6 night mínimums a deal breaker?

Question

I have an accepted offer on a great little lake house, which is in a township that has a 6 night minimum for STR.

It doesn’t appear anyone is abiding by this with STR in the area, based on the listings available. Knowing they could enforce this at anytime, and take your property from profitable to not, would this be a deal breaker for you?

Side note, I’ve also been told the township is difficult to work with and you can expect it to take 10-12 weeks to get your license. This also lends itself to not being STR friendly. Another red flag it seems?

John Myers · Answer

Personally, I don't purchase properties that have negative cash flow with the hopes for appreciation. Who knows what this market is going to do. I personally do not believe we will see a crash, but do think we will see homes decline in value slightly over the next few years.

$14k per year is a pretty big nut to crack each year.

Joshua Messinger · Answer

Hey @Autumn G.!

@John Underwood said this one best ~ You may be able to do well in the summer months. But, what does the off-season look like? Given it it Lakefront too you may be able to get away with a small number of bookings during the off-season but that isn't something I would bet on.

Otherwise, given how the current economy is what is your long-term outlook for the property? Hold for 10+ years? Or sell within 5-10? Would love to help out more! Don't hesitate to reach out!

P.S. if you haven't ran an analysis yet for the off season let me know and I'd love to chime in!

-

Josh

Michael Baum · Answer

Hey @Autumn G., it's not a deal breaker for summer. Do you know the occupancy for bumper time? Post the actual location, what lake/town is it in. I can run a few numbers and get a gander at the bumper time.

In our area (Lake Coeur d'Alene, Idaho) we are seasonal. We are right on the lake so June/July/August are booked solid. Now that we are established with all 5 star reviews on AirBNB and VRBO, May and Sept are usually booked solid as well. October bookings are spotty. April is usually 1/2 full.

The bumper time is almost always bikers riding the various bike trails. The Trail of the Coeur d'Alene's is 72 miles and runs right in front of our house. The Route of the Hiawatha's is another one. Fishing is big of course.

How big is the lake?

Michael Baum · Answer

Hey @Jonathan Avellaneda, bumper time is a term that describes the days or months that precede or proceed your main season.

Our main season is June-Sept. Oct is a bumper month, May and April are bumper months for us.

Some areas don't have bumper months at all. They have slower months but they are a 4 season destination.

Jonathan Avellaneda · Answer

Got it ..thank you! That's the first time I heard that, appreciate the explanation!

John Underwood · Answer

6 night minimum in the summer months is doable. Rhia would likely kill your off season though.

Could you be profitable with just the summer months?

Leslie Anne Morris · Answer

I’m a risk taker and I like testing things. If you think it will appreciate nicely then go for it with the idea that you could always sell it if it doesn’t work out. Multiple options in real estate is good.

Bruce Woodruff · Answer

Huge warning signs for me! If they are already at his stage, I would imagine they are heading towards more restrictions....

And it's not like there aren't tons of really good potential places out there to STR. Just expand your search parameter....

I mean, why take a chance with your investment money? Be safe and smart...

Mike Eichler · Answer

This is definitely a dilemma, for me I would keep my options open and only move on this if you truly believe in it, I personally don't like to straight up break rules, especially when there is a potential threat of them coming down to enforce them. There are always more deals to be found that won't have these types of restrictions.

Hope this helps, let me know if you have any more questions

Live Free,

Mike

Autumn G. · Answer

Thanks to everyone for the replies! Just an update on this, I called the township today to specifically ask about the 6 night minimum since no one appears to be following it in the area. They said they don't require reservations to be 6 nights, they just only allow you 1 reservation every 6 day period. So if someone books a Fri-Sun in the off season, you have to block off days before or after their visit.

I don't imagine booking a week at a time will be a problem if I make that a requirement in summer, and in the off season can bump it to weekends allowed. None of the homes in the area have hot tubs, so I'm thinking adding one and providing firewood for the fireplace will boost weekend/holiday performance in the winter months.

6 night mínimums a deal breaker?

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