Happy Thursday!
Today’s message…..
Is now a bad time to buy a short-term rental?
A loaded question, right?
There are a few reasons you might think it’s a bad time to buy.
1. Housing market is softening.
2. Interest rates are going up.
3. Recession is coming. These are all valid concerns.
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648 Michigan zip codes
with projected revenue
Housing prices seem to be coming down.
Obviously, real estate is so segmented that what I’m seeing in SW Michigan can be different from what is happening in Austin, TX. But, if you’ve been waiting for prices to come down, here’s your chance.
Interest rates are going up.
Interest rates were going up like a rocket!
We almost locked in one of our deals at 7%.
Luckily for us, that bank rubbed one of my business partners the wrong way. So we went looking for a different lending partner.
Now we are looking at 6.25%.
So yes, higher than they used to be but there has been a nice pullback as of late.
Recession is coming.
Let us look at historical visitor trends during times of economic slowdown.
Below you’ll find year on the left and number of visitors on the right.
Smokey Mountains National Park
Yellowstone National Park
Joshua Tree National Park
Here’s the link to pull data from other parks as well: https://irma.nps.gov/STATS/Reports/Park/GRSM
I’d look at 2008 and 2009 to see how drastic of a slowdown it was. Did travel fall off a cliff?
You decide.
Ask yourself: How does travel change if funds are tight?
My mind goes to:
- More shared travel where you split the cost of a place with family or friends.
- Less dining out and more cooking for the group. Good for vacation rentals?
- Less air travel and more driving.
This is a topic we discuss often and guess what: We are still buying.
We closed on a 5 unit last quarter and are hoping to close on another 5 unit before the end of the year.
Both to be used as short term rentals to host large groups. Stay conservative. Run the numbers.
Shave some off the projected revenue.
Add additional expenses.
If it still works, then it is a time to buy that house.
Here’s the sheet we use to analyze properties:
https://docs.google.com/spreadsheets/d/1wHHalQ-Ek23DcuA4aqz9eEcikrCOD3eXEemAQkK9PQg/edit?usp=sharing
It is view only, so make a copy and edit your copy.
Enter your properties info and double check the numbers.
Remember, it’s not investment advice, just tools that can hopefully help you on your journey.
Michigan Home That Does $100k Plus in Revenue
Meet “Out of the Blue,” a luxury 5,500 sq ft vacation rental in South Haven, Michigan.
2022 was the owners first season renting this property and they did over $100,000 from June to October.
I can see why!
What I love about this place:
- Updates: It has a very modern feel with the furniture, bathrooms, kitchen, and amenities looking brand new.
- Seems to have a beach view from just about everywhere in the house
- Amenities: Ping pong, pool table, beach rafts, beach chairs, etc. The beach amenities are so helpful, allowing guests to pack lighter when they travel.
We often get asked about beach chairs but we don’t have them.
Great touch here.
This would be a great stay for multiple couples, multigenerational family stays, or bachelor/bachelorette weekends.
Check it out on VRBO.
Check out the latest podcast episode 3 Ways to Separate from the Competition
Three ways I can help you:
1. I can be your realtor for your short term rental. Reach out to me on LinkedIn.
2. I can manage your short term rentals. Visit our vacation rental property management site.
3. Work with me 1:1 to find and setup your first vacation rental.
Have a good week!
Tony