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STR in Bentonville, AR how feasible?
Hello BiggerPockets,
Ive been looking to purchase my first investment property in Bentonville, AR. My wife and I travel here often mainly for mountain biking and have noticed the growth potential. I've been following the Bentonville home prices for a year now and finally am in the position to purchase my first property. My question is, after running numbers on multiple properties utilizing Airdna data and running my own calculations from Airbnb and VRBO, is investing in downtown Bentonville feasible or worth it? Most homes near the downtown square average $400 per square foot; at that price with today's interest rates utilizing the data most potential properties only break even with a 0% cash-on-cash return using the property as a STR. With potential STR regulations, would purchasing a deal at breaking even be worth it for appreciation alone? Currently under contract for a property that was appraised for over 125k than the agreed purchase price.
Thanks for the insight.
@Shawn Mayhew From an avid roadie, gravel, and occasional mountain biker I would buy the property. Bentonville is a growing market and way ahead of the curve. The Walmart family alone has dumped millions of dollars into infrastructure, trails, and public projects. Why only focus on the downtown area? Surely there's cheaper properties just outside of the hot spots for bikers. If the STR strategy isn't penciling after a few summer months (busy) maybe go LTR instead? Nothing stopping you from trying a strategy or switching during a turnover in the future.
You could specifically cater to mountain/gravel bike folks. Interior décor, outside wash station/tools, and even a garage for people to use.
Lets ignore the market and just look at you're real question here which is:
Should I buy a property to convert into a short term rental when my underwriting says it will provide a 0% return?
The answer is an obvious HECK NO! Even if this was a LTR at a 0% return I'd say heck no. But as a STR with all of the additional liability, headache, turnover, competition, and regulation? Not a chance.
You need to leave emotion out of this. I love mountain biking too. And I can't wait to visit Bentonville one day to ride. But unless I ever end up have more money than sense, I'm not going to invest there.
If it is in the downtown Bentonville area (East of Walton, North of 14th, South of Tiger, West of J St), it will appreciate for sure. If you are getting a property that's appraised at 125k more than the purchase price, it sounds like a good deal but I am hesitant to STR use if the numbers you crunched don't put you in the green. Would LTR be more profitable since there are lower expenses associated with it?
I have a small Airbnb downtown in my backyard and the bikers that come through mentioned usually it's not as important as the distance to the trail is but more ease of accessing the trail (like not having to go on main streets with your bikes to get to the trail) for them. For example, houses around Coler Mountain Bike Reserve are outside of "downtown" but would be great for Airbnb at the right price.
When you say "with potential STR regulations" are you saying that you've heard Bentonville is proposing regulations? Or are you just speaking generally?
I've never been to Bentonville but I have a buddy who moved there several years back and loves it. He's also doing a really cool vacation rental project out there, so it seems like there is a demand.
From what you say, it sounds like the big draw is mountain biking so I'd lean into that. You'll want to determine your "guest avatar", which means figure out who your ideal guest is, why they'll be staying there, and what they'll be doing. From there you pick the property and design their guest experience based on that guest avatar. As I mentioned, I've never been there but gut tells me that most people are not mountain biking in the city center. If it were me I'd be looking at more rural properties near the trails with a house and a few acres of land, then add a tiny home or two. At that point you'll have 2-3 rentals which would be much more revenue and could make the deal much more appetizing. Depending on where you buy in that area, my understanding is there is little to no zoning requirements so you would have a lot of flexibility to build what you want. I have to say that's VERY appealing to me, coming from WA state where you need permission from the government to do the smallest things.
Quote from @Andy Whitcomb:
When you say "with potential STR regulations" are you saying that you've heard Bentonville is proposing regulations? Or are you just speaking generally?
I've never been to Bentonville but I have a buddy who moved there several years back and loves it. He's also doing a really cool vacation rental project out there, so it seems like there is a demand.
From what you say, it sounds like the big draw is mountain biking so I'd lean into that. You'll want to determine your "guest avatar", which means figure out who your ideal guest is, why they'll be staying there, and what they'll be doing. From there you pick the property and design their guest experience based on that guest avatar. As I mentioned, I've never been there but gut tells me that most people are not mountain biking in the city center. If it were me I'd be looking at more rural properties near the trails with a house and a few acres of land, then add a tiny home or two. At that point you'll have 2-3 rentals which would be much more revenue and could make the deal much more appetizing. Depending on where you buy in that area, my understanding is there is little to no zoning requirements so you would have a lot of flexibility to build what you want. I have to say that's VERY appealing to me, coming from WA state where you need permission from the government to do the smallest things.
Just in the future for potential regulations.
Not that Bentonville is considered them at this time.
Quote from @Jingjing Yu:
If it is in the downtown Bentonville area (East of Walton, North of 14th, South of Tiger, West of J St), it will appreciate for sure. If you are getting a property that's appraised at 125k more than the purchase price, it sounds like a good deal but I am hesitant to STR use if the numbers you crunched don't put you in the green. Would LTR be more profitable since there are lower expenses associated with it?
I have a small Airbnb downtown in my backyard and the bikers that come through mentioned usually it's not as important as the distance to the trail is but more ease of accessing the trail (like not having to go on main streets with your bikes to get to the trail) for them. For example, houses around Coler Mountain Bike Reserve are outside of "downtown" but would be great for Airbnb at the right price.
Appreciate that insight, the property in question is in downtown, but I’ve also considered homes around Coler.
Quote from @Shawn Mayhew:
Quote from @Andy Whitcomb:
When you say "with potential STR regulations" are you saying that you've heard Bentonville is proposing regulations? Or are you just speaking generally?
I've never been to Bentonville but I have a buddy who moved there several years back and loves it. He's also doing a really cool vacation rental project out there, so it seems like there is a demand.
From what you say, it sounds like the big draw is mountain biking so I'd lean into that. You'll want to determine your "guest avatar", which means figure out who your ideal guest is, why they'll be staying there, and what they'll be doing. From there you pick the property and design their guest experience based on that guest avatar. As I mentioned, I've never been there but gut tells me that most people are not mountain biking in the city center. If it were me I'd be looking at more rural properties near the trails with a house and a few acres of land, then add a tiny home or two. At that point you'll have 2-3 rentals which would be much more revenue and could make the deal much more appetizing. Depending on where you buy in that area, my understanding is there is little to no zoning requirements so you would have a lot of flexibility to build what you want. I have to say that's VERY appealing to me, coming from WA state where you need permission from the government to do the smallest things.
Just in the future for potential regulations.
Not that Bentonville is considered them at this time.
It's always important to consider potential STR regulations, and I always recommend checking with city and county to see if there is anything being considered. With that said, my gut tells me that area is very low risk of passing any regulation that would prohibit STR's entirely.
Ultimately, only you can decide if the numbers work for you. However, barely breaking even is not a deal I'm interested in. Especially if there is potential STR regulations changing. I would look for a tried and true STR market
Hi Shawn,
I'm a real-estate investor/developer in the Downtown Bentonville market. I agree with you on pricing. I've seen $400-$600 per sq ft. The answer to your question really comes down to your own personal strategy. We've seen such appreciation over the past years that I'd personally lean towards buying something that has cash flow day one. That cash flow can weather the storm if the values drop for some reason. With that said, it's such an incredible market and I'm very optimistic at the future here. Best of luck!
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#2 Short-Term & Vacation Rental Discussions Contributor
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You can never count on appreciation as a driver for cash flow.
As an investment, this is a loser IMHO.
Having said that, you love the area and ride there all the time. That situation makes it easier to give it a thumbs up. As long as you are aware you are buying it as a vacation home and are hoping that the extra $$$ from STRing the property might offset the cost of owning/using it.
Hey Shawn, have you already purchased a property in Bentonville? My husband and I have been here for 5 plus years, and have definitely seen the market growth. In my opinion, it is not currently worth it to purchase in Bentonville, specifically the downtown area. The listing prices and the revenue projections do not make sense. We have also done some research on properties in the area that are not downtown and they still just are not pulling the right numbers. It is a fantastic spot for STRs, but because of all the growth in the significant increase in list prices, it just does not currently make sense (at least not from a pure investment perspective). If you plan on using this as a lifestyle property then that might make sense for you. There are currently no STR restrictions in place for Bentonville. Neighboring Bella Vista and Fayetteville do have restrictions. Happy to chat more!
If appreciation is the only thing your banking on, and you're willingly walking into an investment with 0% CoC return, I think you should reconsider. So many other markets to choose from with better returns, and I bet some of them still even offer some good Mountain Biking :). As @Scott E. said above, leave emotion out of this.
@Shawn Mayhew Circling back. Did you find or buy a property that cash-flows? I'm still bias on that market! Surely something pencils out for a quality STR or long term buy/hold investment.
I know this is an old post but I didn't see anyone mention the other options for mountain biking and just biking all along the Razorback Greenway that stretches 40 miles through the entire NWA region and the amazing trails that are tucked all through the area. We recently had family stay at our short term rental in Fayetteville along the Razorback Greenway. They have always stayed in Bella Vista and mountain biked up that way. They were in love with the city of Fayetteville and the amazing mountain biking at Kessler Mountain. They said it was the best they had done in NWA and better than even Colorado mountain biking trails! This region is special in how it is spread out and how there are plenty of cute communities that are growing quickly to each have their own unique vibe. This allows for plenty of opportunities for all level of investors to start where they are comfortable.