All Forum Posts by: Chris Gerard

Yes, the responses have been very helpful, however, appears to me the laws, fees, are dependent upon the area, some more favorable than others, such as Florida coast that January mentioned. As you can see from the thread, someone cited Palm Springs as an example where it is more difficult, and I know here in my county in Colorado, and certain in the research I found on Hawaii, there have been more challenges with some of the community not wanting STRs. So it seems as it varies place to place. Just a concern, and in bringing it up, seems like it would be a consideration for myself. On another note I think some folks have read into my post about being convinced. I would of course convince myself to invest in an STR, and I'm here posting to get guidance and advice, which you have done, so much appreciated.

Brian, those are great thoughts. I guess kind of like having a food court at a mall. It's the mecca so although there are competing eateries, it brings the masses in that all have the intent to eat... I suppose the real art of investing in these is knowing what everyone else wants to know....which is, how much saturation in the mecca until the demand declines.

Brent - this is a very helpful example. Palm Springs is a fun area I am visiting soon. I would think is pretty saturated. You got in at the right time, and now cash is king it appears, and investors are paying a premium. As much as I love short term rental idea, for me personally, I am thinking there are some very unpredictable erratic variables in the equation. I know people can suffer from paralysis from analysis, but when i look at the rapid extreme variability in all of these factors, my gut tells me unless you have mostly cash, then it may be prudent to sit tight on the idea of getting into the first one. If you're already in the game it's different. 

That is good feedback to know about for your area specifically, but it would be fair to see you disagree, but because there are many areas I could cite for example (several in Colorado where I live, Bend Oregon, etc) that the community is not interested in saturation of STRs, regardless of if they financially benefit, I think your disagreement might be slanted toward your geographic area of specialization. Many other areas don't want their community to be comprised of a high population of STRs. So, in the spirt of our conversation, going with your line of thought (I assume focused on coastal Florida), that has support of community and government for more STRs. However, doesn't that just mean it is a more saturated area, and wouldn't this combined with the other factors I mentioned in my orginal post make it a tougher area to get started in? In other words, am I wrong in thinking that investors are seeking more undiscovered areas with the other given challenge of interest rates, recent high appreciation, etc.  Open to hear your thoughts.

Okay that was a good reply! But, I think several people who don't own a STR are thinking some of my same thoughts so maybe I shouldn't say convince me, but rather I want to know what people think about these points.

On your response - didn't the properties in the vacation towns have the crazy appreciation rates, thus making it that much harder to now get in? And maybe some government likes the taxes, but it is true that in many popular areas it is becoming more difficult because of zoning, that is why in Hawaii they have vacation destination zones, and in the county i live in Colorado, they want you to have an acre or more for an STR. What I'm saying is that the appraisal is one thing, but I'm thinking more about what the market will do in the future with this mismatch of current property prices vs. cashflow on what the former price was.

Does anyone have any thoughts on my current perspective: Properties have appreciated at a crazy rate in a short amount of time. Interest rates have since increased and may stay that way or go higher for the forseeable future. The more that an area becomes popular for STRs, the more likely the laws, fees, taxes will become increasingly burdensome. Then, consider airfare, fuel costs, general inflation higher, gets more expensive for average folks to travel. This article says there is more of a demand for STRs but it seems like there are plenty of STRs available since it became such a popular idea. I think this happened because interest rates were so low and buyers got in before prices went up, and before laws became more stringent.

It seems like STRs should ultimately be valued like an income producing property would be. For example, if a property was purchased $500K in 2019 at 3ish%, and maybe they put 20% down, and owner boasts about how profitable of an STR it is; and then now they put is on the market for $900K because that appears to be the market rate (at least this seems to be the case in high appreciation areas such Colorado, Hawaii, and several other areas), however interest rates are now 7.5%, how can this same STR now be cashflow positive? Maybe if you put 60% down payment it can be..., but most buyers can find a better place to park their money if they really need to put down $500K on a $900K property to make it cashflow. Something just doesn't seem to add up, but maybe I'm wrong and enough wealth is being passed down through inheritance from baby boomers and the supply is so low that we are at a "new" normal. Be interested to hear other people's thoughts.

Thanks, what I was meaning is that I understand "profit at sale" would be if you sold the property after commission, balance on principal, etc, however, the spreadsheet shows a negative number for each prospective future year on line 27. Seems like it should be positive by looking at the other numbers. Line 28 of course is based on 27, so if 27 didn't make sense then 28 wouldn't either. Better stated, what I'm meaning to ask is why is "net profit" always negative in this scenario on the spreadhseet?

Hello,

I found this link to this short term rental calculator: https://www.biggerpockets.com/blog/wp-content/uploads/2021/06/STR-Calculator-V2-Locked-.xlsx

It is very helpful and appears to be a useful evaluation tool. I understand all except one part: If you go to the "results" tab at the bottom of the spreadsheet, line 27 where it shows the "profit at sale" row, I'm trying to understand why there are negative numbers for the profit? Seems like this number should be quite a bit on the positive side... And also in line 28, why the cashflow plus the equity is important? (obviously line 28 is based of line 27 data). 

Thanks for any insight.