Stephen writes: What is your view of investing in short term vacation home rentals (and using VRBO) versus longer term dwelling rentals? Assume 5 -10 year investment horizon and assume short term rental would be purchased in mountain area with both winter and summer attractions. Long term rental would be closer to home.

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Welcome to the real investing show with Tim Herriage each day, we’ll provide real investing for everyday investors. Tim is a nationally recognized real estate investing expert podcast, host and public speaker. He built his businesses from the ground up and is here to help you do the same. Here is your host Tim Herriage. 

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Welcome back to the real investing show. I am Tim Herriage, thank you so much for deciding to spend yet another day with me today. Steven writes, what is your view of investing in short-term vacation, home rentals using VRBO versus long-term dwelling rentals, assume five to 10 year investment horizon, and assume short term rental would be purchased in mountain area with both water and summer attractions. Okay. Long term rental would be closer to home. Well, Steven, you must follow me on social media because I love the mountains. I love going into, uh, evergreen, Colorado, Idaho, uh, falls, um, Idaho falls, I don’t know, westbound and down is there. I, I digress, uh, up into the, you know, the I 70 corridor, the 2 85 corridor out of Denver because it’s, uh, close trip for me. And there’s water. There’s plenty of rivers from the melting snow where you can, you know, trout, fish and whatnot. 

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And clearly during the winter you can ski. So it it’s something that my wife and I have looked at a lot. So as I look at the revenue numbers on mountain homes, I have a problem because they just don’t cash flow extreme. Well, on off years, the, there are certain years where the numbers are gang busters. There are certain years where, I mean, it looks like a 30 to 40% cash on cash return. There’s a lot of expenses. There’s a lot of turn from what I’ve been able to dig up. There’s a lot of maintenance cost. If I were to do something like that, it would probably be in a condo community where Airbnb V R B O short term rentals were not, uh, restricted or prohibited. I know that’s a big thing in those mountain home areas right now. Uh, I, I, I, uh, it’s funny, you bring this up. 

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I’m literally thinking about jumping up there the second week of August, just to escape the Texas heat one more time. So I hear you. It’s something that I look at, but it’s also something that has seen some significant price decreases throughout the last, uh, two to three months. There, there are evergreen, Colorado is an area that my wife and I have been watching for a little over a year now. And you never saw houses really being reduced. You never saw, you never saw, oh, available longer than two weeks. And now, I mean, there was a lot that we saw last week or the week before that was reduced by a hundred thousand dollars, it was about a 10% reduction. And now we’re starting to see more and more $500,000 and below homes. So for me, it’s, uh, that market’s UN I’m, I’m unsure about that market right now. 

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It seems like with the COVID rush, everybody kinda ran out and got themself a mountain home and really drove prices up. And then they started doing some Airbnb and now their stock market accounts are down. And so they’re looking at potentially disposing of their mountain homes. So I, I, I don’t know. I I’ll just tell you what I’ve told Jennifer, my wife, I don’t want to invest in areas that have problems. I don’t want to invest in houses that have problems. And when I look at, if there’s a lack of snow in a year, it impacts your rental income. And when I look at the average snowfall and the average temperature, I’m not going all global warming on you, but I mean, it, the environment changes. And when I look at, if you don’t have a melting snow pack, you don’t have rivers to fish in. 

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And there’s just a, there’s a lot about that area that when I think long term, and if you listen to me, talk enough, you know, that my rental properties are long term. I don’t really do the five to 10 year horizon. Um, I’m really looking, I’m 44, I’m looking a hundred years out. So for me, Steven, I would say stick closer to home, stick with what, you know, build a high cash flow business that you can have a lot of units in entry level, or even mid-level housing, make a ton of money and then just get on a plane. Anytime you want to go up there to the mountains. That’s kind of what Jen and I have decided to do. Uh, and we’ve got enough business assets and enough of a portfolio and enough going on in our business that if I wanna hop on a plane tomorrow, I can, and we can go up there and enjoy the ti our time. 

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So as far as an investment, when I pencil these things out, they make, they make sense. The, the, the mountain home stuff, they make sense if you never use it, because if you did use it, you’d want to use it when most people are paying the most for it. So unless you’re gonna be up there all the time using it, I say, stick with close to home, stick with something. That’s not going to ebb and flow with the economy and then make a bunch of money, have a massive portfolio. And if you have a desire to go into the mountains, go then. So, Steven, I hope that helps. If you still have questions, go ahead and hit me up. I do appreciate you taking the time to write a question. That’s it for today, folks. Thank you all. If you have any questions hop over to, Ihavelunchmoney.com. I’ll see you tomorrow. 

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