The days of oversaturated vacation and short term rental markets might soon be coming to a close.
Without question the Pandemic fueled activity and mortgage rates drove investment and inventory of STR's and vacation rentals for rent up in many destination markets.
If we're being honest, not all properties utilized on a nightly rental basis should continue to be operated that way..after all there is only so much travel demand to go around. Many properties have seen drop offs from their 2021-2022 peak, but that should be somewhat expected?
Investors are not the only ones that have taken notice of increased STR supply, the majority of the cities, counties or jurisdictions I service have recently implemented new or revised regulations for obtaining and operating a vacation rental throughout the Oregon Coast and area of coastal California.
Examples include:
- CAP's or limits on the number of vacation rental permits allowed. Palm Springs instituted a short term rental limit last year. Desert Hot Springs has new rules and regulations as well. Lincoln City Oregon has done the same, effectively reducing the number of VRD/STR permits by nearly half through attrition (sales) or non renewals.
- Areas such as Tillamook county Oregon divided their cities into sections with the number of permits in each city or region Capped at a certain number. The majority of the territories are at their maximum, with a handful available in each area.
- On the southern Oregon Coast in cities such as Gold Beach, except for commercially zoned properties or those in the county can obtain new STR permits.
- In Bandon, rarely do eligible vacation rental properties come to market a qualifying is based on a specific zone and saturation rate of actively neighboring properties.
There are always 'work arounds' and exceptions. Many cities rules are limited to their city limits and counties can have different regulations or conditions to meet eligibility (often requiring more time and expense.)
As the barriers to entry for obtaining a short term rental permit on the Oregon Coast or high potential areas of California increase, that should bode well for operators of short term rentals in some of those areas. Particularly for waterfront or view rentals on oceans, lakes or rivers that historically perform best.
Since as inventory of rental options decrease, the demand for those that effectively operate as AirBnB's should theoretically increase.
On the Oregon Coast bookings and occupancy rates are trending upwards from last year with prime properties showing consistent revenue and production during the past three years.
It should also be noted that we are approaching the 2-3 year mark for investors or purchasers of properties towards the tail end of the pandemic market. Many of these investors or owners life circumstances have changed and if not for the incentive of low rates might have already sold.
I speak with friends and clients daily that are considering selling properties acquired in the last few years for one reason or another. Even those with profitable, licensed properties sell from time to time.
If you're looking to expand your STR portfolio and in particular take advantage of the likely extension of the accelerated depreciation for tax purposes, this Spring or Summer could be a good time to secure your west coast STR property.
