All Forum Posts by: Bob Metry

Not including the 2008 financial crisis, does anybody have a sense if property values typically go down in vacation home markets in a typical real estate down cycles and/or recessions? What does history tell us about what we might expect given what is occurring with rising financing rates, rapid inflation, etc? My sense is that prices should start to decline given the macro and micro economic factors.

@Ryan Moyer that is crazy how much build costs are in Gatlinburg. I would think at a certain point more builders would move there to take advantage of the opportunity and thus drive down costs. Is anyone building modular out that way? That would seem like one way to potentially cut costs and lead times. 

@Collin Hays and @John Underwood great discussion and would love to hear your thoughts on what could potentially cause a decrease in prices wether it be from an increase in supply or something else. 

For example, I assume this area is primarily made up of second home owners/investors? If owners bought their properties as STRs within the last couple of years (at a "high" basis), if vacancies increase and rates go down due to increased competition and lower rates (long terms owners potentially have a much lower basis and could comfortable lower their rates) that would seem to make it difficult for the newer owners to keep their investments above water? As we are entering a recessionary environment, are some of the STR investors possibly going to feel strain from other investments/costs eg declining stock portfolios, higher cost of living, etc?

Side note- I am also personally interested in this topic because I have unsuccessfully been trying to buy a second home in the Jersey shore for the past 2 years and hoping a correction might create a buying opportunity for me. 

@Bruce Cline I like to start with thinking if I would buy these properties as rentals at the sales price you could expect to get? I also would consider the huge tax savings of no capital gains tax on the first $250k if single and $500k if married of gains if you lived in the homes for 2 out of the last 5 years. Look into that tax rule if you are not familiar with it. Good Luck!

@Nicholas Delgado just keep in mind with short term rentals you have a lot of costs (management fees, utilities,repairs cleaning, initial furnishings) that I didn't see you factor in that could reduce your posted margins by upwards of 50%

@Jimmy Woodard how about entertainment room with bunk beds and/or pull out sofa? I could see the kids having a fun and all crashing with each other. 

@Bruce Lynn I couldn't agree more. I look back at all the deals I missed because I was being cute trying to negotiate a few thousand dollars. As I have gotten more experienced, if I am excited about a property and the location and the numbers work, I try my best to lock the deal up. Especially for properties I intend to rent and hold. I don't have any regrets on deals I bought but have a lot of regrets on deals I missed out on a for a relative small amount money.  

@Shiloh Lundahl I usually meet the appraiser at the property and explain all the improvements. I also provide them with a folder with the agreement of sale (at least the page with the sales price) and copies of comparable sales with key data points highlighted such as price, date sold, sqft, etc.

Sage advice @Michael Plaks. Many thanks.

@Michael Plaks thanks so much- I always appreciate your insights! If I am planning on selling within a few years, would it make sense to try to sell in a year where I have a lot of accelerated depreciation expense due to utilizing cost segregation studies?