Deal or no deal? NEED HELP FAST

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Short-Term & Vacation Rental Discussions
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Deal or no deal? NEED HELP FAST

Ryan Shekell
Rochester, NY · Member since 2017 · 27 posts · 3 votes

Looking for advice. If low end rental projections (from area property Managment companies) don't cash flow, or are neutral, but AirDNA comps and market data analysis on ADR and occupancy show potential 25% cash on cash return, would you do the deal?!? Asking for a first time STR friend…😉

BTW - this friend is under contract and the increased insurance premiums are effecting the original projections…

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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
3y

Don't trust Airdna. You need to manually get accurate numbers to work with.

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  • Trent Reeve
    Atlanta · Member since 2022 · 710 posts · 640 votes
    3y

    AirDNA also includes cleaning fees in their estimates, but thats something you wont profit from. just keep in mind

    1Reply
  • Ken Boone
    Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
    3y

    I would be leary with the info you have provided.   If locals are not cash flowing or at best breaking even, can he beat them, probably, but by how much?  There is a reason they are not cash flowing.  The locals would want your business if you talked to them and if they are not giving you glowing numbers... I dunno man.  I am no expert with AirDna.. And with the market not recovering any time soon.. I dunno.  I would much rather rely on numbers from people in the area.  Having said that he should do a lot of research on other STRs in the area and what their rates and occupancies are.

    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    3y

    Don't trust Airdna. You need to manually get accurate numbers to work with.

    2Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    3y
    Quote from @John Underwood:

    Don't trust Airdna. You need to manually get accurate numbers to work with.

     What @Ken Boone said.

    0Reply
  • Dave StokleyBusiness Member
    Property Manager · Cleveland, OH · Member since 2015 · 699 posts · 799 votes
    3y

    Are the rental projections from the PM also for STR? Or LTR?

    0Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    3y

    I Gave it the sniff test. I'm holding my nose and running away.

    1Reply
  • Garrett CrosbyPro Member
    Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
    3y

    Honestly, you need to just make sure to vet your numbers with a couple of other sources. Here are some easy ways to do so "quickly".

    #1 - run them with a local STR manager - see if they check out.

    #2 - run them with a local investor-friendly agent who knows the market. Good agents will take the time to help you with it in exchange for your relationship in the future (and potential use). 

    #3 - Connect with other investors in the area. Get real data and cross-examine.

    Just my 2 cents. Best of luck! 

    [email protected]
    0Reply
  • Ryan Shekell
    OP
    Rochester, NY · Member since 2017 · 27 posts · 3 votes
    3y
    Quote from @Trent Reeve:

    AirDNA also includes cleaning fees in their estimates, but thats something you wont profit from. just keep in mind

    Thanks. Included these in the projections as well. Is anyone aware if AirDNA includes their “service fee” as well? 
    0Reply
  • Ryan Shekell
    OP
    Rochester, NY · Member since 2017 · 27 posts · 3 votes
    3y
    Quote from @John Underwood:

    Don't trust Airdna. You need to manually get accurate numbers to work with.

    Thanks. Completely agree. Using  imperative rates and occupancies given by local PM companies, the numbers look good. Their own numbers don’t match their projections. Not sure if they are deducting their 20% fee. 
    0Reply
  • Amy Mead
    Member since 2022 · 21 posts · 5 votes
    3y

    AirDNA projections are 20-30% higher than what local STR agents are quoting me for the same property. I think AirDNA just does a circle around the property which may not get accurate comps. Where I am looking the house on the water may rent at 30% higher than the house three houses back but AirDNA does not seem to recognize the added value of water front vs near the water. If there is a local attraction such as a beach or mountain you really should do your own calculations or ask a few different STR PM.

    2Reply
  • Ryan Shekell
    OP
    Rochester, NY · Member since 2017 · 27 posts · 3 votes
    3y
    Quote from @Dave Stokley:

    Are the rental projections from the PM also for STR? Or LTR?

    It’s a vacation market, so projections are all STR. 
    0Reply
  • Ryan Shekell
    OP
    Rochester, NY · Member since 2017 · 27 posts · 3 votes
    3y
    Quote from @Garrett Crosby:

    Honestly, you need to just make sure to vet your numbers with a couple of other sources. Here are some easy ways to do so "quickly".

    #1 - run them with a local STR manager - see if they check out.

    #2 - run them with a local investor-friendly agent who knows the market. Good agents will take the time to help you with it in exchange for your relationship in the future (and potential use). 

    #3 - Connect with other investors in the area. Get real data and cross-examine.

    Just my 2 cents. Best of luck! 

    Great advice. Do other investors typically share revenue information? 
    0Reply
  • Ryan Shekell
    OP
    Rochester, NY · Member since 2017 · 27 posts · 3 votes
    3y
    Quote from @Amy Mead:

    AirDNA projections are 20-30% higher than what local STR agents are quoting me for the same property. I think AirDNA just does a circle around the property which may not get accurate comps. Where I am looking the house on the water may rent at 30% higher than the house three houses back but AirDNA does not seem to recognize the added value of water front vs near the water. If there is a local attraction such as a beach or mountain you really should do your own calculations or ask a few different STR PM.

    Thanks! I’ve ran the actual rents of all comps in the area and compared features and I’m using conservative comp projections. It appears as though self-managed outperforms PM most of the time. 
    0Reply
  • Garrett CrosbyPro Member
    Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
    3y
    Quote from @Ryan Shekell:
    Quote from @Garrett Crosby:

    Honestly, you need to just make sure to vet your numbers with a couple of other sources. Here are some easy ways to do so "quickly".

    #1 - run them with a local STR manager - see if they check out.

    #2 - run them with a local investor-friendly agent who knows the market. Good agents will take the time to help you with it in exchange for your relationship in the future (and potential use). 

    #3 - Connect with other investors in the area. Get real data and cross-examine.

    Just my 2 cents. Best of luck! 

    Great advice. Do other investors typically share revenue information? 

    I can't speak for every investor - but I would gladly share my numbers with any new investor who approached me in a market I'm invested in. We all win when we collaborate. :) 

    [email protected]
    2Reply
  • Leslie Anne Morris
    Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
    3y

    I’m finding lately that AirDNA is low so add that to your list! I would think (depending on market) a local property management company would know best and in most cases be conservative. 

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y

    it's known airdna is overestimating revenue. Even local PM could be wrong also as vacancy really depends on the unit and dynamic pricing. To be safe, just add more downpayment when purchasing STVR, targeting using 55-60% downpayment

    0Reply
  • Amy Mead
    Member since 2022 · 21 posts · 5 votes
    3y
    Quote from @Leslie Anne Morris:

    I’m finding lately that AirDNA is low so add that to your list! I would think (depending on market) a local property management company would know best and in most cases be conservative. 


     I am looking in coast NC and coastal NE and the AirDNA numbers sound like a made up fairy tail numbers. But both those areas have old school weekly rentals so the rental history is different.

    0Reply
  • Cole SchlackPro Member
    Realtor · Hawaii, HI · Member since 2015 · 145 posts · 95 votes
    3y
    Quote from @Ryan Shekell:

    Looking for advice. If low end rental projections (from area property Managment companies) don't cash flow, or are neutral, but AirDNA comps and market data analysis on ADR and occupancy show potential 25% cash on cash return, would you do the deal?!? Asking for a first time STR friend…😉

    BTW - this friend is under contract and the increased insurance premiums are effecting the original projections…

    The PM is probably right, STR dont cash flow year after year as well as people like to think. If you can use it when its not rented and get some enjoyment and it breaks even I think that a good deal. If its just an investment I would skip it.

    1Reply
  • Ryan Shekell
    OP
    Rochester, NY · Member since 2017 · 27 posts · 3 votes
    3y
    Quote from @Leslie Anne Morris:

    I’m finding lately that AirDNA is low so add that to your list! I would think (depending on market) a local property management company would know best and in most cases be conservative. 

    Perfect! I wasn’t confused enough 😂. 
    1Reply
  • Ryan Shekell
    OP
    Rochester, NY · Member since 2017 · 27 posts · 3 votes
    3y
    Quote from @Amy Mead:
    Quote from @Leslie Anne Morris:

    I’m finding lately that AirDNA is low so add that to your list! I would think (depending on market) a local property management company would know best and in most cases be conservative. 


     I am looking in coast NC and coastal NE and the AirDNA numbers sound like a made up fairy tail numbers. But both those areas have old school weekly rentals so the rental history is different.

    How does “old school weekly” impact projections vs dna? 
    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y

    I think AirDNA is useful for analyzing a general market, but not for performance of specific houses. There are too many variables for a computer algorithm to measure.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    2Reply
  • Evangeline Hooie
    Jacksonville, FL · Member since 2018 · 29 posts · 18 votes
    3y

    What kind of management company is it? In Florida, we have lots of mom and pop - 30 year old rental companies that don't use modern tech. I think that matters to how well they can do. Also, I have found most rental projections are far lower then I can do on my own.

    0Reply
  • Erik Stenbakken
    Investor · Nortnern Colorado · Member since 2020 · 157 posts · 131 votes
    3y

    An important question for your friend to ask himself/herself: “Can I afford to be wrong?” Remember, all of these projections are using past numbers and  guessing what the future looks like. If the future doesn’t look like the past, can your friend afford to be wrong?

    There’s also this: most of us make decisions on an emotional basis. If your friend wants to find reasons to look at sunshiny data to justify the purchase, no amount of reality will slow that roll. It’s OK that we use emotions. Just need to be aware that emotions are as potent as any of the numbers you will see.

    0Reply
  • Brockton Olsen
    Real Estate Broker · Salt Lake City, UT · Member since 2020 · 1 post · 0 votes
    3y

    @Ryan Shekell I try to always have 2 or 3 exit strategies. If it works well as a BnB but you lose money on every other strategy I’d probably stay away.

    Never know when laws will change, or bnb fees will increase, or you have crap tenant that ruins your reviews👌

    0Reply
  • Leo R.
    Investor · Member since 2021 · 591 posts · 695 votes
    3y

    @Ryan Shekell presumably, the comp data used by air dna, the PM, and anyone else who gives you data, is at least a couple months old (or its YTD data)...either way, the market today is a different universe than it was a few months ago, and it's likely that it will continue to change (particularly with STRs, which tend to get hit hardest with vacancy during a recession).

    So, even if the data you're getting was accurate at the time it was collected, it's probably almost meaningless now.

    Moreover, there has been a lot of news lately that the STR market is way oversaturated with supply (and again, demand is dropping fast because we're heading into recession). Further complicating the matter is the fact that air bnb recently changed their platform and algorithm to focus primarily on the top teir, A+++, highly unique properties (think: luxury beach-front treehouse), and more "normal" listings aren't getting much traction any more... lots of specific details on these issues are outlined in a variety of recent BP podcasts (e.g.; the on the market podcast), and tons of other sources all over the interwebs, so it's a good idea to read up...

    Good luck out there!

    1Reply
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