Earthship in New Mexico
Once a week, we take a deep dive into an existing short term rental that is listed for sale.
This week we’re taking a deep dive into a property in Tres Piedras, NM, just outside Taos. As with all of our deep dives we find short term rentals with a history of success on AirBNB that are currently for sale and analyze the potential return on investment.
13 N Lemuria Rd, Tres Piedras, NM 87577
Summary
This week we have a truly unique property - an Earthship outside of Taos, NM. Earthships are off-the-grid, self-sustained homes designed by Michael Reynolds. There are 79 Earthships concentrated in a community known as the Greater World Earthship Community. The community is a burgeoning tourist attraction with its own visitor center and $8 self-guided tours. The property is described as a 1BD/1 Bath on Zillow and a 2BD/1 Bath on AirBNB. The current owners have rented the property on AirBNB since last fall and have 42 reviews, with a total rating of 4.95 stars. For a closer look at a recent Earthship purchase take a look at this Twitter thread by a short term rental investor who recently purchased an Earthship and has seen some good success so far.
Economics
Asking Price: $540,000
Cash-on-Cash Return: 15.18%
RevPAN: $164
Monthly Profit: $1,825
Deep Dive
Pros
Very unique property
Proximity to skiing and Taos
Historically high occupancy
Cons
Cash-on-Cash return is on the lower end
Off-grid property may require complex maintenance
Significantly higher purchase price relative to recent comps
Areas for Improvement
The listing’s reviews are generally very positive and while some of the decor may be outdated, given the off-grid nature of the property the simplicity of the furnishings may actually be a net positive.
Stress Scenarios
We unfortunately did not have access to financials from the listing agent on this property, but there are a few Earthships on AirBNB that make for good comps. While the cash-on-cash return is on the lower end of the acceptable range, comparable Earthships tend to perform well from a RevPAN perspective. Comparable Earthships generally see occupancy in excess of 80% and although generally smaller properties, they tend to generate stable revenue.
Recent Earthship sales in the last six months have generally sold for around $400,000 including properties that are on larger lots than that of this week’s property. At $540,000, the property is listed for significantly more than recent comparable properties. At a purchase price closer to recent comps, the cash-on-cash return starts to look pretty attractive in the low 20s.
Regulation
The city of Taos has recently passed restrictions on short term rentals within city limits. The new regulation banned new short term rentals within the historic district and capped the total number of short term rentals at 120 within city limits. The Earthships are outside of city limit so not currently subject to these limits.
Conclusion
This property is probably one of the most unique properties we’ve analyzed. Many short term rental investors prioritize a unique property above everything else when it comes to evaluating short term rental investments and this is definitely high on the list. However at asking, the returns are a bit light, but if a deal can be had based on more recent comps then this could definitely be one to take a closer look at.