"Investability" of Waco, TX

[Trevor Caswell]

Demand for Waco based Short Term Rental's continues to stay strong through the rate hikes and falling housing market. Most of this interest from what I gather is still from out-of-state investors looking for the potential "cash-flow" here. 

I recently read an Air DNA article that placed Waco 24th on their list of best places to invest. It was a great article and very insightful on investing in medium/smaller cities around the country. One of the key criteria that they boast in their data called Investability: "These markets tend to score high with our investability score, as home prices have failed to keep pace with rising short-term rental revenues, highlighting new investment opportunities."

Air DNA ranks Waco very high in this category with 98/100. I would honestly be hard-pressed to find local agents and investors, who have been investing in Waco for the past few years, that would agree with this score. 

The article is correct in stating that home prices have fallen in Central Texas. But, I would caution you not lump the local STR's in with this conclusion.

The pool of STR's and possible STR's is shrinking as the city continues to maintain their current zoning criteria. Not to mention, the future challenge to STR's from new hotels being built downtown (AC Marriott, Magnolia's Hotel, Cambria, Pivovar,etc...)

The Waco MLS does not allow realtors to specifically identify properties that are functioning STR's or STR capable in the data sheets. The STR buying process has become finding a needle in the haystack if that haystack were located in a dark cave. Not to mention, this "needle" needs to cash flow after accounting for the increased sales price (b/c it's an STR), higher rates, and increased closing costs.

The article does not reflect on the increased difficulty in finding the deals. I'm speculating that the data is skewed from long established Air BnB's located in downtown or previously featured on Chip & Jo's Fixer Upper. There is a high probability that some of these homes can't remain an STR after sale, or the combination of sales price, taxes, increased rates, and closing costs leads to negative cashflow. 

Local investors and realtors seeking these investments at the right price for their buyers are relying on word of mouth, door knocking, and cold calling in order to find deals that make sense before they go on the market. 

I apologize if this sounds negative, but I just want to curb unrealistic expectations. I hope that this information helps those of you seeking your next investment in Waco, Texas and surrounding cities. I also hope that it helps you be patient with me and other realtors who can sometimes feel like we're digging for water in the desert. 

[Nick Mehl]

Trevor, I'm wondering, from your perspective, what is driving the vibrancy of STRs in Waco. Is it the University, Magnolia, the travelers along I-35 or a combo of things? I also saw that report on AirDNA and the data for occupancy rates and revenue is impressive, ranking Waco up there with the best. Is there any advantage to buying a distressed property that's zoned for STRs and putting time and money into it? If so, what kind of STRs do well in Waco? Thanks for writing this article and generating a discussion.