All Forum Posts by: Sean Bramble

@Dawn Asher @Junee Gam ... and anyone else who operate STRs in Three Rivers, i have an underwriting/ financial projection question:

 I spoke to someone the other day who mentioned that Airbnb only recently (within the last year) started charging guests the 10% occupancy tax at checkout. Before this, it was up to hosts to pay up at the end of the tax year, which made their gross revenues look artificially high (because they were pre-occupancy tax). This switch creates an issue for me as I run financial projections on deals - I've been projecting based on specific comps using past 12 month data from Pricelabs/ Airdna, etc. who scrape the web for rates at the time of booking and combine them into yearly revenue totals. But if Airbnb only recently started collecting occupancy taxes from guests, it means the months before the switch shows revenue 10% above what they actually were after taxes. (My assumption here is that guests are only willing to pay so much, so if you're charging them directly they'll spend less from a daily rate perspective. 10% is a big miss in projections, so I want to be sure I'm factoring occupancy taxes in correctly.

Do any of you know exactly when Airbnb started automatically collecting occupancy taxes from guests in Three Rivers?

Thank you!

@Junee Gam

Everything Ryan said!

Many long-standing vacation markets link permits to properties, which makes them transferrable. i.e., once you have one, you own a hospitality asset that can be sold in the future as a business rather than a "home". i.e., sell at cap rate instead of based on comps. Either that, or they won't ever cap permits, making your investment just as transferrable. These markets are WAY more business friendly, but I've noticed cashflow is often lower given appreciation driven by recent flood of investors/ second home buyers. Think Destin, Smokies, blah blah ... you know where I'm talking about

Then you have rapidly developing "new" vacation markets in more rural areas where counties/ towns are still figuring out how to treat STRs. I've come across a few that seem somewhat dependent on occupancy taxes (i.e., probably won't outright ban STRs in the future), and require nontransferable permits linked to people (not properties) which haven't been capped ... yet ... could happen eventually if enough locals complain. So they're STR friendly today, but tomorrow is unknown. If they cap permits, current investors will likely get grandfathered in and be allowed to continue operations, but they won't be able to sell later at the premium STR cashflow implies bc permits aren't transferrable ... so not-so-great exit options. You'd be selling based on comps instead of cap rate and miss out on a lot of upside. That said, capping permits caps supply, so your cashflow is assured to remain high if you keep the property. OR maybe they won't cap at all ... no one has a crystal ball.

Cashflow tends to be higher in some of these "newer" markets, but the risk profile is a totally different ballgame - higher risk, higher return, but possibility that new regulation hurts your exit options and causes a lot of headaches. THESE are the markets I'm interested in - just my personal preference and risk tolerance

Anyone out there pursuing similar off-the-beaten path markets? How do you think about these risks?  Would love to hear your thoughts/ investment philosophy

Thanks everyone!

I live in a tiny apartment in NYC, so we're constantly having to get creative with our storage space ...

Couple of ideas: storage bed, storage ottoman, other furniture like a credenza or TV unit. You can manually add locks to all of these so that guests can't access. You could even build in a bottom compartment to your closet that has a lock (if you don't want to lock the entire closet)

Evolve isn’t the best at revenue management based on my research, so they could be leaving money on the table pricing too low in high season/ too high in low season. I agree with the others here - your best bet is to look at comps in the area. You can skim their calendars on Airbnb for a rough idea, but that can be somewhat misleading depending on whether you’re in high or low season. A better option is to subscribe to a Market Dashboard through Pricelabs for your area and look at the estimated actual revenue each listing captured. You might even find this exact property on there, but either way there will likely be similar comps you can benchmark off of. This only costs $10-20. Rabbu is yet another option that will give an estimated revenue and some comps. Good luck!

Hmm ... hard to say bc it's obviously deal dependent, but if you're focused solely on Texas beach markets and prioritizing cash-on-cash returns check out Aransas (near Corpus Christi), Surfside, Gilchrist and Bolivar (all near Galveston), and Port Isabel (near South Padre). That said, if you're willing to venture a bit outside of Texas you should check out Gulfport/ Biloxi, MS which is one of the best beach markets in the US for cashflow today. I also think there is a lot upside in these markets for design-centric listings - these are mom and pop beach communities desperately in need of new investors breathing life into the area. Caveat: check local regulations on all of these places by calling town halls directly. Assuming you're good regulation-wise, I'd recommend setting up searches in all of these areas, underwriting properties as they hit your inbox, and eventually pulling the trigger on whatever seems like the best deal. Good luck!

One clarification: by "high ROI" I really mean high cashflow

Warning: long-winded question ahead ...

I've seen a few attempts at software that helps investors find high ROI STR markets ...

> Airdna had one I believe they retired (not Market Minder ... forgot the name - plotted a bunch of triangles in a matrix)

> Mashvisor currently offers a heatmap feature for "Airbnb COC return" - cumbersome, but you can manually scroll across the US and look for green areas while pulling your hair out every time their interface freezes

> I'm actually beta testing a new platform a company called STR Insights is launching that displays the same data in table form with a map feature as a bonus to double click into individual markets and see where high performing listings are located

All 3 are essentially doing the same thing: comparing average STR revenues (scraped from Airbnb/VRBO) to average home prices (scraped from Zillow, etc.) and converting them into a ratio. I'll call it "gross ROI" (avg revenue / avg sales price within the same bedroom type). The ratio ignores all PITI and operating expenses, so it's not the "real" ROI, but if you compare it across markets you should get a sense of the relative affordability of STRs ... higher ratio implies higher return ... in theory ......

I'll admit that software like this has been useful for me to identify a few geographies I wasn't previously considering, but i'm starting to notice major limitations as well. Specifically, ratios change significantly and extremely often in many markets, which has me thinking this sort of software is plagued by low sample sizes ... at least outside of major areas with lots of STRs and home sales. It also doesn’t work well in markets where high performing listings are all in a specific area (like a beachfront). Not to mention it ignores all the other qualitative variables that will help or hurt your eventual return (especially how professionalized current competition is). I know software like this is only designed to do a light scan across markets before diving deeper yourself, but I'm starting to wonder if it's even that helpful as a first step. 

Maybe that's why Airdna discontinued their solution for this in the first place ... who knows ... scratching my head a bit here

Any quant nerds in here like me who have used software like this before? Where have you found it to be useful, and where does it fall short? Are there better ways to identify high ROI markets?

... also bracing myself for the number of replies that mention "analysis paralysis", haha ... well deserved :)

@William Hamburg well done! Question: was this flip designed with exiting to an STR investor in mind?

I’ve  been wondering about a flip-to-turn key investor model in some of the markets im looking into (east coast)

There are a few other forum posts on this topic you should search. I was looking in these areas over the last few months and can confirm that they are very STR friendly and locals in the markets expect them to remain so (lots of second home owners renting their places when they're not around … there have been a few city council meetings where STR owners took a stand to ensure it would remain legal). Hunter, Windham, Jewett are safe, Lexington has some limitations that may or may not be flexible (capped currently, but there is word they will increase the # of allowable permits soon), and Prattsville hasn't weighed in yet. But Hunter, Windham, Jewett are the sweet spots for demand anyway.

That said, revenues seem to be declining since the highs of the pandemic, so be sure to consider that in your underwriting. Specifically, shoulder season this year (Mar-May) seems be lower than 2021 … so it will be interesting to see how summer performs vs the pandemic years. For now, I would recommend being very conservative in your underwriting - assume 2019 was a “normal” year, and keep an eye on this summer to see if you can adjust expectations upward. Airdna shows historical going back multiple years, but Pricelabs has better granularity for looking at the market today (and is cheap as hell - just draw your own radius and pay $10-20 p/month).

Beyond that, property taxes are generally high in NYS vs other states. This really infcreases your PITI and decreases cashflow, but as they say - if a deal works it works regardless of any one variable

PS- there is a forum called “Short Term Rentals” on BP - if you post on there you will probably get a lot more responses than this one

feel free to reach out to me directly if you have any other questions - happy to help! There are a few agents I can recommend, but beyond that this is the info I have. Good luck!