Lender · Austin, TX · Member since 2022 · 223 posts · 244 votes
What are your non negotiables when underwriting a potential deal? Obviously positive ROI is an easy one, I am more so asking about your non-negotiables as they relate to the physical structure you are buying.
Anything from property age, property type, square footage, permitted or non permitted, location, foundation, etc....
No HOA, no condos, nothing I wouldn't want to vacation at myself.
Newbie here. Why do you stay away from condos? I've read on another post that somebody found great success in it but see a couple of posts here that you guys stay away from them?
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
3y
Going to be a huge spectrum here based on market and experience. I would recommend doing your best to not lose money on the first one. If you want to start simple buy a 150k long term before you jump into a short term which is generally going to be much higher purchase price
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
3y
Everything about STRs centers on location. Everything. It's far more important than with a LTR obviously. Ideally you want a good year-round location....
Investor · Curtis, NE · Member since 2019 · 231 posts · 140 votes
3y
No HOA. Period. Also, regarding physical issues, you want landscaping that is easy and low maintenance.. Nothing can kill an impression like an ugly overgrown yard filled with weeds that just popped up after a recent storm, etc...
Why no HOA, Bob? All bad or just mostly bad experiences in the past?
They may allow STR now, but that can change very quickly. I have had this happen to me twice. Ended up selling two different houses after HOA rules changed regarding STR. Of course you can fight them, but is it worth it?
Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
3y
I don't say flat out no to anything. I look at all deals and evaluate based on underwriting metrics and how that new property will fit into the portfolio.
Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
3y
2 non-negotiables for me in an STR are: must be on municipal water and sewer and must be able to self-manage. We live in the country and know the challenges of owning a property on a well and septic. Septic is rarely the problem, but wells and pumps can give you all kinds of problems - problems I don't want to deal with in an STR, not to mention the cost of power to operate the well. And not being able to self manage cuts into the potential cash flow too much.
No HOA, no condos, nothing I wouldn't want to vacation at myself.
Newbie here. Why do you stay away from condos? I've read on another post that somebody found great success in it but see a couple of posts here that you guys stay away from them?
Because all Condos are going to come with an HOA...meaning you are at the whim of a Board that can change in a day from STR friendly to no STRs allowed. I've been on an HOA Board in the past and they are a nightmare at best. I wouldn't take a STR in an HOA situation if you gave it to me....
No HOA, no condos, nothing I wouldn't want to vacation at myself.
Newbie here. Why do you stay away from condos? I've read on another post that somebody found great success in it but see a couple of posts here that you guys stay away from them?
2 non-negotiables for me in an STR are: must be on municipal water and sewer and must be able to self-manage. We live in the country and know the challenges of owning a property on a well and septic. Septic is rarely the problem, but wells and pumps can give you all kinds of problems - problems I don't want to deal with in an STR, not to mention the cost of power to operate the well. And not being able to self manage cuts into the potential cash flow too much.
We live on a property with a well, has an STR on it as well. Don't have any issues with it, other than replacing the pump several years ago (after years of use). Doesn't cost much to run either, not where we live....way cheaper than our STR in the city actually.
Rental Property Investor · Wake Forest, NC · Member since 2017 · 128 posts · 131 votes
3y
@Tyler Solomon I just liked every single comment stating NO HOA - couldn't agree more. I've lost count of how many times I've had a friend mention their HOA rules against "fill in the blank". Another huge part of the HOA problem is the variable expenses. Your monthly payment is subject to change without any notice, special assessments, general assessments. Nothing will kill your cash flow quite like an HOA payment going from $120 to $275 a month.
Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
3y
@Bruce Woodruff we live on a property with a well, too. Most my life I've lived on properties with wells. And we've had the well go out, the pump go out, broken water lines, all the usual stuff. Our biggest issue right now is severe drought and the BOR unilaterally deciding not to release water to our irrigation district this year so groundwater rechard did not happen and the water table has lowered dramatically. Lots of people around us have had their wells go dry. So far so good for our well. Anyway, all of that is not something I want to deal with at an STR. Any of those expenses could wipe out cash flow and cause negative reviews. I'll stick to municipal water and sewer for any STR. Doesn't mean there will never be any problems, but the likelihood is much lower and you can pretty much guarantee occasional issues if you're on a well.
@Bruce Woodruff we live on a property with a well, too. Most my life I've lived on properties with wells. And we've had the well go out, the pump go out, broken water lines, all the usual stuff. Our biggest issue right now is severe drought and the BOR unilaterally deciding not to release water to our irrigation district this year so groundwater rechard did not happen and the water table has lowered dramatically. Lots of people around us have had their wells go dry. So far so good for our well. Anyway, all of that is not something I want to deal with at an STR. Any of those expenses could wipe out cash flow and cause negative reviews. I'll stick to municipal water and sewer for any STR. Doesn't mean there will never be any problems, but the likelihood is much lower and you can pretty much guarantee occasional issues if you're on a well.
I guess it depends entirely on the size of the aquafer that you draw from. My well properties are on huge ones so no issues..... Good luck with yours...
Property Manager · Member since 2022 · 196 posts · 125 votes
3y
Good question here.
#1 - The municipality you are buying in must allow STR's. Make sure they aren't trying to regulate this arbitrage.
#2 - The numbers must work as a LTR. If somethings and you no longer can/want to manage a STR, it must be viable to run as a HOLD.
#3 - Ensure the property can be STR'd. After checking if your municipality allows it - be sure there is no HOA/Condo Assoc/or other gate keepers that could stop you.
#4 - Ensure it's a STR area. Something that will drive the demand for this type of arbitrage. Local colleges, tourist attractions, a view, direct access to things like major hospitals/venues/event spaces that are active.