ACK Now Has It Wrong: Nantucket Vacation Rentals Are No Longer A Good Investment

To the editor: As a long-time Nantucket visitor and more recent homeowner - and as someone who still occasionally hosts “short-term rentals”, I am writing to refute the narrative and fear-mongering that ACK NOW and its supporters are pushing. Since I have “on the ground” experience with investing and running “STRs”, my view may well give a more accurate view of the nature and status of our island’s unique model of vacation renting experience (“STR”).

In 2012, my wife and I rented a cottage for one week on Nantucket with our family. We knew what rate we paid per week, and we knew what the recently acquired home had been purchased for - and we knew there was an eight- to ten-week prime season. On paper, it looked like a decent investment opportunity to purchase a home on Nantucket, use it for our own enjoyment for three or four weeks and rent it to other families for the rest of the season.

The reason the math worked so well was that in the years following the 2008 financial crisis, home prices on Nantucket had fallen dramatically (around 30 percent), while seasonal vacation rental rates had only fallen 5 percent because rental rates are much less volatile than home prices. My wife and I are pretty handy, and we did a lot of the work on the property ourselves - and this helped keep the overhead low. In addition, interest rates were at historic lows, which made the whole process feasible for a young family who loved Nantucket. The math worked so well that my wife and I eventually decided to purchase several more homes.

Fast forward to more recent times. Over the last few seasons, the weekly rates to rent someone’s vacation house on Nantucket hit a wall and stopped appreciating as Nantucket became overpriced relative to competing vacation destinations, while at the same time, the property values here continued to climb. In addition, the price of every service here, including cleaning, landscaping, pool maintenance, trash-hauling, homeowners' insurance, and caretaking, rose dramatically. Lastly, mortgage rates more than doubled since we originally purchased our home - and even treasury bills that once paid almost zero have been recently as high as 4.5 percent and provided a better return than renting. Not only does it no longer make sense to buy and lease short-term vacation rentals on Nantucket - but it’s become so uneconomical that we have sold several properties.

In retrospect - and with a much broader lens - the low interest rates of the post-2008 financial crisis created a once-in-a-lifetime opportunity to purchase rental properties at historically low interest rates. Furthermore, this is exactly what the Obama administration wanted - to refloat the US economy by stimulating the economy through low interest rates. Nantucket was just one small example of how this mechanism worked nationwide. However, during wide stretches of time such as 1975 to 2008 when interest rates were higher - and since summer of 2021, when the Fed began raising rates, Nantucket vacation rentals never really made sense as a financial investment.

In reality, operating a short-term rental on Nantucket is a poor way to make money. Post-pandemic, Nantucket has returned to normal, and despite Nantucket being the fantastic place to live and visit that so many generations have enjoyed, the fear-mongering cannot change the hard reality that vacation rentals no longer make sense to investors like me. At best, they are a wonderful mechanism for some hardworking people to make ends meet by renting out their homes a few weeks per year. Let’s not mess with a good thing.

Bill Hamlen