I have seen the future and it is not STR (for the most part).

Short-Term & Vacation Rental Discussions
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I have seen the future and it is not STR (for the most part).

Ken Latchers
Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes

There is something called an efficient market (well known in stocks and commodities).  That is where there is no easy money to be made, as everything is priced so no one has an advantage.

Then there is the mania.  For traders, the Dutch Tulip crisis centuries ago.  People kept bidding up the price of special tulips, investing everything, and then the crash wiped out many.  Roaring 20s and Great Depression anyone?

Doom comes ever closer.

Eager beavers are pouring into the STR remarket. They get excited. They want to buy as many properties as possible. They read a book! They read a few posts here! They want to arb. They want to scale. They ask how much WILL they make (as if their market cannot get saturated in the future). Can I retire with 4 of these properties?? Yowza. I'm so excited. And I just cant hide it. I'm about to lose control and I think I like it! Occupancy can plunge and rates forced down. That is the meaning of an efficient market.

Regulatory restrictions in cities, moving to towns, moving to the country.  Our small "country" town is now investigating restrictions - and has been considered one of the permissive/supportive of short term rentals historically - it came out of nowhere.  They are actually discussing requiring ONE PARKING SPACE PER BEDROOM.  Like Bed and Breakfasts.  Of course most houses here are on small lots and have no such space!  This may became a small tidal wave.

Doom comes ever closer.

There are a few companies (whose name escapes me) getting into building or controlling vacation rentals. Hotel chains are getting into it. This is the tip of the iceberg. When REIT and other companies really decide that the possibility of 15-20% return outweighs the struggles with the stock and bond market, it will turn into a tsunami. Occupancy can plunge and rates forced down. That is the meaning of an efficient market.

The expansion may have reached its end. The Trade Wars and a lot of other things are starting to wear on this economy.

Doom comes ever closer.

Consider Hades.  Consider the "safer" places with a long history of vacation rentals that will likely stay that way.  But your brilliant purchase of a $750K house may make more money as a landlordly endeavour.  If you have 20 arbs cleverly arranged at market rent for 5 years, welcome to the "Wall Street Lays an Egg" scenario.

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y

I'm in historic Cody, Wyoming. We're the last real town before hitting the east gate of Yellowstone and get a ton of tourists in the summer. Our City recently enacted regulations for vacation rentals and now the County is considering the same due to the number of complaints. Some people - like myself - will have a vacation rental on 5+ acres so the noise and parking isn't an issue. But there are many that have standard lots with neighbors close by and they are cramming 20+ people into one house and that causes problems.

I used to manage 70 vacation rentals and know that it is very difficult to make more money with a vacation rental than it is with a long-term rental. When you factor in costs of furnishings, utilities, TV/Internet, landscaping, firewood, marketing, lodging taxes, and everything else that goes into it, the margins get pretty thin. 

Why do so many report to be making $40,000 a year? That's easy: they don't break out all the expenses. The vast majority of posts I see on BP will give out a big number but refuse to share the details when I challenge them. Even the ones that report their expenses are still cheating because they don't calculate the cost of their own time.

I know a woman that owned five vacation rentals, starting back in 2000. She did everything herself through a private website and was probably booked 95% of the time, year round, year after year. She made a NET that was 2x what a long-term rental would be but that's before calculating her time and she was BUSY! She did all the cleaning, maintenance, marketing, checking people in, answering the phone, taking payments, answering questions, etc. If she paid herself $20 an hour, she would have probably been back down to the income of a long-term rental.

There are exceptions to every rule but I don't think STR is a path to long-term wealth unless you're really busting your hump. I'm buying one because it can pay for itself and then give me a place to go when I want to get away from things...or people.

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  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    7y

    In addition to Hades, you might want to consider Ponca City OK, Wynnewood OK, El Dorado KS, Cheyenne WY, and any town in Louisiana or Texas that has a refinery.

    But you have to put up with refinery contractors.  Big burly guys with neck tats driving jacked up 4x4s.  They smell like diesel fuel and chew tobacco in their sleep.  They like their places decorated as if Hugh Hefner did it himself.  This may not be the cup of latte for everyone.

    2Reply
  • Lauren Kormylo
    Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes
    7y

    @Ken Latchers I guess the one parking space per bedroom will impact your boarding house model more than an Airbnb place.  I wondered about that - My next door neighbor got divorced and couldn’t afford his mortgage. So he rented his 3 spare bedrooms out to 3 friends. Between the 4 of them, they had 7 vehicles. and we are in a culdesac. It looked like a parking lot. 

    0Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    7y

    I agree to some extent. Especially in areas that are more urban and subject to restrictions. My area is rural and the small town is happy to have more tourism come there so I feel we are safe in regard to restrictions. There are only 2 of us doing vacation rentals in town.

    Pigeon Forge is probably safe as can be. Also, some areas are more common sense than knee jerk in their reactions.

    I think it will come down to being more diligent in your selection of properties. Making sure you run down all the necessary things on the list to make sure the purchase is going to work.

    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    I'm in historic Cody, Wyoming. We're the last real town before hitting the east gate of Yellowstone and get a ton of tourists in the summer. Our City recently enacted regulations for vacation rentals and now the County is considering the same due to the number of complaints. Some people - like myself - will have a vacation rental on 5+ acres so the noise and parking isn't an issue. But there are many that have standard lots with neighbors close by and they are cramming 20+ people into one house and that causes problems.

    I used to manage 70 vacation rentals and know that it is very difficult to make more money with a vacation rental than it is with a long-term rental. When you factor in costs of furnishings, utilities, TV/Internet, landscaping, firewood, marketing, lodging taxes, and everything else that goes into it, the margins get pretty thin. 

    Why do so many report to be making $40,000 a year? That's easy: they don't break out all the expenses. The vast majority of posts I see on BP will give out a big number but refuse to share the details when I challenge them. Even the ones that report their expenses are still cheating because they don't calculate the cost of their own time.

    I know a woman that owned five vacation rentals, starting back in 2000. She did everything herself through a private website and was probably booked 95% of the time, year round, year after year. She made a NET that was 2x what a long-term rental would be but that's before calculating her time and she was BUSY! She did all the cleaning, maintenance, marketing, checking people in, answering the phone, taking payments, answering questions, etc. If she paid herself $20 an hour, she would have probably been back down to the income of a long-term rental.

    There are exceptions to every rule but I don't think STR is a path to long-term wealth unless you're really busting your hump. I'm buying one because it can pay for itself and then give me a place to go when I want to get away from things...or people.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    4Reply
  • Ken Latchers
    OP
    Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
    7y
    not a boarding house. i am allowed up to 3 bedrooms rented per unit before boarding house applies. So just a LTR officially

    Originally posted by @Lauren Kormylo:

    @Ken Latchers I guess the one parking space per bedroom will impact your boarding house model more than an Airbnb place.  I wondered about that - My next door neighbor got divorced and couldn’t afford his mortgage. So he rented his 3 spare bedrooms out to 3 friends. Between the 4 of them, they had 7 vehicles. and we are in a culdesac. It looked like a parking lot. 

    0Reply
  • Nancy Bachety
    Rental Property Investor · North Fork, NY · Member since 2016 · 1k+ posts · 631 votes
    7y

    Diversification wins. But, what was your question?

    0Reply
  • Nik Moushon
    Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
    7y
    Originally posted by @Nathan Gesner:

    IShe made a NET that was 2x what a long-term rental would be but that's before calculating her time and she was BUSY! She did all the cleaning, maintenance, marketing, checking people in, answering the phone, taking payments, answering questions, etc. If she paid herself $20 an hour, she would have probably been back down to the income of a long-term rental.

    THIS RIGHT HERE!

    So many people see the big NET returns and think STR/vacation rental are the next bitcoin. They never stop to think how much they have to work. This is a full time job if you do it right and want to see those kind of numbers. Not that anythings wrong with working STR as a full time job....just most people dont want that. I'm looking into the possibility of turning a Duplex into a STR and it only works for me if I can minimize the time I spend on it, since I already have a full time job that can be anywhere from 40-60 hrs a week, and what I've found out so far is if I automate/hire out EVERYTHING (so the amount of time I spend at the unit equal that of a LTR) the returns are almost the same.

    1Reply
  • Bradley Chapman
    Real Estate Agent · Charleston, SC · Member since 2018 · 37 posts · 29 votes
    7y

    I'm not sure what one considers hard work, but I maybe spend at most 5hrs a week combined running two Airbnb's. Hardly a full-time job, but there is time up front spent on getting the property designed, setting up the listing, finding services for cleaning and yard, but once that's done its a breeze. I'm curious as to what's so time consuming with operating a STR?

    3Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    7y

    Let's see, what have I done lately.  Brought home 19 propane and charcoal grills.  Cleaned them up, welded loose frames and fabricated drip pans & cooking grates, repainted them, then took them back to properties.  Cut down and hauled off a bunch of saplings growing around a house.  Treat the stumps with Tordon.  Made 2 new 8' billboards and hung them in the contractors parking lot at a refinery.  Diagnose and repair modems and cable boxes.  Reprogram television remotes.  Shampoo carpets. Swap a broken washer with a good one and bring the broken one home to fix.  Fix a broken washing machine.  Collect rent 3-4 evenings a week, every week, 52 weeks a year.  Show prospective tenants properties for their crew of 6-10 people. Mail promotional materials to companies sending their workers here. 

    Every now and then a situation arises where I deal with police, fire, EMS or a combination of all 3, dead bodies, overdoses and prostitutes too.  

    2Reply
  • Ken Latchers
    OP
    Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
    7y
    laundry, stains in linens, scratches and gouges, improvements, rearranging what they get their hands in, running air conditioners in and out to storage, mowing, dirty windows, missing screens, hair their sneaked in pets get in awful places, coffee setups, orienting them with questions i never considered, and a lot of other stuff, breakage, restocking things they replace or lose, checking unit to ensure in order, etc.

    This is far worse than ltr

    Originally posted by @Bradley Chapman:

    I'm not sure what one considers hard work, but I maybe spend at most 5hrs a week combined running two Airbnb's. Hardly a full-time job, but there is time up front spent on getting the property designed, setting up the listing, finding services for cleaning and yard, but once that's done its a breeze. I'm curious as to what's so time consuming with operating a STR?

    0Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    7y

    Replace a burned electrical cord on a 220 electric hot water heater.  Drain 2' of water in a basement that flooded from a broken pipe from a sump.  Replace a section of pvc pipe for a sump pump in a basement.  Replace a control module in central heat unit in a basement that failed because it got flooded.  Clean, wash, dry and reassemble the reusable filter element in a vacuum cleaner.  Replace the disposable air filter for a central air unit.  

    0Reply
  • Ken Latchers
    OP
    Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
    7y

    Got a double booking for Saturday. And they were both on the same listing site! So I spend 45 minutes on the phone with various people trying to find out why and finally finding out is because of a very confusing design that accidentally two days were showing as two available units for the same address. So groveling and offering a major discount if he'll take Sunday night instead with late check-out free. Happily the person decided to cancel and take another place even though this is popular time of year with the leaf changes

    0Reply
  • Bill Kramer
    Contractor · Evansville, IN · Member since 2019 · 142 posts · 208 votes
    7y

    One would think there would be a demand for a STR specialized contractor that handles everything. Kinda like how they do with turnovers in a regular rental.

    0Reply
  • Mike Lattier
    Member since 2019 · 65 posts · 27 votes
    7y

    There's a well-known person on this site that is currently running about 5 STRs, making a huge amount of money, and by his own admission, spends around 2-3 hours a week on it.  I think it's like anything else.  There are those that are very good at streamlining the process and there are those that struggle.  Same is likely true of LTRs too.

    2Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    7y
    Originally posted by @Mike Lattier:

    There's a well-known person on this site that is currently running about 5 STRs, making a huge amount of money, and by his own admission, spends around 2-3 hours a week on it.

    You speak of the Ayatollah of Rock 'n Rollah, The King of Jack 'n Cola.  He's probably hanging out with the non-institutionalized members of Metallica and keeping them out of rehab.  @Luke Carl

    2Reply
  • Mike Lattier
    Member since 2019 · 65 posts · 27 votes
    7y
    Originally posted by @Paul Sandhu:
    Originally posted by @Mike Lattier:

    There's a well-known person on this site that is currently running about 5 STRs, making a huge amount of money, and by his own admission, spends around 2-3 hours a week on it.

    You speak of the Ayatollah of Rock 'n Rollah, The King of Jack 'n Cola.  He's probably hanging out with the non-institutionalized members of Metallica and keeping them out of rehab.  @Luke Carl

    0Reply
  • Mike Lattier
    Member since 2019 · 65 posts · 27 votes
    7y

    Respect!

    1Reply
  • Reagen Natho
    Real Estate Agent · Texas Tennessee · Member since 2019 · 93 posts · 83 votes
    6y
    Originally posted by @Bradley Chapman:

    I'm not sure what one considers hard work, but I maybe spend at most 5hrs a week combined running two Airbnb's. Hardly a full-time job, but there is time up front spent on getting the property designed, setting up the listing, finding services for cleaning and yard, but once that's done its a breeze. I'm curious as to what's so time consuming with operating a STR?

    Same here. I have one STR that has been booked at 95% occupancy since I started it in May and I literally maybe spend at the absolute most 2 hours a week managing it. And that is probably a stretch. I have the occasional fire to put out, but my housekeeper can handle most things that come up with the house. Maybe it's my established vacation rental market that makes things so much easier to self manage...

    2Reply
  • Ken Latchers
    OP
    Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
    6y
    95% occupancy likely means you are underpriced which also means more wear and tear.

    Originally posted by @Reagen Natho:
    Originally posted by @Bradley Chapman:

    I'm not sure what one considers hard work, but I maybe spend at most 5hrs a week combined running two Airbnb's. Hardly a full-time job, but there is time up front spent on getting the property designed, setting up the listing, finding services for cleaning and yard, but once that's done its a breeze. I'm curious as to what's so time consuming with operating a STR?

    Same here. I have one STR that has been booked at 95% occupancy since I started it in May and I literally maybe spend at the absolute most 2 hours a week managing it. And that is probably a stretch. I have the occasional fire to put out, but my housekeeper can handle most things that come up with the house. Maybe it's my established vacation rental market that makes things so much easier to self manage...

    0Reply
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