All Forum Posts by: Ryan Moyer

In the Disney area there are a bunch of gated neighborhoods that are built as STR specific neighborhoods. The homes are zoned for nightly rentals, and the entire neighborhood is built with the intent of STR. While some people do choose to live there, the homes are not built with the intent of primary residence. Instead of garages the homes have game rooms. There are no mailboxes at the homes. Trash is collected by the HOA 7 days a week, etc.

Most of the resorts have a big clubhouse amenity area with giant pools, waterslides, mini golf, splash pads, movie theater, etc.  Guests staying in the homes in the neighborhoods are allowed to access these amenities for free.

Yes, it is all run through the HOA.

$82k gross on a $700k purchase is not ideal at current rates.

Margins are slim, and I worry that you are underestimating costs and potentially overestimating revenue (I would not take Rabbu projections at face value).

Margins are slim, down payment amount is high. Unless this is in a market with extremely high potential appreciation I think there are probably much better ways to spend $300k.

 Bingo.

Average is death right now in the STR space.

 Because most people can't afford a $6M property...

As both an investor in Kissimmee and PM in Kissimmee with around 20 units I have been the biggest bear for the market on this forum for a while now.  I saw the writing on the wall with thousands of new units going up and everyone rushing to theme, leading to both quantity and quality saturation.  I was warning people off of prices from 2 years ago at those rates.

I will say this though, things MAY be starting to finally turn the other way.  Prices have come down a lot, and I do think one advantage to Kissimmee right now is that prices might have bottomed out, and there are some really good deals to be had, whereas other markets are still early in their drops so there is a lot more risk that you're buying something that may drop 20-30% in value over the next few years.  In Kissimmee, that's already happened.  9br homes in Champions Gate were $900k+ a couple of years ago, now available in the $600k range or a little bit more with theming already done.

With prices dropping a lot, the returns relative to gross revenue are starting to look attractive. The big thing people overlook that dampens that a bit is that costs are very high in Kissimmee compared to most markets. For starters there are HOA fees of around $500. Electricity on the big houses is going to be $600-$900/mo. And maintenance costs are high because these are high occupancy houses packed with people, mostly kids, that are very hard on the house. You'll have to steam the carpet/couches and repaint the walls and flush the A/C and fix the fridge etc more often than most markets.

But on raw numbers, I just found a client a turnkey themed out 8br for $715k that I have two almost exact comps in my portfolio currently doing $120k-$130k a year.  Where else right now can you buy $715k turnkey (furnished, etc) for $120k gross with no value add?

If value add is your thing, there are 100 copies of that same house unthemed that you can get in the $600k-$650k range and do $100k in theming to hit those $120k gross rents numbers.  Again, elsewhere $600k pp + $100k renovations for $120k gross is doable, but it's not as easy/straight-forward.

Again, the key in Kissimmee is proper underwriting.  Most people way underestimate their costs.  So if you can do $120k gross on $715k purchase in another market your actual net is going to be better.  But people that bought at $900k with 8% interest are panicking right now and with the right deal it can make a lot more sense now than it did two years ago even though rents have dropped over that same time frame.

The problem there is once you add a mortgage at 75% LTV with a 6%+ interest rate to the equation, the cash flow disappears entirely if you're only doing $50k gross on a $500k purchase. In fact, you're most likely paying out of pocket each month and not even covering your costs.

Of course the answer there is to buy in a market where you're not paying 10x gross revenue, or do a value-add where you're not paying 10x gross revenue.

But yes, I agree with Colin's premise that buying STR at 10x gross revenue is a terrible deal. Thankfully there are better deals available.

I would add Destin to the list as well.  That's another market like the Smokies where people have just kind of accepted that a property is going to be listed for 10x gross revenue.  Lifestyle asset, future appreciation, maybe.  But the numbers are really bad on 10x properties at current interest rates.

Though for what it's worth, I wouldn't necessarily just look at the list price and assume you can get it for that in your underwriting.  The Byars house ended up selling for about double the list price when it went on the market.

I assume this is about the Wheeler house from Stranger Things that went on the market a few weeks ago.

If you want a comp, somone already STR-ified the Byars house from Stranger Things.

It's booked out solid at really high rates from Nov - Jan with the final season of Stranger Things airing.  If you can close on the Wheeler one and get it all themed out in the next month or so (a tall task) you can probably do ~$90k revenue in 3 months.

Byars house rates are pretty low after that so if you miss out on that, probably not worth it.

VRBO is no better, and will almost certainly copy this in the coming months.

VRBO and Airbnb take turns coming up with jerk the host around policies, and then the other one copies it.

Remember, VRBO are the ones that invented charging fines to hosts beyond even the max refund amount, which is pretty much the most brutality punitive policy in all of business and something no other business would accept.

Imagine if waiters had to pay a $2000 fine for spilling a drink on a diner.  That's VRBO if they were in the restaurant biz.

Don't forget to apply the mark up to your fees as well.

If you were charging $250 for cleaning before, Airbnb would charge the guest their 14% on top of that and still pay you roughly $250 (minus 3%).

Now they will charge the guest $250 and only pay out $211 to you.  So you need to mark up the cleaning fee as well.  Along with pet fee, damage insurance, etc.