From House-Hacking to High Returns with Matt Kruger, Co-Founder of DSM Stays

In this episode of STR Data Lab, Jamie Lane, Chief Economist at AirDNA, sits down with Matt Kruger, co-founder of DSM Stays, to discuss his journey from house-hacking to building a successful short-term rental business. Matt shares how he leveraged real estate automation, strategic market research tools, and the power of sweat equity to transform his investment strategy and scale his portfolio in a non-traditional vacation rental market.

Despite starting in Des Moines, Iowa, an area not typically associated with vacation rentals, Matt identified unique opportunities to cater to larger groups and families. His success stems from a deep understanding of local market dynamics, a focus on enhancing property amenities, and the use of automation to streamline operations and improve guest experiences.

Here’s What You Can Expect from This Episode

Insights into transitioning from long-term to short-term rentals
The role of market research in finding profitable STR opportunities
Strategies for leveraging sweat equity to maximize property value and cash flow
Tips for using real estate automation to scale and manage operations efficiently
How to enhance guest satisfaction with thoughtful property amenities

Episode Highlights

Building a Short-Term Rental Portfolio in a Non-Traditional Market

Matt began his real estate journey with house-hacking. He bought properties, lived in them while making improvements, and eventually rented them out. This hands-on approach allowed him to build a solid foundation in long-term rentals before transitioning to short-term rentals.

Matt chose to stay local in Iowa rather than invest out of state. He identified untapped potential and catered to a niche audience in Des Moines by focusing on his local market. While most properties in the area were designed to accommodate smaller groups, Matt saw an opportunity to target larger families and groups traveling for events, family reunions, and business retreats. His first STR, equipped with amenities like game rooms, hot tubs, and spacious living areas, quickly became one of the top-performing properties in the region.

Understanding the local market was crucial for Matt’s success. Using market research tools like AirDNA, he identified gaps and tailored his properties to meet the specific needs of his target audience.

Leveraging Sweat Equity to Build Wealth

One of the key factors in Matt’s success is his focus on sweat equity, the value added to a property through renovation and improvement. Instead of purchasing turnkey properties, Matt and his wife sought out homes that needed work, allowing them to build equity and increase cash flow.

Matt shares an example of a property he purchased for $160,000. After investing time and resources into renovations, including modernizing the kitchen, upgrading the bathrooms, and adding high-demand amenities, the property now generates over $85,000 in annual revenue. The sweat equity not only increased the property’s market value but also made it more attractive to guests, leading to higher occupancy rates and better reviews.

For new investors, Matt advises focusing on properties with potential for improvement rather than those that are move-in ready. The value you create through sweat equity can provide a significant buffer against market fluctuations and help you build long-term wealth.

Real Estate Automation: The Key to Scaling Operations

As Matt’s portfolio grew, managing multiple properties manually became increasingly challenging. To streamline operations and improve efficiency, he turned to real estate automation tools. One of his most valuable tools is Hospitable, a platform that automates guest communication, synchronizes bookings across platforms, and coordinates cleaning schedules.

Automation has been a game-changer for Matt’s business. It lets him focus on growing his portfolio and improving his listings, instead of getting caught up in everyday tasks. Matt has been able to scale his business while maintaining high levels of guest satisfaction by automating guest messaging, cleaner scheduling, and dynamic pricing through tools like PriceLabs.

In addition to automation, Matt emphasizes the importance of having a direct booking strategy. He built a website to showcase his properties and encourage guests to book directly. This approach reduces reliance on third-party platforms like Airbnb and Vrbo and helps build a loyal customer base.

Direct bookings allow Matt to control the guest experience from start to finish. He can offer personalized touches, provide better customer service, and reduce fees associated with third-party platforms.

Enhancing the Guest Experience with Property Amenities

In a competitive market, property amenities can be the differentiating factor that drives bookings and positive reviews. Matt continuously updates his properties to stay ahead of the competition and meet evolving guest expectations.

He started with game rooms and hot tubs, but now he is adding unique features like barrel saunas, fire pits, and pickleball courts. These amenities not only attract more guests but also encourage longer stays and higher nightly rates.

Creating a memorable guest experience goes beyond offering standard amenities. It involves curating a space that guests will remember and want to return to. Matt focuses on the details, high-quality furnishings, comfortable beds, fully stocked kitchens, and thoughtful touches like welcome baskets and personalized notes.

Matt has been able to maintain high occupancy rates, receive glowing reviews, and build a strong reputation in the Des Moines market by prioritizing guest satisfaction and continuously improving his properties.

Actionable Takeaways for Aspiring STR Operators

Conduct thorough market research: Use tools like AirDNA to analyze local market trends, identify gaps, and tailor your properties to meet demand.
Invest in sweat equity: Focus on properties that need improvement to build equity, increase cash flow, and improve guest appeal.
Leverage real estate automation: Automate guest communication, scheduling, and pricing to streamline operations and scale efficiently.
Differentiate with property amenities: Continuously update and enhance your properties to create a unique guest experience that stands out in the market.
Develop a direct booking strategy: Reduce reliance on third-party platforms by building a direct booking site and offering a seamless guest experience.

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Up Next:

Economic Outlook for Short-Term Rentals - A 2025 Forecast

In this episode of STR Data Lab, Jamie Lane, Chief Economist at AirDNA, is joined by Bram Gallagher, Director of Economics and Forecasting at AirDNA, to discuss the evolving landscape of real estate investments. Together, they explore key real estate investment trends, the forecast for the real estate market in 2025, and the critical role of market stability in shaping the future for short-term rental operators and investors.

With a focus on actionable insights, Bram and Jamie analyze the broader economic forces at play, such as interest rates, housing affordability, and supply dynamics. Whether you’re a property owner, operator, or investor, this episode offers a comprehensive look at the challenges and opportunities in the coming year.

Here’s What You Can Expect from This Episode

Insights into economic conditions and their impact on real estate investments
Key trends influencing the short-term rental market in 2025
The interplay between supply growth, demand, and pricing strategies
Actionable advice for navigating market uncertainties and leveraging regional opportunities

Episode Highlights

The Current State of the Economy and Its Impact on Real Estate

Jamie and Bram begin by reflecting on the economic conditions of 2024, a year marked by resilience and recovery. After the turbulence of 2023, which brought high inflation and fears of a recession, the economy stabilized in 2024 thanks to strong employment growth, rising incomes, and falling inflation rates.

Bram attributes much of this recovery to the Federal Reserve’s aggressive interest rate hikes, which successfully curbed inflation without triggering a major economic downturn. However, the higher borrowing costs have created challenges for real estate investors, particularly those reliant on leverage to fund new acquisitions.

Despite these hurdles, the overall market remains strong, with robust demand for both long-term and short-term rentals. The STR market has benefited from stable employment figures, increased travel activity, and rising disposable incomes. However, high housing prices and elevated interest rates continue to weigh on affordability, shaping investment decisions in 2025.

Real Estate Investment Trends for 2025

The real estate market in 2025 is expected to be defined by slower supply growth, stable demand, and incremental pricing recovery. Bram explains that after a surge in new STR listings during the pandemic, the pace of supply growth has steadily declined. This trend is expected to continue, with forecasts predicting supply growth of just 4.7% in 2025 and further deceleration in 2026.

This slowdown is largely driven by rising interest rates, stricter regulatory environments, and limited inventory in key markets. Bram emphasizes that this creates a favorable environment for existing operators, who will benefit from less competition and greater pricing power. However, for new investors, the slower pace of supply growth means fewer opportunities to acquire high-performing properties.

Jamie highlights how these real estate investment trends reflect a broader shift in the market. The days of easy returns fueled by rapid growth are giving way to a more mature market, where strategic decision-making and data-driven insights are essential for success.

Market Stability: A Crucial Factor for STR Success

Market stability is a recurring theme throughout the discussion. Bram explains that the alignment of slower supply growth and steady demand is creating a more predictable environment for STR operators. Occupancy rates, which have been under pressure since 2021 due to oversupply, are expected to stabilize and even increase slightly in 2025.

Jamie adds that this stabilization provides a much-needed reprieve for hosts who have struggled with declining occupancy and pricing power in recent years. With fewer new listings entering the market, operators can focus on optimizing their existing properties and regaining profitability.

Bram also discusses how market stability will allow operators to adopt more proactive pricing strategies. Average daily rates (ADR) are projected to rise by 2.9% in 2025, driven by a combination of stable demand and improved revenue management practices. This recovery in ADR, coupled with stable occupancy rates, is expected to support overall revenue growth for the STR market.

Regional Dynamics and Investment Opportunities

While national trends provide a broad overview, Bram and Jamie emphasize the importance of analyzing regional dynamics to identify specific opportunities. Markets vary significantly based on factors such as regulatory environments, economic activity, and traveler preferences.

For example, coastal markets with strict regulations, such as New York and San Francisco, continue to face challenges in adding new supply. In contrast, rural and small city markets are experiencing growth, fueled by increasing traveler interest in unique and off-the-beaten-path destinations.

Bram highlights recovery trends in areas affected by recent natural disasters. Regions like Maui, which faced significant disruption due to wildfires, and Gulf Coast destinations impacted by hurricanes, are expected to see strong rebounds in 2025. These markets often present unique opportunities for investors willing to take a calculated risk, as recovery efforts drive both demand and pricing power.

Jamie advises investors to use market research tools like AirDNA to analyze local market conditions and identify emerging opportunities. Operators can position themselves for long-term success by focusing on markets with favorable dynamics.

Preparing for the Future: Key Considerations for Investors

As the real estate market continues to evolve, Bram and Jamie offer practical advice for navigating the uncertainties ahead:

Monitor Interest Rates and Borrowing Costs
Elevated interest rates are likely to persist in 2025, so investors should carefully assess financing options and prioritize deals with strong cash flow potential.
Leverage Market Research Tools
Data-driven insights are essential for understanding local market dynamics and identifying high-performing properties. Tools like AirDNA can help operators track key metrics, such as occupancy rates, ADR, and RevPAR.
Focus on Supply-Constrained Markets
Areas with slower supply growth often present opportunities for existing operators to capture demand and improve pricing.
Optimize Pricing Strategies
With ADR expected to rise, dynamic pricing tools can help operators maximize revenue while staying competitive.
Capitalize on Regional Recovery
Markets recovering from natural disasters or economic downturns often offer attractive entry points for investors willing to take a long-term view.