Short Term Rentals
There is no longer hiding that the best cash-flowing asset in residential real estate is short-term rentals. However, because this asset class is highly customer-facing, and up against renewed calls for further regulation many investors who lack experience in the space are a falling flat.
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The management team at Above 8 Capital has over 5 years of operating experience in the Short Term Rental space while maintaining an extremely high customer satisfaction rating. Because of this, the company is positioned to continue to expand STR operations in markets that present good instability, recession resilience, and lower demand for tight STR regulations.
Why Short Term Rentals (STRs)
As mentioned income generation from STRs can significantly outpace that of a normal long-term rental. This is especially true in markets that are heavily supported by the tourism industry. Pound for pound (or sq. ft to sq ft.) when done correctly a quality short-term rental in a recession-resilient market will produce a greater gross income than any long-term rental asset ever could.
How It Fits Into Our Strategy
STR operations fall into the cash flow line of effort of the company's overall strategy. Because STRs are transient accommodations, tenants (aka guests) are willing to pay a higher average daily rate (ADR) for the accommodation. Coupled with sound management, brand development, and a high level of customer service the STRs under Above 8 Capital will provide higher operating capital per asset. This increase in operating cash flow will decrease the time needed to source internal capital which will enable further investment into long-term holdings.
Mitigating Risks in STRs
Although this sector of residential real estate has exploded over the last few years, that growth has not always been beneficial. Renewed discussions and regulation are taking place nationwide as STRs take the wrap for putting greater stress on the affordable housing market.
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Although this is a concern for the asset class in the broad scope, widespread regulation is not likely as STRs have varying effects on the communities they reside. Above 8 Capital will seek to enter STR markets where an initial round of regulation has already been conducted and is not likely to occur again (at least for awhile). For example, this market may look like a vacation town that requires all STRs have business licenses and remit local taxes (perfect sweet spot).
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Additionally, STRs can be more volatile when it comes to monthly income. To mitigate some of these risks, Above 8 has designed a specific tool to asset and rate STR opportunities. A key facet of that tool is assessing for recession resiliency. This means asking the question, if the economy declines, will people still travel here? Aka a Staycation location. For all STR assets under Above 8 management, that critical question will always require a yes.
