Rookie Investor - STR looks appealing

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Rookie Investor - STR looks appealing

Vincent Samaha
Member since 2023 · 12 posts · 1 vote

Hello. First post. I've been listening to the podcast/videos. I've recently begun realizing that my 401k will very likely be insufficient for retirement (I'm 37), so I'm searching for alternative investments. Instead of thinking of my later years as "retirement", it's better to call them the "passive income years", and real estate seems to fit perfectly within that idea. 

Since our family is regularly on the paying side of STRs through VRBO, it's something we're familiar with, and my wife and I have jokingly talked about buying a cabin in the Smoky Mountains or a beach house on Dauphin for personal use and rental income.

But I don't want to joke anymore. If we just play it safe and let someone else plan for our "passive income years", we won't be having passive income. 

So where should I start with STRs? Can I annualize the estimated income from a site like AirDNA and plug the numbers into a normal rental calculator to analyze the investment? What metrics should I prioritize?

Thanks for your help

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

STR'S are the shiny object attracting everyone's attention right now.

People have not done their research, paid too much and are making ingredients very little or coming out of pocket to make the mortgage payment.

That said, if you run the numbers and do your research you can find a profitable vacation rental.

Turnkey is going to cost you more.

Turning a great house into an STR will likely be cheaper but will be more work.

Buying a distressed property or foreclose will likely involve a remodel plus furnishing it. This will likely net you more profit, but will be even more work.

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  • Vincent Samaha
    OP
    Member since 2023 · 12 posts · 1 vote
    3y

    Thanks for the clarification on CoC return.
    I got the 10-12% from a BP video on LTRs. So 20%+ is the goal then for STRs.

    I also haven't considered income tax that will eat into CoC... Are your CoC numbers before or after tax?

    The plan is to get my numbers set and then see what fits into them. I've not going to try to make a square peg fit into a round hole. 

    0Reply
  • Sara Levy-Lambert
    USA · Member since 2022 · 879 posts · 109 votes
    3y

    Look up Awning top vacation rental properties, each property on the market is already analyzed for STR and LTR income. You can get a good idea of what opportunities are on the market and tweak certain variables to understand how they effect your return on investment

    0Reply
  • January Johnson
    Real Estate Agent · Emerald Coast, FL · Member since 2016 · 820 posts · 487 votes
    3y
    Quote from @Vincent Samaha:

    Thanks for the clarification on CoC return.
    I got the 10-12% from a BP video on LTRs. So 20%+ is the goal then for STRs.

    I also haven't considered income tax that will eat into CoC... Are your CoC numbers before or after tax?

    The plan is to get my numbers set and then see what fits into them. I've not going to try to make a square peg fit into a round hole. 

    20% CoC for STRs is ambitious...

    0Reply
  • Vincent Samaha
    OP
    Member since 2023 · 12 posts · 1 vote
    3y
    Quote from @January Johnson:
    Quote from @Vincent Samaha:

    Thanks for the clarification on CoC return.
    I got the 10-12% from a BP video on LTRs. So 20%+ is the goal then for STRs.

    I also haven't considered income tax that will eat into CoC... Are your CoC numbers before or after tax?

    The plan is to get my numbers set and then see what fits into them. I've not going to try to make a square peg fit into a round hole. 

    20% CoC for STRs is ambitious...

    I know at the current prices it definitely is. Things are crazy right now. 
    0Reply
  • Robert Posta
    Rental Property Investor · Roselle, IL · Member since 2020 · 30 posts · 12 votes
    3y
    Quote from @Michael Baum:

    Hey @Vincent Samaha. There is a lot of advice and ideas floating around. I guess it comes down to what you find acceptable. Some here have said they wouldn't get out of bed for 10-12%. Some think it is OK if you are happy with it.

    We are at about 24%. It is way better than we expected and has been steady. We are on target for about the same in 2023 so far. Time will tell.

    Bottom line is if you are happy with the 10-12% and it is steady and works, then you are fine. Yes you could possibly do better, but you never know.

    As for the time it takes, in high season, I spend about 2 hours a week working on our lake house. I handle everything regarding bookings and communication. I have a great cleaner and a handyman on call if I need help there. Our place is 8 hours away from us.

    We have good systems in place, do very regular maintenance on all the house systems and vet each and every guest. No instant bookings allowed. We rarely have a bad guest, have all 5 stars on both VRBO and AirBNB and are booked 100% for our season, each and every season so far.

    It doesn't have to be a chore, or a full time gig. If we had 10 houses, I would do something different, but one place is pretty easy if you do it correctly.

    My 2 cents.


     Would love to know your vetting process sir.

    0Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    3y
    Quote from @Robert Posta:
    Quote from @Michael Baum:

    Hey @Vincent Samaha. There is a lot of advice and ideas floating around. I guess it comes down to what you find acceptable. Some here have said they wouldn't get out of bed for 10-12%. Some think it is OK if you are happy with it.

    We are at about 24%. It is way better than we expected and has been steady. We are on target for about the same in 2023 so far. Time will tell.

    Bottom line is if you are happy with the 10-12% and it is steady and works, then you are fine. Yes you could possibly do better, but you never know.

    As for the time it takes, in high season, I spend about 2 hours a week working on our lake house. I handle everything regarding bookings and communication. I have a great cleaner and a handyman on call if I need help there. Our place is 8 hours away from us.

    We have good systems in place, do very regular maintenance on all the house systems and vet each and every guest. No instant bookings allowed. We rarely have a bad guest, have all 5 stars on both VRBO and AirBNB and are booked 100% for our season, each and every season so far.

    It doesn't have to be a chore, or a full time gig. If we had 10 houses, I would do something different, but one place is pretty easy if you do it correctly.

    My 2 cents.


     Would love to know your vetting process sir.

    It's nothing fancy. So when I get a booking request I have a set of questions I ask. They are not intrusive, but they give me a better idea of who they are and usually the guests pony up other info.

    I ask have they been to the area before, are you celebrating any special occasion and are they bringing a dog.

    None of those questions really tell you much, but how quickly they respond, what their response is (how verbose) and the overall feeling you get.

    If they don't get back to you quickly, if they answer in single words (NO) or don't respond at all, it gets my agent orange up.

    None of this is a sure thing, but it can give you an idea of what kind of guest they will be. People who don't communicate are often less than stellar guests. If there is an issue they don't let you know. If they bust something they don't let you know. If they want to stay later than checkout, they don't ask.

    This has just been my experience, but so far we haven't had any really terrible guests.
    1Reply
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