Like many here, I am preparing for a major slowdown in both the stock market and housing market over the coming years.
I’ve long been interested in buying prime vacation rentals and starting a side business. This seems especially interesting in a downturn as vacation property prices tend to experience more severe price fluctuations.
Am I crazy to do vacation rentals versus the more traditional rental close to home?
How will you manage the vacation rentals? Do you plan for short terry rentals? Some cities ban Airbnb
Vacation rentals are highly risky. Like hotels they will suffer more than longer term rentals in a recession and are subject to local politics. Many cities are banning them.
I’d focus on short term rentals in prime spots like Big Island. I’d try to pickup properties during downturns when vacation properties get hit especially hard.
Has anyone tried this?
The Big Island is subject to local anti tourist laws. Suffers greatly in a recession and has limits. Maui, Honolulu and Kauai are better bets. The Big island has few beaches and tourist amenities. Better to stay at a resort than a vacation rental house or condo.
Maui and Kauai are my two personal favorites.
Are there other prime destinations that are favorable to vacation rentals?
More importantly will you use it. VHRs are rarely great investments. You should pick one you would use yourself. Management and local fees can take 50% of your profits. Plus 50% occupancy is a good bet on the amount of time a place will have guests. Even hotels are happy with only 65% occupancy. And closer to 50% during the recession. So figure 50% of 50% of gross potential revenue.
That means you will lucky to get 25% gross potential income. At $100/n that means $9k
instead of $36k potential.
Less taxes, mortgage, maintenance, travel, weather cancellations, insurance etc. Meaning most vacation rentals lose money even if you pay cash.
Long term local rentals are a much better investment.
Yeah I think the Airbnb wave has been overdone now. It may be profitable a few years back to buy properties specifically for Airbnb but now that window has closed I think because of competition and local policies.
I like the idea of buying student rentals better.
What kind of pricing cycles do student rentals typically go through.
At first blush, student rentals seems like they’d be resilient to downturns so it’d be difficult to get in at a good entry.
Thanks, this is super helpful. Makes sense.
College tuition goes up at 8% a year. Rents following like a parasite are a sure thing. High maintenance though.
If people like warren are elected and college became free students will blow their money living large.
If you were starting from square one right now looking to buy a rental property, would it be student rental? What else would be at the top of the list?
My favorite is self storage. Look at Trailer parks. Multi Family. I just invested in hospitality. A hotel in Sunnyvale
And am dipping into REITS.
Bought MTN at 181 now 228 pays 3%
Can buy a REIT index fund that pays 3%
I am not currently into student housing. Might want explore REITS that do that.
ACC and EDR are two student housing REITS. EDR was acquired by Greystar last year.
For self storage I prefer EXR to PSA. They tend to be interest sensitive but recession proof.
@Elt1 was right ON ! more than one year ago.
What is the situation now with AirBnB …It would be a good time to pick something in hawaai ?
People are definitely buying in Tahoe even though VHRs are being phased out in the city of South Lake Tahoe. WFH is the new mantra.
As far as Hawaii, the 14 quarantine may destroy their tourist and housing businesses.