All Forum Posts by: Dan Maciejewski

 Wellllll . . Marriott is entering the STR / vacation rental space! They definitely see value and want to recapture that business that strayed away. And they are allowing you to use reward points to book! But you are definitely right. The cap rates / ROI will shrink and many places are regulating more and more as homeowners get all NIMBY even as they stay in STRs when they vacation. The past 2 years were a historical fluke that I don't think we'll ever see again. The travel to the states that were open driving ADR and occupancy and the lowest interest rates in history were huge drivers for people to buy and make money hand over fist.

I poll everyone I talk to and there is a decent mix of people that love resorts and hotels and people that will never stay in a hotel unless they can't help it.  I see both continuing to thrive in the future.  Like Uber and taxis!  Hotels are definitely not going away, though.

For the OP: I am in a Tier 2 destination/vacation market. Hotel and STR occupancy and rates have been off the charts, and will probably continue to remain high through the recession. When hotels were hit hard here, STR actually gained. We were the only market that maintained over 50% hotel occupancy through the worst of the paddleboat, though. Transient travel will generally keep occupancy rates in hotels and STRs linked to some extent.  Hotels nationwide aren't projecting a "full" recover until 2024.  That's mainly because business travel is still down.  

So, to answer your question, I would say that hotel vs STR will depend on the mix of your transient travelers. Is the market driven by business or tourist travelers, and how much of each. Business travelers tend to just book hotels and tourists look for value and location.

Besides parking, does the city actually regulate how many separate families can stay at a location? In my area you would be fine to market the same property twice -- one ad for an ADU and one for the main house. The bigger question would be if the property allows for two groups that don't know each other to each enjoy their own space.

If you truly can't market it separately, there is a big draw for MIL suites in a vacation rental.  That's one of the reasons why our luxury houses do so well and get great rates.  You can fit large or extended families, or you can fit 2 families vacationing together.  It happens a lot.  We have a friend that has a giant lake house and sometimes has 3 families staying at once!

Realistically, advertising will alert the authorities that you are operating a short term rental.  There is no practical way to advertise "only" to guests and not the authorities, as well.

From a business perspective, it's not a great idea to start a business that goes against local ordinances.  Or to sidestep the permit process.

It also looks like the city of LA at least, is actively enforcing STR ordinances.

Around here for STRs, usually owners/managers will have it stocked at arrival and let the guests fill up after that.  6 months and a day is long enough to establish residence in our state, so I would not be  grocery delivery service for a long term guest.  Even mid-term 30-60 day stays should be able to take care of their own toilet paper and coffee!

My MLS (Stellar, the biggest in the state) will let your Realtor check any house you are looking at for down payment resource options. Some lenders that specialize in 1st time homebuyers should be able to help you out for anything you are eligible for, too, and maybe direct you to cities and neighborhoods that are offering incentives. You can check at the Down Payment Resource site, yourself, too.  Click the hotlink.

Nope, you've got the gist of it. Direct neighbors will often complain about the STR next door if the owner keeps booking parties. Honestly, even one loud party can leave a bad taste in people's mouths.

You will often hear people say that investors are coming in and driving prices up.  Which is odd because it's usually the investors that have a driving need to keep purchase prices as low as possible.  It's the people that treat mortgages as free money that muddy the waters and bid up houses hoping that an appraisal will bring the price down.  Not so much in the past 2 years, but that's a big strategy when it can work.  And there are still Realtors that think that's going to work so they tell the buyers to do that.  So the investors now have to outbid the owner occupants that didn't really intend to pay what they bid.  

It's mostly just a case of NIMBY from people that will stay in a vacation rental home when they travel. They don't think it's the same thing in their backyard as when they stay in a cabin in the mountains.  I point that out to the people that I talk to.  There are a lot of people in Clearwater/Pinellas that go up to the mountains in the summer then complain about all the  visitors here on the beaches when they come back home!

I'm on the buy him out bandwagon.  Ellijay is a great tourist spot and the property will appreciate in the next 5-10 years.  

It's definitely not normal.  It's legal to do in Florida and probably your location, but not normal for a short term rental sale.  Usually you buy the house and sometimes the furniture.  The bookings will be cancelled and then given the option to rebook at your price and with your account(s).  

Sometimes the booking entity (LLC or other entity), like "Bob's Vacations" is sold, and the passwords and all bookings go with it. That sounds like what he is doing, but the unusual part is him holding the property hostage unless you do that.  

It would depend on my projections for the property,  the purchase price, and what his current business looks like to make a decision on whether or not to proceed.  I know that when I buy a property I manage it better than it had been so I don't want to pay a premium for the past business!

My guess is that with gross revenue of 86k, it's not worth an extra 100k.  In theory you're paying 100k for 172k worth of business (the 2 years he's holding hostage), but if you're in a high demand area, that business will come whether or not there's the past owner's reviews.  And is the furniture and "digital media" worth 100k?  The digital media costs around $250 for pics and a website can be around $250/year, or you just use the platforms everybody does (Airbnb and VRBO).  My guess is that it's selling around 650-750 with an ADR of 330-ish?  If it's selling at 500k, you might just pay the extra and move on, but if you're financing, you'll also need to consider whether you have the cash if the area doesn't support the price for an appraisal.

Also, as mentioned above, are you in an area and rent rate that will be hit more or less in the coming recession?  That could determine how much your occupancy and rate drops for the next year or so.  Hotels are trying to hold strong on rates right now.  All brands are being told to NOT flex on rates, but it will depend on the area whether or not they can.

Like @Luke Carl said -- you're buying a 3-bed and you'll own and be selling a 3-bed.  However you set it up and market it as a rental doesn't have anything to do with that.  The number of people it can sleep may have regulations in your locality, you may want to check.

For the septic, you may run into issues where you might have to pump it more than if there were less people using it.  You can check with the current owners to see if they've had any issues.  They may not disclose anything, though.  But like Luke says, it's pretty common.  You can always get quotes to see how much it would cost to enlarge the leach field if there is an issue.