"Buy only in top tourist areas" and other b.s.

[Collin Hays]

Guys and gals, sometimes I get a belly full of hearing the same old conventional wisdom over and over.  Today I'm going to tackle this one:  "Buy only in the top tourist areas."   Are we more worried about investing sexy, or investing for more profit?  

I have a good friend who lives in Amarillo, Texas.  No one goes to Amarillo to vacation.  Nice city and all, but it's not exactly Aspen, Tahoe, or Gatlinburg.  It's in the middle of nowhere USA.  

My friend has been systematically buying up inexpensive homes, with cash, within a mile of Interstate 40, which runs right through Amarillo.  His typical purchase price is around $125,000 for a small home.  He is then getting anywhere from $40,000 to $50,000 per year in night rents.  The houses are paying for themselves within 3-4 years.  He already owns 18 that are completely clear.   Net to him, that's over $650,000 a year income.  I'm sure that allows him some posh accommodations in Aspen whenever he wants.  

Folks, it pays to look at options besides what the herd is telling you. Do your own homework. Look around your hometown. The herd is usually dead wrong. Your very best STR options might be within a few miles of your house.

[Ryan Moyer]

I agree somewhat, but it's situational.  So far the touristy areas have held up much better than the fringe areas that got popular during post-covid revenge travel.

Houses in the Smokies and Destin are still selling for close to what they were in the peak.  I've got a place in southern Utah that blew up during post-pandemic revenge travel.  Houses there are already selling for 50% less than they were at the peak, and the revenue decline matches that.

Obviously there are places that haven't turned like this, but I think a lot of these fringe markets that blew up when everyone was forced into them are going to really take a beating.

And of course, those kind of areas are much more vulnerable to future regulation.  Gatlinburg isn't going to wipe out all STRs overnight and leave the owners holding the bag.  Some fringe town in Texas or Utah could.