IT'S DIFFERENT THIS TIME!

“It’s different this time!”

Many fortunes have been lost under the “it’s different this time” rallying cry. With every bull market – be it commodities, stocks, or real estate, folks start saying “it’s different this time." The traditional rules of valuation are passe. Old fashioned. There's new thought these days.  

But the cycles of inflation, recession, defaults, euphoria, and panics have been going on for many centuries. They probably date back to when cave men were trading sea shells and rocks for clubs and leather wraps.

In the Short Term Rental world, I am hearing a whole lot of “it’s different this time” talk. Rents will keep soaring. Demand will continue escalating. Prices will keep climbing. Well yes, yes they will. Until they don’t. “But this time is different…there’s nothing to stop it!” Oh yes, there is plenty that can, and will, stop it.

I first started investing in STRs back in 2005. The market was pretty euphoric back then, too, and I really got caught up in it.  I paid way, way too much for a property, that would end up losing half of its value over the next 5 years. Below this post, I have attached the price history of another property, once owned by a friend of mine, that lost over half its value in just a few years. It has since recovered, but the first owner sold it and was financially ruined by the deal. I know him.  I hope that you will look at it closely.

Will that happen again? Of course it will. Nothing goes straight up. There are expansions and contractions in every investment. There are no guarantees. So when you are evaluating the purchase of an STR, run the numbers for a scenario that demand is cut in half, and the price of your asset is cut in half. See if you can still make the payment. If you can’t, it’s time to find something else to invest in.

Because it is certainly not different this time.