Are there Good STR markets in the Midwest/

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Are there Good STR markets in the Midwest/

Joseph Goode
Sacramento, CA · Member since 2010 · 26 posts · 17 votes

I know that the big players in the STR market have been the Smokey's, parts of Florida and Joshua Tree but it seems like the price point are high and the bidding competition is crazy. Can you guys recommend some great STR cities at a lower price point in the Midwest, south or really anywhere that works.

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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
4y

@Joseph Goode I operate a STR in the mid west, but there are two things you need to understand:

1. STR will do better in highly traveled vacation destinations. Warm weather, ocean and mountains are your top attractions. The other draw may be major urban areas that see high tourism like San Francisco or San Diego. Not that Omaha isn't a nice city, but you will get nowhere near the number of year-round tourists or gross revenue as you would in a vacation destination.

2. Price point of the property is irrelevant. I purchased my STR for $130,000 and I can gross $2500 in a good month. You could buy a place in the mountains for $600,000 and may gross $9000 a month. You may think, I will just buy 4X properties like Joe has and spend $450K to get $10K revenue. Now you have 4X the number of guests and 4X utility bills, cleaning, etc. The higher dollar vacation rentals will get more "bang for you buck" and will appreciate better than cheap houses in the mid west.

Like I said, I own a cheap house that is a STR in the mid west. If I lived in Sacramento, CA, there is no way I would buy a place in the mid west for a vacation rental. I may consider houses in the mid west for long term rental, but short term rental is too much work for the return on low dollar properties.

The reason properties cost more in some markets is because they are in more desirable locations. 

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  • Jody Sperling
    Omaha, NE · Member since 2020 · 611 posts · 665 votes
    4y

    We've got people in Omaha and Lincoln that do very well with STR. You just have to keep the properties closer to the urban center, whereas in some more geographically desirable places you can get out into the burbs and be just fine.

    You also want to connect with a real estate agent who's very familiar with the urban location to avoid the pockets of rougher neighborhoods. Not that the travelers will immediately know when they book, but because negative reviews kill STR.

    Kansas City would be great too, if the prices haven't already skyrocketed. Best of luck!

    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    4y

    Coastal Carolinas are good areas.

    Don't be scared of looking for properties in the areas you mentioned. If you can get a property that cash flows don't get hung up on the price. Prices aren't coming down, we are not in a price bubble.

    2Reply
  • Alex S.
    Investor · Metro East of St. Louis (Illinois) · Member since 2016 · 255 posts · 211 votes
    4y

    @Joseph Goode I have a few STRs in the Metro East of St Louis.

    You are right that there are broadly TWO STR markets:

    1. Vacation Hot-Spots

    2. Hotel/Motel market

    PCB, Great Smokies, Disney, etc...incredible vacation hot-spots and lots of opportunity for STR, but you will have significant competition and you should be careful about buying too high. I doubt you'll lose your shirt, but you might not see >20% Cash on Cash returns if you aren't careful. Just like any RE investment...run the numbers, put a dollar sign on any concerns and make a decision. Lots of people on here know way more about these markets than me.

    An often overlooked STR market (not as sexy) is the hotel/motel market. Any mid-sized (>10-20K people) town in middle America with chain hotels present already (Hilton Garden Inn, Fairfield Inn by Marriott, etc) has significant STR demand. Many times, there is little to no competition...or the competition consists of Uncle Billy renting out a twin mattress on the floor of his bedroom, dark creepy photos, and 3 reviews averaging 2.6 stars.

    It'll be super easy to find a place that cash flows, but regulation is a real risk here.

    Here's the thing, while risk is certainly present on any REI...I would suggest that it is actually fairly low. Worst case, your STR gets outlawed and you switch to lower returns on LTR/MTR OR you just sell the place.

    4Reply
  • Dave StokleyBusiness Member
    Property Manager · Cleveland, OH · Member since 2015 · 699 posts · 799 votes
    4y

    I've got tons of clients killing it in the Cleveland market. Personally I just bought a single-fam for $165k that I'm expecting to cash flow $1k/month, > 30% cash on cash.

    1Reply
  • Kevin Pillow
    Realtor · OK · Member since 2020 · 138 posts · 165 votes
    4y

    I used to live in Omaha for 5 Years while I was at Offutt, AFB and I have to say that is a great city for STRs. Every year the College World Series would draw in HUGE crowds in the summer. Omaha also is hub for big concerts, business conferences and of course the annual Berkshire Hathaway shareholder meeting. I would do some digging and try to link up with an agent like @Jody Sperling mentioned. Power and Light District in KC is also a really popular destination.

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    4y

    @Joseph Goode I operate a STR in the mid west, but there are two things you need to understand:

    1. STR will do better in highly traveled vacation destinations. Warm weather, ocean and mountains are your top attractions. The other draw may be major urban areas that see high tourism like San Francisco or San Diego. Not that Omaha isn't a nice city, but you will get nowhere near the number of year-round tourists or gross revenue as you would in a vacation destination.

    2. Price point of the property is irrelevant. I purchased my STR for $130,000 and I can gross $2500 in a good month. You could buy a place in the mountains for $600,000 and may gross $9000 a month. You may think, I will just buy 4X properties like Joe has and spend $450K to get $10K revenue. Now you have 4X the number of guests and 4X utility bills, cleaning, etc. The higher dollar vacation rentals will get more "bang for you buck" and will appreciate better than cheap houses in the mid west.

    Like I said, I own a cheap house that is a STR in the mid west. If I lived in Sacramento, CA, there is no way I would buy a place in the mid west for a vacation rental. I may consider houses in the mid west for long term rental, but short term rental is too much work for the return on low dollar properties.

    The reason properties cost more in some markets is because they are in more desirable locations. 

    4Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    4y
    Originally posted by @Joseph Goode:

    I know that the big players in the STR market have been the Smokey's, parts of Florida and Joshua Tree but it seems like the price point are high and the bidding competition is crazy. Can you guys recommend some great STR cities at a lower price point in the Midwest, south or really anywhere that works.

    I have 12 airbnbs in Columbus, Ohio. I really like this market for STRs

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    4y

    Columbus, Ohio is a great growing city of urban Airbnbs. Theres even some nearby areas like Hocking Hills and Mohican State Park that do more vacation style rentals.

    [email protected]614-363-2787
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  • William Beck
    Realtor · Branson, MO · Member since 2018 · 272 posts · 283 votes
    4y

    Branson area's a top spot in the country for STR investment. Super similar to Gatlinburg/Pigeon Forge.

    2Reply
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