Episode Summary:
In this episode of Real Investor Radio, host Craig Fuhr welcomes Kenny Bedwell, founder of STR Insights, a data and advisory platform focused on short-term rental (STR) investing. Kenny shares his journey into the STR market, starting from his initial investments to developing a software that helps investors identify profitable markets and avoid regulatory pitfalls. He emphasizes the importance of data-driven decision-making in the STR space, highlighting the shift from quantity to quality in property management and the need for investors to adapt to a maturing market. Kenny discusses the current landscape of STRs, including the impact of regulations, market saturation, and the importance of understanding expenses beyond just cash flow.
Episode 107 Overview
Kenny Bedwell, CEO of STR Insights, joins host Craig Fuhr to discuss the current state of short-term rental investing. A former Citibank data analyst, Bedwell began house hacking nearly a decade ago. After using data to scale his portfolio, he built STR Insights—a software platform that helps investors identify profitable markets, avoid regulatory pitfalls, and make smart, data-backed decisions.
The Shift: Hospitality vs. Real Estate
Short-term rentals are no longer just side hustles. With 2.4 million active listings and over $64B in U.S. revenue, they’ve become mainstream. Accordingly, Bedwell argues the industry is moving from “real estate” into the “hospitality” realm. Top operators now behave more like boutique hoteliers—prioritizing guest experience, operations, and design.
Top 10% Are Winning—Here’s Why
Average revenue is down 10% year-over-year for most operators. However, the top 10% are seeing growth. Why? They offer superior location, design, and pricing strategy. Bedwell notes you can’t be average anymore. Properties must deliver more than just a clean space—exceptional guest experiences now drive performance.
What Hobbyists Get Wrong
Many investors fail to underwrite STRs correctly. Bedwell emphasizes they often overlook:
Property wear and tear
Higher operating and management costs (20–30%)
Seasonality and irregular cash flow
Instead of chasing “doors,” his strategy focuses on quality over quantity. His six properties across five states each net $80K+ annually.
Smarter Underwriting: Forget Occupancy Rates
Instead of average occupancy or daily rate, Bedwell looks at gross revenue versus expenses. He suggests setting aside 20% of high-season income to buffer slower months. Investors must learn how to budget across seasons to stay solvent.
Regulatory Red Flags
Regulation is inevitable, but not always bad. Bedwell advises investing in vacation-driven markets with clear, established STR rules. Surprisingly, markets without regulation pose greater risk. Cities like New York, New Orleans, and Austin illustrate the dangers of investing where sentiment is shifting.
Don’t Follow the Crowd: Orlando is Overdone
Though Orlando seems ideal, oversupply has crushed investor returns. Bedwell avoids saturated markets with copy-paste properties. He prefers areas with natural moats—features that can’t be easily replicated—like views, unique amenities, or walkability.
The Theme Trap: Gimmick vs. Guest Experience
While themed properties can work, Bedwell stresses they must align with the market’s guest avatar. Otherwise, they become novelty over substance. Most guests prioritize convenience, cleanliness, and comfort—not hidden bedrooms or over-the-top decor.
DSCR & Capital Strategy: Proceed with Caution
Although many lenders offer DSCR products for STRs, challenges persist. Investors without 12-month STR history may struggle to prove cash flow, as appraisals often rely on long-term rent comps. However, Bedwell notes that niche lenders now exist who understand STR income and will lend based on verified short-term comps.
Exit Risk: The Arm Dilemma
Some investors used 5-year ARMs with only 10% down. With limited equity and rising interest rates, many now face looming refinances with tougher terms. This could cause more exits from the market in the coming years.
Tax Benefits and What’s Ahead
The new bonus depreciation rules (starting Jan 2025) allow STR investors to claim significant upfront tax write-offs. As a result, high-income W2 earners are entering the space, boosting demand. However, Bedwell warns: don’t mistake tax strategy for investment strategy. Fundamentals still matter.
