STRs - can I be convinced they are a good idea...

[Chris Gerard]

Does anyone have any thoughts on my current perspective: Properties have appreciated at a crazy rate in a short amount of time. Interest rates have since increased and may stay that way or go higher for the forseeable future. The more that an area becomes popular for STRs, the more likely the laws, fees, taxes will become increasingly burdensome. Then, consider airfare, fuel costs, general inflation higher, gets more expensive for average folks to travel. This article says there is more of a demand for STRs but it seems like there are plenty of STRs available since it became such a popular idea. I think this happened because interest rates were so low and buyers got in before prices went up, and before laws became more stringent.

It seems like STRs should ultimately be valued like an income producing property would be. For example, if a property was purchased $500K in 2019 at 3ish%, and maybe they put 20% down, and owner boasts about how profitable of an STR it is; and then now they put is on the market for $900K because that appears to be the market rate (at least this seems to be the case in high appreciation areas such Colorado, Hawaii, and several other areas), however interest rates are now 7.5%, how can this same STR now be cashflow positive? Maybe if you put 60% down payment it can be..., but most buyers can find a better place to park their money if they really need to put down $500K on a $900K property to make it cashflow. Something just doesn't seem to add up, but maybe I'm wrong and enough wealth is being passed down through inheritance from baby boomers and the supply is so low that we are at a "new" normal. Be interested to hear other people's thoughts.