All Forum Posts by: Levi Bennett

Sweet, are you a licensed broker in NC?

 I would bet that most people have no idea how incredibly valuable this information is! Amazing response, thank you!

I helped clients with 4 LTRs into STRs with 1031 in 2022. Since STR's is all we do, let me know if we can help. We utilize a suite of paid software to qualify/disqualify properties and help with consulting, contractors, and underwriting.

My thoughts on this are a little contrarian, but basically I think the best time to buy is when everyone is saying to not buy. It obviously depends on where you're looking to invest, but there are tons of great tools out there to help you evaluate a market (AirDNA, Rabbu, etc..). Personally, my experience is in North Carolina and Florida and despite numerous claims of "over-saturation" my clients have performed very well. It's not a matter of getting in at the right time as much as it is positioning your asset in a way that will not go out of style, and will always be the first click for a booking in a given market. 

Regarding the recession, and everything else we're hearing.. interest rates have stabilized somewhat, and they're not expected to keep going for more than 2 years either way. I think around the time of the next presidential election cycle, you will see a steep decline in interest rates to get back to the Fed's goal of 2% per year. Again, that's my opinion, but then layer in the fact that builders are building at a pace that is far less than necessary to keep up with new families and homes. For instance, most Millennials buy their first home at age 31, and for the next 5 years, 5 million Millennials will be turning 31. Add to this migration trends to the South from the North, and you have an interesting brew that seems pretty recession resistant. There is a lot of pent-up demand in the market right now for people who need a home. There are simply not enough homes. The problem is affordability, and that will eventually correct itself once lending becomes less stifling. I'm expecting a surge in appreciation once interest rates ease. 

Regarding travel during a recession, this comment about less travel is a common misnomer in the investment community. As an example, Walt Disney World park reached record attendance and profit from 2008-2011, at the bottom of the recession. The more miserable and unemployed people are, for some reason, the more they travel to distract themselves from the economy. Add to this, despite the horrible "recession" everyone has mentioned, airbnb and VRBO continue to set monthly and quarterly records in overall growth and market cap. More people are booking STRs than ever before, and that trend doesn't seem to be slowing. Again, depends on the market, and many other factors, but it's a market large enough that, if you make the right moves and work with the right consultant, you can easily win at as long as we don't have an entire market collapse. 

Great post! I've worked quite a bit around the Asheville market for STR investors and I can say that, from an investor perspective, the entire area is full of opportunity across a wide array of investment strategies. To add a little color to the STR strategy.. I'm glad Jarad mentioned the STR restrictions (I wrote a blog around this shortly after the STR laws were clarified by the North Carolina Superior Court in the Wilmington case earlier this year) as they are changing quite quickly in certain mountain towns. 

To be clear, if you're in Asheville city limits, most likely you cannot STR a house unless you're in a hotel-friendly zone, and then you need to meet hotel code requirements (open space, common areas, etc..), but the Asheville city limits are not massive, and even some Asheville addresses are not in Asheville city jurisdiction. Here is a very useful link if you're unsure if it's in Asheville city limits or not. 

Many of the surrounding towns have benefited greatly from this restriction and have totally revitalized their downtown areas due to the influx of tourism over the last 10 years. A few towns that have been historically very friendly to STRs: Black Mountain, Fletcher, Fairview, Mills River, Hendersonville*, Swannanoa, Clyde, Waynesville, Candler, Canton**, Mars Hill, Weaverville, Maggie Valley, Brevard, to name a few. 

*Hendersonville did try to pass an STR restriction but failed. There is interest in the community to limit or ban, so proceed with caution. However, due to the proximity to the Blue Ridge Parkway, I-26, the Biltmore and the Breweries, many have found success and pushed back on this. So far, they've remained friendly and seem to be leaving it alone, but proceed with caution here.

**Canton has a notorious paper mill downtown that produces an odor almost 24-7 that usually travels north-east across town unless a weather pattern turns it to the south, but in general, people vacationing here for the lower prices are displeased. In general, I advise people to be cautious with investing here because this is the #1 negative comment from people visiting here. 

Towns around Asheville that I'm aware have new STR restrictions in city limits are: Sylva, Webster, Highlands, and Woodfin. This list is growing as this has become a very popular topic among town hall meetings. There are attorneys state-wide that are pushing back on this, but in general, make sure you work with a realtor/consultant familiar with regulations on STR and know how to qualify at the county, municipal, HOA, and deed restriction level.

I find it astonishing that nothing in Western NC made this list. Boone/Banner Elk (Watauga County and Avery County) have literally hundreds of millions of dollars worth of new construction happening right now in a relatively rural area, making, per capita, one of the fastest growing counties in the entire United States, but didn't make the top 5 in North Carolina? Respectfully, a better name for this post seems to be "Real Estate Market in Eastern NC"

A quick google search for top tourist attractions in NC, and you find that 6 of the top 10 are either in Western NC, or Charlotte area (including #1, the Biltmore Estate, which is Asheville and has some of the fastest appreciating real estate in the entire state). While Raleigh/Durham ranks 4th fastest growing metro area in the United States, Charlotte ranks 10th, nothing to sneeze at. But what makes Western NC very interesting is the number of people that have moved to the Carolinas from up North, and brought their skis with them. This has made the High Country one of the most desirable places for vacation rentals in the entire United States with an overall market cap in vacation rentals exceeding the national average by quite a large margin due to relatively low entry prices, and very high returns and occupancy. 

I'm not an expert by any stretch of the imagination with Eastern NC, but I can say with some conviction that I serve clients that seek me out from all over the country to invest in Charlotte and Western NC and the performance of those acquisitions have been stellar to this point. There are several cities and small towns in Western NC that have emerged as hot spots for consistently high yield investments. I think the overall tide is rising in NC, and we've seen a statewide appreciation in value and yield that we all get to benefit from, but for some reason I would be fairly surprised that a town outside of Raleigh would beat the kind of outrageous returns that are commonly seen in the mountains right now. 

I think maybe people are a bit unclear by what you mean as "client"? Do you mean other hosts? I'm a full service STR consultant/broker in North Carolina (soon to be TN, FL and possibly GA) and I've been advising on STR acquisitions for 8 years. I'm happy to connect. Most of my investors do NOT want to self manage, and we're always looking for superhosts to discuss management with.

Totally depends on the loan product you used to acquire the loan, so you're first call should be to the mortgage lender who did your loan. It's all in your lending contract. Many conventional loans will allow you to do it right away, but again.. it depends on your personal situation. An experienced realtor in STRs will be able to tell you what questions to ask your lender before closing. Also, it usually makes a difference if you're renting out your entire property or just a portion of it (like a room or a guest suite), normally you can do this right away assuming that your local government allows this (municipality, county, HOA, etc..) and there are no deed restrictions prohibiting it.

 So you're right about all of that. The problem that most investors don't account for in the South is that density is significantly lower than other places in the country, particularly the far West, midwest and up North. This means that MF properties are VERY rare, and very competitive. If you're looking to do a 20-30 year hold, it makes more sense, but they typically don't cash flow for quite some time unless you're buying 200+ units at once. Small MF is just very competitive. I have another comment about this. Overall the market is amazing here, but it's not amazing in the MF space specifically. Is there any other strategy you're considering? 

 I notice you picked all southern cities with very low density (low MF inventory). Usually MF trades at very low cap rates in the South. Just curious why these cities? Was it related to MF performance specifically or overall economic performance?