Which market to target

Question

Hello everyone,

I am looking forward to invest in STR and researching some markets and I need some help or advice. Which market is better to target as I am currently residing near Raleigh, NC. I am considering Metro market in Raleigh, NC, Vacation market in NC like Carolina Beach, or vacation market in FL.
I would love to hear from experienced investors who have some insight into these markets. Any advice or recommendations would be greatly appreciated. Thank you in advance for your help!

Abbey Humphreys · Answer

Hi Lila - we have seen lots of people have huge success in the Outer Banks area with the market still looking strong.  Sneads Ferry is a great spot (and AirDNA is showing really strong numbers, including near-year-round occupancy at 79% which is great for a beach town).  One thing to watch out for is the soil erosion and any issues around that though!

Brandon Vanderford · Answer

I have not worked much in the STR space, but I have several years of experience working with MTRs in the Raleigh-Durham area. My take is that the Raleigh market is far more business-dependent than tourism-dependent, which makes rentals less susceptible to the market changes that can hit vacation areas harder. That being said, I am bullish on North Carolina as a whole. More business in Charlotte and the Triangle means more NC residents, which naturally means more vacationers along the coastline and in the mountains. I am pretty well-established here in the Triangle, but I do have some folks telling me that they are having some difficulty getting established in the STR market due to the competition. I would not let that discourage you, but I always encourage investors to ask themselves, "Could I make the numbers work on this property if I had to convert it to an LTR down the road?"Happy to connect if I can be of help in any way.

Joe Prillaman · Answer

Hi Lila,

NC is a great market for STR. I personally invest in a few of the vacation rental markets “Banner Elk, Carolina Beach, and Kure Beach” but also see good returns with my mid term rentals in Chapel Hill and Winston Salem. Happy to chat if you need anything.

Joe

Bonnie Low · Answer

Look into a data source like Airdna or STR Insights or data.rabbu.com to start to get a feel for your revenue projections for different markets. None of these tools are perfect, but you'll start to see some trends. I also recommend you join some local host groups for the areas you're targeting to get some boots-on-the-ground insights from current operators as folks with a vested interest in selling you a property don't necessarily also have the experience of being operators themselves. Bottom line, you need to consult a variety of sources to get a solid understanding of what's happening in a given market. As others have noted, research STR regulations and look into any insurance challenges - this comes up primarily, but not exclusively, in coastal markets and in wildfire prone areas.

John Mausteller · Answer

Outer Banks is a great market for STR rentals - with various management options, from full service companies, to Airbnb 'Hosts', and maintenance / services only companies if you are self managing!

Levi Bennett · Answer

Hey there, welcome and great question. I think you're off to a good start. I wouldn't pigeon-hole yourself to a location, this is a common mistake that new investors make. If your goal is ROI, then seek ROI with someone who can help you underwrite, don't make it about location.

Location is one of 7 value layers I consider when helping clients find STRs (I've been doing it for 9 years, and have closed over 30 in the last 18 months). The acquisition is everything, and things like views, interior design, uniqueness, availability, bedrooms per dollar are other things to consider.. the more "value layers" you can stack, the better chance you will have at standing out. Sometimes that is in a commonly desired location, and sometimes it will surprise you and be in a location nobody thought of. The actual property itself, layered with the type of demographic that will rent the property, is more key to a successful STR / MTR than just location alone. I've seen this mistake made over and over. Be careful of saturation for different types of properties in a particular area (for instance, one zip code might be off-the-charts for return, but 3 bedrooms are over-saturated and difficult to occupy, this is the "availability layer"). Use a realtor or someone who has access to PAID data that give deep insights into the specific markets you're looking at so you can select a property that has a high chance at being a top 10% performer.  If you want to look at locations, there are several places in NC that can meet these goals, beach, urban or mountain (some good ones were mentioned above).. but I would say it depends heavily on your goals, your budget, etc.. work with someone that can work with you to maximize ROI.

Best of luck to you, and I hope you find this helpful!

Pat Lulewicz · Answer

We're seeing that a lot of coastal markets are getting higher insurance costs than in-land given the devastation on the coasts recently. Thought historically I feel good about NC coast and continue to buy and operate STRs there, the insurance companies are still hedging their risks. Wimington will be a bit less expensive than Carolina Beach. Holden Beach and Ocean Isle good to look into.

STR/MTRs in metros do well assuming you have a niche you want to go after or can differentiate your product.

A lot of lenders currently doing DSCR loans on STR proforma's which can make it possible to qualify higher priced homes for loans if the LTR rate doesn't substantiate it.

January Johnson · Answer

Thanks for mentioning us!  We are in 19 markets now, including NC and FL.  Also TX, GA, AL, TN, AZ, MO, OK, and WA.  I'd be happy to answer questions about how to target a market.  Please feel free to PM me.  :)

Ricardo Hidalgo · Answer

Panama City Beach is a great market that many investors are opening their options to. It's affordable, growing and it's an established city on the emerald coast. The airport is expanding and they are starting to bring more jobs and commercial infrastructure. In addition, land values have continued to go up (limited amount of it) which offers a more stable market than the majority of the cities with vast options. I have enjoyed tremendous growth over the last year and half with the ability to scale my real estate portfolio.

Yu Liu · Answer

First thing is to check local regulations before investing. I would also read some FB group posts from Build STR Wealth group or STR Nation for example.

I know some people do well in Banner Elk, NC. For Florida, a lot of people invest in Destin, short term shop is usually referenced.

Which market to target

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