What's the best size for an STR?

Question

I've been looking at short term rentals in a few different markets. Not quite ready to pull the trigger, but will be in the next 5 or 6 months. I was initially interested in buying a 1bd/1ba condo near downtown Nashville, but as I ran the numbers it didn't look like avg nightly rates justify the investment. It looks like serious cash flow is made once you get up near or above the $300/night ballpark, meaning it requires around a 3bd/3ba or bigger type of property.

Is my conclusion correct? What are your different criteria for a property when looking at an STR investment?

Is my conclusion correct? What are your different criteria for a property when looking at an STR investment?

Stuart Morrow · Answer

I own an STR in Breckenridge CO that does well 10 months out of the year. It is a 4 bedroom that makes if big enough for two families to travel together but small enough for one family as well. My biggest concern is not the market but the local government putting restrictions on STR's. I would make sure you know the rules in the area you buy before you get into something.

Christian Espana · Answer

Hi @Ryan Cummings,

I have a 4 bedroom NOO 5 minutes outside downtown Nashville. When I was looking, there were 2 or 3 bedroom options with rooftops for similar prices which made ask a similar question. Talking to my property Manager he said 4 bedroom without hesitation, more beds = more revenue. People come for the Nashville experience so many are looking for lots of sleeping areas and close location to downtown.

Wale Lawal · Answer

I agree, @Cole Britting. It depends on the market and the people you are targeting.

Cole Britting · Answer

Lots of interesting thoughts on this thread, thanks for kicking it off!

My two cents: It depends who you are marketing to. For example, I am currently looking for a STR near the beach. I am going to be looking to rent to families with kids, so a 3+ BR is a must for me and seems to do well in the market. Had I chose to invest closer to a city where there is a lot of jobs and business travelers, maybe I would look for a 1BR since it would make sense to target a person visiting by themself for business. Once you figure out who you are marketing to, you might get a little more clarity on the size/amenities to offer.

Ryan Cummings · Answer

Thanks @Mike Shemp, that's some good information. I appreciate it!

Mike Shemp · Answer

@Ryan Cummings

I think the answer will be "it depends".

For us, we have found that when we host larger groups of people there is more damage to the home and more issues to deal with.  We manage remotely, so minimizing issues and damanage is a higher priority for us than if we could get more money by allowing more people to stay.

One issue with larger STRs is you may have more difficulty renting them in the off-season or shoulder-seasons.

One issue with smaller STRs is you may not get the same amount of revenue as a larger STR during peak.

I think my point is that if money is the only driver, than a larger STR may make sense.  In our experience the smaller groups have been easier to manage (knock on wood).

Hope that helps.

Mike

Ryan Cummings · Answer

Thanks for the responses everyone! Very helpful to hear your personal experiences and insights.

Lyndsey Garza · Answer

It’s been my experience (the Galveston, TX beach destination market) that 3+ beds are a must if your goal is to earn that serious cash flow here on the Texas coast. We are becoming less of a seasonally driven market, but with a teaching hospital (UT’s med school), 3 other 4-year colleges, snowbirds, and proximity to an INTL airport, Galveston has plans A, B, C, and maybe even Z for strategies.

At minimum, especially in condos, I suggest a min size of 2 bed/2 bath to start justification…if you can invest bigger, 4 or 5 bedroom homes on the Island are more of a rarity, and in the right location with the right amenities, that will start your serious cash flowing off on the right foot!

Sidharth Singh · Answer

Hi Ryan,

If you are looking at a seasonal vacation destination, then a larger property makes sense. That is especially true if summer is your peak season. Demand for larger properties is strongly correlated to school holidays.

If you are in a year-round destination, then a smaller property makes more sense. You can get people who are in town for special occasions who don't have children. They don't travel in large groups and are more likely to travel outside school holidays.

Large groups need more time to coordinate a trip. Smaller properties also book later than larger properties. There are always people who want to join another group and will book an add-on reservation in a smaller property.

What's the best size for an STR?

Most Popular Reply