Quote from @John Farkash:
Quote from @Chad McMahan:
I just wanted to rejuvenate this great post about Sedona real estate. The market has gone from red hot to lava hot.
Expect quite a few multiple offers, many of which will be cash. Commonly we are seeing 10% - 20% above asking, as buyers are getting frustrated with making offers over and over again and not getting properties into escrow, as there is so much buyer competition and not enough property inventory. It's rough out there for buyers right now.
My forecast is we will likely see at least a few more years (and possibly 10+) of major heat, before things cool a bit. We are still on the front of this wave.
Be bold, buyers. Remember the show American Gladiators? Yep, it's a bit like that. The good news, is, there is a LOT of support here. The other good news, when you have the right team (The best local title company, realtor, mortgage broker, contractor, house cleaners, property management, etc), it goes smoothly and you get the best results).
So much great info in this post! Chad, any interest in rejuvenating it once again? How are things looking now in Sedona and the surrounding areas?
Hi John.
Happy to.
Lots of changes. For those that don't know, I also have podcast and Youtube recordings you can find online, which can show many changes in the local market over the last 2 years, as well as some great interviews with mayors, lenders, title agents, investors, etc. I'm due to record something this week, as well. My next recording will be about the City of Sedona trying to get home owners to sign deed restrictions that stop them or any other owner on that address from being able to operate a STR for the next 50 years, irrevocably- yuck.
We were getting STR saturated (mainly with more common, less expensive homes) in Sedona, with approximately 20%-21% of housing consisting of STR's. Because many STR's owners received bad advice from non-str specialized agents, marketed poorly, and/or managed poorly via self-management or via a terrible STR PM, many of these more common STR's have failed in the area. The percentage has recently dropped back down to 16%, which spells great news for me and my clients, as our occupancy/revenue has only gone up, as supply has gone down.
Buyers beware- anywhere, whether it's here or in Timbuktu, there is a large margin of error with STR's. If it's approached right (location, property, improvements, marketing + management), you should have a solid ROI and sleep well at night. But it's easy to get it wrong- so make sure you get seasoned STR advice and guidance, throughout. Also, choose a real estate agent that will update you and consult, as the market continues to adjust, over time- someone that regularly studies STR related changes in law, and has the local pulse of what's happening and what's likely coming.
As far as the Sedona real estate market goes, non-STR properties have taken a hit and reduced in value. Most STR-friendly properties have, as well, but to a lesser degree. Hot STR properties that are more desirable and yield a strong ROI, are doing much better: Closer to -5% to +5% appreciation (depending on the property). There aren't many of these, as they need to check enough of the right boxes, to attract enough STR bookings. As everyone knows, the name of the game is occupancy- without sacrificing your ADR. Most people are not sure how to improve their STR's and aren't seeing occupancy, so they are dropping price to attract guests. I discourage this. I encourage leveraged cosmetic and functional improvements and marketing, to increase occupancy and ADR.
The hot STR's are still receiving multiple offers (but fewer) and even with the higher interest rates buyers are making it work. Although, they are eager for the day when they can refi down to lower interest rates to increase net cash flow.
The STR-friendly properties that are a step below the "hot" STR's, have real opportunity for deals. Many sellers are still a stick in the mud when it comes to price reductions, terms, etc- but some motivated sellers are slowly surfacing. As an example, I just got a luxury STR property in contract for my STR buyer clients at significantly below asking/market value, due to motivated sellers and creative negotiation, which should result in a great ROI and huge equity, once the real estate market stabilizes a bit.
The nation-wide interest rate and economy concerns are obviously justified and legitimately a problem for investors waiting to purchase or needing to refi right now. Just know the rates go up and go down and we will see them drop- but may take a few+ years. Although, there is already serious chatter about rates coming down in 2024. I *hope* we see 6.5%-7% next year.
