All Forum Posts by: Derek Fike

@Derek Fike, you are completely correct.  The front page news is "Airbnb is going bust".  And when you ask any of the many, many people who bought into STRs being a cash printing machine for anyone involved, it is a bust.  Like a lot of things real estate over the last few years, there are a lot of people that leaped in without any real knowledge or plan, and they are not doing well.

You are also right that a well located property with all the required work needed to differentiate yourself will yield a solid return.

There are certainly headwinds that stem from the popularity of these STRs: as you note, more jurisdictions are changing their laws and/or requiring more from hosts. Since you bring up condos: not only could the local jurisdiction change their laws (less likely in a high vacation area like Gulf Shores), but also any HOA doesn't step in and start trying to restrict Airbnb usage.

I think the thing many people don't think about is the marketing aspect of the successful Airbnb's.  If you believe buying a condo in Gulf Shores and throwing it on Airbnb is a surefire way to success, I would be very cautious.  How many other Airbnb's are in the same building or adjacent building you are looking at?  What will get people to want to stay in yours over the neighbors, besides price?  You need to create a UNIQUE value proposition, and in the world of STRs, that not only comes from many areas: namely the property's ability to capture attention on the platform and the guest experience from response times to questions or booking confirmations, to comfort of mattress and towels, to enough toilet paper being on site, through to checkout requirements.

Quote from @Derek Fike:

 I agree with you! This is what is drawing me to Gulf Shores/Orange Beach, AL. This is a hot spot for tourism with beautiful beaches and great entertainment/events. I live in Colorado and would like to purchase my first rental here, but it seems too risky with all of the upcoming restrictions and potential quadrupling of lodging taxes.

Seems like commercial taxation of Colorado STRs might be amended pretty heavily. (And it seems there's at least some chance it doesn't pass at all, based on the opposition they're setting.) I've got several clients wanting a vacation rental in Colorado who are watching closely. 

Find your subject matter expertise and unfair advantage. Here's a random example - know a guy that has gone on ice fishing trips in New England for 15 years. He bought an ice fishing cabin for pennies in a location that you, I, and all the other clowns talking about real estate on the internet would never know about. I don't know his in depth numbers, but I'd venture to guess he made over 50% cash on cash. 

Looking on a map or an online forum to find a location is a good way to eek out a modest return if managed well. The outsized returns that make an STR worth the hassle are found in niche categories and locations now. National Parks are mentioned above - everyone knows the Smokies, Yosemite, Yellowstone, Zion, Grand Canyon, but have you heard of New River Gorge, Mammoth Cave, Pictured Rocks National Lakeshore, or other lesser known but very well visited national park sites?

A short time ago, it was an IQ test. If you could look on a map and do basic math, you could make a 20-50% cash on cash return. The market has matured and margins have compressed. 

Hello fellow member! My name is Teren Hooper, I am a realtor in the North Ga Mtns. I had a STR in 2018 and did very well. I was only renting out one bedroom at the time, but I was bringing in on average 1000-1200 per month. I was in college and it was a great way to help keep me afloat and make a house payment. Fast forward 6 ish years, My wife and I decided to rent out the home as a STR. I had done minimal research however felt it would be a great opportunity mostly because of the success I had when renting out one bedroom in the home in 2018. I was mistaken. The home is paid off but it still took over 6 months just to break even on what we had bought in materials etc for the rental. When researching the numbers seemed to add up but there was one key problem I did not take into account. The market was completely flooded. It is my observation that this is currently the growing problem. Too many STR and not enough long term housing. My wife and I decided to turn the home into a long term rental and have not looked back since. We have a huge housing problem in our area and we have been very successful in filling that gap.

Hope this helps! 

Quote from @Derek Fike:

Quote from @Chris Seveney:

@Derek Fike

Goes back to the #1 rule of real estate - location

We saw FOMO and everyone throwing a STR up even in residential neighborhoods which are bedroom communities. Not really a great place for one whereas if you are near water/entertainment or something worth while then it can be a great investment.

 I agree with you! This is what is drawing me to Gulf Shores/Orange Beach, AL. This is a hot spot for tourism with beautiful beaches and great entertainment/events. I live in Colorado and would like to purchase my first rental here, but it seems too risky with all of the upcoming restrictions and potential quadrupling of lodging taxes.

Hi Derek!  We started investing in STRs in the Gulf Shores/Orange Beach area in 2009 & have helped many BP members buy their first one here.  Happy to walk you through the market details here if you want to send me a message or reach out.  You can check our reviews & properties we have sold here by clicking on the Reviews & Deal tabs at the top of our company profile:  

Pfabulous Real Estate/eXp Realty | BiggerPockets

You're on a good track...it does all depend on the host/owners and what they know and understand about the market they purchased into. Some believe that is the biggest problem with low numbers and hosts feeling like STR is a dying strategy, they never did understand the market they were buying into. Also, I scroll through the OTA and see hundreds to thousands of bland listings with seriously dated decor and properties. It's easy to pass them all by and find one with amazing ocean views and bad decor, or better yet a STR with modern decor and close to the ocean. People want an experience not just a place to sleep.

Four things to remember...location, proximity, knowing your market and guest avatar, and design/amenities can make or break a STR.

@Derek Fike

Goes back to the #1 rule of real estate - location

We saw FOMO and everyone throwing a STR up even in residential neighborhoods which are bedroom communities. Not really a great place for one whereas if you are near water/entertainment or something worth while then it can be a great investment.