Vacation rentals in North Carolina [2022]

[Batool Haider]

Are there short-term rental investors in North Carolina on this platform? I would love to hear your insights.

I am a newbie investor looking for a large single family properties (5+ bedrooms mostly for family/friends/corporate gatherings) under $750K. As a rule of thumb, I am trying to hunt properties that produce an annual revenue of about 1/6 the purchase price. So far, none of the areas I have checked in NC come close to satisfying that rule. The properties close to the mountains (Ashville, the Smoky Mountains etc) are relatively less expensive, but so far I have seen their annual AirDNA revenue to be under $100K and so the net cashflow is not impressive. The beach-front properties do produce over $120K of annual revenue but most are above a million dollars of purchase price and so again the cashflow takes a hit because the monthly payments are really high. I checked the cities too. Charlotte's Mooresville, for example, has very profitable properties on Lake Norman, but those waterfront properties are quite expensive.

Are there potential high cash-flowing areas in NC that I may have missed and should check out?

[Sean Bramble]

You're seeing a broader phenomenon that is affecting essentially all STR markets across the US. Home prices rose significantly over the last 3 years in a way that caused typical STR returns to tumble from 40%+ to half of that or less. This is not unique to STRs either - it's more difficult to find LTR deals that cashflow as well. Add in rising interest rates to these peak prices and yields are very compressed across the board. It's a bit of a vicious cycle bc tons of LTR investors searching for yield have pivoted to STRs and are happy to take ~10% COC returns since that beats what they can find today with LTRs … problem is STRs are much riskier/ more volatile, so in theory investors should demand a higher yield than this to hold these assets (but most folks aren't thinking in this much depth). These investors are pushing STR prices even higher and returns even lower

To find returns that mimic the “old days” of STRs investors today are either seeking 1) off market deals, or 2) value add deals with a renovation/ refinance component. It’s just where we are in the market cycle - you’ll have to do a lot of legwork to cashflow, but it is definitely doable if you’re willing to put in the work.

I'd recommend picking a few markets, studying them every day for weeks/ months as listings hit the MLS, and eventually pulling the trigger on whatever pencils out to your liking. Don't be afraid to make a lot of "unreasonably low" offers as well. Think of it like fishing … it takes awhile but you'll eventually get a bite. Good luck!