Hello Bp,
I wanted to hop on here and write about what I have seen in my backyard STR market in the Pocono Mountains of Pennsylvania. For Transparency and details on my background, I am a licensed realtor in PA and work in property management of over 110 STR properties in the Poconos Market. I often hear people saying that Airbnb is dead or that it's not what it used to be.
My initial thoughts are, how is this true? Just remember, its easy to get caught up in finding value. This is a mistake my mentor and I made early on. Going for the 4 bedroom home thats priced in the realm of 3 bedrooms. Big win right? Not always, and in fact with STR usually the opposite. I'd rather have the 2 bedroom priced like a 3 bedroom. Why? In order to be in the upper echelon of available listings, or reach occupancy and rates above the average Joe, your listing needs to reign supreme. Be honest when buying the home, is this somewhere you would be excited to book and stay? Your thinking must align with the travelers, and often experienced-based thinking will take you much further than value based.
So, let's say you are looking to enter the STR market and don't know what to look for in a winning home. (Remember that I work in the Poconos market, so your market may differ slightly.) Firstly, you have to consider the price point. For the Poconos, I like to explain homes here in three separate tiers. (These are not in order of how profitable they are, it's just used as a way to separate them for explanation purposes. )
The first tier of homes are 1-2 bedroom homes these are homes that are tailored ( or should be) toward couples or small families and can range between 100-250k. The second tier of homes are your 3-4 Bedroom homes priced between 250-400k. This is the tier that you really need to be careful of, which I will explain in more detail later. Finally, your third tier of homes are your 5 Bedroom+ Large Cabin homes priced in the realm of 400-700k. (There is also a fourth sub-tier of A+++ properties which includes your awesome lakefront homes and 7+ bedrooms at 700k - 1 Million. )
In the Poconos market, we have been seeing homes that are smaller or larger be the better performers. I believe this is because of the sheer lack of inventory of 1-2 or 5+ bedrooms. The beauty of the smaller is that this market is historically a "vacation market" and a couple's getaway market and that has not changed. With small homes you get quick and easy stays with fewer issues, cheaper cleaning fees, higher occupancy, and still great rates. The Larger homes tell a different story, these are more expensive purchases but allow for large groups to travel together and more importantly for you, split the bill together. With a large group of say 16+ guests a $2000 or $5000 weekend is much less expensive when multiple parties are paying.
To summarize, STR is not dead to the ones that treat it like a business. When run like a business from the beginning, choosing the right house at the right price and furnishing correctly, then adding the right amenities according to your market, you will do just fine. Also remember that Real estate is a long-term play so even if the cash flow isn't a "home run" right now you can refi later and hopefully even pull out some equity you can put down on another one, bringing you closer to financial freedom.
Thanks for reading BP!
-Mike Eichler
~Realtor and STR Property Manager~
Also, DM me, I'm always happy to help investors looking to enter the Poconos market, and I'm available for STR questions.
