Thank you for reading my post! Gardiner, Montana, gateway to YS is Good place to invest in a vacation rental? I was looking at a small 2 br house, 1931, total fixer but downtown. Overpriced ($175k). Still a good place? Im from California so I was wondering about winter problems, concerns as well??? I love Montana but not sure about investing?? Heard that Boseman or Livingston are good places to invest? Thanks kindly!
Updated over 3 years ago
Thank you for your information!
@Gayle Eisner I love Gardiner. I have stayed there a few times. I am not sure what you would do with the property between Oct 15th and May 1st which is going to be really off season.
Are planning on using it for short term rentals?
As an investment, long-term rentals produce a better return with less headache. There are exceptions but Montana isn't one of them.
I live in Cody near the east entrance to Yellowstone. I used to manage 70 vacation rentals and none of them produced as much income as they would have as a long-term rental and the work required was significantly higher. Even owners that live locally and manage everything themselves still don't make much more and the extra effort required is ridiculous.
First of all it's Bozeman. The market here is exploding right now and most people will be priced out of our market.
I see any gateway community as a great investment and with Gardiner you have year round traffic. $170k is not over priced for Gardiner. I've seen cabins for sale at that price in town.
I disagree that LTR's are better than STR's especially in our market. I manage 2 STR's in Bozeman year round and we are about 90% occupied and I make about 3 Times as much as my previous setup which was LTR college rentals.
I saw far more depreciation in my LTR than I do with my STR.
If you need an agent let me know but an investment in Gardiner can be an excellent setup for a STR. Also let me know if you need any management services. As I said I operate year round.
Also about Livingston: I think the right property there would work fine for a STR. I have researched the STR market out there quite a bit, and without giving away all of my hard earned knowledge, I'll say that you would be better off building out a lot specifically for a STR type setup. It may even work out better that way for many investors, as lot prices can be reasonable out there (when compared to Gardiner and Bozeman).
Here is the bottom line: Many Montana cities whose economy relies on tourism have regulated and/or banned new STR's. Bozeman is just starting its regulation process, something I am also intimately familiar with if you have any more specific questions. It is a minefield right now in our market. Many of my competitors will be out of business as soon as next month.
Hey, Account Closed, great insight! Wow so Bozeman is moving ahead with regulations? Thats pretty scary. I guess maybe it's better to get it figured out sooner as opposed to later.
I was wondering, in your experience, do you opt for smaller STR's , or bigger ones? I'd be interested in your opinion on that. Let me know, and I'll give you the general opinion here.
So that's a good question no one has ever asked me before. Both of my STR's are medium sized units. They have the exact same floor plan, and are about 850 sq ft. with 3 beds, 1 bath each. They are perfect in my opinion, because they are small enough to clean in 2 hours, but large enough to have up to 10 people stay there.
The problem I see with smaller STR's is that they do not capture the business from families and large groups traveling to this area as efficiently. On the other hand, a large home is more suitable for longer stays, with higher cleaning fees, etc. I find that larger STR's do better for things like family reunions, and wedding parties...
So with that said, I find that my units are the perfect size for me. I am priced right in between the single room AirBnB's, and the large STR's which rent for $200+ a night. A larger home will definitely bring in more money, but in this market, a large home + associated setup costs, in a good spot, will cost around $650k-???.
And yes, regulations... I can't complain about it, but I know many people who may be out of business next month. It all depends on whether their neighbors complain at this point. New STR's are banned. STR's already functioning must get the proper permits and licenses. (I was forced to get 3 business licenses for my STR's even though they operate out of the same property). Those fees are VERY steep for STR's not in the right zoning. They will need a lot more paperwork, and neighbors will have the final say on what's allowed. Sucks.
But I watched this unfold over the course of a few years, and saw it coming. We got all permitted up, and are good to go. I have already decided I am going to leverage my Bozeman real estate appreciation and set up a few STR's outside of town, closer to the park, and away from the mess going on in town. I understand what the city is doing - generating tax revenue by increasing land and property value to pay for crumbling infrastructure, because Montanans are allergic to taxes... That's great, but we have seen businesses turn away from Bozeman bec of strict codes, and the gentrification which follows these policies, prices out Millennials which make up 50% of the population. I hope the commission knows what it is doing...
Bozeman has got some growing pains going on!
Excellent information, Mike!
And those sizes sound amazing; A realtor here with a lot of experience running STR's promotes small over large for some of the same reasons... margins seem to be not so far apart between small and large, easier to rent smaller size, and the larger ones sometimes end up with large parties, a lot of cleaning and more wear and tear.
Trying to decide between what I know (long term) and STR's for an upcoming investment. Wish I was still fishing the Yellowstone!
Yes, I would agree with the smaller size being more efficient to operate. The catch there is that if you are building from the ground up, then you will have a much higher start up cost. Buying a condo or studio, with the express purpose to rent it as an STR, doesn't seem to work well in my area though because everything is so expensive. Most of the time, people operating AirBnB's out of condos in expensive areas are trying to live mortgage free, which is great for them. I guess the market regulates itself in that sense.
What a lot of investors do around here is to portion the rooms in a large lodge-type building into seperate units. Those can be wildly successful, or not... I would never venture down that road, as I feel as going that "small" would alienate about 75% of my guests. But in some situations it works well. Why those owners and businesses don't just operate as a motel/hotel at that point is beyond me... Probably something to do with zoning or covenants. But operating under adverse zoning conditions is a whole other topic.
But I would imagine it totally depends on your market. Bozeman has a lot of things going for it, but one of the most important things it has, is a diverse economy. This brings me a wide range of guests. We've hosted research professors, Chinese tourists, almost one hundred families, young groups traveling across the country for the first time... All types. They all want different things. So we tried to include as many possible types of stays. So we are moderate sized, moderate priced, but we don't skimp on amenities. That seems to be a winning formula for us so far, but we are still evolving.
Glad to hear you enjoy our area! I grew up close to you, but after traveling through Bozeman I became hooked. We spend a lot of time in Paradise Valley as well. If you ever need an agent who specializes in STR's, in MT let me know!
Michael, when you say you are making three times what you did as a long-term, are you referring to gross or net profits? Care to share some numbers?
Every market is different and there are always exceptions to the rules. With long-term, tenants cover everything but certain repairs/improvements. With short-term you have far more expense and work involved: furnish the home and keep it furnished, mow the lawn, pay utilities/cable/internet, higher vacancy rates, higher insurance, more taxes, marketing costs, etc. If you are managing it yourself, you have to consider the value of your time. If someone else is managing it, you could be paying 20 - 50% in management fees. After considering income and expenses for any given year, not one of my 70 vacation homes produced more than they would have as a long-term.
I know a woman that managed four little houses in Cody and she out-performed my long-term rentals every year. However, she worked her fingers to the bone and was driving herself to an early grave so she dumped them after ten years. I regularly remind her that she could have given them to me to manage as long-term rentals. She would have made 20 - 25% less but she would have been 100% free!