Airbnb's hangover is your buying window.

The 2021 STR buyer is stuck, and it isn't the mortgage.

THE LEVER

In Orlando, the Smoky Mountains, the Emerald Coast, and a lot of other STR-heavy markets that I watch, I'm seeing two things at once: falling values and foreclosure/short sales, or, at the very least, distressed listings. Seems to be an opportunity for investors.

Here's what the seller looks like: they bought at the peak of the craze, 2021 to 2023. A lot of them ran cost seg studies and took bonus depreciation. Fantastic move at the time. This was all the rage. Then supply flooded the market, nightly rates fell, occupancy fell, insurance and HOA dues went up.

So why not just sell? Because the sale itself has a tax bill. That year-one depreciation lowered their basis. Sell now, even at a loss on price, and a chunk of it gets recaptured at closing. Underwater on cash, underwater on tax. The only exit that doesn't require writing a check is asking the lender to take a haircut. That's a short sale. (Talk to your CPA before you act on any of this. I'm the debt guy.)

Real deal, in process right now. Client anonymized.

Seller bought it in 2022 for about $655K. Today they owe about $485K. My client is under contract at $395K, and it appraised at $410K. The lender is taking roughly $90K short to get it closed. The seller lost about 40% of the value in four years. My client is buying below appraisal on day one.

One house, three numbers. Live short sale, in process. Numbers rounded, market withheld. Buying $15K under appraisal on day one. Not a quote.

Now the buyer side (which is you): two things we can do to make this window work for us:

1. Underwritten as a long-term rental (LTR) is easier and quicker to close than short-term rentals. Even if a bank is taking a haircut, if they're certain you'll close quickly, they're much more likely to take the deal. Keep in mind, these have to be approved by the lender. You can always change it to an STR later.
2. The tax lever that trapped the seller does not apply to you. Bonus depreciation is back at 100% (new basis, new study, new deduction). You can take advantage of it if you like.

This week, pull listings in one STR market that you know. Filter for the ones with a theme room and a pool (or another market-specific amenity that likely shows it's a short-term rental). Run them at LTR rent, shooting for a DSCR of 1.0. That's your buy box. Make aggressive offers.

THE W

THE L

Workload has gone up (good thing) but with it, free time has come down. Working to implement more systems so that there is better balance. Still not there yet.

ON THE RADAR

1. $300/month team. Called it a few editions ago: GrokBot is a force multiplier when used correctly.
2. Credit monopoly breaking? FHFA's Pulte just ordered Fannie and Freddie to accept VantageScore from every lender, and he's openly floating a two-bureau or even one-bureau credit pull. Cheaper reports, and a second score that could land you in a better pricing bucket.
3. DSCR gold rush. DSCR has been cheaper than conventional investment money for a while. Now it's taking market share of total loans originated.

Cheers,
Wyatt

The Leverage Letter | When you know the game, nobody can play you.

Deal numbers reflect a real transaction in process, anonymized and rounded; not a quote or a commitment to lend. Tax topics: talk to your CPA. All loans subject to credit approval and underwriting. Also in the archive: a 2.1 DSCR on a long-term rental.