive landscape. To get something that works you have to get a house decked out with game rooms, themes, private pool and a bunch of bedrooms. I distinctly recall a buyer that I worked with that purchased a vacation rental approved 3BR townhouse and it didn't get any bookings for the first 3-4 months. The #'s just aren't there when you add on top of that you have to cut your rates to compete with the numerous options in the market area. This is a massive market for vacation rental owners but the saturation hurdle is a tough nut to crack.
With that being said, govern yourself accordingly and good luck with wherever you do end up deciding to purchase a nightly rental.
80 Replies
- Rental Property Investor · Black River Falls, WI · Member since 2019 · 1 post · 0 votes5y
@Shawn McCormick I did some digging on Orlando and Orange County, and it appears that they don't allow STR for pure investment purposes, what would be your work around to still invest in such a great area? This article says surrounding counties are less strict, so that may be an option?
https://ericadiazteam.com/purchasing-real-estate/is-orange-county-zoned-for-airbnb/
- Flipper/Rehabber · Jersey City, NJ · Member since 2016 · 158 posts · 86 votes5y
@Steven Goldman
Glad to see some inputs in Poconos.
I am starting my research in Carbon and Monroe counties.
Regarding the gated communities , do they allow STR . I see they have HOA fees but I wasn't sure if they restrict from Airbnb etc... to avoid traffic from non residence.
- 5yKerry BairdPro MemberRental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
I'm investing in short term rentals on the barrier island of the East Coast of Florida, South of Cape Canaveral
- 5yShawn McCormickPro MemberRealtor · Central Florida-Orlando · Member since 2014 · 1k+ posts · 892 votes
@Jake Hutch that is correct. It is a combination of Orange County and the city of Orlando. There are some areas grandfathered in and allowable, but the possibility of this changing at a whim or from pressure from outside sources isn't worth the risk, IMO.
On the other hand, the area around Disney is called Four Corners as Orange, Polk, Lake and Osceola counties meet. The other 3 do allow STR and that is where you will find the bulk of the resort communities and others that allow it. HOA's still hold more power than anyone in Florida and can change the rules if they decide. So either buy in a community that is deeded and zoned specifically for STR (Championsgate, Solara, Solterra, Storey Lake, Windsor Hills and several other large ones) or buy in a neighboring community with less amenities, but it will give you more options to go long term rental in the future and have better options when selling. You will be limited on size, occupancy rates/nightly rates and number of beds and proximity to the parks, but attract smaller families that may take better care of the property.
There are many variables to consider when buying here and depending on how you will use the property (will you and your family use it part time, who is your target audience..large families, snowbirds, vacationers from around the globe) etc will directly impact your cash flow.
- Real Estate Agent · Pittsburgh, PA · Member since 2019 · 22 posts · 11 votes5y
We are currently looking in the southern Florida area. AirDNA is a great resource for researching STR's
- 5yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
@Shiloh Lundahl
Absolutely correct!!!
- Investor · Lake Villa, IL · Member since 2021 · 2 posts · 1 vote5y
@William Beck I always thought Branson MO was heavily regulated? I should take another look!
- Rental Property Investor · coeurd'Alene ID · Member since 2020 · 20 posts · 25 votes5y
@William Beck
nice list never heard of island park but coeurd'Alene idaho rated #1 hottest market by Wallstreet
- Flipper/Rehabber · Jersey City, NJ · Member since 2016 · 158 posts · 86 votes5y
@William Beck
Great to see Poconos in your top three, However is it true that the STR occupancy is almost dead during spring and fall..keeping covid spikes aside.
Thanks
Kunal M.
- Realtor · Branson, MO · Member since 2018 · 274 posts · 283 votes5y
There should also be a "Worst places to purchase a vacation rental investment" thread. Even purely for entertainment purposes. I'm sure some will find this educational, but i'm writing this post because it's a bit cathartic and fun! I consulted thousands of people looking all over the US for: where should I buy a vacation rental? There were definitely cases of people trying to put a round peg in a square hole. I'm sure there are creative real estate investors on BP could find some individual one-off cases to prove me wrong, but for the most part these are not recommended spots to get into the STR investment space. Especially if someone isn't really familiar with the market and are newish to Short term rentals. The key word is investment because there are a few markets where you can own an oceanfront property, or a ski property that makes a ton of money as a vacation rental... but not a good return on investment. Anyways, here we go....
There's obviously places that are in the middle of nowhere and no tourism flow to speak of (North Dakota comes to mind, no offense to any highly successful vacation rental investor there *crickets*) so those are not great places to start a vacation rental if there is not something nearby for people to go visit. Pretty much a logical "Duh" statement right there so there could be a few one off people that say "Hey my Podunk town has a refinery so I get tons of business" or "We have a great college football team so we're going to crush it on game days." But for the most part, if the town has less than a hundred people and you pop on Airbnb or Vrbo and you see less than 2 or 3 vacation rentals in a 10 mile radius, it really begs the question "Why would someone go here?" The answer is "There isn't a reason... ."
I'm all for people trying new things, but Bigger Pockets isn't the place to test new creative ideas. The closest we're starting to see in 2021 is a migration of deals to periphery markets that are near highly successful vacation rental hotspots. With the price appreciation in the major areas, there is something to be said about nearby spots where property values haven't skyrocketed as high.I'm going to start trashing some of the WORST places to get a vacation rental based upon my time working with vacation rental buyers all across the country. These are not in any particular order and these opinions are purely my own so don't get too butthurt if you want to argue.
1. Big Cities - LA/Chicago/NYC - great places to visit, Amazing food & entertainment, BUT regulations are murderous for Airbnb and vacation rentals. People can justify ADU's and renting out bedrooms, but for traditional standalone vacation property after factoring in the already high cost to purchase and the incredibly difficult regulations.... just go somewhere else. I didn't even bring up Covid and travel lockdowns but just add that on top of the trash bin.2. Las Vegas - Read: Casino lobby doesn't like the vacation rental business eating into their market share. Heavily regulated and super challenging to get started there. I probably worked with 100 people that tried to buy something there. I didn't have one successful person that went through all the hoops. I feel like I might get whacked even just talking about Vegas. For STR investors? Avoid.
3. California - Taxes, Regulations, Property values. With 40 million people and tenant friendly anti-landlord legislation it's already not looking good. San Diego is probably one of the better big cities there to do it. The Coachella Valley (La Quinta, Palm Springs, Palm Desert, Etc.) is pretty seasonal and regulations are starting to get ugly. Big Bear/Lake Arrowhead: Saturated. Coastal cities, mostly regulated. San Fran: 30 day min restrictions. Tahoe: regulated, pricey. If someone held a gun to my head and forced me to invest in a short term rental in California, I'd pick something along the edges of Yosemite like in Arnold, CA but then you run into issues with local cleaner options. After visiting San Francisco a few years back for a real estate investor conference, I definitely came away thinking that the traditional vacation rental property was something that not many people got or wanted to get into when I was there and based upon the state's natural barriers to entry it makes sense.
4. Breckenridge/Vail/Aspen/Park City/Tahoe/Insert other major ski area - Ski areas are highly seasonal. When there is snow, people go. No snow? No go. That's making it a case where you have a vacation rental that is needing to pay you money where it's getting rented for 3-4 months solid in peak season... then 2-3 months in the summer.... and then... not at all. Combine that with the fact that they also tend to be very expensive. Those two factors combined make most ski property "Non investment grade". There are some one-off places where buying near a ski area where you can find a deal could work but epicenter of these major ski areas is a recipe for offsetting some costs and not generating major ROI.
5. Residential Property on Hawaii - Hawaii is some of the best occupancy month over month vacation rental real estate out there. 300+days booked a year on average is doable! Just don't buy a house in a non-resort zoned area on big island. Locals will despise you and the fines there are obscene for running an illegal vacation rental. Quoting from Honolulu Council: Oahu property owners who illegally use their units as short-term vacation rentals could face fines of up to $10,000 a day under a bill passed unanimously by the Honolulu City Council... PER DAY?! Yeah that's right.
6. Northeast USA Beach Property - Anything basically north of Virginia along the coast is seasonal. VERY seasonal. Cape Cod, Hamptons, Jersey Shore. The rental season in this part of the country is a few months during summer each year. I've had the pleasure of speaking to people that knew of a "Friend that rents his vacation home for $10,000 a week!" That's phenomenal! How much did he/she pay for his place? <insert 7 figure answer> Oh. So after expenses they're making how much? OK. yeah, that's not that great. Bottom line, if you have 3-4 months to make a years worth of money to offset your offseason of 8-9 months - good luck have fun!
7. Portland - Regulations. Airbnb has a page on how to get yourself legal and it involves the words, permit, license, rules, registration. But I just remember when our company I worked for had to kick out almost every property we worked with because of the new law that was passed and it basically became a no-go zone. Again, I'm sure someone has a workaround but for most folks that are looking for a place they can buy, furnish and set up as a nightly rental, you're going to have to climb a mountain to get the property legal to do what you want to do.
8. South Padre - Hurricane insurance, not many people are visiting here anymore. Spring breakers are drunken wild children that have a penchant to destroy things while inebriated. These properties don't make much money so all hassle and no reward.
9. Florida Keys - Once again, the regulators have made this idea a bust. There are a few spots where you can get something that's zoned or a property might be already operating as a vacation rental, but the likelihood of getting it grandfathered in is very very challenging. (Too bad, my first time visiting a Vrbo was in Key Largo but the regulations are a deal killer)
10. Kissimmee/Davenport - I'm really going to stir up some annoyed property managers, realtors, investors and the like with this pick. But I have to say it because it's a true warning for anyone looking to make serious money with a vacation rental investment. What can't be argued with is that this market is the most saturated vacation rental market in the entire country. Possibly the entire world. Sure there's international interest for this area for tourism and I've seen some highly successful properties here that I'd even consider buying. However, this is a perfect case of where everyone has the same idea and there are thousands upon thousands of competitors all vying for the same tourist business. You can be successful but it's a hyper-competitive landscape. To get something that works you have to get a house decked out with game rooms, themes, private pool and a bunch of bedrooms. I distinctly recall a buyer that I worked with that purchased a vacation rental approved 3BR townhouse and it didn't get any bookings for the first 3-4 months. The #'s just aren't there when you add on top of that you have to cut your rates to compete with the numerous options in the market area. This is a massive market for vacation rental owners but the saturation hurdle is a tough nut to crack.
With that being said, govern yourself accordingly and good luck with wherever you do end up deciding to purchase a nightly rental.
- Investor · Lehigh Valley, PA · Member since 2019 · 129 posts · 127 votes5y
@Kunal Mishra It was slower pre-covid but I know a few people that have done around 15 days a month occupancy in those spring/fall times. At this point, the game in the Poconos has changed probably at least for the next few years, and if you can get in for a low price, LTR isn't a terrible exit strategy should the STR market dry up. Lots of New Yorkers migrating to the I-80 corridor in the Poconos
- Rental Property Investor · Fort Worth, TX · Member since 2016 · 39 posts · 20 votes5y
@Travis Muse I am looking at the Blue Ridge area. What kind of STR's are you buying? Are they cabins?
@Zach Lemaster I’m looking in Central Florida right now but open to opportunities in Florida in general. Looking for distressed properties, going off of Zillow and Realtor.com mostly, not sure how to grab the off markets since I’m out of town. I’m wanting to give it a try with a Rehab and either rent or flip, so looking for something small under 200K if possible. So far, not looped in with a property manager as of yet, just started looking maybe a week ago in this state/area. May potentially consider a partner also. If there are any opportunities you come across you’d like to pass off please keep me in mind, thanks!
- 5yChris MuryBusiness MemberRealtor · St. Augustine, FL · Member since 2017 · 182 posts · 100 votes
Originally posted by @Daniella Lamis:
Good question! if this were our second vacation home, I would likely look at the Carolinas, near water. I like historical cities, near water. But we are primarily looking at cash flow, and can use said cash to vacation where we want lol. IDK- should we be looking longer term, meaning this STR home will be part of the family for years?
As far as goals, we are looking for cash flow to eventually replace W2 jobs. We have a LTR (adding more) for equity.
If you like historical cities near the water, St. Augustine, FL would be a great choice. I'm a local STR investor here. We're a top STR market but are still somewhat under the radar here on BP for some reason.
Chris Mury- Realtor543 Reviews - 5yShawn McCormickPro MemberRealtor · Central Florida-Orlando · Member since 2014 · 1k+ posts · 892 votes
@Wendy Lin I'm in Central Florida and connected to many wholesalers if you are looking for off market. The terms are much different than traditional purchases as you are buying the contract and not dealing directly with the seller. I would caution about buying remotely from a wholesaler if you plan to flip. The numbers have gotten tighter and tighter the last couple years and it get tough to do unless you have a full crew here. As far as your budget of $200, that won't go too far here anymore unless you are far outside of metro areas and that makes the ARV lower too. Just some points of view IMO.
- Investor · Kissimmee, FL · Member since 2020 · 121 posts · 35 votes5y
@Steven Wilson
My PM says $1600 if long term.
$2000+ a month if short term. 30 day stays is the minimum required by oridinance.
- Rental Property Investor · Versailles, KY · Member since 2016 · 6 posts · 0 votes5y
@Chris Mury St. Augustine is an area we were considering. What are the STR regulations like there?
- 5yChris MuryBusiness MemberRealtor · St. Augustine, FL · Member since 2017 · 182 posts · 100 votes
Originally posted by @Randy Philpot:
@Chris Mury St. Augustine is an area we were considering. What are the STR regulations like there?
Great question, Randy!
Regulations are driven by location and jurisdiction. In St. Augustine, we have properties located in the City of St. Augustine, City of St. Augustine Beach, and outside city limits. Properties in an HOA will be regulated by the HOA bylaws/C&R's.
City of St. Augustine- https://www.citystaug.com/830/...
City of St. Augustine Beach- https://www.staugbch.com/citym...
Outside city limits in St. Johns County- https://stjohnsclerk.com/minre...
I find the St. Johns County regulations to be the least restrictive overall with the City of St. Augustine being next best and St. Augustine Beach being the most restrictive. Happy to answer any follow up questions you might have.
Chris
Chris Mury- Realtor543 Reviews - Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes5y
Originally posted by @Joel Lazar:
@Steven Wilson
My PM says $1600 if long term.
$2000+ a month if short term. 30 day stays is the minimum required by oridinance.
Im sure the 30 day minimum stay hurts your STR rates?
- Investor · Kissimmee, FL · Member since 2020 · 121 posts · 35 votes5y
I think it will.
- Realtor · Cumming, GA · Member since 2018 · 158 posts · 127 votes5y
I grew up in North Georgia and I'm also an agent/investor in the Blue Ridge area so beware of my bias, but Blue Ridge, Georgia is a fantastic market worth considering
- Real Estate Broker · East Brunswick, NJ · Member since 2011 · 3 posts · 0 votes5y
- Member since 2022 · 1 post · 0 votes4y
Agent in the Myrtle Beach, SC area. It's not just Myrtle Beach, we have Little River, North Myrtle Beach, Surfside Beach, Garden City, Murrells Inlet, Pawleys Island! Let me know if you're interested in getting added to my 'potential investors' list. Cheers!
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