All Forum Posts by: Lisa Marie

 Check out www.floodfactor.com.  Type in the property address, and it will tell you a score from 1 to 10 as how likely it will be flooded.  1 is best, 10 is worst. 

There are addresses that may not be in the FEMA flood zone, but have a very high Flood Factor.

It used to be that you buy a house at a price that's comparable to what people pay for a primary residence or a LTR, but if you can make it work as STR, you can make more money. Now, people are buying STR eligible properties at 2 or 3 times the price of other comparable but not STR eligible properties.

I find it funny (and scary) that nobody is talking about the fact that in most of the vacation markets, the STR supply probably doubled over the last 2 years. If the demand goes back to pre-COVID norm or even lower (due to a possible recession), what happens then?

@Jake Durell, where are you finding the beach houses under $300k?  Up and down the Atlantic seacoast, I am not seeing any beach house (in reasonably attractive condition and attractive location) for anything under $250/sq ft.  The avg is more like $300~350/sq ft. I may be generalizing a bit here, but my point is, if you can buy these properties at such low prices, it tells me that this is not a prime vacation spot, therefore more susceptible to demand shock.

Also, regardless the location, if your finance is stretched so thin in order to buy a $300k house, I am sorry but I don't think you are ready for real estate investment, especially at this market condition (both in terms of real estate prices and the uncertainty of STR supply vs demand). Don't fall for FOMO.

If you have time and energy on your hand (which you have to, if you are new to STR and want to be successful), you may be better off spending that time and energy to find a better paying W2 job.

If you have some money laying around, I honestly think right now you are better off putting it in the stock market. The stock market today is 30% less than what it was 6 months ago. You can argue it was frothy before, but is Google or Amazon's business prospect suddenly 25~30% dimmer over the last 6 months? If the real estate market price drops 30%, everyone on this forum will be talking about liquidating every brokerage/401k/IRA account to buy houses, right?

I know I am sprouting heresy here by advocating stocks on a Real Estate investment forum, but I believe most people on this forum are smart and reasonable market-neutral capitalist, i.e they want to make money in whichever way that provides the best return at the lowest risk.  My husband and I have money in both -- our networth is about 50% in RE and 50% in stocks, so I consider myself unbiased.  I can tell you any new savings we have right now is going into the stock market. 

“2. The cost of borrowing is rising significantly, due to rising mortgage rates. If rates rise from 4% to 6%, that isn't a 2 percent increase. It's a 50 percent increase. That means that a cabin that was profitable yesterday, suddenly isn't profitable today.

3. Higher vacancy rates due to less traveler demand, meaning declining yields, and prices of real estate adjusting commensurate with those declines.”

Your points #2 and #3 are the lethal combination to any new STR investors, not just in Gatlinburg but anywhere. Somebody who buys a property today will probably have a monthly mortgage expense that's two or three times the mortgage expense of another property purchased two years ago. When the demand is high, everybody can charge a higher ADR that still results in positive cash flow, but if demand softens, the ADR has to come down. Well, the guy who bought the house 2 years ago only need a revenue of $5k a month to cover his expenses but you Mr. Johnny-come-lately needs $12k to break even because of your mortgage payment. Then what happens? Do you have money elsewhere to cover the shortfall and wait for the demand to recover? Or do you sell the house at a loss and walk away?

I agree with your assessment. This area is not a real “destination vacation spot” in the sense of Virginia Beach or Outer Banks. People mostly come for the weekends, so even at the highest occupancy you will have many empty Tuesdays Wednesdays and Thursdays, especially during the school year.
And I believe this kind of spur-of-the-moment trips are most affected by negative sentiments like a bad economy or high gas prices.

On the positive side, people don’t plan this kind of trips 6-12 months in advance. So it’s likely some of the dates will get filled in 1 month or even 2 weeks before arrival.

The real challenge is the high purchase price in relation to the ADR. I have been watching this area for more than a year and I have not seen a single listing on MLS that will produce sufficient cash flow (with a comfortable margin) based on its asking price and the likely revenue it will produce. If someone bought a property 2 or 3 years ago at half the price as your property (bought today), he can afford to charge a lot less or have a lower occupancy rate than you since his mortgage payment is only half of yours.

I own a short term rental remotely, and I hire a property manager to do it. It’s not worry-free because I basically have to manage the manager. Nobody takes care of your property like you do. However if I try to manage myself, there will be much more work because I will then have to manage cleaner, handyman, landscaper, and various contractors. Many advocates of self management would casually say “you just need a good handyman and a good cleaner”. Well, last time I checked, they are not available through Amazon Prime that I can place an order and get delivered in 2 days. A PM’s main job is to find these contractors for me and fire/hire new ones if necessary. 

It’s never a good idea to take advice from strangers, including me. It’s more dangerous when such advice gives you a benefit, which makes you want to believe it. 

Based on what I know, you cannot deduct expenses related to travel and research a property unless you actually purchased that property or at least a property in the area you traveled to. Otherwise what is stopping me from deducting every Hawaii or Disney trips, because I’m always thinking about possibly buying a house in Hawaii or Orlando. And even if you do buy a house and start a rental business in the area you traveled to, the expenses incurred prior to the start of the business is added to the cost basis, which is to be amortized not deducted. 

At today's real estate price, Massanutten is a tough place to do STR and be profitable- you are competing not only against other STR properties but also the resort who is pushing their timeshare units with all kinds of incentives.

Real estate is not much different than any other business. The people who are successful at it are likely to be successful at other business if they had chosen to do those, because they have the entrepreneur spirit and the grit and smarts. On the other hand, people who don’t have the skills or work ethics to thrive at a W-2 job are not likely to be successful at real estate investing either. There is no magic in real estate investing, it takes the same kind of discipline, hardwork, and intelligence as any other business.

Hi, my beach house STR needs some replacement kitchen chairs. When I bought the house, all the furnishing came with the house so I didn't have to do anything. Now, a couple of years later, several of the chairs are banged up pretty bad and need to be replaced. Those are clear plastic chairs -- very good looking, and because it doesn't have any upholstery, super easy to clean. I can understand why the previous owner bought them.

Now it's time for me to replace them, I am wondering if the the clear plastic chairs are too much on the "cute" side, not enough on the "sturdy" side.  I would appreciate recommendations on good kitchen chairs.  Because it's for a beach house, I would prefer to stick with non-upholstered kind.  But more important than anything else is the sturdiness.  I don't mind paying more for good quality, but nowadays, price and quality are not necessarily correlated.  A $500 chair can be just shoddily built as a $50 chair.  

Thanks for your help.

Lisa