A firm that takes every client and brings every property is not doing the work that makes the service valuable. We reject roughly 98% of the deals we screen and turn away prospective clients regularly, and the reasons are consistent enough to state plainly.
Markets we do not transact in
Jurisdictions where the conventional investment model is not available. Denver, Atlanta and Charleston tie licensing to a host's primary residence. New York City requires host presence and limits occupancy to two guests. Most of Hawaii restricts substantially.
These markets have genuine demand and no legal path for what our clients are trying to do. They are eliminated before any financial analysis.
We are also cautious in California generally, not because demand is weak but because no state preemption exists, permit caps with waiting lists are common, and wildfire has made insurance difficult or unobtainable in several areas.
Properties with unclosable gaps
A view cannot be added. A property cannot be moved closer to the beach or the lift. A lot without space for a pool cannot have one. A cabin on a road that is impassable in winter will lose bookings every winter.
When the gap against the comparable set is physical rather than financial, the property is capped below its competitive set permanently, and no amount of operational skill closes it.
This eliminates a meaningful share of properties that otherwise look attractive, and it is frequently the hardest rejection to explain, because the property shows well.
Deals that fail the stress test
- Revenue at 75% of projection does not cover debt service.
- Three lost peak weeks would require drawing the reserve to zero.
- The model only works with insurance at the current quote and no headroom.
- Property tax reassessed at the purchase price breaks the numbers.
- For city properties, the long-term rental floor is unacceptable.
These are the hardest rejections, because the base case works and the client has usually already formed an attachment. A property that works in a good year and not in an ordinary one is a property with no margin.
Deals where the seller will not transact
A property that works at $80,000 below asking and does not work at asking is only a deal if the seller will move. Sometimes they will not, and the correct answer is to walk.
This is the discipline that most directly determines client outcomes, because buying under market is the only permanent advantage available. Optimization is bounded; price is locked at closing and never has to be re-earned.
It is also the least visible part of the process from a client's perspective, because a deal that dies in negotiation looks like nothing happened.
Clients the strategy does not fit
Buyers whose marginal rate is not high enough for the deduction to convert meaningfully into cash. The operational burden of maintaining a seven-day average and logging participation hours is the same regardless of the benefit it produces.
Buyers who cannot realistically meet a material participation test and have no spouse or partner who will. Structuring around hours nobody will work produces either a failed position or a fiction.
Buyers who need monthly income rather than after-tax total return. The strategy optimizes for the latter, and year one in particular is when launch costs land and the reserve should not be touched.
Buyers planning a short hold. Accelerated depreciation is deferral, and a three-year hold with a full recapture event returns much of what the study deferred, at ordinary rates on part of it.
Why saying no is the product
Our repeat buyer rate is about 80%. That number does not survive a practice of bringing marginal deals, because a client whose first property underperformed does not buy a second.
The incentive alignment is straightforward and worth stating: a firm optimizing for transaction volume brings more properties. A firm optimizing for repeat business brings fewer and better ones. We have chosen the second, and the 98% rejection rate is what that choice looks like operationally.
It also means the answer to 'can you find me something in this market' is sometimes no. There are markets where we do not currently see deals that clear the filters, and saying so is more useful than finding something that technically qualifies.
What we do instead
When the strategy does not fit a client, the useful conversation is about what does. Sometimes that is a long-term rental. Sometimes it is a different asset class. Sometimes it is that their situation calls for tax planning we are not qualified to advise on and their CPA is.
When a market does not work, we say which markets do and why, rather than finding something in the market they asked about.
And when a specific property fails, we explain which filter it failed and what would have to be true for it to work. That is more useful than a rejection, and occasionally the answer is that a lower price would fix it, which is a negotiation rather than a no.
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Frequently asked questions
Why do you reject so many short-term rental deals?
Because listings are selected by sellers rather than buyers. Most fail on market legality or supply, others on an unclosable physical gap against the comparable set, and a further share fail the stress test even though the base case works.
Do you turn away clients?
Regularly. If a buyer's marginal rate is not high enough for the deduction to convert meaningfully, if material participation is not realistically achievable, if monthly income is the goal, or if a short hold is planned, the strategy is a poor fit.
What is an unclosable gap?
A physical constraint that caps the property below its comparable set permanently: no view, distance from the beach or lift, no space for a pool, or road access that fails in winter. No operational skill closes those.