The threads about short-term rentals in Pirate's Beach and New Braunfels led me to google how local communities are handling STRs, and the news reports were pretty sobering.

This list on the website Business Insider lists 25 popular vacation spots that are cracking down on STRs, including places like Waikiki and Palm Springs.

https://www.businessinsider.com/cities-fighting-airbnbs-with-regulations-for-short-term-rentals-2022-5

Many of these cities are instituting homestead rules or at the very least local property manager requirements. Full-time residents appear to be winning a lot of these battles to outlaw or limit STRs.

What's this board's thoughts on the long-term outlook for STRs?

In my opinion, and that all it is and all its worth, but I think STR rental in non-resort areas will be a very tough business if not impossible due to regulation in the near future.

True resort areas (that are not very high end like Aspen/Palm Springs etc) will not regulate you out of business, although at some point you have to worry about over saturation. Prices in resort areas already use STR income potential to price the property. At some point, for those who pay top prices assuming the income will stay the same or keep going up might have trouble. I take multiple calls, as do my loan officers, from not particular sophisticated would be real estate investors and more then not they are looking to buy STR properties.

Jay - do you guys have specific STR loan products? I remember reading an article from this board about lending groups having specific products based on STR income. They were more expensive but in some cases required little to no down payment.

we have products that will use a % of airdnd.com estimate for a property. How ever, they do require 20-25% down payment. You are not going to find a non-owner occupied program no matter how the income is calculated with nothing down.

Have you looked at the Airbnb platform since the updates last June? They see the writing on the wall, unique stays away from cities is what they want now. I am set to break ground on septic and electric to develop two RV pads on our Nueces River property this week. Those should be up and running on the platform in 2 months. We're also starting construction on a container cabin that I think will do really well.

The property is 15 acres with some topo that gives 50 miles views from the top. The rv pads will be at the bottom, the container will be about half way up the slope with lots of trees around for privacy. We have neighborhood access to three spots on the river. We have some hiking trails on the property and will add more. The best part is no HOA, POA or City to worry about.

We have been running 2, 1/1 apartments in our homestead about 1/2 mile from the Pearl and River Walk for going on 4 years. One apartment is lagging way behind, the other is still going strong. It's purely an algorithm problem, we have thousands of views for the good apartment and 25% of that for the dog. We're trying to get the slow apartment into mid term game with strong discounts. That's more from a diversification standpoint than anything else.

I THINK the one apartment will continue to do well enough for us to keep a presence but I have no doubt the CoSA is not on our side with them. There have been a ton of new properties added in our area, some are already selling furniture in the social media groups. One I know of was only open 3 months, brand new operator apparently purchased just for STR. Many in those groups don't even know how to work the HOT tax, it's a pain in the ass.

Long story short, I don't think STRs are going anywhere but you better be prepared. It takes a ton of work, a good property, willing neighbors and it better make sense as a long term rental just in case.

Since selling our STR, I've rented a lot of VRBOs, most in Texas.

Many of the houses we've rented are no longer STRs. One was impacted by local HOA laws changing. I know at least two that became long-term rentals. Others I'm not sure about; they just aren't listed any more.

Not sure if that says anything about the market overall. Could be that some of those owners sold for big profits during the pandemic run-up, and the new owners aren't interested in operating a vacation rental. But I find it interesting nonetheless.

Good thoughts so far. Our STR in Bryson City seems to have found a really good spot/niche. Very close to Smokey Natl Park without the stupidity of Gatlinburg and immediate surrounding areas.

Minimal local restrictions (none really), very low property taxes, low inventory of available properties, and a strong and very well established tourist draw.

It's done better than original forecasts since we put it on the market last September, and I'm looking forward to the busy summer months to see how it nets over a full year.

I only follow Colorado because we have a home there and have seen the results of too many STR in a residential neighborhood.

Breckenridge is divided into 3 zones. Commercial and historical districts can keep STRs, but subject to regulation and taxes. Residential zone allows grandfathered use of STR, however, when the owner sells, the home can no longer be utilized as a STR. It appears that STRs will be forced into the condo/time share market and slowly eliminated from the SFR neighborhoods.

Pagosa Springs is attacking on different levels. The upper end neighborhoods have for the most part, eliminated short term rentals by amending HOA rules. Our subdivision voted on it last year with about an 80% voting against STR. STRs within the town limits are facing new taxes, fees that have been approved by voters but are in various stages of legal dispute.

jmm said:

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I only follow Colorado because we have a home there and have seen the results of too many STR in a residential neighborhood.

Breckenridge is divided into 3 zones. Commercial and historical districts can keep STRs, but subject to regulation and taxes. Residential zone allows grandfathered use of STR, however, when the owner sells, the home can no longer be utilized as a STR. It appears that STRs will be forced into the condo/time share market and slowly eliminated from the SFR neighborhoods.

Pagosa Springs is attacking on different levels. The upper end neighborhoods have for the most part, eliminated short term rentals by amending HOA rules. Our subdivision voted on it last year with about an 80% voting against STR. STRs within the town limits are facing new taxes, fees that have been approved by voters but are in various stages of legal dispute.

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Can you elaborate more on what too many STRs do to a neighborhood? I don't live in an area with a lot of STRs. It's just an interesting topic to me.

Thanks for the reply

Reminds me of college when I decided to buy a condo. I ended up in a development that was 80% owner (or immediate family) occupied. The maintenance, the overall appearance, and ultimately the property values were night and day over a property I looked at that was in a development that was majority investor owned units.

Everything I saw in those College Station condos is exactly what you described in SFR neighborhoods. That was with LTR, so I'm sure even more pronounced with STR.

all good notes but do you think some of these mountain towns are cutting off their nose in spite of their face? those STRs get taxed out the ass and those people come and spend green as the earth money.

Not every place can be Aspen and occupied by gazillion-aires... although Breck is going that way.

Or is the city and its residents just trudging forward and saying "fine, rent a condo on the mountain".

We LOVE getting houses vs. condos when skiing. I like a hot tub on the patio, a garage and places to spread out.

that's a good point.

We frequent Winter Park and have for a long time... it was Colorado's best kept secret unitl iKon purchased it... now it's absolutely blowing up.

I recently saw that there's a local organization starting to build affordable housing for locals. I know, I know "free market, subsidize housing is for the leftists" but for towns like this.. it's needed.

Those lifties and bartenders need a place to sleep too. This is the type of stuff where Section 8 or whatever subsidies are needed and warranted...

Man, I wish we'd bought there 5 years ago. Crazy how much development is going on there.

well, but that is why I said like a restaurant owner or maybe even the local doctor. The lift workers and bartenders were priced out before STR with just second home buyers. Now even folks with 6 figure incomes cannot afford to buy anything in the high end places. They organize better then bartenders.

The combination of STR regulations/banning/taxation coupled with doubling of mortgage interest rates has had a negative affect on home prices in areas that I know. Part of management company/REIT/PE financial formula is the reversion or anticipated profit at the end of the holding period. That has been wiped out/restricted in the SFR markets and there is very little demand coming from that segment of the buying pool.

Best I can tell, prices in Breck have declined 20% or so in the past 8 months. That is OK with me since prices were insane at the start of 2022 when demand far exceeded supply. Now, SFRs are sitting on the market. There are only so many people that can afford multi-million dollar second homes. The second home market will continue to drift downward. Corporate owners will be placing homes on the market over the next couple of years since their financial returns are dwindling. Second home owners who leveraged their property are being squeezed into negative returns which will add more inventory to the market.

this is great info - I've got a separate thread talking about the beginning of looking at a property in CO and this is the type of info i'm trying to get a bead on.

We're likely a year or two away from seriously considering dropping the coin but I'd like to try and keep an eye on it.

I just don't see how these towns can sustain this pricing and it sounds like STR metrics for valuation/cash flow have driven everything up - "Hey, rent this for 60-70k/year and it's worth a ****pile!"

Hopefully "expensive" debt slows this down to somewhat of an equilibrium..

Crazy to think you could rent a nice house in one of these mountain towns for $5k/week a few years ago... a really nice one now may run you 15 or 20. Just NUTS.

So much gdamn money in this country.

jmm said:

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In simple terms, it is the view of ownership that is different. A home that is owner occupied has a pride of ownership component that a management company product does not have.

Let's use Breckenridge as an example. There are several neighborhoods in the city limits that are within walking distance to downtown or a very short car drive. They have always been in high demand. As the STR platform took off, individual investors could now afford to purchase there since part of the cost could be covered by rentals. Management companies got in the game because of the IRR that was able to be generated. What happened over time is that homes were no longer being maintained at the same level. Harsh weather is hard on exterior trim and it became very noticeable who was owning a second home and who was STR. The landscaping would become less of a priority. The multitude of cars parking each week would take a toll on the grass and driveways. It makes sense because the companies were driven by profit. Exterior maintenance, beautification of the yard and general cosmetic updating took a back seat to the number of bunk beds, size of the hot tub and how many flat screen tvs. Owner occupants began working with their HOAs to limit STR and the city became very involved.

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Another is that short-term renters bring a lot of problems. Parking issues, loud parties, overpacked houses, etc., etc. They add a lot of traffic and in some secluded vacation neighborhoods, it creates a perception of reduced safety because there are always unknown cars coming and going.

ChoppinDs40 said:

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that's a good point.
I recently saw that there's a local organization starting to build affordable housing for locals. I know, I know "free market, subsidize housing is for the leftists" but for towns like this.. it's needed.

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Do you know what they are called and if they have a website?

I don't actually - just remember reading it in an article somewhere,

ChoppinDs40 said:

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I don't actually - just remember reading it in an article somewhere,

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https://www.denverpost.com/2023/01/11/new-winter-park-employee-housing/

FincAg said:

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ChoppinDs40 said:

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I don't actually - just remember reading it in an article somewhere,

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https://www.denverpost.com/2023/01/11/new-winter-park-employee-housing/

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thanks!

I'm not certain if he posts here, but I do know his acquisition lender does from time to time. But the co-owner of Beach Box is a relatively young Ag. Him and his partner own more STRs on the Island than anyone.

www.staybeachbox.com

We own multiple short term rental properties and there always seems to be a constant battle between full time residents and STR . Another thing to think about is when issues involving STR come up for a vote or are an issue in an election guess who gets to vote? Only the local full time residents so even when they make up a small percentage of the overall ownership of the real estate in an area, they carry 100% of the votes that can decide on issues. I do think there are times though the owners shoot themselves in the foot on this if you are just talking about increasing their overall property value (which some dont care if they never plan on selling). We see the same thing in BCS. There are neighborhoods who have outlawed more than 2 unrelated people living in the homes to try and keep college students from living there. While I'm sure that is nice if you are living there full time and never plan on leaving it has a drastic affect on their home value in some areas.

I'm in Meeker and in the middle of a remodel of my home to rent out. Well, I should say I was going to rent it out. New town laws will basically make it uneconomical and nearly impossible to make this work for me. I am going to finish the remodel, as the house needs the updates anyways. I still may rent it out to hunters I know and trust but I no longer can advertise online or anything real visible. Our town is in the middle of the hunting central and lives off the hunters spending money here for 5 months a year. I dont understand why they are making it more difficult for citizens.

This was our towns justification of the new laws and such, but I think it is a crock of BS. Its a money grab and the effect of liberals from CA moving here wanting more government along with a bunch of Karens on our town boards.

Hoyt Ag said:

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This was our towns justification of the new laws and such, but I think it is a crock of BS. Its a money grab and the effect of liberals from CA moving here wanting more government along with a bunch of Karens on our town boards.

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Depends on the location, I'm sure.

For example, beach houses are magnets for big groups and parties. Loud music on the deck, lots of cars parked on the street, etc., etc. I've seen it first hand.

Galveston's west end used to have a private security service, funded by rental property owners, that would patrol neighborhoods and respond to rowdy guests. Not sure if they still do, but the reason it was put in place was to protect the neighborhoods for full-time residents.

That seems like a better approach than just banning STRs outright.

No argument here, I agree totally. The majority of the STR for our small town is for hunting and recreation, we are not a resort town. The people that come here have a lot of FU money and spend big on outfitters, places to eat, groceries, shopping, etc. They are not here to party or tear things up. Hence my feelings. Its not that they are shutting us out, it is things like no STR within 300ft of another one, annual permit of $500, and number of ppl per room rules.

ChoppinDs40 said:

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all good notes but do you think some of these mountain towns are cutting off their nose in spite of their face? those STRs get taxed out the ass and those people come and spend green as the earth money.

Not every place can be Aspen and occupied by gazillion-aires... although Breck is going that way.

Or is the city and its residents just trudging forward and saying "fine, rent a condo on the mountain".

We LOVE getting houses vs. condos when skiing. I like a hot tub on the patio, a garage and places to spread out.

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No, they don't need the tax money as bad as they need their city to not become a Walmart.

Yesterday, voters in Folly Beach (south of Charleston) voted to cap the number of STRs in their community to 800.

There are currently 1,200 operating in the area. The City Council will let the number dwindle organically as people sell their homes or fail to renew their STR license.

https://www.live5news.com/2023/02/08/short-term-rental-licenses-folly-beach-officially-capped-800/

mwp02ag said:

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Have you looked at the Airbnb platform since the updates last June? They see the writing on the wall, unique stays away from cities is what they want now. I am set to break ground on septic and electric to develop two RV pads on our Nueces River property this week. Those should be up and running on the platform in 2 months. We're also starting construction on a container cabin that I think will do really well.

The property is 15 acres with some topo that gives 50 miles views from the top. The rv pads will be at the bottom, the container will be about half way up the slope with lots of trees around for privacy. We have neighborhood access to three spots on the river. We have some hiking trails on the property and will add more. The best part is no HOA, POA or City to worry about.

We have been running 2, 1/1 apartments in our homestead about 1/2 mile from the Pearl and River Walk for going on 4 years. One apartment is lagging way behind, the other is still going strong. It's purely an algorithm problem, we have thousands of views for the good apartment and 25% of that for the dog. We're trying to get the slow apartment into mid term game with strong discounts. That's more from a diversification standpoint than anything else.

I THINK the one apartment will continue to do well enough for us to keep a presence but I have no doubt the CoSA is not on our side with them. There have been a ton of new properties added in our area, some are already selling furniture in the social media groups. One I know of was only open 3 months, brand new operator apparently purchased just for STR. Many in those groups don't even know how to work the HOT tax, it's a pain in the ass.

Long story short, I don't think STRs are going anywhere but you better be prepared. It takes a ton of work, a good property, willing neighbors and it better make sense as a long term rental just in case.

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This is definitely an avenue worth taking. We rented a vrbo down in Kerrville right after Christmas 2021. It was 10 acres with a big fishing pond. Kids absolutely loved it and actually kick started our desire to buy our own property.

Little stay cations with fishing etc and no hoa's or city ordinances are perfect.

EclipseAg said:

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Yesterday, voters in Folly Beach (south of Charleston) voted to cap the number of STRs in their community to 800.

There are currently 1,200 operating in the area. The City Council will let the number dwindle organically as people sell their homes or fail to renew their STR license.

https://www.live5news.com/2023/02/08/short-term-rental-licenses-folly-beach-officially-capped-800/

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Beat me to it, I was wondering how that came out.

Folly is too much of a fustercluck to even bother going to during summer. The only road in and out of the island is 2 lanes and that hasn't been adequate in forever now.

My parents live on the island in Corpus Christi. Several years ago they bought a condo a block from the beach to host customers. They never rented it out, it was simply a place for customers, friends, and family to stay when visiting. It was nice for family because it was a mile away (a short golf cart ride) to their house.

The neighborhood made it so tedious and raised so many claims of using it as a STR that they eventually just sold it because they were tired of dealing with it.