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The short-term rental market is far more competitive than it used to be, but it is starting to stabilize. And if you can pinpoint the right market, crush the competition on hospitality, and optimize your systems, short-term rentals might be the best option for cash flow right now. Today, we're going to break it down.

Hey everyone, Dave Meyer here from BiggerPockets. And today on the show, we're talking short-term rentals and Avery Carl is back to help us out. If you haven't heard Avery on the show before, she has more than 250 doors in her personal portfolio and is the CEO of The Short-Term Shop.

She's also written a brand new book, Smarter Short-Term Rentals, which has a ton of advice on how to thrive in this hyper-competitive short-term rental space that we're in today. We're going to get some of that advice on the show. And if you like what you hear, of course, check out her book at biggerpockets.com slash smarterstr. Let's bring on Avery.

Avery Carl, welcome back to the show. Thanks for being here. Thank you so much for having me. Well, you are a longtime friend of the show, BiggerPockets contributor. But for those who don't know you, can you give us a brief intro? Yes. My name is Avery Carl. I am a real estate investor. I've got several hundred doors across the country, but my specialty is vacation rentals, short-term rentals, if you will. And I wrote the BiggerPockets book on short-term rental investing a few years ago called Short-Term Rental, Long-Term Wealth.

and I have been involved as an agent on over 5,000 short-term rental deals. So I would never say that I've seen it all because that's asking for trouble, but I've seen a lot that hopefully I can bring some experience to the listeners. Awesome. Great. Well, let's start at the top. Tell us big picture what's going on in the short-term rentals. Just like the rest of the real estate world, it's been a pretty wild ride over the last couple of months and years. So how do you assess the short-term rental market right now?

I would venture to say the short-term rental market is now stabilized. I think we're there. We might still be working on it a little bit, but it definitely went through a much-needed stabilization after COVID. So it's a much friendlier time to get in than the past few years now that we kind of seem to be towards the end of that. So I'm very excited about that. By stabilization, what do you mean? Like, I know it just sort of skyrocketed.

And now you hear things about revenue coming down and a lot of supply. Do you think that's over? And now we've sort of like hit some sort of equilibrium where investors can at least get a sense of what to expect for the next few years? Yes. So I think we're getting there. I don't know if we're

all the way there, but I think we're definitely getting there. And what I kind of want to separate out is that so the vacation rental asset class has been around for decades and decades in beach markets, mountain markets, lake markets, things like that. But once Airbnb came along, I don't know, 15 years ago now, but really in the last five, has it really been adopted heavily? It kind of

democratized vacation rentals. So you could now actually make money on them instead of the only option being to put them on a big property management company that charges like 40%. So when that happened, that happened about the same time that COVID happened, which obviously tons and tons of travel happened then, and also the perfect storm of really low interest rates. So a ton of people got in because travel was at an all-time high and rates were at an all-time low. So buying of all types of real estate was very high.

So we saw some markets growing too fast, having too much supply coming on too quickly, which did cause the prices per night or the gross annual income of properties to go down some. And some markets worse than others. As you know, real estate is not national. It's very market specific.

I was reading an article from AirDNA actually a few days ago where they said in Joshua Tree, for example, in 2021, supply increased like 20% and you saw that saturation problem. Now, I think they said last year it was only up about 6%. So Joshua Tree was on all the best places to invest in short-term rental lists four or five years ago. Then it kind of swung off because of that saturation. And now it's back on, which I think is a really good

testament to true, really tourism-heavy vacation markets that even though they saw that big bump in supply, now that the tide's kind of gone out on this big supply problem, that they're still really great markets because the tourism demand is not going to change. I'm glad you brought that up because to me it seems like

those markets tend to be a little bit more resilient, especially because right now, I'm sure you talk about this all the time, but it seems like there's more and more regulation in the big cities. You want to be in these markets where the economy and the people who live there are excited to have people come and visit. And that is a big part of their life, right? Correct. So when you look at the short-term rental market,

And talk to your clients. Have people been scared away? I'm just curious if as many people are interested in becoming a short-term rental investor now as there was a few years ago. Are new people coming on or is it kind of...

become one of these entrenched industries where the people who have sort of been in it for a while are the ones who understand it and are the ones who are going to succeed at it. I think there's a little bit of both. There are a lot of new investors or new short-term rental investors who really want to get involved, who are

looking. But because of the rates, they've been kind of in this wait and see mode all the way, I would say, until like Q4 of last year, because they wanted to see what's the Fed going to do with rates, who's going to be president. And now we're kind of past all of those wait and see moments. So I do think that more investors, new ones will start kind of jumping in now, even though rates have not dropped. So I will say, though, across 20 different markets and 20 different types of markets,

We saw last year, at least in our business, 80% of the buyers who closed on the buy side with a short-term shop last year were past clients who'd already bought with us. And probably more than that were already short-term rental investors who maybe we just didn't have data on because they bought their first one in markets that we aren't in.

So all of the people who are experienced have been buying and taking this opportunity where there's not a lot of competition to get some good deals. That's super interesting. I guess it's not really all that different from the real estate right now. We're just seeing less new people get in in general.

Because it is daunting. I mean, I think between you and I, we know there's good deals out there, but I can imagine that it's daunting for people who are just starting in either industry right now to figure out what exactly you should be doing. So what should they be doing? What are you recommending to people, whether they're new or repeat clients, the best way to find a good deal right now? So my advice, like all...

I mean, I think we know what my answer is going to be. The best time to buy real estate was always yesterday, right? And you don't know what's going to happen in the future. If you can find deals that work today, then buy those deals today. Because when the rates start to go down and a bunch of people start jumping back in, then you're going to have more competition. I don't think it's going to be 2021 level. But right now, the properties that are sitting on the market are

for six, eight months, a year. We have a joke in the real estate industry that right now you always want to be the second listing agent because the first listing agent it's going to expire on because you can't convince the seller to come down to where the price needs to be. So if you can get deals done right now, it's usually the need to sellers, the sellers who are going to have a little more room because they need to get this done rather than want to. So if you can do it now, if you can find deals that make sense and buy those

what you pay for the property is what you paid for the property forever. But interest rates change. Yes, it costs money to refinance. But if you can find something that works now, I'm not saying buy something that doesn't work and wait for the interest rates to change. I want to be very clear about that. But

But if you can find something that works now and you can get a lower rate later, there are a lot of great deals happening right now. You just have to get in there and make a bunch of offers. It's back to being a real real estate investor. You can make low offers. You can make a ton of offers. Whereas two years ago, you couldn't. You get buried in the pile of offers. So it's a great time to be a real estate investor if you want to do the work. I totally agree. But it's funny what you said about the second listing agent. I went to go tour a property the other day.

You know, I'd seen five that day and I was like, what was the, you know, asking on this again? He was like, do you want to know my price or the seller's price? This is a listing agent. I was like, yeah, exactly. It's like mine starts with an eight. His starts with a nine. So it's going to be a while before we before we move this thing. And I think that goes to what you were talking about, just sort of about being patient and doing the work of a real estate investor. It doesn't matter which strategy you're going at right now. It

It's your job to sort of separate the wheat from the chaff and sort of figure out what's going to be worthwhile and to be persistent on because there's just a lot of trash out there right now. Yeah.

That's how it used to be. It's always sort of been this way where there's some realistic sellers, some sellers are more motivated or more willing to negotiate and be reasonable about it. And it sounds like short-term rental, long-term rental, it doesn't really make much of a difference there. Right. Across all asset classes, you got to just do the work to find the seller who's ready to finally let it go. That's great advice. I do want to ask you a little bit more about

optimizing performance in the short-term rental market, Avery, because I personally have been struggling with this a little bit and I hear about this a lot. But first, we got to take a quick break. You ever thought about diving into real estate but got kind of stuck on where to start? I mean, of course you have. You're listening to this podcast. Well, we've got something that might just kickstart your journey. Enter PropStream, your secret weapon in the world of off-market properties. With over 155 million properties at your fingertips, you can

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We're back with Avery Carl on the BiggerPockets podcast talking about the short-term rental market. Avery's already given us some great advice about what to be looking for in the market today. Before we move on to optimizing your existing portfolio, Avery, can you just tell me a little bit about how you track or find clients?

good markets or even understand market health? Because you talked a lot about this glut of supply and going where there's consistent demand. How do people logistically do that? There's so many lists and articles and things online, email lists about, here's the top 10 places to invest. And the funny thing is, none of them really ever have all the same markets on them

Every company that does this, usually big property management companies, data companies like AirDNA, they all have different towns on their lists of best places to invest. So my advice for choosing a market the way things are today, and really it's my advice

all the time, is forget what the lists say. Buy in the market that you know and understand, in the market that you have a competitive edge. And a competitive edge is really just knowledge. So I can be successful in Starkville, Mississippi, where I grew up, because I know exactly who comes there and when and why and what time of year. And I'm

I'm going to be able to find somebody to train to turn a vacation rental, whereas somebody who lives in Seattle who's never been to Starkville but saw it on a list might have a much harder time being successful than me and vice versa. You want to be in the market where you understand who the guest is. And I'm not saying you have to buy where you grew up, but take the time to truly understand who goes there best.

what type of budget they have, what part of the market they go to. We saw a lot of people mess up in beach markets years ago by buying like on the sound side instead of buying on the gulf side because the sound is like black opaque water and the gulf is blue crystal clear water and that's where people

Yeah, we want to go to the beach, not the South. Yeah. So, I mean, the best place to buy is somewhere that you like to go because you're the guest avatar. You understand who goes there and what they're going to do. But you can learn that. You can take the time to learn and go visit a market. So there is no best market. There's a best market for you. Well, that's great advice for people who are looking for new markets. Let's shift gear to maximizing your portfolio because I'm hearing a lot about

Taking existing properties and sort of amenitizing them or trying to really have a competitive edge. And that sounds great. It makes sense to me. But can you just tell us a little bit more about first why to do that and then how to figure out what amenities make sense for your short-term rental? Okay.

Great question, because right now there's a lot of people that are going way too crazy with this. And I'll explain why. I'll give an example. But what you want is you want to do the enemy method, which we talked about on previous BiggerPockets episodes. There's a BiggerPockets YouTube that I did on it. Basically, it's a competitor analysis. You're looking at your competitors in your market of your same size property bedroom count.

and looking at what they have, what are your guests gonna be presented with as choices? And what can you do to make them choose you instead of them? And in a lot of cases, you're not gonna have to do anything crazy. You wanna have a cute, clean, comfortable, updated place

with good, light, bright photos that make someone want to click it. The more clicks you get, the more bookings you'll get. If you can get a pool, always get a pool. Pickleball courts, relatively inexpensive to put in if you have room. But where I see people going too crazy is buying properties and then wanting to add so many amenities that do boost income. I'm

I'm not by any means saying they won't boost your income because you will get booked and you will get booked high. But if you're buying a $500,000 property and then putting $250,000, which this is a real number that on a client I helped last a couple weeks ago.

it doesn't make sense because a lot of these amenities, even though they boost your income, they don't add value to the property. So you better be planning on holding that property for a really long time if you're going to spend half the price of the property in cash to amenitize. Oh, that much? Yes. Yes. This deal was $550,000 and a $250,000 quote for amenities, which was like

Putt-Putt, I think it already had a pool, basketball court, like human-sized bowling pins, sauna, weight room, all these things, which yeah, that's really cool. People are gonna wanna book that. But you could also buy two more $500,000 properties with that cash that you're coming out of pocket for these amenities. So you have to decide which thing is wiser to do. I can't answer that for you, but I can give you another example of a house that I had listed that I was the first person

real estate agent and then fired. And then I was the third real estate agent and got it sold. Really? Yes. But what happened was it was a big beach property. And this person did all the crazy, the over-amenitizing, the murals on the walls, and it did great, amazing income numbers. And I was like, this would be easy to sell.

What happened was every single showing we got, the buyer said, at this price point, we're really looking for something that feels a little more luxury and not murals on the walls and like all this silly childish stuff. And all that stuff, even though it does add income, it doesn't add value to the property. So when you go to sell it, you're probably not going to be able to recoup, you know, on a $500,000 property, $250,000 extra.

And because banks still look at short-term rentals as residential and not commercial properties, it doesn't matter what the income is. When a buyer comes to get a loan on it, the appraisal is going to be what it is, whether it made $200,000 or $0. So you have to be careful with the amenitizing and know that you're going to hold it for a long time. And things do happen to make you have to sell properties that are outside of your control. For sure. So just make sure that you're doing it

Maybe one thing at a time. Maybe let's not drop half the value of the house in cash up front. Right. Yeah. Yeah. You can really get stuck on that if you end up having to sell. First of all, I think this goes to maybe my personal career working mostly in tech work. They drill into you the idea of like iterative improvements where you just like make small changes and see if it works.

before you have to commit a lot of resources to any one investment. And if you're doing this and you need all this money up front, especially when it's unproven, how much it's going to improve your occupancy, how much it's going to improve your average daily rate,

It's tough because there's probably no comps, right? You know, you could do this kind of upgrade in a long-term rental if you're flipping a house because there's comps and you can, you know, generate at least some reasonable degree of accuracy and confidence that you're going to generate an ROI. So I think...

That's number one. And what you said about selling is so true. Like doing the amenities is great, especially if they will be appealing to, like you said, different types of buyers. You don't want to lock yourself into only being able to sell to a short-term rental operator. Like most people don't want a putt-putt

course and a human size pool. Like a few people might, but you're definitely limiting who you could sell this property to. So I think that's very good advice. Yeah. Yeah. And it does, I will say it does add income, but just don't forget the rest of the picture as well. We are going to talk more about the future of the short-term rental market, but we do have to take a quick break. We'll be right back.

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We're back with Amy Karl talking about the short-term rental market.

Can I be selfish and pick your brain a little bit about my short-term rental? Of course. I'd love to. Okay. So I'm experiencing something I think a lot of people in the industry are. I bought a property in 2018, turned it into a short-term rental. It's in a ski town. So high demand, no regulation really. Permits are good. They're pretty supportive, generally speaking. And property value has done great. It's really gone up a lot.

But in the last year, 18 months, the revenue has just really started to go down. And I,

I have noticed that in my neighborhood, in the subdivision I'm in, there's just a lot of competition. And it's a beautiful house. We hired an interior designer, tried to make it stand out, all that sort of stuff. And so it does okay, but it's just not doing as well as I would like for it to do. So I'm curious if, I know that's very general, but like where would you even start to try and diagnose this issue? And if you do have any tips for me and feel free to ask any questions.

Okay, so first question, your description, is it a paragraph or is it bullet points? It's paragraph and it's long. Okay, that's a big problem. It's TLDR. People like they're going to scroll through the photos. You want some white space in there and especially above the fold before you click it and it expands.

Does it say anything about the actual location of the property, how far from things it is, or anything that is descriptive about how many bedrooms, what all it has, etc.? Or is it like, join us in this whimsical forest retreat in Colorado? Is it flowery? Or the latter. Okay.

Okay, so you want bullet points. You want to get to the point pretty quickly. People's attention spans are so short. If you've got beautiful photos and the interior design is good, you want to let them know real, real quick before they even have to click on anything. Hey, this is five minutes from the ski slope or this is ski in, ski out. Everything that you have, like do you have a dedicated workspace? It's a four bedroom, but actually there's extra sleeping space in X, Y, and Z places online.

Any cool amenities that you have, list them there. How far are you from the major attractions or the cool restaurants, etc.? You want bullet points, you want white space, otherwise people aren't going to read it. Are they using dynamic pricing? And if you don't know the answer to that, click on your calendar. Yes, they are. I don't know how...

how good it is. Okay. Because like we were not getting a lot of bookings and I asked them to just like lower it for a weekend and they got a booking like immediately just for like that one weekend. So I'm not sure how, how dynamic it is.

It actually is. Okay. So what you want to do with any dynamic pricing tool, so even if they are using like a Price Labs or a Wheelhouse or Beyond Pricing is the other one, you still have to look at that every day and you have to understand what the lead time is. So in my market where a lot of my properties are, the lead time is about five weeks. So Luke, my husband or myself are looking at in our properties, in our Price Labs,

every day and saying, okay, five weeks out, we should be booking. It's four and a half. This should be booked. Time to lower it. Because what Price Labs does is it tries to get you the highest possible price you can get, which is great, but it is still, you know, it's a tool. It's not a replacement for you. It's a system that you still have to manage.

So if they're not going in there and checking that every single day proactively and looking at the lead times and saying, you know, Christmas for this year should be booked already, then you do have to get in there and manage it. So whether you have a zillion properties that you're managing or just one, it can be easy to kind of think, oh, you know, it's on autopilot. The algorithm's got it. But you do have to get in there and kind of tweak it. Okay.

Okay, well, great. Thank you for sharing that. And I just, you know, I'm obviously asking you out of selfishness, but I would imagine that this is something you hear quite a lot, especially these days where there is increased competition. Do you hear people with similar challenges to what I'm experiencing? Oh, yeah, yeah. We have people several times a week pop up and say, hey, I'm not booking the way I thought it was. Can you help? And it is almost always 90 times out of 100 people

It's a pricing problem. It's just because Price Labs and all of the pricing tools, they're so great.

But a lot of people don't realize like you still have to mess with it all the time and just really keeping an eye on it. Yeah, that's helpful to know because here I was, I was about to amenitize. That was my instinct. I was like, I'm just going to throw some money at this problem and see if I can add an amenity because I have some ideas for amenities that would be fun and are within reason. But it sounds like it's much more mundane than that. It's just like basic operations.

Probably. Without seeing it, I would say probably. My last question is your headline. What does it say? Does it say like the name of the property in it? It just says like stunning retreat with private hot tub and breathtaking mountain views is what it says. Okay. So that's kind of good. Mountain views are good. So the last thing I'll say about it is the headline is the most important piece of real estate in your life.

entire listing because when you're scrolling through Airbnb or Vrbo, they're going to see a few pictures and they're going to see that headline. So if it says like Dave's Hideaway, you know, they're

So wasting that really good real estate with the name of the property, like the guests don't care what the name is. The guests want to know how far it is from stuff or does it have a hot tub or does it have mountain views? Views are a big one in mountain markets. So you want to make sure just that that headline real estate is being used to make sure that they know something really cool about the property that's descriptive and not just like...

hey, you know, bear tootin' hideaway, come visit us or whatever. Yeah. So, okay. Thank you. I'm going to do these things. These are very practical and honestly, not very challenging things. It's far easier than what I was thinking needed to happen. That's going to be an interesting conversation. I got to talk to my property manager about how to do some better marketing and tell her to listen to this podcast episode. Yeah. They're going to be really glad that we had this conversation on air.

But I mean, it does benefit them. They take they take a very large share of revenue. So if we could if I could help them and well, you can help them and I can pass along your advice. Maybe that they would generate some more revenue as well. Well, I hope so.

Avery, you've told us a little bit about the state of the market. You helped me with one of my current challenges. Let's shift focus and talk a little bit about the future. Do you have any thoughts on what comes next for the short-term rental market now that we've, as you've said, stabilized?

So I think that as metro and suburban markets continue to place bans and hard restrictions on short-term rentals, I do think that that is going to commodify the more vacation-type properties and vacation-type markets. I don't think it'll get to the point where you can only do short-term rental in vacation markets, but I think we're kind of heading that way.

And I think that the industry has been very professionalized too over the course of this stabilization. So people, in order to make money, you do have to be professional. You can't slap things up. You can't really be successful or make any money if you're not being professional, which it doesn't take much to be professional, guys. It takes about an hour a week to manage one property. But I like that because now I think that

more and more travelers will continue to book vacation rentals and feel more comfortable booking on Airbnb and Vrbo and not using like beachvacations.com as they get a better idea of standardization. Okay, I'm not going to go stay in this house where somebody moved out for me to stay for the weekend, that it is a true, almost like a hotel style vacation rental. So I think we're moving in a very good direction in terms of the professionalization of

of the industry. And it's hard to say what will happen in the future with all the restrictions, but I bet on vacation markets with very little hotel presence and pro short-term rental regulations 10 years ago when I started. And that bet has 10 years later continued to produce for me. I've never sold a vacation rental. I still have the very first one that I bought. Really? Yeah. That's awesome. Never sold one. Well, congrats. That's a very good track record. Thank you.

Yeah. So to me, vacation markets are going to continue to be the gold standard for vacation rentals. That's why I say vacation rentals to kind of separate it from like, hey, I'm going into a starter home neighborhood in Indianapolis and buying a bunch of houses that would have been where somebody could live. So I like to separate from that. That makes a lot of sense to me. And even if that's not true, it seems like the wise bet just like to be a conservative investor and

focus on the places where the demand is not going to go away and the community is not going to want to, you know, run short-term rental investors out of town. I think you're right. Like it almost feels like there's two viable paths, not that not everywhere, but like there are two consistent paths. One is like you said, the vacation markets, vacation rentals,

I still at least still see a lot of the almost like house hacking version of short-term rentals work too, because it seems like a lot of municipalities allow you to buy a single family, put an ADU or rent out your basement or that kind of thing. Do you think there's any risk of that going away? Or do you think it's still a good strategy if it's available? I think that's a great strategy if it's available. So Kathy Fetke, for example, I talked to her recently and she said,

Airbnb is their back house and it pays their entire mortgage in Malibu. It's amazing. That's unbelievable. Yeah. So I love little tricks like that. Now, I wouldn't do it

in a room in my actual house where that's not separate, but like a mother-in-law type suite or a carriage house, as they call them down here on 30A, so pretentious, or an ADU. I love that strategy, especially if you're new to be able to, you know, just get an FHA loan or if you're a veteran, a VA loan, and to be able to rent out an entire unit that's separate from the house. I think that that's a really great strategy, especially if you're starting. Awesome. Well,

All of this is such helpful advice, Avery. Thank you so much. I appreciate both your general and your personalized advice for me. As you all can tell, Avery is clearly an expert and knows everything about this. So if you want to learn more about how to be a successful short-term rental investor, don't forget to check out her brand new book, Smarter Short-Term Rentals. You can get that at biggerpockets.com slash smarterstr. Avery, thanks again. We really appreciate your time.

Thanks so much for having me. Thank you all so much for listening. We'll see you next time for another episode of the BiggerPockets podcast.

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