How to get started with investing in a STR

Question

Hi

I am looking to buy my first STR, I don't really have any preference of a market. I am based out of Bay Area and I am looking to get tax advantage through STR with accelerated depreciation.

Are there any do/don'ts with first STR, like only buying something nearby and not anything which is further away from where I live.

Are there any companies which can help me vet and buy my first STR.

Aaron Zimmerman · Answer

I'd recommend educating yourself on STRs overall before jumping in. I think there's a lot of mistakes/potential mistakes to be made but biggest things you'll want to understand are pricing, marketing, analyzing what a good deal looks like to you, etc.

The issue with this strategy is that (1) many people don't see it as a real business and the hours can't be batched.

(2) If you buy a property and it doesnt Work out and you've done a cost seg, you're limiting options. For instance, let's say you're able to get $150k of additional depreciation. That's a great year 1 benefit assuming you're able to use it . However, if you're done with the property by year 3 and sell it , you have a ton of depreciation recapture. Your options at that point are to do a 1031 exchange or buy a property in the same year and make sure to be able to place it in service and then do a cost seg.

To be clear, I'm not saying not to do the STR strategy but rather to go in with your eyes wide open.

Duc Ong · Answer

@Harsh Gupta

If your main goal is tax benefits via STR + accelerated depreciation, think “business first, tax second,” not “vacation home with write‑offs.”

• First call is with a CPA who actually does STR loophole planning. You need clarity on material participation, what you can outsource, and how big a purchase you need for the depreciation to matter.
• For a first deal, distance does matter. A drive‑to market within 3–4 hours of the Bay makes it easier to be hands‑on early and actually hit your hours. If you go farther (Tahoe, out of state, Hawaii), you need an A+ local team and very conservative underwriting.
• Non‑negotiables:Clear pro‑STR regulations (confirmed directly with the city / county).Real data (AirDNA plus 1–2 years of financials if it’s already an STR).Underwrite with lower ADR and higher expenses than the glossy pro formas, and make sure you have a viable Plan B (mid‑term or long‑term rental).Cleaner + backup cleaner + handyman in place before closing; for out‑of‑state, a co‑host or local STR manager for year one can be a smart bridge.
• Clear pro‑STR regulations (confirmed directly with the city / county).
• Real data (AirDNA plus 1–2 years of financials if it’s already an STR).
• Underwrite with lower ADR and higher expenses than the glossy pro formas, and make sure you have a viable Plan B (mid‑term or long‑term rental).
• Cleaner + backup cleaner + handyman in place before closing; for out‑of‑state, a co‑host or local STR manager for year one can be a smart bridge.

• Clear pro‑STR regulations (confirmed directly with the city / county).
• Real data (AirDNA plus 1–2 years of financials if it’s already an STR).
• Underwrite with lower ADR and higher expenses than the glossy pro formas, and make sure you have a viable Plan B (mid‑term or long‑term rental).
• Cleaner + backup cleaner + handyman in place before closing; for out‑of‑state, a co‑host or local STR manager for year one can be a smart bridge.

Order of operations I’d use with Bay Area clients in your shoes:

• STR‑savvy CPA call, 2) define budget + time you’ll commit, 3) shortlist 2–3 markets that fit that box, 4) regulation + data check, 5) then find the deal with an investor‑friendly agent and local STR manager.

Wilson Lau · Answer

Welcome @Harsh Gupta. In order to take advantage of the bonus depreciation, you need to "materially participate" in the property, so I would suggest to first narrowing down your search to a few locations. Nearby the Bay Area, you have options such as Lake Tahoe, Yosemite, and even Hawaii.

Adrian Lammersdorf-Scioll · Answer

I'm a superhost on Air Bnb, and also a realtor that helps people analyze these deals, and what I've found is that Air Bnb is getting harder to do if you don't live in the property, or if its not zoned for it. It get's harder to do each year, but it's an INCREDIBLE way to increase your cash flow. I'd highly recommend buying a small multi family 2-4 unit building in a highly desirable area and turning the other units into an Air Bnb. Most places in the United State will allow you to do this. If not this method then look into adding amenities to already low performing STR market properties.

Another that is good once you get experience is doing boutique hotels. I'm looking into it myself recently, and it's a great way to make some good cash flow and increase the value of a property. You would call owners of mom and pop hotels nearby and ideally have them seller finance you. These are some of the easiest cold calls you can make cause the owners are willing to hear you out and listen to you. You would want to target owners that have had their property 10 years or more.

Bradley Buxton · Answer

@Harsh Gupta

Talking with a CPA is a great first step to determine whether a short-term rental is the right strategy for you from a tax perspective. STRs have tax advantages, but they also appeal to many owners because they can also be for personal use—especially in destination markets like Tahoe.

There isn’t one “best” STR market. Successful STRs exist in many areas, and the right fit depends on how much time, energy, and capital you want to invest. An STR is a business, and those inputs largely determine performance and returns.

From a tax standpoint, you’ll need to meet the material participation requirements, which can still be done even if you use a property manager. Markets just outside major tourist destinations—often a short drive away—can offer more consistent income and require less upfront capital. Those areas are worth exploring as well.

The key is aligning the market and strategy with your financial goals, lifestyle, and level of involvement.

Jeff Roth · Answer

Hi Harsh from the Bay Area-

Congratulations! You are looking to buy your first short-term rental, don't have a preference for a market, and want to take advantage of accelerated depreciation to save on your active income taxes.

We have helped people from the Bay Area do this and one of our best referral groups is a national group of high-income earners looking to do this exact thing. Because Michigan has abundant water and natural resources and is affordably priced compared to other places in the country, investors have many markets to consider.

We partner with a statewide short-term property management company that has properties in the communities our investors are looking and they can give us on-the-ground feedback to help us make informed decisions. We want to know local regulations, average daily rate, average monthly occupancy, average annual revenue, and how to increase the daily rate and property value with improvements.

We also have local cost segregation companies to work with and the rest of the team to refer to you so you have the best ownership experience possible.

To Your Success!

Alfath Ahmed · Answer

Use airDNA to collect market data. Do neighborhood research and look at crime data. If you buy an already made ready-to-go airbnb. Look at 2 years of financials. Call building & zoning to understand permitting process.

I've sold a ton of airbnbs in Columbus market where the tech industry is booming and hospital have a ton of travel nurses. You can look into the short north.

Happy to share airbnb resources and strategies that I created for my investors.

Bo Smith · Answer

Distance matters way more for your first one than people realize. I'd stick within 3-4 hours drive max - you'll want to see it in person when stuff goes sideways. What's your target budget range?

Kerlous Tadres · Answer

@Harsh Gupta I’d recommend you pick a place where STRs are allowed and hire a great local manager and cleaner. For help vetting and buying, use AirDNA to check the numbers and work with a strong local STR manager.

Basit Siddiqi · Answer

You should have a preference on the market that you pick.

Professionals can not and should not pick the market for you. Professionals will have an incentive to sell you on their market where they will be compensated.

It is your job to do the following
1) pick the market(Get even specific when it comes to a specific neighbhorhood)
2) Identify your buy box(purchase price, how big of a property, level of rehab required, etc)

Once you identify these, it will be much easier to find the professionals.

How to get started with investing in a STR

How to get started with investing in a STR

Most Popular Reply

14 Replies