7 Signs Your STR Demand is Likely to Increase

One of the most basic fundamentals of real estate investing is supply and demand. And I've got some little belated stocking stuffers for you. I hope you had a merry Christmas. I've got seven reasons this week why the demand in your market might be increasing, which means more money for your short term rental. Stay tuned. Welcome to Short Term Rental Riches. We'll discuss investing in real estate, but with a specific focus on short term rentals. Quick, actionable items to acquire, manage and scale your portfolio. I'm your host, Tim Hubbard.

Welcome back to the Short Term Rental Riches podcast. I'm happy you're here again. There's a lot of doom and gloom out there. Actually, there's always a lot of doom and gloom out there that the market's crashing, that we're in a recession, that we're going into recession, that we're going into a depression. But of course, there are always two sides to every story. Right? This week I wanted to give you seven reasons why your property or your market in general might have more demand coming to it, which means you've got a better investment, you've got more money in your pocket. So let's just go ahead and get right into it. Number one, new market attractions. So what do I mean by this? This could actually be a lot of things, but basically this is a reason why more people are going to visit your market or visit your neighborhood. So a quick example, a convention center or an amphitheater, something that' going to bring events in your space. And a lot of times these amphitheaters or these event spaces, they don't just bring music events and sporting events, but they also bring business events. Right. So that is a really good one. That's something that has happened in some of the markets where I have properties. Another quick example, and this is sort of an extreme one, but as many of you know that have been listening to the podcast for a while, I've properties my personal portfolio spread across multiple states, multiple countries. One of those properties is in southern Brazil and they just announced that they're opening South America's largest cruise terminal, cruise port, which you better believe that's going to bring a lot more tourism into this specific city. So I'm really excited for that. They haven't started building it yet, but it is on the radar. And how did I learn about this? I'm not actually in Brazil right now. I'm in Colombia and I learn about a lot of the city development through YouTube. So if you missed our episode on YouTube research and how it can really, really help you to identify good markets and opportunities. Go back and check that out. You can see all of our episodes@str riches.com so those are a couple examples. Obviously those are really big wins if we happen to be in a market where a new attraction is coming and going to be built and stay there permanently in our city. The next reason why demand might be increasing in your market, in your city is is if there is a new development going on on our city or our neighborhood, wherever it happens to be. So obviously these are awesome things as investors to get ahead of. But these could be things like hospitals, for example, these could be things like universities. And remember, anytime we have these big construction projects, we also need construction crews, right? So we have people coming into the city temporarily that are going to be living there. And sometimes these can take a couple years. So that can be a really good opportun for those of us that have short term rentals in these places. Now remember, if someone's adding a hospital to a market or your area, that's not just going to bring in temporary demand for your short term rental, but that's going to bring in temporary demand indefinitely. And what do I mean by that? Well, when we have people stay in hotels, a lot of times they're traveling from far away, right? Especially if it's a specialized hospitals. So we've talked a lot about traveling nurses on this channel. That can be a really good opportunity. So you also have the patients that are coming to stay in those hospitals and then you have the families of those patients coming. And a lot of times they're staying right by the hospital. So if there's a hospital coming to your market, that is a really good one. It's also one that I think is just a sound fundamental for real estate investing because our demographic in the US is aging and medical is going to become more and more important. So those are a couple sort of temporary projects, but with a long term play in mind. Number three, new events. So not attractions, not temporary projects, but actual events. What am I talking about? Taylor Swift. Taylor Swift. If you have a property and Taylor Swift's coming to town, you better believe that your average daily rates, your ADRs are going to go through through the roof. But it's not just Taylor Swift, right? It can be all kinds of events. So it could be the Olympics, that would be a massive one. It could be the super bowl, that would be a massive one. Where there's just a ton of demand coming to your city. Now remember, you don't Want to buy an investment based off these small little demand spikes. Right. We want something that's going to be consistent. However, if you love one of these markets and you live there a long part of the year for a big part of the year, and you do want to rent out maybe just for the this week or these couple weeks, remember that the IRS here in the US has what they call the Augusta Rule, which means that you could rent your property for up to two weeks, your personal residence, and not have to claim that income on your tax returns. I am not a tax accountant, so make sure you check with your professional. But that can be a really good way to get into the short term rental market. For those of you out there that haven't quite taken the leap, if you have a property it's in this position, that could be a really good move for you. The fourth reason why demand might be increasing for your specific property, and this one's going to sound a little weird, but that is if regulations increase short term rental regulations increase for your local market and, and you happen to have a short term rental license or permit to operate your property, then that means supply is going to be restricted and you've got one of those gyms in that neighborhood or that market that's still allowed to operate short term rentals. Well, your ADRs again, your demand can go through the roof. Fortunately, it doesn't go the other way. Right. So stay tuned. In the future, we're going to come out with some of the top reasons why supply might be increasing in your market and things to look out for, especially if you haven't quite pulled the trigger purchasing an investment in that market. So yep, I know that sounds a little bit weird, but if regulations increase and you have a permit, that can be an excellent opportunity. If you are acquiring a property that has a permit in an area that's limited and those rules are established, then that can be a really good win for you. You can do really, really well. Of course, our pricing and the real estate prices these days are pricing that in. So a lot of times if a property can be operated legally as a short term rental and it's in a limited supply, its actual sales price is probably going to be factored into that. Number five, the fifth reason why demand might be increasing in your market, and this one's going to sound a little bit weird again, demand raising your average daily rates. But this is if a hotel is going in, in your neighborhood or in your market. And why do I say this? Well, especially if it's a big hotel chain. Remember, they do a lot of research before they invest 10, 50, 100, 100 plus million dollars in building these hotels and luxury hotels. They do a lot of research and they're not going to put a hotel in a market where they don't see a lot of demand coming. Right. And so depending on the type of short term rental you have, it can be a really good substitute for hotel rooms. Right. A lot of times hotel rooms are for two people and if a family's coming in with six people, then buy this hotel going into that market, you know that demand's going up and this could be a really good sign for you and your short term rental in that area. Another one that you might want to keep an eye out for are really large furniture stores. So I've talked a bit about Ikea in the past. Ikea is the largest furniture retailer in the world. They're fully global and you better believe that they are doing their research before they go into a market as well. So generally they're going to be going into bigger cities. But if you happen to be near some of these bigger cities or in these tertiary markets, that means they're expecting more people, they're expecting more demand, more population, all things that are good for your short term rentals. Number six, the sixth reason why demand might be increasing in your market, in your neighborhood, your city, or maybe it already has and now we're playing a little bit of catch up. And what do I mean here? The sixth reason is if travel is improving and it's getting easier to go to your market. So this could be anything from a new direct flight coming into your city. It could mean a new airport going into your city. That would be a huge win. You better believe that we're not putting airports in places where people aren't going. Right. It could also mean the expansion of the airport in your local market. Remember, those expansions are going to require construction crews too. So they're going to come in, they're going to work there. Who knows? A lot of times these projects take a long, long time. It could be a railway coming into your market like the one in California that if you haven't heard, they've been building it for a long time and unfortunately it's still not complete. After billions and billions of dollars. I hate to pick on California. I'm from there originally, but the regulations are tight and that has seized up that railway from Southern California to Northern California for quite a while. I'd like to see it happen. I think easier Travel to any market is just, it's a good thing. It makes it easier for us. Right? And it helps travel, all types of travel. So vacation traveling for business, traveling to see family. The easier our travel is, the more travel people will do. And that's just the short of it. Easier travel could also mean improved highways or freeways or just expanding them. So I'm currently down here, Medellin, Colombia, and I've got quite a few friends building projects, short term rental projects outside of the city. And, and if you haven't been here before, the roads are pretty darn good. In fact, if you arrive to the airport Medellin, you will enter the city through one of the longest tunnels in South America. Yeah, they built a tunnel. It took a long time, like eight years, but through a massive mountain that shaved a lot of time off the airport travel to the city. So new highways, new tunnels, new bridges, new new direct flights and airports and airport expansion. This is all a really good sign for your market that the demand is very likely going to increase or population's going to be increasing there as well. And that leads me right into number seven, and that is an increase in population. So if your market is seeing a net increase, more people are moving in than moving out, then that is good for your short term rental demand. Now you might be thinking, Tim, if people are moving to the city, they're staying in long term rentals. How can this possibly be good for my short term rental? Well, you've got to remember that when people are moving to a city, that means that there's very likely more employment opportunities happening there, which means there's more construction going on and there's just more reasons for people to visit that city. The bigger it gets, the more attractions it has, the more routes of access, the easier travel gets to it. And so increased population is a really good thing for a market, unless the supply, which we're going to talk about here in the near future, happens to be outpacing the demand. And I will tell you that the supply is not likely to outpace the demand in most markets in the US in the near future because construction costs have just gone through the roof. Same with financing costs. And so a lot of those things are sort of drying up or existing supply, and we're probably going to fall even further behind our construction supply. That is a full topic for another episode. But in a nutshell, increased population in our city is generally a really good thing. A lot of the increased populations have been happening in affordable areas, these places like Tennessee and Florida. And Texas, now, every market's different, right? So Austin within Texas is very expensive. A lot of times these tertiary markets can have some really good opportunities. So those are one place where I keep an eye out for. So there we go. There's seven reasons why the demand might be increasing in your market leading to better returns for your short term rentals. Now, you might be thinking some of these seem a little bit difficult to get in front of, right? As a real estate investor, we want to be in front of a lot of these things, but we have a lot of resources at our fingertips. So aside from all the great channels on YouTube that we talked about recently, you also have information like U.S. census data that tells us the net population growth in certain cities. We also have moving reports from companies like U Haul that show us where people are moving to. Remember, a lot of times when someone goes to a city or goes to a market in a U Haul truck, they usually don't drive it back, right? Usually means they're moving. So they put out some really good information on a general level, on a high level market overview. So keep an eye out for these things when you're looking for new markets to invest in. And keep an eye out for these things in the market where you already are. I hope that gave you a little more insight. Until next time, I hope you have a fabulous week. I've dedicated years figuring out how to manage my personal portfolio remotely and it wasn't always easy and it took a long time. But now my amazing team can professionally manage my properties without me. And good news, our team can also manage yours. Let us save you the stress and headaches and some money by offering you an industry low fee. To find out more about partnering with us, head to Strom, hit the property management button, answer a couple quick questions and meet with me personally. That's strange. Rest easy knowing that with my team, your properties will be in excellent hands.