How do you think coronavirus will affect the STR market???

Question

I guess the snowflakes melted under the pressure of my last forum  (banned) post. Sorry but reality doesn't care about your feelings, or mine.

The truth is a lot of people in the Airbnb, STR, VRBO, etc. market are potentially about to go out of business. This is not funny, I don't think it's funny, I don't want you to fail even if it does prove me right.

How do you assess that we handle this situation if bookings continue to cancel over the next 2-3 months?

How will you weather the storm? How long can you go without income on your properties? How can the STR community both here and locally band together to save those who fall behind?

Thanks.

Michael Baum · Answer

Hey Account Closed have you read any of the other 20 threads on this subject?

Account Closed · Answer

Amen.  This is why I am so against leveraging oneself to the hilt, taking out all equity to buy another property, etc.  You just never know when something can come along to affect the market.  Nobody ever lost their shirts because they thought the market might fail.

John McGonigal · Answer

Account Closed though the temptation is there, we wouldn’t put ourselves in that position. This COVID-19 experience provides a great reminder as to why our personal REI philosophy works for us... assume some risk(but not too much), diversify assets to offset that risk, and have the ability to cover the load for a while when $&@) hits the fan.

Luke Carl · Answer

There are 40 threads on this subject already.

My properties are still packed. People have nothing else to do. The mountains seem to me like a great place to stay away from this thing.

Greg Dickerson · Answer

So far no cancellations coming in on the Outer Banks. I’m curious if resort areas will close down like Miami and Ft Lauderdale have done today and how that could possibly affect houses and hotels etc. i guess all we can do is wait and see if there are any domestic travel plans to drivable destinations. Pretty remarkable times.

Account Closed · Answer

It's good that you can cover the expenses from your jobs. How would you react if you have more properties than you could cover with your W2 income?

Account Closed · Answer

I think it's important to keep this in the forefront of people's minds.

Dan H. · Answer

Our PM (San Diego (Mission Beach)) yesterday cancelled all bookings through April 16.  So looks like my STR income is going to be $0 for the Mar 16 to April 16 month span.  For April we are usually at ~$13K (Easter break helps it a bit).  I had been thinking (possibly hoping for) 50% ($6k or $7K of rent), but that will clearly not be the case.  In addition, the rates reflected for April are lower than our usual April rates.  April 19 is only $8 above the lowest rate we have charged in a year.  We have low expenses due to having been an STR for over 20 years, but many STR owners in our area may have some difficult finances.

The wife and I briefly discussed using one of the 2 units but she is like all we could do is walk around a bit.  Our house has better TV, faster internet, better/larger beds, more of our toys and requires less effort.  So we decided not to make use of our STRs that have a rare weekend vacancy (and we have both units vacant).

Dan H. · Answer

Our two STR units are beach units in San Diego (Mission Beach).  The better, more expensive of the two is still largely booked (a little more than 50% booked).  The other unit is mostly not booked.  These are 2 units that have had virtually 100% booking for 3 years.  The rates have also fallen. Our peak rate that previously was mid $500 is currently mid $300.  $366/$350 July 4 weekend is available.  At the current STR rents posted, our rent that has averaged ~$15K/month (more in summer, less in off season) would possibly not average $10K/month if fully occupied.

We can handle at least a year of zero bookings but that is not going to happen.  If come August the STR units are mostly not booked, we will convert them to LTR during the school year and have them STR only for the summer.  We took this approach during the Great Recession.  With its percentage of bookings the last few years, I thought they would never become LTR units again.

I suspect we are in a decent position to handle the impacts of the pandemic to both our STR and LTR units.  We will definitely loose income and net worth, but I suspect virtually everyone will.  Ours in dollars will be worse than most, but I suspect in terms of percentage of net worth or income will be less than most.  Many people have virtually zero discretionary income.  When their paycheck stops for a week/month, it impacts necessities like food, shelter, warmth, etc.

My point is that with all the people suffering, those suffering mainly from reduced occupancy/rent from their investment property does not make my pity list.

John McGonigal · Answer

This too shall pass.

My wife and I purchased 3 condos in Branson since last November.  Spring Break business was booming until a few days ago. Summer bookings were coming in regularly until a few days ago. We’ve been able to rebook some of the cancellations at a much reduced rate, but the once full March calendar is now increasingly empty.

Luckily, we didn’t sell the farm for this business and have the ability to weather the storm with excess from my W2 job, along with whatever extra we get from the STRs. I know many others aren’t so fortunate. We wish all of you luck and bumper crop business in the summer months.

How do you think coronavirus will affect the STR market???

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