All Forum Posts by: Alesandro Breguez

@Kano Wu, building on Scott's comment previously, you need to run a very precise due diligence regarding the SRT regulations, both at Township and HOA level. Couple if years ago is very different from now as they the STR ordinances are just getting started and HOA bylaws can change at any time. Make sure you have this on the top of your checklist prior to doing the deal.

Regarding property management: I confess that I don't know anyone who successfully hired a reliable and affordable property management company. Depending on the level of complexity, you can mange it yourself - there are a lot of tools that can help to automate the guest communication. You need to focus on hiring a decent local team of cleaners and one general handyman for maintenance. Ask for at least 3 referrals to minimize the risks of bad hires...

I agree with @Scott Rankin, you rather plan a base case, worst case and best case scenarios. 

I got similar occupancy rates - average 60-65% occupancy, +80-90% in the summer (peak in Aug) slows down a bit in the Fall and picks up again in the Winter. The slowest months for me are April-May. 

According to AirDNA reports, there is a surge in the number of listings (20-25%) in the last quarter in most popular areas in the Poconos. Make sure you include in the analysis an overall long-term outlook of supply vs. demand as the dynamics of the market might change rapidly.

@Steven Gudiel, I also recommend the Poconos area. The prices went up a little but but great revenue potential. Make sure you have a efficient local team and it should be fine 

@Henry Clark and @Mike Lambert - Good points, comprehensive analysis, and nice theoretical and paper exercise but I would like to share with you my practical experience of living and investing in Latin America and Europe.

Whenever you are investing overseas, you need to consider in your analysis 2 major risks: FX/currency and regulations. These are 2 elements that are new to the risk-reward equation in comparison to domestic investments.

Currency is a MAJOR risk. Rule of thumb, US dollar is still the strongest currency and during any economic crisis, foreign investors will seek investments in USD as hedge to the local Emerging Markets currencies. As example, most Emerging Markets currencies depreciated 25-35% vs USD in 2020. The investor might focus too much on foreign markets with attractive 7-10% cap rate and completely overlook the volatility of the currency.

Regulations: Europe tend to be way more regulated regarding real estate speculative market and stricter tax rules. @Joshua Flowers  might remember that investing in real estate in Berlin in 2010-2012 brought AMAZING returns as of key European capitals was still very underpriced in comparison to peer cities. HOWEVER, there are a lot of different tax rules in short term and long-term capital gains.

REI in foreign countries require a LOT of due diligence, this is not for beginners…

@Michael Kunis, it might be a bit premature to start a property management service contract now but I do recommend to run a very comprehensive due diligence before selecting the right company. My experience is that most are not reliable . Do not under estimate the on site presence. I recommend to be very hands on at the beginning so that you know all nuances of your STR business

@Troy Judge, I would invest some time to run a proper due diligence. Few things to consider:

1. Regulations: some townships are starting to regulate STRs and they have very high requirements for the locations. Not sure if the area you are planning to purchase the land will require it and if yes, not clear if the trailers would pass the requirements.

2. Financials: make sure you know the numbers. Have a look if trailers are booked and what typical ADRs are. Run different NOI and ROI scenarios to understand your best and worst cases scenarios.

3. Risks: you might want to investigate risk factors as safety, theft, infra structure of the land etc.

In overall, as first STR investment I would stick to a single family home located in a secure and established neighborhood.

I tried a couple of property management companies or ''want-to-be'' property managers and in overall I wasnt impressed and found them not professional enough. 

If you look at the overall numbers, the Poconos area has over 1,700 active SRT listings and +90% are owner-managed. If you are an owner and if you have the time to dedicated for your STR business - that's the ideal scenario because nobody else would have more vested interest than you in making it successful.

However, if you are an investor looking for passive income or planning to scale your STR business, its paramount to have professional help.

Most property management companies will charge either a flat fee or a percentage of the revenues that could vary from 10-20%. During a good season, an average 3-4BR property makes 6-8K in revenues, so you are handing over 1.2-1.6k in that month - that's a considerable stake of your margins.

Few property managers are willing to enter performance-based contracts where compensation are tied to clear performance indicators. That's for me a clear no-go signal.

How is your experience with property management companies so far?

Hi Guys, 

Glad to join this discussion! I have few units in Lake Harmony and Emerald Lakes and I admit that during my first year I struggled to find reliable workforce. It took me some time to put a robust team together but I assume this is not only the challenge in the Poconos, this is a general challenge in the hospitality industry.

I also went throught he STR license process which are now required by some townships.

Feel free to DM me and connect to exchange about best practices.

Here some variables that might influence the dynamics of the Supply/Demand of the market:

Supply:

More distressed sellers:

1. According to the Mortgage Bankers Association (MBA) the number of loans in forbearance in mortgage servicers' portfolios grew to 6.99% (as per May 5th, 2020). The coronavirus pandemic has already cost more than 30 million jobs, approx. 18% unemployment rate

Demand:

1. Less qualified buyers due to the increased lending requirements 
2. Buyers more cautious waiting for the ‘’ expected housing crash’’

1. BUT Inventory still low in some areas – this is a general statement as it has to be evaluated in specific by area

Do you see other drivers? Any thoughts?