All Forum Posts by: Caleb Rohn

Was utilizing it as a short term rental an option? Is cape coral friendly to STR or was long term renting what the buyer preferred? Especially if he or she intends to use the property I would have thought that STR would be preferred.

We are currently in the process of acquiring a few short term rental properties and have done a lot of research leading up to this point (12 months of research).  We put 2 units under contract last week (to be built), a 5 bedroom and a 9 bedroom.  I own long term rentals in Springfield, MO which is about an hour's drive from Branson.  I have been wanting to diversify into another market hence the move to the Branson area.  We are investing in STRs near the lake.  The location is great as it has wide lake views but also within 10 minutes of the main strip where the shows are and just over 10 minutes to Silver Dollar City.  After growing up on the lake and nearly a year of real estate research here is what I can tell you:

There are pros and cons right now in Branson related to STR:

Pros:  

-Branson is popular and growing in popularity - approximately 8 million visitors annually for a city of 10k population is pretty massive

-Peak season is definitely the summer months, but even September-December do relatively well from a tourist standpoint.  Really January through early March are the only dead times in Branson.  

-Branson has character - The strip is cheesy in many ways with it's Reno-like neon lights and signs but the area overall is very nice and the lake is absolutely gorgeous.  The large rolling hills can give some panoramic lake views that are breathtaking and make for some amazing sunset views.  Out of state friends we take to the lake always comment on how amazing and beautiful the lake is and how big it is. 

-Johnny Morris, owner of Bass Pro is pouring large amounts of capital into Branson - Golf courses, hiking areas, restaurants, glamping - Johnny provides it and he does everything first class. It feels like Johnny is angling to get a PGA tour event to Branson with all he is investing in golf and accommodations. Big Cedar Lodge, is a huge draw to Branson and they announced recently a multi-billion $ new hotel coming (this is both a pro and a con for STR's in my opinion). A rising tide raises all boats, but that new hotel will mean a lot more boats.

-Branson is centrally located in the country and therefore accessible by drive for many which is helpful in a Covid world

Cons

-Like most real estate across the country prices are rising insanely fast. My brother put a 5 bd 5ba STR new construction under contract 9 months ago for $382k, I just put the exact same house in the same development under contract last week for 499k. And if you're wondering about demand for that house @ 499k, 40 units in this development came on the market as part of the next phase of this development a week ago, all but 4 are pending and most didn't even hit the public market but were scooped up prior to.

-Zoning is a challenge - These large developers have spent the time and money to get their neighborhoods approved for STR. They are packing them in like sardines. I approached a few different property owners who had vacant land as I thought of building and most times was told STRs were not allowed due to zoning. Keep in mind the lake is huge and runs for miles, but the main channel is for sure your best bet for STR returns lakeside and closer to the 76 strip if you're not lakeside.

-I would be lying if I said oversaturation isn't a concern at least in the short term - About 2 years ago there was a huge influx of inventory that started to be developed especially for 5-10+ bed/bath houses. Basically last year and in the coming year this market will see hundreds of brand new medium to large houses specifically aimed at STR and they are NICE! They are decorated first class and have first class amenities. I can only assume these new properties will squeeze the returns of older properties and also they will be competing with each other. Developments include Branson Cove, Chateau Cove, Chateau Mountain, Lodges @ Table Rock Lake and a few others. Each of these developments has close to or more than 100 units, they are new and they are nice. A simple google search of those neighborhood names and you will see what I mean.

Oversaturation is my biggest concern short term and of course this short supply market has to give somewhere because prices just can't continue on this unsustainable path upward. It's hard right now to project occupancy rates with this new influx of nice inventory. I think the smaller 2-3 bedroom STR's are a little bit insulated though there are some large condo projects going on as well.

All that said I am very bullish on Branson long term. However, I think you need to be able to handle the potential for a slow start with your STR as competition grows.

Here is my situation.

I spend a lot of time on BP and I have developed a small portfolio of 4 residential rentals simply from learning on here and spending time getting to know my local market.  

Recently an opportunity came by my desk that was very intriguing as I often am scouring the various platforms for deals.  The situation was a house that was significantly undervalued due to a fire that happened in the house.  The property prior to the fire was on the market for around 1.3 million dollars.  Now the property is on the market for about half that.  The structure of the home is sound as a structural engineer has shared with us what needs to be replaced and what can be salvaged.  Now the different trades are coming in to to review all the different areas (electrical, HVAC, plumbing etc.).  I recognized early on that there is a good return to be had here, the caveat being I would have to reach out to a contractor/investor I know because with his business he could keep expenses lower and more safely add value to the deal with the crew he runs and we could stay under budget. Furthermore this is simply more cash outlay than i would want on my own

I offered a partnership on the deal to the contractor.  The contractor agreed and told me we would split equity based on whatever cash or cash value each of us puts in.  For example.  The house in its current state is 650k.  He is asking we both put 75k each down on the property to get it under contract under jumbo (500k inititial loan), then he would use his company and absorb most of the renovation costs which he says would be about 285k, but he can do it for about 225k as he won't be passing along his profit margin in light of it being an investment.  

In total he would be into it for 300k (reno + his portion of the down payment) and I would be into it for 100k ( I offered an additional 25k in cash above the down payment for the renovation as we expect it may go over with material prices jumping so high)  

As such he is telling me that he would own 75% of the investment and I would own 25%.  Now if you simply look at the numbers I understand how he came up with this.  If total investment is 400k and he puts in 300 and I put in 100k then that makes sense.  However, I am the one who found the deal, did the research on it, pulled everything together and then brought him in on it.  The more I think about it I feel there should be some added value in light of these things.  I am curious what this community thinks is appropriate in a situation like this.  He is obviously bringing his rehab abilities to the table but there is no deal if I don't find this and tee everything up for him. 

Any thoughts on this from others would be helpful.  Perhaps what he is proposing is appropriate.  I just need some insight from others.  

Thanks,

Caleb