@Paul Wolfson in regards to your question about the 4 bedroom cabin demand I can shed some light. We are a property manager in the Branson area for vacation rentals since 2005. We mainly focus on stand alone properties of which many are 4 bedroom cabins. We are not in Pointe Royale as we offer our guests a unique experience. We currently manage over 225 properties ranging from 1 bedroom to 12 bedroom vacation rentals. Our 4 bedroom, depending upon amenities and location in 2022 for only nightly revenue (does not includes cleanings/sales tax/insurance) over $50,000 to $75,000. We are on target to duplicate this success for 2023 as well.
How is this even a question? It boggles my mind that there are people out there that are investing hundreds of thousands of dollars into a niche while being incapable of reading even the most basic reports on that niche.
Every quarterly report is the same. Quarter after quarter. STR demand is up, but STR supply is up more.
Everything happening right now is simple supply and demand. With supply increasing faster than demand, rates and occupancy of individual properties will decline unless your property truly stands out in some way. STR was easy money, everyone saw that and tried to jump in, so supply blew up until it was no longer easy money and it became something you actually have to work for. The same as every other growing investment vehicle ever.
Eventually supply will outpace demand by enough that people will start getting out of the game, supply will drop, and things will balance again. Then it will tip the other way. And back. And over and over again as these things have all throughout history.
It's easy to pick out the ones that will get out and reduce supply. If someone says "iTs ThE eCoNoMy" they will be the first to go. Because travel demand has never been higher in all of history. It blew up to unsustainable levels coming out of covid and somehow, against all odds, has only continued to RISE since then. Eventually it will pull back, and then the real fun will begin with these people that already think things are too hard when travel demand has never been higher.
One neat trick for tracking travel beyond Airbnb's own earnings reports (which are such an easy guide to what's happening on the platform it's amazing people don't read them) and AirDNA reports (which dumb it down for all of us, yet people still don't read them and make ridiculous conclusions based on anecdotes instead) is to read the earnings reports of credit card companies like Visa, Amex, Mastercard. They continue to list travel as one of their top performing categories, exceeding their expectations and smashing records every quarter.
So if these folks can't succeed in this during the peak travel demand in all of history, what are things going to look like for them when travel demand actually does have a totally normal and organic pullback/decline? They're going to quit, and their supply will be out of the picture.
When things aren't going great, there are two types of investors.
1) The kind that rationally examines the market and forces at play, looks at what they're doing and how it relates to that and how they can succeed among that
2) The kind that irrationally blames everyone else (usually politics), throws a hissy fit on social media, and loses money to spite themselves instead of looking at things rationally.
Shawn Moore actually had my favorite quote about this on his podcast. "People are quick to give themselves all of the credit when things are going well, and none of the credit when things are going poorly".
IE in the post-covid market where a blind monkey could throw a dart at a house, pop it up on Airbnb, and cash flow extensively, everyone that did as much thought to themselves "Wow I'm really killing it, I'm really good at this!". Then when the market settled into a more natural place where it's still relatively easy with travel demand very high, but requires a little work and is no longer the easiest way to make money ever those same people are thinking to themselves "well this isn't my fault, I'm not doing anything wrong, it's just impossible in this horrible market!".
Hello,
I have started looking for some STR properties in Oralando specifically the Kissimmee area. I'm working with the Short term shop agent and so far like it. I have a couple of questions for folks who have already invested in STR in Orlando.
1. How easy is it to manage STR remotely? Property management company charges 20-25% which I think will eat my profit. Managing by myself could be challenging but if someone has done it, I would love to connect and know the challenges.
2. When you bought an STR was it already furnished? A lot of deals that I see are already furnished.
3. If the previous owner has listed the STR on Airbnb, did you get to keep the reviews and listing as it or would you need to start again from scratch?
4. If my STR strategy does not work for some reason, possible to rent it long-term? I'm not sure about the long-term cash flow in the resort community in Orlando.
5. Is Kissimmee already very saturated or still hot? I can research other areas as well where there is less competition and still decent demand. I live in Seattle so it doesn't matter to me if it's Orlando or Miami. All I'm looking for is the numbers that make sense.
My budget is around 450k. For Orlando STR people say the bigger the better so would look for 4+ bedrooms.
Thanks,
Rachit
1) Orlando is very easy. Huge city with lots of STR (well, Davenport/Kissimmee of course, but people call it "Orlando"). Plenty of PMs more in the 15% range here with all the competition, but if you want to self-manage Orlando is as easy at it gets as there will be a zillion cleaners, handymen, etc to choose from, plenty of big box stores, instacart, same day amazon delivery, etc. Essentially, it's tier 1 in terms of STR infrastructure.
2) Yes, and strongly recommended. In Orlando, you want to spend your money on theming, not furnishing. You can spend $60k on furnishing to make your place look like all the 40,000 other rentals, or you can spend $60k on theming to make it stand out and be one of the top 1,000. The latter is not only the obvious choice, it's the necessary choice if you're working with a budget.
3) No. You start over.
4) In Orlando area you're most likely looking at the gated resort communities built specifically for STR. You won't even come close to covering the mortgage as a LTR. People that say you should make sure your property can work as a LTR too are talking about regular cities that aren't tourist destinations. Like in Akron OH you could probably buy a place that will work as a LTR if STR doesn't work out. But in tourist destinations like Orlando, Gatlinburg, Destin, etc it's not realistic. LTR rates in those areas won't even come close to what you need to cover the expensive mortgages that are driven by STR revenue.
5) Both, maybe? Everywhere is saturated now. The difference with the Disney area is that there have always been lots of rentals, so it's a different kind of saturation. In rural Southern Utah "saturation" means that there are 400 rentals now in a city that had 30 rentals 3 years ago. In Disney it's not that there are more rentals, it's just that there are more GREAT rentals, which means you have to really stand out, and when you do stand out you're still going to have more competition. That is, there are maybe 40,000 rentals now whereas there were 37,000 3 years ago, which is a negligible difference. But the major difference is that there may be 2,000 nicely themed properties now where as 3 years ago there were 100 of those.
450k purchase price or cash? 450k isn't really going to get one of the "big" places in Orlando if you're talking purchase price. "Big" in Orlando is 9+ bedrooms and unlike other markets, there are tons of them even in that size. That's not to say you can't do well with a 4-5 bedroom place, but just clarifying that's not what people mean when they say "big" in this market.
I'm not affiliated with STS but I know the STS realtor in this market and you're in very good hands.
I own a property that does very well in Champions Gate, and also manage a handful of other properties in Champions Gate, Solara, and Storey Lake.
This is the property I own: https://www.airbnb.com/rooms/5...
You have a very good understanding of the area already. Most of the questions you had that you speculated on you pretty much nailed. I don't manage any in Reunion but when we looked at properties to buy ourselves we came to the same conclusion as you. It is a nicer neighborhood, with typically lower ROI. The nightly rates are higher, but so are the home prices, and the bump in home prices is greater than the bump in nightly rates.
So on that front, you've nailed it in that you really need to choose which is more important to you between using the place yourself or maximizing ROI. One thing that surprises a lot of people who buy remotely in the non-Reunion resorts is that, despite being really nice neighborhoods with really nice homes, the other resorts can feel kind of trashy while you're there. The houses are all jammed together and some of the PMs are renting out 9br homes for $100/nt to bad guests that play loud music and get into big fights outside. Cars are piled up everywhere on the street, etc.
Other times of year when rates are higher it's better, but that kind of stuff has definitely gotten more and more prevalent with the increase in competition driving down rates and bringing in worse and more "party oriented" guests. Even if you're taking good care of your place the 4 houses around you may not be, and your guests (or you when you visit) may end up outside in your pool overhearing a drunken family argument 15 feet away next door. (One neat trick for this is when you're looking at a property, pull up the homes next door on the Airbnb/VRBO map and see if they are nice homes with good rates or if they're unthemed party pads renting out for super low rates and getting trashed).
But, on the flipside of that, a 5-6br home in Reunion is going to cost significantly more than a 9br home in CG, and if themed out well that 9br home in CG can compete with the 5-6 BR themed home in Reunion on revenue despite costing 50% less.
Additionally, like you mentioned, the PM requirements for amenity use are going to be a major roadblock for you if you want to prove material participation for taxes. It is going to be difficult to prove material participation if you're using a PM (and you're already fighting an uphill battle on that if you're a W2 worker and you're trying to prove material participation for yourself rather than a non-working spouse).
In terms of the neighborhood, the big choice is Reunion vs. all the rest for the reasons above. Once you decide one of the rest, it's not a HUGE difference between them.
A quick breakdown of them would be.
Windsor Hills is the OG resort and by FAR the closest to Disney. The homes are older here so may require more renovation work if you're not buying an already renovated one, but you know the three L's of real estate and this neighborhood smashes all the rest on that. If self managing do note that the gate system is notorious for being a the world's biggest PITA.
Storey Lake is the 2nd closest to Disney (once traffic is accounted for, because you don't have to touch I-4) and is one of the newer/nicer neighborhoods. Guests will pay a small premium for this and occupancy may be slightly higher, but home prices are a fair bit higher as well. You're looking at $1M+ for a non-themed newish home there, whereas the homes in Champions Gate are a good $200k+ less and you could buy a fully themed property in CG for less than an unthemed one in Storey Lake. But again, you can't move the location.
Champions Gate is generally one of the cheaper neighborhoods and still really nice, but also the furthest from Disney. It was one of the first to really take it up a notch after Windsor Hills so some people still actively search out "Champions Gate" directly, but if your place doesn't stand out there with really good theming it's going to be harder because location is not on your side. One less-known advantage of Champions Gate is Passover. The HOA works with the Jewish community to basically turn the whole neighborhood into a Passover hub and orthodox Jews from all across the country travel specifically to CG for the holiday. So you get a free two week booking at Christmas rates (we actually booked 14 days all at ABOVE our Christmas rates this year) in April that none of the other resorts get, which is a nice headstart every year.
Solara would not be my first choice as home prices are higher like Storey Lake, but the location is not as good so it doesn't rent at as much of a premium. Still a nice neighborhood though. Nice self management bonus is that you don't have to put names on a gate list like most of the rest, as the resort takes care of that part.
Windsor at Westside I don't have personal experience with but people seem to do well there. Location is just okay, but the neighborhood is very nice and the "Windsor" name does carry some weight.
Solterra is the only one I would avoid. Old. Reputation for crime. Bleh.
All in all, the main piece of advice I would give people in your situation right now is that you need to REALLY do a good job on the theming (or buy one that is really well themed). Two years ago just giving it your best shot on theming meant automatic success. But now with higher prices/rates along with a lot more themed competition you can definitely still have a themed property and not cash flow. You've not only got to put in the effort of theming, you've got to actually succeed with it and creating (or finding) something that really resonates with guests.
- Reasonable STR Laws already established
- High revenue
- Don't cost an arm and a leg to get into
Choose 2.
Pre-2022 you could find markets that had all 3, but not now.
I think guests have definitely gotten worse as Airbnb has captured more of the hotel crowd. Now a lot of guests expect all of the conveniences and scalability of a hotel in their STR, while simultaneously expecting the personalized and custom support of an STR.
I've been staying in STRs since the 90's and back then you had to bag your trash and take it with you in your car when you left. And you were happy to do it because you got to stay in a cool 4br secluded mountain cabin with a view rather than having to buy 4 separate hotel rooms in town with the crowds.
Now these whiners (and it's all over social media) ##### and moan for hours about having to do their own dishes or leave the towels on the bathroom floor.
Same thing with supplies. Every STR we've stayed in even the last 10 years the first thing we always plan to do when we arrive is go grocery shopping and pick up paper towels, etc. And we always pack detergent and shampoo. But now guests expect everything to be provided. Which is mostly fine because we've always provided them at our STRs, but more as a courtesy than a requirement. Now if there's not 3 months worth of supplies there people are whining about it. "Uh, there were only 14 Tide pods left when we arrived, how are we supposed to vacation like this?".
I'm just glad I have large properties where most of our guests are old school STR travelers who are actual reasonable people. I've got to imagine it's a nightmare with smaller condos in town where the competition is a lot more hotel specific.
I felt sorry for the owner of a place we stayed over spring break in Havasu city. 4br house with the coolest pool you've ever seen. Swim-up bar with full outdoor kitchen, waterfall, diving platform, two fire pits, etc. Looks like something at a 5-star Hawaiian resort, not a private home in Arizona. All for like $253/nt. Then the owner texts me and says something like "I'm really sorry to even ask this and don't want to inconvenience you, but would you mind taking the trash cans to the road on Wednesday morning. We can send someone out to do it if it's too much of a hassle".
And I'm just thinking to myself "JFC, of course I'll spend the 10 seconds to wheel the trash cans 20 feet so you don't have to pay someone 40 bucks to come do it or drive an hour and a half roundtrip from your residence to come do it yourself." But I know they're only asking in such an overly gentle manner because they've had stuck up brats before (and seen plenty on social media) whining about how if they stayed at a Hilton they wouldn't have to "pay a cleaning fee and then clean the property myself", where apparently spending 10 seconds wheeling a trashcan 20 feet is "cleaning the whole property" themselves.
Again, I'm just glad I have mostly larger (and some rural) properties where those kind of guests aren't frequent. I see people whining about it on social media all the time and it just grinds my gears though.
In the current market, you get out what you put in.
In the peak of the post covid market you could get away with 30-120 minutes a week and relax. Just throw it up on Airbnb/VRBO with dynamic pricing software and places would rent themselves.
But with saturation and competition much higher now, if you want to maximize revenue, you've really got to put in more time.
Some people can still get away with a minimal time investment because they are on pre-covid mortgages and don't need to come anywhere close to maximizing revenue to cash flow nicely. But if you're buying at current prices/rates it's unlikely you'll be able to just throw it up on the OTAs and watch the money pour in automatically.
On the Orlando home in my profile we did $185k during peak covid and should come close to that again this year. But I'm spending A LOT more time on it this year to keep those numbers up. And the people in that market still spending the same 30 minutes they spent during peak covid are seeing huge drops in revenue and blaming everyone but themselves for it.
And we're all basing this off a Yahoo article! Somebody should call a stock expert to explain just what percentage drop is actually a big deal.
Where are you getting this notion? Did you actually read the posts? Most that are critical are speaking of the poor business operation or outdated model, not some article.
As for stocks, there is no universal % drop, it varies stock too stock.
If O dropped 5%, in 1 trading session people are going to flip-out wondering what the heck is going on. If TSLA drops 5% in one session we shrug and say "must be a Tuesday". ZG/Z can move on average ~2% any direction any given day but any blip in the news and it's an up-to 10% roller coater ride of up's n down's and again, not a big deal, just is how that trades. Hence how day traders make $.
I have a feeling your not as clued into stocks as thought you were, maybe, possibly.
Err, which category do you think a highly volatile 40 P/E growth stock that ran up 200% on its IPO day fits into?
The stock has already recovered a big chunk of the move. It was just traders having fun with some short term volatility off a hit piece like we see a dozen times a week in the market.
The book direct movement is not new. It's been going on for years. It can make sense for the right person but a miniscule percentage of hosts follow through on it and a miniscule percentage of that miniscule percentage are able to do it successfully enough to leave Airbnb behind.
I don't like ABNB stock as an investment at all because there is WAY too much future growth baked in to a company that has already had captured the majority of the growth in their market but this silly report is about 100th down the list of bullet points to consider when investing in the company.
Can't believe Airbnb did not see this coming.... Did they really think that hosts would never think to take on repeat visitors?
But I'm not surprised I guess. Most of my dealings with them have been with young, woke fresh out of college types, not very business savvy. But wouldn't you think that the people at the top would be more astute?
More astute to do what?
The company's valuation is $70bn, up 35,000% in the last 10 years and 7,000% in the last 5 years. I think they're pretty happy with the choices they've made. It's one of the most successful and fastest growing companies in the entire world.
5 years ago VRBO/Expedia was 14x larger than Airbnb. Today Airbnb is 5x larger than VRBO/Expedia. I would imagine that qualifies as pretty business savvy.
I didn't realize the stock was up 35,000%! It would be a funny exercise to see if we just took all the money we have into the rentals and put it in the airbnb stock when it went IPO which path would of made us more money. I agree with you otherwise, airbnb is frustrating but it isn't going anywhere.
The company wasn't public back then so if you wanted to own a piece of it you'd have had to find a way to invest privately.