Exposing the Get Rich Quick Scheme of Short-Term Rentals 

Companies like Airbnb and VRBO have paved the path for centralizing short-term rentals. While they have been a hit since their inception, Covid propped them up like a golden child. Over the past 2 years or so, the short-term rental market has exploded. Many areas experienced a price increase that more than DOUBLED due to a huge demand for short-term rental homes—Areas such as 30-A, Blue Ridge, and Gatlinburg.  While certain areas will maintain a sustained level of demand, the numbers are starting to trend down. Part of the issue is the sheer over supply of short-term rentals. It became the popular investment during covid that everyone and their mother thought they could get rich running an Airbnb. For a short time there, you probably could. However, many did not realize it is a full-time job on its own. Want to pay a management company to handle it? Good luck finding one that will produce a cash-flowing asset for you, and even if you do, majority of the profit you imagined will get eaten up in management fees, bed taxes, and repairs.

Many buyers fall under the spell of "If it cash-flows, forget the rest", and while this works in a bull market, a slump in demand will leave you with sleepless nights. I expect there to be a huge hit to the Airbnb market in 2023. We are seeing demand tighten across the board as the FED holds strong on crimping inflation.

Not all DOOM & GLOOM...You can still make money running STRs, but you need to look at more than cash-flow. You need to focus on the purchase, where you can find outsized returns besides cashflow. Value-add properties—Ones that are in need of a renovation. Think of grandma's home with the shag carpet, yellow walls, ugly kitchen, but still has a solid foundation. Especially in investment markets like 30A, people DO NOT WANT TO DO THE WORK. This is where you can take advantage, get outsized returns, and cushion your investment. 

Focus on this:

  • Dial in on destination areas. Think of areas where you can go to the beach, mountains, skiing, etc. If you are at the beach, be on the water or within walking distance. If you are in the mountains, be as close to the action as you can. *not a cabin in the middle of the woods*.
  • Make sure you are focusing on the purchase. Do not only focus on the cash-flow. If you can handle a cosmetic renovation, find grandmas house. 
  • Plan to self-manage if you can. If done right, this is where you will see outsized returns. If you must hire it out, try to seek out a smaller local company that knows your market, keeps rates competitive and doesn't undercut to boost occupancy *this is important*. I often see self-managed properties do 20-50% more yearly revenue then professionally managed units. AVOID large management companies like the plague. 
Posted by Carson Hulak on


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