Are Loan rates so bad that a first time STR buyer really should steer clear?

[Chris Allen]

I put Branson because that is what I am near, but I am interested in lots of areas, mainly Florida.

Are rates really so bad right now that a first time STR buyer with 20% Down should not even try? Based off the numbers from AirDNA and others, when I plug them into a calculator, it looks like I am out of pocket whether paying for management or not. Is that what everyone is seeing or am I missing something. I am figuring on a 360 month loan at 7.5%.

[Ken Boone]

Chris, 

The problem is not just that the rates are higher.  Reality is that these rates we have had the last couple of years were historically low.  But again that is not the only issue.

There are many issues here. Too many people jumped in to the STR market when it was near its peak in 2021-2022 causing many places to be saturated. Then we had people with FOMO still buying at high interest rates at super high prices through 2023. Now with the increased supply of STRs, and less demand, everyone is dropping prices to compete. There is more competition and lower ADR. Lower ADR and lower occupancy combined with the higher interest rate is what is really making most STR deals not work out.

Having said that, it depends on what your goal is.  If it is to cash flow... uh think again for 95% of the deals out there.  If it is to have a vacation home that someone else helps pay for then maybe.