Any successful STR investor's on the OR coast?

Question

Just seeing if anyone is familiar with STR investing in Oregon. I'm looking toward the coast for my first investment. Florence is the closest coastal town from my primary residence near Eugene. The numbers I have found work although I am skeptical about the data being accurate. At the price of a nice vacation home here I could invest in many other highly profitable places. I'd love to have one close to home my family and I could use a few times a year. I'm just hoping to speak with someone who has done it or knows someone who has or is that can confirm the analytics tools I'm using are somewhat accurate. Thank you in advance to anyone that takes the time to reach out with any information.

Sean Bramble · Answer

Can’t comment on the this market specifically, but make sure to ask others who are more experienced WHEN they invested your area. It’s easy to say “yeah my property is performing great!” when they bought in 2019 and have significantly lower monthly payments driving meaty cashflow. Agents in the area will also usually weigh in and say the area is great. Nothing wrong with this - it could actually be a home run of a market, just make sure you are comfortable with your underwriting.

I suggest buying data for your market on Pricelabs specifically ($10-20/ mo - worth it). Instead of spitting out an estimate like Airdna does, you’ll actually be able to find comps that match your property type and the design/ photos you think you can deliver. They’ll show you what they earned last year so you can get a sense of what to expect, but be sure to look at revenue/ occupancy trends over time to see if the market is trending down post-2021 (and give their totals a haircut for your own forward looking projections if so). Also realize that your closest comps may not be pricing correctly and leaving a ton of money on the table. Price optimized comps usually have occupancy around 70+% depending on the market.

Projecting revenue is a bit mindbending, especially after 2020/21 when consumer behavior was very abnormal, but don’t let that scare you away from making a great investment - underwrite conservatively and you should do great! Good luck!

Taj Richardson · Answer

Hi Trevor,

The Oregon Coast is a popular vacation rental market but regulations have limited the options along the Coast. The good news is that Florence remains one of the more STR friendly markets on the Coast. The numbers generally look good there as well... but good numbers are relative to the market.

If you want cash flow with a standard 25% down payment you will want to look somewhere else. If you want amazing appreciation for the long term benefits, the Coast is a solid option. You can find cash flow with 20-25% down on the Coast, the most common cap rates on the Coast are around 4.5%-5.5%, 6%+ caps are rare finds... They are out there, but you have to be willing to find off market deals, and for the Oregon Coast that is basically up to the buyer. There are not wholesalers here on the Coast, and I don't know of any RE agents that are out there seeing off market deals for their clients.

As far as analytical tools, the most commonly used in our area is the AirDNA Rentalizer, I find it is usually about 20% to generous, generally. So if the tool tells you $100k a year, run your numbers at $80k and if you like what you see then keep that property as an option. If you are going to self manage it might be a little better, like 10% instead of 20% off, but better to be conservative if you need cash flow. If you are considering property management the commission is usually between 25-35% on the Coast.

When I underwrite deals I usually start with a few simple benchmarks for our area. I usually will look at a property that looks like it would be a good rental, then I figure out it should make something like 9% of the purchase price in annual rental income. Then I divide that by half for operating costs. Then you have the remainder for covering your mortgage and after that any profits you might have. If you find a home that meets these requirements on the Coast (cash flow positive with a 9% gross yield) you have an interesting opportunity.

Best of luck, let me know if I can assist in any way.

Ryan Moyer · Answer

This post is very apt.  So many people put way too much emphasis on other people telling them that a market is "doing great" for them.  Or, my favorite, "crushing it".

Everyone has different definitions of "crushing it" and "doing great".  Everyone has different purchase points.  A lot of time people say they're "doing great" on a house that is just breaking even and they're happy that their vacation home's mortgage is being paid each month.  Even worse, they may have bought at a significantly lower price to the point where you'd be negative cash flowing if you made the same gross revenue.

When you do find people that are able to help, you've gotta ask for actual numbers that you can underwrite with.

AJ Wong · Answer

Hi Trevor, did you ever acquire an Oregon Coast STR? Florence is still one of my top target areas due to ease of licensing and permitting..currently the only requirement is a business license. The productivity of OR STR's is very consistent and growing due to the barriers of entry of restrictions in other coastal towns. A rough performance metric is 10% of valuation in gross annual income. Hope this helps!

Michael Porche · Answer

Hey Trevor! I got access to airdna data in that area and can confirm what you are looking at. Message me if you need that assistance.

Trevor Hill · Answer

Thank you both for your input. Jefferey, I had considered Seaside because of the fact there is more tourism being closer to a bigger city and we love vacationing there. A downside is it's further away. Also looking at the data on Rabbu and Airdna, Florence penciled well compared to Seaside. There are thousands more vacation rentals in Seaside so higher competition that could lead to less occupancy or an undercut in prices because they have lower expenses than I would. Florence is less expensive and occupancy/nightly rates look great especially on the well setup homes.

Bonnie, I have been following the regulations on STR's and you are absolutely right. There are a few county's cracking down on STR's in what are some of my favorite places to vacation. For example, we love Newport and it is only an extra half hour away compared to Florence so it seemed great. Upon looking into regulations I found out about the local community fighting hard against them and making it more difficult to operate. I will definitely be sure to due my due diligence before committing to a market.

Another area we enjoy is Central Oregon mainly Bend. We go to Sunriver every year, spend lots of time snowboarding and camping. That market has appreciated insanely and the competition is fierce. Plus its more difficult to get started with Airbnb's due to regulations. Some day I plan on having one there but I'm not sure if its the best choice for my first venture. My goal is to have vacation rentals in all sorts of markets and it is such a motivating goal to have. Finding real estate investing has opened my eyes up to the world. I am so thankful to have found it. As well as a forum with great people like yourselves who I can communicate and gain more knowledge. Thus far I have only met one person in person who invests in real estate. So thank you again for chiming in everyone. Your input is much appreciated :)

Sean Bramble · Answer

Hopefully someone else on here has some first-hand experience

Love the Oregon coast btw … saw the ocean for my first time in Canon Beach many moons ago. Jealous that you live so close to it!

Jeffery Wilen · Answer

Trevor,

Congrats on making the decision to get into RE.  Advice given by the other posts are spot on. Other consideration that we've found critical is housekeeping and local handyman.  Since you're not in town, you'll need both.  They are critical to your success, just note what some of the other high volume posters in this forum have said.  Even if the numbers look good, without these two you'll struggle to have success. Speaking from experience, until we dialed in a fantastic cleaner our properties were very meh.

Something to consider for Florence vs rest of the OR coast is proximity to Portland or type of destination.  Demand will be lower than those closer to Portland or Bandon for its destination draw.  You'll likely see more seasonality than those other locations.  On the other hand, probably lower property costs there vs other locations.

We've looked at a couple locations on the OR coast, but as a WA resident adding the OR income taxes have made other locations more attractive for us. Also be careful with the STR regulations being considered in many jurisdictions, do your research.

Best of luck

Bonnie Low · Answer

I don't have any STRs on the Oregon coast but we visit there often, have family in Brookings and have had our eye on the southern OR coast for some time. Our family has an ocean front home in Brookings and are friends with many other residents in their neighborhood who also have coastal STRs. They all have high occupancy. ADRs according to Rabbu look ok to me, but not stellar. That said, they all bought a few years ago at least so looking at their cash flow is not an apples to apples comparison if you're buying at today's prices. One thing to be VERY wary of on the Oregon coast is that there is a very active lobbyist group that is trying to get STRs shut down. There are a few communities they've already succeeded in. And in some cases, they're not grandfathering in existing permits - they're phasing them out. So go above and beyond when you do your research to find out if this is being discussed in any of the coastal towns you're looking at. I believe Astoria is one of the ones where this happened, but don't quote me on it. For what it's worth, the Brookings city council is currently STR friendly.

Any successful STR investor's on the OR coast?

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