First Time Investor: Long term vs Short Term rentals?

Question

My husband and I are looking into our first investment property. We are based in North Dallas area. Initially we were thinking on a duplex in Lubbock area since DFW is such a competitive market right now (we won’t be paying with cash, financing with a down payment). We have some distant family there and hubby went to Tech which is why we thought of that area.

But now I’m thinking maybe we should look into Airbnb’s instead in Lake Texoma/Broken Bow. The cons I’ve heard is that STRs are much more involved than LTR’s though. We both hold full time jobs, with two small kids so pretty busy. 😀

Our ultimate goal is to have passive income where we can hopefully do this full time in 10 years. thank you!!!

Corin Prendiville · Answer

Hi Jennifer,I'm a real estate investor and agent in the DFW area. I agree like others have said that it depends on the level of involvement you want in running the property, STR is a lot like buying a tiny hotel and will require more management but has the upside of potentially more profit if purchased in the right area and run properly. It sounds like with your current lifestyle a LTR would work better for you but that is a choice you have to make on your own! One of the most profitable ways to run a STR is getting a large bedroom place near the airport and renting it by the room, but that is management intensive.Some people are open to doing both and buy the deal not the strategy. There is an advantage to that in that you don't lock yourself into a single-minded track where you can only see a deal from the perspective of a long-term buy and hold, maybe it allows you to see a flip opportunity, or a highly profitable STR opportunity that others are blind to. Just make sure if you do STR that you find a good cleaner who has reasonable prices and ideally get something that works financially as both a STR and LTR for your first one. You want an out if STR ends up not working for you if that is the path you take.The fastest way in my opinion to get out of the daily grind is to find ways to increase your income and decrease your expenses, every strategy works but the more capital you can pour into investments the faster you will reach your goals. If you ever need anything feel free to reach out and I wish you luck on your journey as a real estate investor!

Jennifer Inumerable · Answer

Wow I didn’t know STRs in Lubbock are a major thing!

Travis Hanson · Answer

Either way you go is a good idea…property management with either class will be critical.  Assure you have great investment advisors as well, not merely a great real estate agent.

Mason Moreland · Answer

If you are aiming for passivity, it will take longer but you should angle towards LTRs. If you are aiming to move quickly towards independence, STRs are more time intensive but can yield higher returns and get you there faster. There will almost always be a time/returns tradeoff so I'd decide what your goal is and when you want to reach it/how and choose your strategy and market form there.

Don't sleep on Lubbock STRs either (I know it's far!). Ours does fantastic. We have LTRs in DFW, Lubbock, and Midland. STRs in Lubbock and Midland.

Grace Wang · Answer

@Jennifer Inumerable Both strategies are great. I'd recommend chatting with other local investors about both strategies, and then picking one and running with it.

And in response to your comment about your goal of passive income: The key is a solid property management company! A professional, experienced, and well-managed PM company will make or break your experience. Once you get the contact info of a few PM companies, interview them and get a good gauge on what each is like. Get your team in order and your goal of passive income will come into fruition :)

Quinn Olivarez · Answer

STR is definitely more time consuming. Up front costs can be a lot higher too, when you factor in furnishings and appliances. LTR is more simple to manage on a day to day basis, but, you run the risk of bad tenants that can be hard to remove.