All Forum Posts by: Paul Haney

Thanks for the comments everybody. I think part of what's going on with the property/market I'm looking at is that the occupancy rates sky-rocketed last year (compared to 2019 and 2020). Hard to know if that's sustainable. The 68% CoC may get closer to 30+% if you use 2019 occupancy rates (Incidentally, I'm using airdna to assess this market, and I've found it to be very useful and reasonably reliable.) It turns out I do have the reserves to absorb transient losses, so I don't really pay as much attention to this.

In regards to my general question, I'm getting the sense that folks here do *not* believe there's a systematic gap (at least in markets that they're familiar with) between housing prices and STR revenues. I'm a total amateur so I don't trust my judgement much, but I felt like there was a gap (at least where I'm looking). I thought that the supply of STR's will therefore continue to increase, and rental prices and income will then come down to fill the gap.

Collin,

thanks for the reply.  part of what i take from your message is that STRs' income is highly volatile (compared to long term rentals for example), so that the cost of this risk makes up some of the gap that i'm seeing with the numbers...  

-paul

yeah, it was like 10% with the most ridiculously conservative estimates.  to be more concrete, if i take the listing price, compare to the net income from last year (where rates were high and the unit was rented out at over 90% occupancy), then i get 68% return!  based on this, i'm happy to pay waaay over the listing price.  makes me think i'm missing something.

I'm making offers on homes near a resort, where a large fraction of homes serve as STRs. As I crunch the numbers for how much net income can be expected from STRs there, it seems that the housing market prices do not reflect the STR income. They are priced too cheap, by a lot! For expected gross income, I'm looking at data from airdna and getting corroborating info from real estate agents / individual research. I'm adding a factor of 0.7 to account for other expenses, and getting easily over 10% cash on cash return. Am I missing something? Is the market not valuing STRs properly?

Thanks  -Paul