Cash flow vs building equity with STR's

[Heidi Nikolai]

Hi all,

I am looking for advice on STR's and cash flow. I bought my first STR two years ago and did very well my first year and a half. However, now the STR market in my area is flooded with inventory which drove down both my occupancy and my rate. I went from $150-$250 per night down to an average of $87 in the last four months. Between the mortgage, utilities, cleaning costs, ect I am usually just breaking even each month. I have about $80,000-$100,000 of equity in the house already, along with a very low interest rate. I am wondering if it would be worth it to hang onto this property and continue to build equity until the market improves, or interest rates decrease, and I can sell to find a more suitable market to invest in. I am not losing money at this point, but I am not sure when I should pull the plug. This was my first investment property and the first time I am finding myself at the "hold or sell" stage.

Thanks in advance!

Heidi

[Nathan Gesner]

Quote from @Heidi Nikolai:

Welcome to the BiggerPockets forums!

There's definitely an increase in short-term rentals, but you also bought right at the peak of the market. Once States opened up from COVID restrictions, everyone wanted freedom and everyone had extra money in their pocket. In 2021, every single camp site in or around Cody, Wyoming was jam packed. I mean 100% full and people driving around looking for places to stay. @Luke Carl came to town and can attest. He came back to town in 2022 and there were plenty of spots. Visit this year and you'll see it's back to 2019 levels, which means things are full around certain holidays like Memorial Day or Independence Day, but spots are available all other times.

The way I see it, you have two choices: stick it out or cut bait and run. I think a lot of people are in the same boat as you and will be cutting bait over the next 2-3 years. If you are able to hang on and get through the tough times, you'll improve the business and you'll be happy you hung in.

I don't know many people that look back and regret keeping a property through difficult times, but I know a lot of people (myself included) that regret selling a property.