STR's

[alebrewer]

Have visited with several folks recently who have asked me how to develop and report an STR analysis. All were CR appraisers. One even said that the Chief Appraiser of a national AMC was providing him 'guidance' on how to select comps and develop the analysis.

 

[Surf Cat]

If there were USPAP and Fannie Mae guidelines of what aspects were to be performed, what is to be valued... a proper form with the correct breakdown and certifications, I suppose I could do it. But as it stands right now, I feel I'm not qualified to perform that analysis.

Even though STR's have been around for a while, it's still kind of the Wild West regarding rules and regulations depending on where they are at. Some cities in my area have a full-on ban on them and they're not allowed. While in the neighboring city, they're plentiful. There's conflicting data of legality when looking at the zoning regarding the use codes..... so it's a slippery slope especially if you're signing a report as a residential appraiser. There doesn't seem to be a universal standard.....

Personally, I've stayed in a few STR's and have had great experiences. Then there's others where I have been greeted by hostile neighbors while unloading the car to begin to stay. The neighbors have obviously had bad experiences with visitors.

 

[Fernando]

What is a STR?

 

[alebrewer]

It seems to me that an STR analysis is really nothing more than a going concern appraisal. I personally feel very unqualified to perform an STR analysis. I've never valued FF&E, I've never audited P&L's, etc. There are lots of appraisers who think it's just estimating nightly rent and multiplying by 30, and there are a lot of users who are more than happy to allow residential appraisers to hang themselves in that manner.

 

[Fernando]

What is a STR?

Just clicked. Why should appraisers being doing STRs? More like a business hotel operation.

 

[George Hatch]

AFAICT an individual SFR or condo being used as an STR is an occupancy. Not a property type. No different than if the property owner is running a doggie daycare or a 6-bed elderly care operation. Unless/until they start altering floorplans or building in equipment in the next buyer is as likely as not to be an owner-user. Especially if the local jurisdiction gets around to limiting those operations. Or banning them in order to suppress the "market price" as a means of protecting the general economy.

I have never valued an SFR or a condo as a hospitality property. Nor do I intend to, just like I don't intend to appraise an SFR with a weed grow setup in the garage as a commercial nursery. Because if/when their sooper-special vacay rental venue goes bust the lender isn't going to be getting the business interest of any of the furnishings back. All they're getting is the RE itself.

 

[KHS445]

Just clicked. Why should appraisers being doing STRs? More like a business hotel operation.

You have no idea what you are talking about.

As George stated a STR is a use/occupancy, no different than a longterm rental. When it comes to analyzing the income and expense it is still not any different than a longterm rental. Biggest issue is zoning, building requirements and permitting. My City is in the process of instituting a STR zoning ordinance and they keep running into objections and issues as the cows are already out of the barn and getting them back will difficult.

 

[BRCJR]

Short-term rentals must be analyzed like a hotel not as a long-term rental.

Lenders will get back a residential dwelling in lower tourist/traveler areas.

Think Pigeon Forge or Gatlinburg, TN. You may be getting back a STR that was mismanaged, and the H&BU is not as a long-term rental.

It depends on the market environment.

 

[BRCJR]

You have no idea what you are talking about.

As George stated a STR is a use/occupancy, no different than a longterm rental. When it comes to analyzing the income and expense it is still not any different than a longterm rental. (absolutely wrong) Biggest issue is zoning, building requirements and permitting. My City is in the process of instituting a STR zoning ordinance and they keep running into objections and issues as the cows are already out of the barn and getting them back will difficult.

see red highlight above

Long-term rentals do not have a frequent cleaning expense. Who supplies the toilet paper in short-term. Reckon they bring it themselves?

Check your insurance policy, too.

Who mows the yard for short-term rentals?

Does a short-term rental have to charge a lodging tax?

I can probably come up with several more differences........

 

[George Hatch]

STRs are like motels in that the buyers are buying themselves a job.