STR & Vacation Rentals are dead, LTRs are in...

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STR & Vacation Rentals are dead, LTRs are in...

Eric Power
Member since 2026 ¡ 11 posts ¡ 3 votes

My position is more nuanced than the overly reductive title indicates.

Of courseI believe people will continue to find decent deals, and investors who bought right years ago will more than likely continue to do well if they play their cards right.

That said...

The Orlando landscape has shifted and the STR/Vacation play isn't what it used to be. The market has matured, becoming saturated, and now requires the stewardship of a strong operator. The good investors are being separated from the bad.

The regulatory environment is becoming more and more restrictive with each passing day.

Without a highly differentiated product, owners are having to reduce ADR in pursuit of higher occupancy, ultimately crushing RevPar.

Dynamic pricing is complex, time intensive, and more important than ever. The average time from booking to stay is approaching 3-4 days.

The number of available prospective properties zoned for this activity is shrinking.

Property management fees are higher than ever. 

This is a wealth preservation vehicle at best and positive cash-flow is compressing. ROE will be the main source of upside for many investors, which requires a second or third, or outright exit.

Why LTRs may offer a path to safety:

Property management fees tend to be 15-20 percent less for LTRs.

Almost no meaningful fluctuation in income. Long term tenants bring stability.

Same or similar paper money upside.

Zero zoning restrictions.

No self-employment tax and no hotel/hospitality tax.

In summary, we are no longer in the early stages, I believe most would agree with that, and consolidation has begun. Arbitrage is limited.

Wealth preservation > wealth creation.

I know this is a hot take. I am open to any counter arguments. Curious to know your thoughts. I am a truth seeker, and recently I have become less and less comfortable encouraging my investment circle to engage in the STR play. I have research supporting this position as well as anecdotal evidence. Do you agree? Disagree? Why?

All the best!

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Shawn McCormickPro Member
Realtor ¡ Central Florida-Orlando ¡ Member since 2014 ¡ 1k+ posts ¡ 892 votes
2mo

Let me give you a bit of perspective from an agent that works in this exact arena and still finds Orlando as a viable market.

Some of your points are certainly valid and I'm here to figure out why you wrote this or where your information comes from. 

One of your first points is that units require a strong operator. Of course it does, any business does and that is why so many are sour on Orlando, they just hear the stories of operators losing money and having to sell at a loss. That headline could be virtually any business. Most people didn't underwrite what it takes to operate units here, end of story. If you are a bad operator and didn't do your due diligence, of course you won't succeed.

Second point is more restrictive regulations, that really isn't the case unless you are operating outside of what is handed to you on a silver platter....resort communities specifically built to be STR here in the 4 corners area. Again...back to due diligence. Not wanting to pay higher HOA fees thinking your genious. The HOA's resorts will be the last ones standing.

Third, a highly differentiated product..again, this is almost any business model. What do I have that is better, faster, cheaper, more convenient than you do. That is just building a better mouse trap (Disney pun intended), and should have been on the forefront of your business plan from the start. 

Dynamic pricing is an app, software or algorithm that is much easier now than ever, IMO.

Fourth, the property management fees are literally cheaper now than I've seen them since pre pandemic. They used to be 20-25%..I've got PM's calling me after a closing begging to offer me 12-15% tops. There will be a consolidation of them too as better PM companies take more market share and squeeze out the lazy or old school operators.

With bonus depreciation play being a key solution to many high income earners and on their radar now, STR is a great play and is bringing in more savvy investors that know they have to treat this like a business and I believe we will see revenues and sales of these units slowly make more sense here in the Orlando market.

Are there better STR markets in Florida, absolutely, but there are also much more restrictions, weather events, sheer volume of tourists, less name recognition, less occupancy issues that Disney doesn't really content with. Theme parks are getting bigger, more and more enormous projects are coming to keep attracting the more than 75M visitors we already get including our expansion of convention space and so much more.

As a Realtor that works the STR market consistently in Orlando, I am still selling in the $600-800k range, just a different type of buyer now.

Just my 2 cents.

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  • Michael BaumPro Member
    Olympia, WA ¡ Member since 2016 ¡ 8k+ posts ¡ 7k+ votes
    2mo

    Ugh...

    0Reply
    • Eric Power
      OP
      Member since 2026 ¡ 11 posts ¡ 3 votes
      2mo

      @Michael Baum that's about what I expected! 😂

      Hey Michael, if you don't mind sharing your take with me, that'd be great. I've had some pretty sobering conversations with several investors and a GP of a fund all with exposure to the right properties.

      I was about to move forward with something and now I've halted that until I get full picture.

      Thoughts?

      0Reply
  • John UnderwoodPro Member
    Investor ¡ Greer, SC ¡ Member since 2014 ¡ 13k+ posts ¡ 17k+ votes
    2mo

    I wouldn't say that. Sure its saturated in some areas making STR'S tough, especially if you have to pay a PM.

    Yes I love my LTR'S and they are my bread and butter.

    You can still make money with a STR if you buy right, have a great location and good amenities and look better than your competition to a guest via what you can provide or via price.

    0Reply
  • Mike GrudzienPro Member
    Lender ¡ Eugene, OR ¡ Member since 2019 ¡ 2k+ posts ¡ 1k+ votes
    2mo

    I love STRs.  Results are both Host and market dependent...

    1Reply
  • Andrew SteffensBusiness Member
    Tampa, FL ¡ Member since 2022 ¡ 3k+ posts ¡ 3k+ votes
    2mo

    Key word was Orlando. IMHO the worst STR market in the US.

    [email protected]813-563-0877
    Vacation Rentals of Florida53 Reviews
    WebsiteView Page
    2Reply
  • Shawn McCormickPro Member
    Realtor ¡ Central Florida-Orlando ¡ Member since 2014 ¡ 1k+ posts ¡ 892 votes
    2mo

    Let me give you a bit of perspective from an agent that works in this exact arena and still finds Orlando as a viable market.

    Some of your points are certainly valid and I'm here to figure out why you wrote this or where your information comes from. 

    One of your first points is that units require a strong operator. Of course it does, any business does and that is why so many are sour on Orlando, they just hear the stories of operators losing money and having to sell at a loss. That headline could be virtually any business. Most people didn't underwrite what it takes to operate units here, end of story. If you are a bad operator and didn't do your due diligence, of course you won't succeed.

    Second point is more restrictive regulations, that really isn't the case unless you are operating outside of what is handed to you on a silver platter....resort communities specifically built to be STR here in the 4 corners area. Again...back to due diligence. Not wanting to pay higher HOA fees thinking your genious. The HOA's resorts will be the last ones standing.

    Third, a highly differentiated product..again, this is almost any business model. What do I have that is better, faster, cheaper, more convenient than you do. That is just building a better mouse trap (Disney pun intended), and should have been on the forefront of your business plan from the start. 

    Dynamic pricing is an app, software or algorithm that is much easier now than ever, IMO.

    Fourth, the property management fees are literally cheaper now than I've seen them since pre pandemic. They used to be 20-25%..I've got PM's calling me after a closing begging to offer me 12-15% tops. There will be a consolidation of them too as better PM companies take more market share and squeeze out the lazy or old school operators.

    With bonus depreciation play being a key solution to many high income earners and on their radar now, STR is a great play and is bringing in more savvy investors that know they have to treat this like a business and I believe we will see revenues and sales of these units slowly make more sense here in the Orlando market.

    Are there better STR markets in Florida, absolutely, but there are also much more restrictions, weather events, sheer volume of tourists, less name recognition, less occupancy issues that Disney doesn't really content with. Theme parks are getting bigger, more and more enormous projects are coming to keep attracting the more than 75M visitors we already get including our expansion of convention space and so much more.

    As a Realtor that works the STR market consistently in Orlando, I am still selling in the $600-800k range, just a different type of buyer now.

    Just my 2 cents.

    2Reply
  • Henry Lazerow
    Real Estate Agent ¡ Chicago, IL ¡ Member since 2017 ¡ 2k+ posts ¡ 2k+ votes
    2mo

    Same in my market chicago. LTR nets out roughly the same as STR. I removed mine and so did a client. Its so much less work and makes no sense unless there is a large premium. This was even with self managing.

    0Reply
  • Ashish AcharyaBusiness Member
    CPA, CFPŽ, PFS ¡ FL ¡ Member since 2017 ¡ 5k+ posts ¡ 3k+ votes
    2mo

    I'm actually in Sarasota myself, so this hits close to home on the Florida STR landscape you're describing.

    The tax picture actually cuts both ways on your thesis and is worth adding to the debate. On the STR side, the SE tax and dealer tax point you raised as an LTR advantage is real, but it's only half the story, that same STR "downside" is exactly what makes the material participation loophole work in the first place, self-managed short stays let losses offset W-2 or business income without needing REPS, that's a benefit LTRs simply don't have access to unless someone qualifies as a real estate professional. If wealth preservation is genuinely the goal now rather than active tax offset, that STR advantage matters less, but for anyone still working a W-2 and looking to shelter income, giving up STR status also means giving up the one tool that made it worth the operational headache to begin with.

    On the ROE and exit point, cost segregation compounds this either way, but differently depending on the strategy, an STR generates a bigger one-time paper loss upfront through bonus depreciation, useful if you need that offset now, while an LTR's steadier depreciation stream matches the "wealth preservation over wealth creation" framing you're making, smaller annual benefit but more predictable and less front-loaded. If someone's already deep into an STR that's lost its tax advantage due to market saturation, a 1031 exchange into an LTR is worth modeling before an outright sale, that preserves the deferred gain rather than triggering it while making the LTR pivot you're describing.

    Happy to connect!

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  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States ¡ Member since 2022 ¡ 1k+ posts ¡ 870 votes
    1mo
    Quote from @Eric Power:

    My position is more nuanced than the overly reductive title indicates.

    Of courseI believe people will continue to find decent deals, and investors who bought right years ago will more than likely continue to do well if they play their cards right.

    That said...

    The Orlando landscape has shifted and the STR/Vacation play isn't what it used to be. The market has matured, becoming saturated, and now requires the stewardship of a strong operator. The good investors are being separated from the bad.

    The regulatory environment is becoming more and more restrictive with each passing day.

    Without a highly differentiated product, owners are having to reduce ADR in pursuit of higher occupancy, ultimately crushing RevPar.

    Dynamic pricing is complex, time intensive, and more important than ever. The average time from booking to stay is approaching 3-4 days.

    The number of available prospective properties zoned for this activity is shrinking.

    Property management fees are higher than ever. 

    This is a wealth preservation vehicle at best and positive cash-flow is compressing. ROE will be the main source of upside for many investors, which requires a second or third, or outright exit.

    Why LTRs may offer a path to safety:

    Property management fees tend to be 15-20 percent less for LTRs.

    Almost no meaningful fluctuation in income. Long term tenants bring stability.

    Same or similar paper money upside.

    Zero zoning restrictions.

    No self-employment tax and no hotel/hospitality tax.

    In summary, we are no longer in the early stages, I believe most would agree with that, and consolidation has begun. Arbitrage is limited.

    Wealth preservation > wealth creation.

    I know this is a hot take. I am open to any counter arguments. Curious to know your thoughts. I am a truth seeker, and recently I have become less and less comfortable encouraging my investment circle to engage in the STR play. I have research supporting this position as well as anecdotal evidence. Do you agree? Disagree? Why?

    All the best!

    @Eric Power @Shawn McCormick good back and forth here. Wanted to add one thing to the 1031 point I made earlier in the thread.

    If someone's pivoting an STR into an LTR and the property actually needs work to function well as a long term rental (different layout, no more furnishing package, whatever), a straight swap isn't always the right tool. A build to suit exchange (some people call it an improvement exchange) lets you use the exchange proceeds to fund construction or renovation on the replacement property before you take title to it. So instead of 1031'ing into something that still needs six figures of cash to convert, the conversion gets funded inside the exchange itself. Downside is it's more moving parts, the QI has to hold title during construction and you're still working inside the 180 day window, so this needs a real intermediary who's done these before, not just any QI off a list.

    One risk worth raising on the other side of this: if you've been buying and selling STRs on a shorter hold, the IRS can look at that pattern and argue dealer status, and dealer property doesn't qualify for 1031 treatment at all since it was never held for investment. If a full exit is on the table for anyone here, that's worth sorting out before assuming the exchange is even available.

    @John Underwood @Henry Lazerowgood points too, feels like the operating question and the tax question are two different conversations getting blended together in this thread.

    Happy to Connect!

    This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice. 

    [email protected]628-241-0888
    0Reply
  • Angela Venger
    Member since 2026 ¡ 47 posts ¡ 21 votes
    1mo

    You said the part that matters, reducing ADR to chase occupancy and crushing RevPAR. That's the trap I see most owners fall into, they think the problem is an empty calendar. The worst case for me isn't an empty calendar, it's renting it out and still losing money. I built a floor calculator for all my properties, mortgage HOA utilities insurance, so I know the absolute bottom number each one costs me just sitting there. Once you have that number you stop discounting by feel, and a saturated market gets less scary because you know exactly where you can and can't play.

    1Reply
  • John LitzPro Member
    Reno NV ¡ Member since 2022 ¡ 74 posts ¡ 56 votes
    1mo

    You hinted at the solution in your own post. An actual operator will far out perform the average. Average sucks, when you're in the top 10% who cares about saturation or what the bottom 50% are doing. I am fine with them getting out. Gives the operator that much more opportunity. This summer has been the best 3 months I have ever had in 3 years in STR. I am destroying what cash flow could be had as an LTR. My profit has been more than double my W2 monthly income. Yes I am in a saturated area. In fact just had a STR open across the street from me. They have weekend booked and that is good but I am at over 70% occupancy so no their weekends are not hurting my business at all. In fact I got their number so I can send overflow to them. They have a nice property. I laugh all the way to the bank every time I hear this story. Be better, study, market, hustle, be the operator your guest deserves. They may have saved all year for a single chance to enjoy. Give them the best experience possible!!!

    1Reply
  • Scott Dinan
    Property Manager ¡ Saint Petersburg ¡ Member since 2026 ¡ 7 posts ¡ 2 votes
    1mo

    The easy money phase of buying a property, furnishing it, and throwing it on Airbnb is over. Supply is up, regulations are tighter, guests expect more, and average properties are getting lost in the crowd.

    Where I disagree is the idea that STRs are now only a wealth preservation play. I think the margin for error has just gotten much smaller.

    Not all real estate is equal, and that is especially true with short-term rentals. There can be a massive difference between two properties in the same neighborhood based on design, amenities, photos, pricing, listing optimization, and guest experience. When we look only at market averages, the great properties get lumped in with a lot of mediocre inventory.

    The biggest mistake I see is investors treating an STR like a traditional real estate investment. It may technically be a real estate asset, but you're really entering the hospitality business. Most investors underestimate how much skill and attention it takes to manage pricing, protect ADR, optimize the listing, control expenses, and consistently deliver a great guest experience.

    I own a management company that has operated more than 50 vacation rentals, and we see this all the time with investors coming from the long-term rental world. They’ve had success with LTRs, so they assume STRs will be an easy transition. In reality, it’s a completely different skill set.

    I definitely see the appeal of LTRs. Lower management fees and more predictable income are real advantages. But a lower management fee doesn't automatically make something a better investment. What matters is what the owner keeps after vacancy, turnover, maintenance, CapEx, financing, management, and reserves.

    I also think some of the tax and zoning points require more nuance. LTRs generally face fewer restrictions, but “zero restrictions” is probably too broad. Tax treatment also depends on how the rental is structured and operated.

    So yes, I agree that the market has matured and that consolidation has started. I just wouldn’t say STRs are dead or that they’re only a wealth preservation vehicle.

    I'd say passive, poorly underwritten, and "doing the bare minimum" STR investing is dying.

    Some Orlando properties should absolutely be LTRs, and some probably shouldn’t be purchased at all. But the right property, bought at the right price, in the right area, with a strong operator can still create meaningful wealth.

    For me, the question is no longer, "Is Orlando a good STR market?"

    It’s, “Does this specific property, at this price, have enough upside to justify the added complexity?”

    1Reply
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