Buying STR with current rates as a retirement plan?

New York, New York
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Buying STR with current rates as a retirement plan?

Kiko Mattoso
Member since 2021 · 28 posts · 6 votes

Hi everyone,

I want an honest answer about something. I own only one STR property upstate NY that gives me around 11% cash on cash return. This means, I get like around 10k per year, net. But reading some posts here on Biggerpockets, this deal will sound bad to a lot of investors who say they only consider deals that can generate at least 20%.

My long-term goal is to buy enough STR properties that will generate a cash flow of 20k/month, so I can retire in the next 15 years with live with this cash-flow money.

BUT, in NY the homes are expensive and with current interests rates, I am not sure now buying STR properties is the way to go. I probably can get 10% investing in stocks. Not sure I wanna go that route, though.

My thoughts: I could buy another house now that would generate another 10% Cash on Cash return, and get around 700 dollars per month in cash flow, but then I'd have to buy 25 properties to reach those 20k. I'd need to buy 2 per year, to achieve that, but I don't have the time or money to do that.  

I know some of you will say " find better deals, maybe not in NY" but how when you're on a 9 to 5 job?

Any advice? What is the best free tool to help me find the deals? I love real estate, so would prefer to find ways to make it right, than to invest in stocks.

Thanks a lot in advance!

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Travis TimmonsPro Member
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
3y

One more unoriginal thought here - slow and steady still wins the race. 

Try to find your unfair advantage. Ours is that my wife is an interior designer. She does that for a living and has worked in $10M homes...she is actually a designer for a living, not "has an eye for design." It's a bit of a cheat code when buying short and medium term rentals. What is yours? Do you have specific hobbies or travel destinations that the masses do not know about as well as you? Do you have any advanced knowledge in construction? Do you have family member or close friends any interesting markets that will be helpful when building out boots on the ground? Find that unfair advantage, lean into it, and slowly, year by year, get the snowball rolling down the hill. 

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  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    3y
    Quote from @Kiko Mattoso:

    Thanks Michael. I’m taxes right now, I hope they can help pay zero tax on this little income I had in 2022. I’m not familiar with cost segregation but I hope my accountant is! This is my first year doing taxes as a home owner. 

    So Michael, so since CoC is done annually it can change drastically from the first year to second year, right? So because I've spent so much fixing and renovating, my CoC this year is around 11%, but next year, without this 70k, it should go around 20% ( just guessing). I must make around 35k gross per year I'd say. Is this making sense?

    Ok, so it depends on the 70k. If it was for hard systems; furnace, A/C, major appliances etc, then some of that gets depreciated instead of deducted.

    There was/is an IRS rule about taking a huge deduction in the first year it has been in service. Do you know if you were able to take that deduction?


    Investors can take advantage of Bonus Depreciation
    which in 2022, allows you to depreciate 100% your assets with a life
    span of 20 year or less in the year you place it in service. 
    The new law increases the bonus depreciation percentage from 50 percent to 100
    percent for qualified property acquired and placed in service after
    Sept. 27, 2017, and before Jan. 1, 2023.

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  • Todd Goedeke
    Contractor · Sheboygan, WI · Member since 2016 · 921 posts · 266 votes
    3y

    @Kiko Mattoso although ConC return is calculated annually, your cash invested is cumulative. Cash invested gets added year to year as more money is invested in the property. Example: $25k down payment gets added to $10k renovation cost in year one = $35k invested, following year another $15k invested = $35+$15=$50k upon which ConC is based. Just because you don t have any additional cash invested from one year to next does not reduce your cumulative cash invested when calculating ConC.

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  • Kiko Mattoso
    OP
    Member since 2021 · 28 posts · 6 votes
    3y

    I think they will, my accountant said I will pay no taxes on this little income I had. Which is a good thing! Thanks for your help, Michael. 

    1Reply
  • Todd Goedeke
    Contractor · Sheboygan, WI · Member since 2016 · 921 posts · 266 votes
    3y

    @Kiko Mattosoa good way to achieve your goal is by being a passive investor . I’ll explain.

    You should be able to net now,$1k per month , $60k down payment on a $275k property on a triple net leased property leased to a property management company. 

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