Posted about 2 months ago

Let's Zig when others Zag

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You all know by now that I am involved in the short-term rental world. Well, this world is a stir right now as there have been many changes to the Airbnb platform that is affecting the performance of the rentals. Also, inflation has gone nuts, which is hurting everyone's vacation budget. The people looking to buy these types of properties are drying up and owners are panicking and selling.

You also all know by now I am a mindset guy. So if you are looking at this from a SWOT analysis format; Strength, Weakness, Opportunity, and Threat, which one is it? Well, these are external factors so it has to be an opportunity or a threat, but which one? The main sentiment is this is a Threat as the high-interest rates are eroding profits to be made on new buys and the bookings have taken a hit. The profit to be made from them just isn't there… or is it?

Let's shift and think about this a bit differently. The supply and demand curve drives prices up. If more people are scared of buying and people want to sell because they are scared of the profit margins, then the chart drastically shifts so there is no longer a crazy amount more demand than supply. This shift leads to fewer offers and ultimately lower prices. In fact, I have been watching Gatlinburg and I have seen a lot of price drops in the past few weeks. If we were to expand this to the whole market Redfin states that 18% of homes have had a price drop in the United States compared to 9% last year. Yes, interest rates are high right now, according to recent trends, but will they always be? A loan officer talked to predict a drop in normalization soon and a drop in 3-4 years.

Look, I'm in this for the long haul. What I am seeing is I can buy cash-flowing property way under the price I could months ago. I have a cabin in Gatlinburg under agreement for $687,000, when I did the math months ago the average was well over $700,000. Yes, I will earn less cash flow due to my high-interest rate……for now!

I am looking at this as an opportunity to get into the market that will jump-start itself again once the Airbnb changes normalize and we can refinance. Let's Zig when they Zag.

Comments (1)

  1. I've been trying to tell people this exact same thing -- when interest rates are high is arguably a better time to buy, because it drives prices down a bit and then you can refinance later when rates drop!