Hey all, what would you recommend doing with a STR property that's just barely breaking even after all expenses? It's a 3 BR old bungalow in Tampa that I'm renting out on Airbnb. My prop management is handling everything, and they're doing an OK job. I'm at around 50% occupancy (on average - higher in winter, lower in summer), but daily rates are way down since the economy has started suffering. The property is a 8/10 in terms of the listing and amenities. It's a nice property, but I don't have a crazy theme to stand out from the crowd of listings and I only have 5-6 reviews so far (4.75 stars). I just had to make an additional capital investment of $2.5K since it's a 100 year old property and things are breaking here and there. Plus, the summer is pretty slow, so income is down. So while the property has appreciated about 15% since I purchased it last year, it's not doing anything to provide any income after servicing the debt and all expenses. This is a side gig for me, so I'd like to get some cashflow without a ton of effort. I suppose I could A) Try to revamp the property (although I don't want to invest a lot of capital), B) Sell it, C) Switch to LTR or mid term rental (Furnished Finders - traveling medical professionals). All suggestions and insight are appreciated!

Get rid of your PM and take over. By posting here you already prove you have what it takes

Assuming you have a decent property in a great location. Your occupancy for summer should be above 60%. Beach hotels are still running at 80-85%. My partner's hotels are at 85% and 97% at her 2 limited service hotels. That doesn't directly correlate to a single STR, but it should give you an idea that people are still coming. And leisure travel is up! Overall Occupancy should be similar to Pinellas at about 75% as an average. We have been beating that for the past 2+ years for STR, but for a rolling decade, 75% is accurate. Your area in Tampa will probably take a slightly bigger hit on occupancy through the recession, especially since the house doesn't sound like it's catering to luxury renters. But you should have a solid occupancy and the ADR shouldn't take too big a hit. If you closed a year ago, you should have more than a half dozen stays/reviews. You are probably at 15-20% YoY appreciation, so you could definitely sell and walk away with some cash. But, you may want to try some of the suggestions here. First, I would drop the PM. Make sure you have professional photos and a compelling description. Do everything you can to get your ratings up in the next few stays. Use welcome baskets and free coffee cards! And if you can, get something unique and "instagrammable," like a mural or something that the Zoomers can take a pic and post about on their vacay. With you in full control, you'll have a much better idea of what's going on, and you'll be in a position to talk to all your guests to see what they are lacking and liking. I suspect your PM isn't doing you the best they could. They should have a very candid reason for the low occupancy, and, I'm guessing, the low ADR. Not every property is a great STR, but I suspect you did a bit of research before buying and thought this should cash flow. Another option would be to try to get a medium term tenant in there, but honestly, if you're not cash flowing as an STR in this market, I'm not sure you should be cash flowing as a mid-term or long-term rental. STRs should be getting 30%-50% more than other rentals.

Get rid of your PM and do everything yourself. I can do 2 phase electric, plumbing, natural gas piping, carpentry, roofing, drug screen collections and other things associated with short term rentals. My profit margin is about 60% of gross revenue. I'm not paying anybody to do anything. Can you top that?

Hey Neil, would love to chat. Can get a revenue projection done for you to see what the realistic numbers are. Know of a great company with low commission rates, complete transparency, no long term contracts, amazing marketing and pricing team. Lets connect.

Hi Neil, How did you asses the viability of your property as an STR listing before deciding to move forward? There might be a higher and better use. I would get an analysis from AIRDNA for your property and see how there suggested performance fares with what your property manager is actually delivering. These reports are typically $40, but you can find some reputable sites that give them away for free. I get mine for free here: STR AIRDNA ANALYSIS If you can rule out management, then perhaps your property just isn't a good STR. Reach out if you need any additional help! Best, Sam

Sorry to barrage you with questions but... Did the PM provide you with any expectations going in? Did you do independent research to set expectations? What were they based on? Is your pricing competitive with comps in the area? Is your PM a local company with local knowledge? Do you have good pictures (maybe post a link)?

Seems AirBNB is extremely saturated these days, unless you have a really unique theme standing out amongst others, it will be slow to rent. It seems you dont want to put a lot of capital in to change the theme of the home, (potentially repainting, refurnishing). Id run the numbers to run it as a MTR on FurnishedFinders first, then look to rent it as a LTR. Look at current properties in your area that are currently for rent to compare numbers.

What to do with 1st STR - Not Cashflowing

Carson McGee

Rental Property Investor · Charlotte, NC · Member since 2021 · 71 posts · 49 votes

4y

Quote from @Neil G.:

Thanks everyone for your input! To answer some of the above questions:

1. Here's my listing. Open to suggestions! https://www.airbnb.com/rooms/5...

2. My original estimates came from AirDNA. I calculated a target of $200/night with a 70% occupancy rate, although my break even point is $175/night with a 55% occupancy rate. PM did not provide any expectations going in.

3. Here are my real numbers in 2022: 51% occupancy rate (roughly 65% in Winter and 35% in Summer), $2907/mo gross rent ($175/night), $1131/mo mortgage, $523/mo PM fees (18% of gross rent), $441/mo insurance, $285/mo repairs, $200/mo electric/gas, $150/mo landscaping, $120/mo property taxes, $115/mo supplementary STR insurance, $80/mo water/garbage. So my recurring monthly costs are about $3,045.

4. I'm not going to manage it myself. I have two other business that take precedence and I live in Mexico, so that's not on the table. I allocated a couple of hours per week to manage this RE business.

5. I'm using a PM that lists on multiple booking sites, although they don't tell me which sites were used for my bookings.

Since digging into the numbers to supply the above figures, I think I should:

A. Re-run the AirDNA numbers. I haven't looked since Summer 2021. Maybe the market changed.

B. Possibly cancel the supplementary STR insurance. I don't know if it's necessary.

Further suggestions appreciated!

Hi Neil,

It looks like you have a great property. If you are not considering self-management I would focus on hiring a quality property manager. Often times the big corporate property managers may have cheaper fees but don't provide the level of attention you need. They are not monitoring this property's rates daily or being proactive with maintenance etc. You may need to find someone who can truly help market this home to its potential. A few initial things I noticed about your listing, the title is way too long and not catchy "Snowbird-Friendly Home w/WiFi, Central AC, Private Washer/Dryer & Huge Garden". Almost all these amenities can be assumed to be included in a standard Airbnb, you need to brand this property. You should try and sell the modern bungalow aesthetic you are going for in the description. Also advertise why people are coming to your place, how far it is from those destinations etc. I know a lot of that stuff you may not have direct control over but that also goes back to picking out a better property manager. Also if occupancy becomes a problem, consider putting it on Furnished Finder and doing a midterm rental for a few months. If it is still not cash flowing well, another option would be to sell and repurpose the equity somewhere you can get higher returns. Just some of my thoughts, best of luck with your short-term rental!

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Cliff H.Pro Member

Rental Property Investor · Nashua, NH · Member since 2014 · 610 posts · 486 votes

4y

@Neil G.kudos for putting it all out there, your financial breakout and listing is refreshing and helpful us all in understanding what might be going on.

A few quick + honest/direct observations with the disclaimer that we've all been in your shoes at some point so take everything here as simply ideas:

* Dump Vacassa + find a co-host or VA that will manage your rental under your name so you "own" the reviews + pay less overhead. Mark Miles wrote a solid post on this a few years back. Where I'm at (New England) Vacassa-managed properties rent at 1/10 the rate of homes with a real name/person attached to them. YMMV.

* Your review count's crazy low, meaning your platform rank's likely low. That's not helping you show up in search results. Since I suspect you rented out more than 4x in 2022 Vacassa's not likely asking your guests for a review or doing enough on their part to encourage those reviews. Consider doubling down on guest XP to drive higher returns on review quantity/quality.

* Swap out your cover shot for one of the whole house so guests understand what you're renting before clicking into your listing. Your current title photo's a grill... unless you're running a Texas BBQ where that grill's the top reason someone's booking your place it's not helping you drive conversion. My guess is you could grab a sweet sunset shot with that big porch + lights that would really pop. The problem with a bad cover shot? Poor conversions. Check the listing's AirBnB Insights dashboard: my guess is that its conversion rate is really low (ie: you're showing up in results, but no one's click into the listing because the only photo they see's just not catching their eye).

* Reconsider your beds. For a 3BR house your current 1K, 1Q, 2T setup's extremely limiting in what types of groups (personas) can rent your place. I'm a big fan of bunk beds in at least one room since it offers larger families or two couples with kids flexible sleeping arrangements.

* Circle your house in those last overhead/drone photos so I know which house it is w/out having to click back and forth and play matching games. Consider a photo of a map that shows time/proximity to popular destinations guests want to visit while staying here.

* Consider renting seasonal rentals where you can reduce that 18% overhead if that's all too much trouble. ADRs pretty low for a 3BR house and without increasing your occupancy rate you're captaining a leaky boat.

Hope that helps and good luck in the next step. Knowing your numbers and asking for input/ideas back here puts you ahead of 99% of most investors!

6 Reply

Wendy Vaidic

Real Estate Agent · Indialantic, FL · Member since 2014 · 182 posts · 80 votes

4y

How close are you to USF & UT? Student housing might be a better use.

1 Reply

Ian Dunross

Investor · Gainesville, FL · Member since 2016 · 44 posts · 28 votes

4y

4. I'm not going to manage it myself. I have two other business that take precedence and I live in Mexico, so that's not on the table. I allocated a couple of hours per week to manage this RE business.

Your other two businesses take precedence - sell the STR.

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Jack Mawer

Lender · Member since 2022 · 338 posts · 374 votes

4y

Neil, have you looked into market rent in the area to see if the property will indeed cash flow as a long-term rental?

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Collin HaysBusiness Member

Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes

4y

If you are positive cash-flowing on a mortgaged vacation rental, consider that a huge bonus. Other than the past three or four years of craziness, that's the exception and not the rule.

I bought my first vacation rental in 2005, and was negative cash flow for the first several years - probably to the tune of $40,000. So what, even if it never "made" a dime of profit? Someone else paid it off, and it's now worth $600K more than they paid off. That's a smoke'n hot deal.

Instead of focusing on monthly cash flow, consider the fact that other people are paying off your investment, and over a period of time it is going to likely appreciate substantially. Whether it is "making" or "losing" a few $ hundred per month really shouldn't move your needle. Tail wagging dog. If monthly dividends are your primary objective, you should sell it and buy dividend-paying stocks.

[email protected]806-672-7102

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Andrew SteffensBusiness Member

Tampa, FL · Member since 2022 · 4k+ posts · 3k+ votes

4y

Hey Neil - We have been navigating the STR market here in Tampa since 2016. I am happy to give you some pointers and suggestions. Please feel free to reach out any time!

[email protected]813-563-0877

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Kristina Kuba

Tampa, FL · Member since 2021 · 383 posts · 389 votes

4y

@Neil G.

You mentioned you have 2 other businesses that you want to focus on and this was merely a side gig. I would dig into that and ask you how much more can you focus on those businesses and generate more profit?

In my experience, I would recommend moving it into a LTR or selling it. As an LTR, will you cash flow?

There is a severe housing shortage in Tampa proper (Tampa city limits). A July rent report from ApartmentList shows the increasing cost of living in Tampa continues to rise. Tampa rents have gone up nearly 2% month-to-month, and 20.5% compared to the year before. This is the sixth straight month that the city has seen rent increases after a decline in December of last year.

1 Reply

Michael Haynes

Investor · Tampa, FL · Member since 2016 · 681 posts · 288 votes

4y

Hello Neil G. in Tampa, Location, location, location. You have an old, woodframe bungalow in an out of the way street in Tampa Heights. That has no appeal for anyone on vacation. If we get SuperBowl again, you will clean up for that kind of event. Tampa is the Industrial side of Tampa Bay with all the JOB's. In my time, the College types would try to live in St. Petersburg and Clearwater and come right back to Tampa for the bars and events. Your property is convenient to Downtown for the Business and the Convention Center crowd. It's easy access to I275 to get on the highway to go to Bush Gardens or the beaches on the other side of Tampa Bay. Think...who is going to rent something that is an hour drive from the Beaches? Most of the comments suggested that you streamline your process. Like Airbnb is supposed to be more expensive than VRBO. Last year I read that they want to charge fees on your repairs and cleaning? My friend in Safety Harbor gave up on Airbnb and is happy with VRBO. He lives on a hill with view of Tampa Bay. The rental house is next door and he self-manages. Rents only to older couples with no kids or pets for $200/day. The rule over there is 7 day minimums. If they stay for a few and leave, they still have to pay for 7 days. 15 minutes drive to Clearwater beach and Safety Harbor downtown is a gorgeous little community. He gets about 50% occupancy in the month. You sound really smart. Two businesses, live in Mexico and want to be an Absentee Owner of a Short Term Rental in Tampa? Are you a Digital Nomad? Are you successful with your Businesses? The way things are going with your STR in Florida we almost call that, "a Gator" if you you can't increase the Cash Flow after Taxes and you should Sell before it's too late. One thing I think the Newbie's to Real Estate Investing don't understand is that this is not like Stock trading. It's not Instant Gratification. I micro-scalp the ES Futures on my laptop for Daily Cash Flow. I make around $100 in five minutes. Trade around a two hour session each day. I sold my last Rental House in Tampa and moved out to Valrico for a safe, quiet place to come back to from my travels. The last ten years are not normal Real Estate Cycle times. You have to take advantage of the current run up in property values, all the incredible new demand for Commercial and Residential construction in Tampa and get ready for the roll over and slow down in the Real Estate Cycle.

1 Reply

Andres Murillo

Real Estate Agent · Los Angeles, CA · Member since 2022 · 137 posts · 106 votes

4y

Ratings, photos, and listing descriptions should all be reviewed.

There's a big difference between 4.75 and 4.85 - AirBnB recommends the best ratings first. The total number of reviews also factor in to how easy it is to find your listing on AirBnB. A good PM should be doing their best to generate reviews.

Great photos combined with a floor plan photo go a long way in boosting occupancy as well.

The listing description can help boost how well the property ranks on AirBnB search. A compelling description that sells the story of your property (whether you have an elaborate theme or not) is proven to lead to more bookings.

These are all essentially free to review and improve.

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What to do with 1st STR - Not Cashflowing

What to do with 1st STR - Not Cashflowing

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