Branson Market: Vacation rental numbers don't pencil out

[Paul Wolfson]

I am having a hard time figuring out how folks are able to achieve decent cash-flow in Branson, MO as my numbers are not penciling out. 

Yet I am seeing a lot of short term rentals in this market -- 4,184 as of today according to AirDNA. So perhaps I'm missing something? 

My assumptions are below. I'd appreciate any help if I'm missing something.

Assumptions

Branson consists of a majority of 2/2 condo/townhouse units. 

According to a local real estate agent, I was told condos at the Point Royale Golf Village have the below (COA, POA, Golf) fees.

Purchase Price: $200,000

Down Payment: 10%

Interest Rate: 6.5%

Principal + Interest +Tax + Insurance: $1,421

PMI: $100

COA Fee: $209/mo

POA Fee: ($1,500/yr) = $125/mo

Golf Fee: ($700/yr) = $58/mo

Utilities: $250

Cleaning Fee: $600

Internet: $60

Misc: $270

Total Expenses: $2,996/mo

Total Revenue: $2,500/mo based on 50% occupancy rate and $158 average daily rate.

Result: -$500/mo

[William Beck]

Hey Paul,
I've worked with about a hundred STR condo transactions as a Realtor in Branson since moving here in 2020. This question comes up a lot and I think there are a few assumptions to look specifically at tweaking. There are definitely people doing well. This question comes up again and again and I still think Branson is hard to beat at the price point for entry level first time buyers.

*Disclaimer - self management, getting a really nice property to work with, using high quality photos, and proper revenue management with quick customer service are going to yield the best results. People who use a local property manager that is unsophisticated or super high priced can kill all the returns. I've heard horror stories so do due diligence. Generally people who I've worked with that have ended up wanting to sell tried to get something very entry level and it didn't rent well. People who have done well bought something that is more future-proof with upgrades, newer furnishings, rehab, etc. But anyways here's what I'm seeing.  

So let's run the #'s:

Purchase Price: $200,000

Down Payment: 10% & Interest Rate: 6.5% This might be a challenge to get unless you find a local lender, all condos in Branson that are STR approved are non warrantable. Most will want to provide some type of ARM product and may even ask for 20% down. I have local recommended ones but don't want to cross the line if you're already working with a Realtor. I do know a lender that can do 10% for a 30 yr fixed, which is at a pretty high interest rate, it might be worth looking at an adjustable, anyways. 

Principal + Interest = $1448 assuming 30 yr at 9% (explain here shortly)

Taxes:  $76.05 ($912.65 per year I pulled that from  a Pointe Royale 2/2 listed at $212k)

PMI: $0 (No PMI for non-warrantable condos which is why the interest rate is higher)

Insurance: ~$58 a month. (My policy is $765 a year for my 3BR)

COA Fee: $209/mo

POA Fee: ($1,500/yr) = $125/mo

Golf Fee: ($700/yr) = $58/mo

Utilities: $166(About $2000/yr for water/sewer/electric, there is no gas in Branson because of the lakes)

Cleaning Fee: $333 (Assuming 40 bookings a year at $100/clean for 2br is $4000 )

Internet: $60

Misc: $125 (270 a month is a bit high, I think realistically half that is achievable with about $1500/yr, The majority of the condo maintenance is being taken care of through the COA fees)

Total Expenses: $2658/mo

Total Revenue: Pointe Royale has some of the strongest occupancy in Branson with 55-70% occupancy because of the amenities that are open year-round like the indoor pool, plus outdoor pools,  clubhouse, fishing, golf course, etc. Other condo complexes without amenities may see 45-50% as average.  Without diving into the cleaning fee and sales tax as a portion of the ADR, we can keep it simple with a "what does it gross gross for the year" and there's a wide range. I've seen 2BR condos at Pointe Royale do $33,000 a year up to almost $50,000. 

Revenue Low case: $2,750/mo

Revenue High case: $4,166/mo

Monthly Cash flow: $92/mo to $1,508/mo

Hope this helps!