Teton Realty Blog

Teton Region Real Estate Market Stats, Articles & News

Short-Term Rental Pricing

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Price-fixing:

No, I’m not talking about real estate in general, or even real estate commissions. We all know that real estate prices are a collaboration of all of the local real estate agents who determine the market and the commissions the consumer pays. I’M KIDDING.
 
What I am talking about, however, is vacation rental costs. In my spare time (which is usually between 10 p.m. and 12 a.m. and 7 a.m. and 8 a.m.) I spend countless hours burning my eyeballs out looking at my over-sized smartphone, usually something real estate related. The other night, that was vacation rental prices in along the Gulf Coast. Why? I don’t know. So, what did I learn?
 
I learned that unfortunately, vacation rental prices in some areas are way. too. cheap. I was looking at 4 bedroom homes along the Gulf Coast for $89 a night. I thought to myself, “How could this be?”then I remembered that I probably know the answer. The vacation rental market is likely saturated and the market is competitive. I love Airbnb, but when somebody down the road is willing to lease a bedroom for $16.37 for the night with a free light beer in the fridge, it makes it a difficult proposition for everyone else.
 
Being the proud owner of a vacation rental in the Teton Valley area, and having a great knowledge of property management and vacation rental prices after a decade of property management, it got my wheels turning. Are our prices too cheap? Are we headed towards a competitive market place with not enough to go around?
 
Again, I know the answer to this too. Yes, our prices are too cheap. And no, I don’t think the market is over-saturated with the exception of shoulder seasons, but I guess that’s like anywhere else. Nonetheless, I took a detailed look at some of Teton Valley’s short-term rental offerings through various vendors to understand how how many mistakes are being made with respect to pricing. No, like the title suggests, I’m not price-fixing. I’m simply educating myself with what my competition charges, and looking at how much activity there is during certain times of the year. During this exercise, (I checked out a few dates in July of next year) I learned a couple of things.

1) Fortunately, there isn’t a huge number of short term rental owners that are under pricing during peak season – but there are a few.

 
2) There are certainly some marketing mistakes being made. One title was talking about how cool the Fall nights are. I’m not looking in the Fall. I don’t plan my vacations last minute like all of you non-planners, fellow Millennials, and Generation Z’s (or whatever you are).
 
3) Nobody was offering free light beer with a single bedroom stay.
 
My point with all of this is that seemingly, our market is not making the mistake that I witnessed in the Gulf Coast. At least not yet. It really, really, (really) needs to stay that way. There were a few advertising between 10 and 20% less than they should be, (others more) but I don’t think that’s going to kill the market. It’s just going to kill their return on investment. But, these are also probably the people who complain about a management fee that would probably be absorbed by proper management.
 
Anyway, I then looked at rates during shoulder seasons. I had to double-check to make sure that I wasn’t back on the Gulf Coast location, because I learned:
 
1) At least people are taking the initiative to change their prices during different seasons, but it really doesn’t need to be this dramatic.
 
2) That one guy who has 500 reviews and is renting his guest house for less than a hotel room is an idiot.
 
3) Nobody was offering free light beer with a single bedrooms stay.
 
To conclude, we really need to be careful. Idaho is a very pro property rights state. There likely isn’t going to be any restriction with the exception of subdivision homeowners association restriction on short-term rentals anytime soon. This is a good thing and a bad thing. On one hand it protects our interests as short-term rental investors, but on the other it also invites future competitors. As I mentioned at the outset of this article, we have room to grow. We are gaining popularity as a recreational destination for good reason. But, some of these locations I was viewing on the coast were destinations in their own right. It only takes one guy with 500 great reviews to start a revolution, in a bad way. We need to be fair with ourselves as investors and property owners, and we need to understand that people are willing to pay for clean, comfortable accommodations in one of the most beautiful locations in the world.
 
On that note, cheers!

Teton County Zoning, what you need to know

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Oftentimes I receive questions from prospective buyers, (sometimes sellers) as to what they can do with their property, or perhaps how they can advertise their property. When it comes to the city municipalities, they have their own set of zoning regulations and Zoning Maps such as the cities of Driggs and Victor. Each Zone has its own set of code requirements, and you can navigate this information relatively easy on each city’s respective website. The cities, however, take up a very small portion of the usable land in Teton County. The vast majority of private land is in the county itself.

At first glance, the county has only a few zones when compared with Driggs or Victor. In a nutshell, these are agriculture, commercial, manufacturing, public lands and the city areas of impact. Of this acreage, only a very small amount of the county contains commercial or manufacturing zoning, the vast majority is agriculture, with 2.5 to 20 acre density requirements. As long as there isn’t anything abnormal going on, you can subdivide acreage through the formal subdivision process in these areas as long as the finished product meets the density requirement in that zone. Each parcel can then have a house and a guest house, as well as a well and septic system, assuming it meets Department of Health requirements. Each parcel can water up to 1/2 acre per Idaho’s water regulations.
So, the question is, and the point of this article, can you do anything on your agricultural zoned property other than a single family residence with guest house (or of course agriculture)?
The answer is yes, as long as you conform to the land use requirements in the county. In a sense, the name of the zoning is a bit deceiving. It leads most to believe that only agriculture is allowed, and some even question the ability to have a home. Since we talked about that above, let’s talk about some of the other allowed, or allowable uses.
The County’s existing land use regulations are split into three categories. They are:
  • Permitted by Right
  • Permitted with Conditions
  • Permitted with Conditional Use
In a nutshell, if you are trying to do something that is permitted by right, you don’t have to ask in most cases. If it is permitted with conditions, obviously you need to make sure that the conditions are met, and the same rules apply. If it is permitted with a conditional-use permit, there are special requirements that vary based on the nature of whatever it is you are trying to do. Some interesting ones; a home daycare is permitted for up to 6 children, and 7 to 10 children is permitted with conditions. An aviation field is permitted in agricultural zones with a conditional-use permit. A church, or place of worship can be permitted with a conditional-use permit. The list goes on.
Many sectors of retail, manufacturing, and even some residential types are still limited to commercially zoned areas such as convenience stores, bakeries, bars, beauty shops, golf courses, grocery stores, hotels, restaurants – you get the idea. In a way this makes sense, and most of these services would make more sense located within city limits anyway.
You can find the County’s land use Matrix table beginning on page 29 of title 8 of the Teton Valley code, zoning regulations. That link is below.
Teton Valley Code (see Chapter 8)

Will Heat Pumps Work in the Teton Valley Climate

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You’ll probably find a video in the coming weeks with respect to heat pumps in our climate, I’ve just installed one. One can assume that probably means that they do work in our climate, otherwise I wouldn’t have installed one. The real answer is, pretty much. With that said, read on for details.

The first thing to understand about heat pumps is how they work. In a traditional sense, heat is created by burning fuel (in the case of Teton Valley, propane, whereas natural gas is not available) or with the use of an electric heating element much the heating element in your oven, or the elements that glow bright red in your toaster. Heat pumps work much differently. Essentially, they absorb heat from the outside and transfer that heat inside your home through refrigerant. Refrigerant has all sorts of weird properties that allow it to boil and change from a liquid to a vapor at temperatures far different than something like water.

Not all heat pumps are created equal, there are different types. The most common types are air source and ground or water source heat pumps.

Ground source heat pumps are more traditionally referred to as geothermal systems.  There are different types of geothermal systems. The most common types are open-loop and closed-loop, we see closed loop systems more frequently in our area, but I have seen both. With a  closed loop  system, liquid is pumped through tubes in the ground which is naturally warm, even throughout the winter months. The heat that is absorbed is then extracted from the liquid as it returns to the heat pump, and the cold water is then pumped back into the ground to be reheated naturally. In the case of an open loop system, groundwater is used usually from a domestic well, the heat is extracted, and the water is then allowed to drain or in some cases is injected back into the ground.

Air source heat pumps are more traditionally referred to as condensers and evaporators, a good example is an air conditioning system. An air conditioner works by absorbing heat inside the home, then transferring it outside. In the winter the cycle reverses, and the heat is absorbed from the outside air and transferred inside. Believe it or not, there’s enough heat in the outdoor air even at very low temperatures. Obviously a major benefit of an air source system is that it can be reversed, and the home is then air-conditioned during the cooling months. The downside is that these systems begin to lose efficiency at about 0 degrees Fahrenheit, but can operate efficiently in Sub-Zero temperatures to a point. This is why at the preface of my article I said “pretty much.”

With respect to the air source systems, it never gets below 0 degrees in Teton Valley, so there’s nothing to worry about. Right? Sarcasm aside, there are solutions. The easiest solution is obviously a backup heat source that can be activated when the temperatures get too low for the system to operate efficiently. The other solution is to add an auxiliary form of heat to the system which can either be in electric coil that is activated at very low temperatures, or a gas furnace that activates at low temperatures. The latter is referred to a “dual fuel” system.

There are other types of air source heat pumps which are commonly referred to as “mini splits.” Mini splits are basically an air source heat pump, but rather than having the system tied to a traditional furnace, they usually have a smaller self contained blower connected to an outside condenser via refrigerant lines. Mini splits are very common in most parts of the world because of their efficient cooling and heating capabilities and the fact that they can easily be retrofitted to any residence or building with relative ease. The downside is that most mini split indoor units (often called heads) don’t have any way to add auxiliary forms of heat such as heating elements or gas-burning forms of backup heat. Regardless, I do anticipate seeing more of these types of installations with backup heat such as baseboard electric which can be used seldomly when the temperatures dip into the sub double digits.

As for my system, it’s ducted and ductless mini split system with backup heat strips and temperature lockouts, all of which is controlled from my smartphone. I’d be happy to fill you in, it’s pretty cool stuff.

Is the rental market changing in Teton Valley, Idaho?

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Those of you with a pulse on Teton Valley long-term rental market have probably noticed a bit of a lull in terms of occupancy and a small increase in availability. This tends to happen every year after the ski season begins and before the holidays. Those looking for something to rent for seasonal work have already found something in most cases, and long-term residents are generally settled in for the winter.

This year, most property managers have noticed things are a bit slower than the last couple of years, at least with existing inventory, specifically in Driggs and the North end of the valley. This is caused mostly by a supply spike in Victor, where people prefer for the Jackson commute. Several modulars along Highway 31, though lacking amenities, have filled quickly because of their location. Several more units are soon coming available on Dogwood St, and it is yet to be seen how many will be reserved for long-term renters. The new Clinic on Main Street will likely have long term rental availability. These newly completed, or soon-to-be completed projects in addition to a few others seem to have mostly satisfied the shortage, at least in the short-term interim.

I don’t believe this influx of availability will have any long-term effect on the market based on how deep the rental shortage actually is. Once the holidays are behind us, we will begin to better understand inventory levels compared to recent history. It’s been a long time since we’ve seen an oversupply (and I’m not suggesting at all that we are back to anywhere near an oversupply, or even sufficient supply) and even when we did, it was an oversupply of rentals that were not originally meant to be rentals. Throughout the downturn of 2008 we saw a number of vacancies, but these vacancies were second homes converted to long-term rentals, or even vacation rentals which weren’t performing well enough to satisfy debt service. In fact, there haven’t been too many private back-to-back projects built specifically for long-term rentals in a long time. We saw some housing projects near the Sage Hen condos, and of course the Fox Creek Apartments, but all told, not too many dedicated rental properties.

With the headlines being rental shortage you will call me crazy, but we will have to monitor the number of dedicated long term rental projects, apartment buildings and so forth in order to sustain a healthy environment with a good mix of tenants and available rentals to keep vacancies at a minimum and our rental market healthy. It will be interesting to see new major projects and how well they absorb into the marketplace in the near future.

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