All Forum Posts by: Chris Watson

Quote from @Dax Jauhola:

Geez, guys - this thread is not about Orlando. I am not interested in Orlando at all and that is a completely different type of STR community.

Suncadia is a resort property with two hotels, 400 vacation homes, four swimming pools, four restaurants, and two golf courses. It's all under the same banner and controlled by one company.

They have the ability to negotiate with the City of Cle Elum, WA, as they are probably its biggest employer. STRs are popular in this city as they create significant amounts of jobs and revenue.

I am shocked that this model is not more popular around the country. If someone had 1,000 acres in Southern California and created something similar, I would invest in that in a second.

Back to your original topic (we investors do chase rabbits sometimes)...I am not aware of such a place that is not already in an established tourism/STR market. The problem right now in building one is the cooling of STRs nationwide. I believe such a project in the right place could be a honey pot, but it is a 2 to 5 yr investment before seeing any profit. Many investors are too use to quick money over the past decade.

As for your search for your next STR, I would look for the places people are not talking about. Many people start looking at places listed in all these top 10 STR markets to invest in are published and look only there. Unfortunately by the time it is published it is too late or the writers didn't do their research properly. The one good thing you have going is you are willing to invest in states many investors wouldn't touch. I sold my California properties 7 years ago and don't care to ever step foot in the state again. I only went there originally because the military ordered me to. I only investbin places where the state that are pro-property owners and little to no taxation. So there will be some options for you to find, but the hunt for a great cashflowing property in an area where you can find cleaners/maintenance teams is a little harder. You can still find cashflowing properties in the STR areas people have been investing in, butit is just hard to find "great cashflowing" properties producing +25% cash on cash returns when planning accordingly for capex.

Quote from @Todd Goedeke:

@Chris Watson it’s not a race to the bottom if competitors have a purchase price that is much lower or lower ConC goals.

I contend it is fear and not goals dictating the race to the bottom. In the Smokies the people I know (including a few of my own properties) who had a lower purchase price have "price discipline" and are keeping rates where they "should be" and adjust for demand.  Fear produces fire sale prices and these are fire sale prices.  The hotels in town are getting more per night than 3 and 4 bedroom pool homes.
Now the debate of where rates "should be" would be based on the quality of product each person/owner offers.  I personally challenge owners to look at what the Holiday Inn in Pigeon Forge and Gatlinburg are charging and they might see how much money they are leaving on the table.   For those who have been in the market for 5 yrs (preCovid) know post Easter till Mother's Day it is slow outside of rodrun. Also they know due to a very early Easter this year the spring break season was cut in half. That is the data to make pricing decisions off of. Next year Easter is April 20th and we will see a longer spread out Spring break season. Fear, and not data/intel/goals, are driving the race to the bottom.l and I expect those leading the race will be the first to sell.

Quote from @Shawn McCormick:

Quote from @Andrew Steffens:

I know FL is the exact opposite side of the country you want to invest in but we have state level protections in place.  There is a state law from 2014 where municipalities cannot create new or amend previous laws regarding how long or short a homeowner can rent their property for.  Places like Clearwater Beach that had existing laws can keep the law but cannot change it.

Orlando has some communities built where they were built for investors/second home owners in mind to use and then rent out most of the year. However, the Orlando market is really struggling with saturation currently (all it really has to offer is Disney - I like markets where there are multiple draws). I am not sure there is a specific term for this type of community, rather they market is as STR friendly, etc.

Best of luck!

Sounds like you don't know Orlando as well as you may think. We actually have a couple dozen great communities built specifically for STR and we have much much more than Disney that people come here for. In fact, most of my clients that own STR's near Disney say that only about 40% say they are here for Disney. Its the location to Disney that is the key, thats just where the zoning is friendly and the inventory is plentiful.

While I have not studied to determine if the Orlando market is saturated I can atest there is alot more than Disney. I have spent 22 days in the past year in Orlando and never went to Disney. Sea World and Universal is a large draw on top of golf, conferences and sporting tournaments. I actually have read articles this week that Disney expects to see a drop in attendance next year because Universal is opening the new park Epic. So people will be coming to Orlando, and probably more people, but just not to Disney. They are only building 3 new hotels for this park so demand will increase near it for STRs. I do not own in the market and will not own for other reasons but it is a solid market. Just like most markets in America, STRs are returning to pre-Covid occupancy rates and most people have no experience what that looks like because they entered STR investing during and since COVID. So alot of people are screaming the sky is falling on STRs, but really it is welcome back to the seasonal pricing and occupancy roller coaster ride of STRs that have been around for decades. The other benefit of Orlando is the foreign tourist demand helps with off-season *** there summer is our winter.

My May in 3 of 4 properties is already sitting at 33%, 50% and 50% occupancy.  I have one property struggling at 0% currently but working rates and my expectation is May will be 75% or better on all properties.   The biggest question is how will incomes compare to last year.  This April half my properties in the Smokies outperformed last year.  What started off like an empty calendar on these properties two weeks ago is seeing 77% to 100% occupancy for April.  Remember most bookings are happening within a 10 day window. Unfortunately there is a race to the bottom on pricing and several people are trying to win that race. While people are listing 4/4 pool homes for $99 a night my 1/1 April ADR is $146 (76%  occup with 6 days open at the end of the month so might reach 90%+) and my 2/1 $220 (100% occup). So don't join the race to the bottom. I let pricelabs do most of the pricing to get me to high occupancy for April.  

@Matthew Masoud We are in two markets. The Beach market is very heavy VRBO and direct with Airbnb filling in more of the less than 30 day out stays. I have more bookings from Airbnb, but these are shorter (2 to 3 days) stays and represent 22% of income. In the Mountain market it is property dependant and seasonal dependant. I had a property I 1031 last year that was 90% Airbnb and a property down the street 20% Airbnb. Different designs appeal to different people. Up until this year I would say Airbnb guests were willing to pay more per night netting a higher ROI. Now everyone is a bargain seeker.

My beach direct bookings are great (40% to 50% per property) but my mountains need work (8%-17%).

I see many are showing booking.com, but I haven't found any recent post or reviews if booking.com is still a nightmare to work with. So many people including myself had issues with payment, fees, cancellation problems and a high amount of fraud. Have they changed or is it still problematic site to do business on?

I have built a few in the area over the past 6 years. I have two builds finishing up next month. Personally the wisest thing is to pause till the fall or winter to see where occupancy, nightly rates and interest rates are.  For the past 2 yrs everyone has said in a few months rates will drop and all have been basically wrong. I also expect builders to drop prices by 10% around then due to not enough work to keep them all in business. Just as owners dropped their nightly prices in the past 3 months due to fear and scarcity expect builders to follow.  Build times might even quicken. Also, the election will be over and people might be more confident in the economy depending on who is in charge and people might start to spend more/vacation. The worst case is you lose the opportunity on 6 to 9 months of income. Lastly, hopefully the inspections and low returns will force 2% to 5% of cabins back into the 2nd home only (non-rental) or owner occupied. 

I explain the problem as this analogy:

The fed, President and congress blew up a twenty foot inflationary Ballon. Now they only want to let 2% of the air out at a time to deflate it which will take decades. What they should have done is set a decreasing inflation target: 5% in 2023, 4% 2024, 3.5% 2025, 3% 2026 and if they want this pie in the sky 2% then 2.75% 2027, 2.5% 2028, 2.25% 2029, 2% 2040. Now the problem is when they do drop rates (or talk there of) inflation will soar because the Inflation Ballon is still under a lot of pressure.

As for shrinkflation it is real, and as much as I contend our current President is a complete and utter failure, he is right on that. I saw a bag of Dorritos for $6.99.  Are you telling me 9 oz of corn went up $3.  I just choose not to buy unnecessary products I feel like are price gouging.  When consumers are sick and tired of being sick and tired of shrinkflation and quit buying certain products then the prices will drop or sizes will come back.

If it is in a true vacation market most furniture companies will come deliver and setup.  As mentioned above you can get a designer to decorate.  Even when you do this you will regret not coming yourself to go over everything.  Look at it this way you are opening a new $400k to $2.5M business location and you are going to let it open for business without coming in to go over everything.  You need someone to setup the wifi password and connect the remote lock. If you are self managing you need to know where all the GFIs are and where the breakers are. I personally like to stay in mine for 3 days atleast while I setup to know my properties more intimately and to work out the bugs which would be problems for guests. A common issue in the smokies log cabins is no caulking at the outside base of the tub/shower and along the bathroom base boards. So many owners get calls from guests of water pouring from the cieling below the bathroom into kitchens or gamerooms and it is from guests kids showering with water pouring out getting all over the floor and coming down below.  This is just one of many issues you could prevent with boots on ground for 72hrs. We order furniture from Costco and Sam's Club as they will use a shipping company that will schedule delivery for when we are on site.  We even had the shipping company held it for three weeks due to construction running behind time. 

Quote from @Bill B.:

Hopefully some day they’ll force listings to include cleaning charges in the rates. I guarantee people would lose their mind, and the government would get involved, if hotels started charging everyone cleaning fees. One of the few charges more offensive than “resort fees” hotels charge. 

Unfortunately cleaning fees for larger properties are harder to bake into rates. I pay $500 for a cleaner to clean one property. So do I add $500 to evert night? What about the guest that just booked 14 nights at that property? If I added to every night then he would pay $7,000 in cleaning fees. All this said, 99% STRs are not hotels (who has 4 to 8 cleaners on minimum wage for 85 rooms and can bake the cost in) and are not aimed at hotel clientele.  STRs are operated differently because they are different. I too get frustrated at a resort charge but for me I just look at total price when comparing properties.

If you went to a mechanic for new brake pads and they said it would be $195 would you upset?  Now if they broke down the invoice by line item and showed the break pads cost them $25 and they are charging you $170 in labor for the 1 hour of work how does it make you feel?  I believe showing the breakdown infuriates people, but the breakdown is the most honest, clear and transparent way of doing business.

When these people say "rent out better" are they talking about occupancy, ADR or ROI. My 2/1 in the Smokies is at 100% occupancy this month somehow, but it will only produce 1/2 of my 3/3 and 1/3 of my 4/4 this year. It might have higher occupancy but lower rates. In the summer my 4/4 gets 3X to 4X a night over my 2/1. So occupancy does not always correlate to ROI.

Now for planning purposes I spread the sizes of properties I have in this market. Why? Well 5 years ago there was a shortage of 4 bedroom and 5 bedroom properties and "these people" (agents, builders, BPr's and gurus) told everyone this. Over the past 5 years there has been literally several thousand 4 beds and 5 beds built leading to an over supply of this size cabin in low and mid season, which is leading to lower returns. My smaller properties counterbalance this in slow in mid seasons.

So why do I say this? So you realize:

1. You must know your market as much as you can. Dig deep and wide. 

2. You must analyze all the data (size of properties, # of properties of each size, location of best producers, regulations, # building permits for that size issued in the last year)

3. Identify trends and plan accordingly when buying

4. Whatever is the best return on your money this year might not be next year.

5. You must execute and then adjust when needed. Do your due diligence but do not get stuck in analysis paralysis.

Lastly, these online calculator are a good guesstimate but it is skewed with bad managers not effectively reaching the potential of a property So dig a little deeper into the high performers in the area to figure out what the rate should be and what they offer.