A must-read for Vacation Rental investors

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A must-read for Vacation Rental investors

Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes

There's been lots of sunshine pumping in recent years over how easy the money is with vacation rentals.  Manage your mountain chalet from the comfort of your lounge chair in Aruba with your handy smart phone, etc.   Reality has been setting in during the last year.  

Don't misunderstand me:  Real estate, and particularly vacation rentals, can be fantastic, and someday life-changing investments.  But when evaluating such, count the cost.  There's no free lunch.  

This article is worth your time:


‘Don’t screw up your life with an Airbnb’: Dave Ramsey didn’t mince words when this North Carolina woman floated the idea of refinancing her home to buy a vacation rental — here’s why (msn.com)

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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
2y
Quote from @Collin Hays:

There's been lots of sunshine pumping in recent years over how easy the money is with vacation rentals.  Manage your mountain chalet from the comfort of your lounge chair in Aruba with your handy smart phone, etc.   Reality has been setting in during the last year.  

Don't misunderstand me:  Real estate, and particularly vacation rentals, can be fantastic, and someday life-changing investments.  But when evaluating such, count the cost.  There's no free lunch.  

This article is worth your time:


‘Don’t screw up your life with an Airbnb’: Dave Ramsey didn’t mince words when this North Carolina woman floated the idea of refinancing her home to buy a vacation rental — here’s why (msn.com)


Wow. DR is wrong on so many fronts in that article I don't even know where to begin. Most of your STR tenants don't "destroy your property", even though some of course may and there's always that potential. "Buying cheap houses in the bad end of town" for LTRs is a very good way, however, of actually going broke unless you have a lot of skill and patience renting out Class C or below housing. And how many landlords are standing on the stoop collecting rent payments any more?

That said, being cautious with STRs is certainly good advice. You can get in a lot of trouble real fast if you don't have enough reserves to maintain your house and can't withstand economical downturns. And right now with housing prices high it's not real easy to find good cash-flowing rentals, short or long term.

DR is like riding a bike with training wheels. They keep you from falling but prevent you from progressing. 

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  • Konstantin GinzburgPro Member
    Member since 2021 · 376 posts · 242 votes
    2y

    @Collin Hays

    I watched the podcast when that woman called in. I agree with a fair amount of Ramsey's ideas and insights. I think his advice is essentially: financial literacy with training wheels. The majority of people will defintley benefit from his advice but those who are comfortable with business and financing may achieve more by going against his advice, particularly those on this platform. Ramsey has a strict stance against debt of any kind, including mortgage loans. This is especially true for rental properties in his opinion. Although he frequently states how much he enjoys real estate as an investment, he always advocates purchasing a property in cash which is normally the opposite of the advice given on BiggerPockets; rather this forum leans more towards using debt to leverage financing and using OPM to grow personal wealth through rental properties. 

    I do agree with his stance that STRs and short term rentals are a riskier model. AirBNB has a substantial post-pandemic boom period but that surge has since come to an end. While there is still plenty of money that can be made through airBNB; this will now require competing with others in saturated market. This has made airBNB a far more active real estate investment now than other asset models. Due to the upcoming regulations Dave mentioned in many cities; it is also important to hedge your bets and underwrite any deal conservatively. One strategy that we used when acquiring our 1 STR property was ensuring that it could also cash flow or at least break even as a long term rental. In this way, we will have a method to pivot in the event that the market shifts or other factors force us to pivot. Selecting the correct property will also require more effort since finding a property with a location, amenities, or other stand out factors could make the difference between a profitable STR and a vacant one. This model does represent more risk and work; but there is also higher potential for a high return on your investment, if properly underwritten and financed.

    2Reply
  • Collin HaysBusiness Member
    OP
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    2y

    Yeah if I followed Dave Ramsey's advice, I would be worth maybe 20 percent of what I am today, and I never would have left corporate America.  But STRs are big boy risk.  It's essentially your own business.  Folks need to recognize that it isn't a mutual fund where you just by and watch.  You'd better have the time to attend to it, and plenty of cash for that new septic system, etc.

    [email protected]806-672-7102
    SMOKY MOUNTAIN FALLS INC.51 Review
    WebsiteView Page
    0Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    2y

    Yeah, I really don't care for Dave Ramsey. For the completely financially uneducated person/couple it is a way to go.

    If I listened to his advice, we would never have bought a house let alone investing in real estate.

    1Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    2y
    Quote from @Michael Baum:

    Yeah, I really don't care for Dave Ramsey. For the completely financially uneducated person/couple it is a way to go.

    If I listened to his advice, we would never have bought a house let alone investing in real estate.


    Dave Ramsey is more like basic financial education for kid.
    For experienced guy like us we read Trep-wire LOL
    0Reply
  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    2y

    I love what Grant Cardone said about Dave Ramsey...He's good for the middle-class and those that want to stay there. But for those that want to push to the top you need to think bigger.

    [email protected]330-557-3021
    1Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    2y

    and .... Grant Cardone is also good only for newbie multifamily type of investor that want to be defrauded by him LOL

    0Reply
  • Brian Kragerud
    Investor · Member since 2021 · 29 posts · 19 votes
    2y

    Buy STR as STR, if not penciling out, invest elsewhere.

    1Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    2y
    Quote from @Collin Hays:

    There's been lots of sunshine pumping in recent years over how easy the money is with vacation rentals.  Manage your mountain chalet from the comfort of your lounge chair in Aruba with your handy smart phone, etc.   Reality has been setting in during the last year.  

    Don't misunderstand me:  Real estate, and particularly vacation rentals, can be fantastic, and someday life-changing investments.  But when evaluating such, count the cost.  There's no free lunch.  

    This article is worth your time:


    ‘Don’t screw up your life with an Airbnb’: Dave Ramsey didn’t mince words when this North Carolina woman floated the idea of refinancing her home to buy a vacation rental — here’s why (msn.com)


    Wow. DR is wrong on so many fronts in that article I don't even know where to begin. Most of your STR tenants don't "destroy your property", even though some of course may and there's always that potential. "Buying cheap houses in the bad end of town" for LTRs is a very good way, however, of actually going broke unless you have a lot of skill and patience renting out Class C or below housing. And how many landlords are standing on the stoop collecting rent payments any more?

    That said, being cautious with STRs is certainly good advice. You can get in a lot of trouble real fast if you don't have enough reserves to maintain your house and can't withstand economical downturns. And right now with housing prices high it's not real easy to find good cash-flowing rentals, short or long term.

    DR is like riding a bike with training wheels. They keep you from falling but prevent you from progressing. 

    Podcast Guest on Show #243
    Skyline Properties
    View Page
    3Reply
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