Sedona, AZ short term rentals

[Kevin Rice]

Does anyone have experience with STRs in Sedona, AZ? My understanding is that historically the city restricted STRs though a local ordinance, but this changed when Senate Bill 1350 became law in 2017, restricting municipalities from prohibiting STRs.Visitation has skyrocketed, and it seems there are more visitors in the off season months. Any insights would be appreciated. 

[Chad McMahan]

Originally posted by @Kevin Rice:

Does anyone have experience with STRs in Sedona, AZ? My understanding is that historically the city restricted STRs though a local ordinance, but this changed when Senate Bill 1350 became law in 2017, restricting municipalities from prohibiting STRs.Visitation has skyrocketed, and it seems there are more visitors in the off season months. Any insights would be appreciated. 

Hi Kevin.

I've been a realtor in Sedona for 15 years, and lived here for over 30 years, I specialize in 2 things:
1) Sedona Investment properties, primarily STR's

2) Sedona Luxury Real Estate

 
Short version, Your summary is correct. Sedona has one of the strongest STR markets across the country.

The massive appreciation and ongoing rental rate increases are also secured by major buyer demand uniquely fueled by:

1) Desire for this beautiful area (Which in turn is fueled by increased Sedona tourism)

2) Our ample and clean water supply

3)(full circle) The strong STR's returns in Sedona, creating a large and aggressive buyer pool

I review the town of Sedona official data (monthly and annual reports), so that I know what's happening with the local Short term rental market. According to the this official local data, Sedona tourism has increased since 2019 (pre-Covid) by approximately 62%. This is filling the STR properties with tenants, helping my investors see strong annual net cash flow.

Here’s the current (As of the August 2021 report) lodging landscape in the greater Sedona area --
• Hotel Rooms: 2,789
• Timeshares: 1,504
• STR | Single Family Home + Condo/ Townhouse: 992 equaling 2,877 bedrooms (2.9 bedrooms avg per house)
• STR | Home Sharing Apt + Guest House + RV + Private Room: 347


Overall, STRs outperformed the past few months compared to the previous two years.

 Short Term Rentals Occupancy %
July 2021 66% 
June 2021 74%
May 2021 77% 

As you can see, these occupancy rates are above the national average (66%) and the occupancy rate trend is holding. While we are seeing more STR's vs non-rented SFH's, we are also seeing the increased buyer demand. I've heard some people speculate Sedona is STR saturated. However, the data and certainly my observations show otherwise.

FINAL SUMMARY:

Sedona does NOT have official average STR cash flow data. However, based on occupancy & rental for STR's, and my extensive and ongoing discussions with other realtors, investors and other professionals such as contractors, inspectors, title agents and architects- most investors outside of my sphere are seeing 10% -18% net cash flow, compared to most of my clients receiving 13%-25%+ net cash flow. I attribute my clients receiving higher net cash flow, to my understanding of the current market, market trends, as well as performing "rental audits" for my clients during and after close of escrow to max their ROI, as well as my checkpoint discussions with listing agents before structuring an offer.

Indications are that we are still mid-wave and should receive massive home value and rental rate appreciation in 2022. For buyers that purchase now, cash flow by end of 2022 may actually be closer to 20%-35%. Based on conversations with Sedona zoning and planning, Sedona is going to close the loop on some STR methods over the next 1-2 years. Investors now, can lock in (via permits) these benefits before these changes occur.

If you decide you want to purchase in Sedona, know that it is fiercely (buyer) competitive. 

I'm happy to answer questions and go into greater detail. Please call or message me if this would be helpful.