Have any of you lived through a full STR market cycle?

[Sean Bramble]

Were any of you investing in STRs back in '07/'08/'09? I'm trying to understand how much (%) revenues drop in a down market so that I can factor this into my underwriting. Seems like most of us on here are relatively new to the asset class, but would love to hear from any of you who have been in the game long enough to know what happens to demand in a slow market first hand

[Collin Hays]

Quote from @Sean Bramble:

Were any of you investing in STRs back in '07/'08/'09? I'm trying to understand how much (%) revenues drop in a down market so that I can factor this into my underwriting. Seems like most of us on here are relatively new to the asset class, but would love to hear from any of you who have been in the game long enough to know what happens to demand in a slow market first hand

That is a tough one.  We humans like things that are linear.  10 percent drop in demand?  No problem!  I'll budget for 10 percent drop in income.  

Reality is, when supply outpaces demand, the suppliers are in competition for the limited demand.  So a cabin that was renting for $399 in a boom, but suddenly have to cut rates by 30, 40, even 50 percent in order to stay rented in a recession.  

Let's take firewood as an example.  Typically a cord of wood where I live is around $300.  But several winters ago, it never really got that cold, so folks were delaying buying firewood.  Yes, a number of folks planned ahead and bought their wood in August, but those that waited until December just kept waiting.  And it was so warm, some just decided to not buy any for that winter.  Next thing you know, there were firewood guys at the corners of intersections offering a cord for $100 - just something to keep some cash coming in.   

Demand may have dropped by 20 percent, but the cost of a cord dropped about 66% in response.  Firewood suppliers were hustling just to get wood sold at any price.

Before I bought any property, I'd make sure you can live on half of what 2022 or 2021 produced.  If you can't, walk.