First STR with $100k or less?

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First STR with $100k or less?

Member since 2022 · 42 posts · 16 votes

I've been back and forth on the idea of using our savings to invest in a STR. I've read how it has changed people's lives, but have been super apprehensive seeing how saturated the STR market has become since 2020. I work for myself, have a small kid and one on the way. My wife and I are ready to do something different to replace my income. However, this is a situation where I need to be right the first time. I'd say being right means cash flowing at least 3k per month. Now how do I get to that point and what market to do that? I have no idea.

I thought about purchasing a property using owner finance option and using our savings to build a smaller home. The plan is to use the cash flow to pay the land off.

It seemed like the only option. With interest rates being high, it seems ridiculously dumb to purchase an existing home in this market.

Am I missing something? Seems like another case of dollar short, day late.

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James Hamling

Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes

You need to take a step back @Jayme B., because I hear you asking the wrong questions, and with the wrong focus.

First you need to decide if your going to INVEST that capital, or Launch a Business with it. And yes, these are 2 very different directions.

STR is a BUSINESS. Yes, it has a component of Real Estate, but it is NOT Real Estate Investing, it is HOSPITALITY business. The "STR Trail" is strewn with graves marked "I thought it would be easy" and "but the books said". NOT everyone can do it CORRECTLY, well, proficiently, profitably. Problem is many get confused for fact any can do it, with any can do it PROFITABLY, which no, MOST don't. Just look-up AirBnB, look at all the janky places, charging near to nothing, with few to little bookings, and then that "one" jumps out that's booked solid. Now think, that's ONLY those failing now, today, that's not the grave-yard of those who already failed.

STR is a HOSPITALITY Business, and coming into it with anything less than a focus on building a Hospitality business is planning to fail.

And that whole needing a 4-sure homerun hit out the gate, STOP, that does not exist in a startup business of any kind more or less a hospitality business which is one of the single most competitive in existence.

You want assurances, INVEST via a Pro. Yeah, it means lower returns, but that comes with safety. You don't know, so put your $ with someone who DOES. It's just that simple. And than learn from the experience until you grow your knowledge base to be empowered to do something on your own. Book smart is still only book smart and trust me, once in the trenches, with your $ on the line, yeah things are a whole lot different.

This $3k mnthly cash-flow off $100k, not realistic. Not to start, with low risk etc.. Reward and Risk are a married couple, you don't get more of one without more of the other.

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Jayme B.
OP
Member since 2022 · 42 posts · 16 votes
3y
Is even $80k-$100k enough to get started in this financial climate? Thanks for the help!
0 Reply
Jemma Jacques
Member since 2021 · 49 posts · 33 votes
3y
Yes you can do it, with $100k you can get 4 SFR in the right town, I have some available for sale in Cleveland right now, one is going for $80k and rents out up to $1250 a month, get a mortgage on that it will cost you $20k (down payment) and about $500 a month mortgage so you can make a good $500 a month income, then do that 5 more times, thats what I did.

You just need to factor in cost of repairs, let me know if you want me to send you my current properties available, I have a nice cashflowing duplex in Cleveland too, cost $127k, cashflows $1800 a month, great tenants
6 Reply
Jeff Langley
Member since 2021 · 167 posts · 141 votes
3y
Yes that is enough if you're able to qualify for a 2nd home loan @10% down, otherwise you'll have to find an STR DSCR. Those are probably the easy tasks compared to finding an STR that profits 3k monthly, that'll be the real challenge. I know we see the "gurus" on social media doing it.
1 Reply
Jayme B.
OP
Member since 2022 · 42 posts · 16 votes
3y
I feel like having another mortgage is a huge risk for us. I know how it goes - no risk, no reward. Thinking about covering the mortgage, cleaning fees etc and worry about the occupancy rates otherwise you come out of pocket for it gets me worried. I know you have to calculate conservatively as much as possible, but it would be nice to pick someone's brain that has done this before and knows a good deal when they see it. I don't have enough savings to practice haha.
I know my wife loves Orlando, but it seems that market is so dang saturated. We spend a lot of time there, so thoughts are that it would be beneficial.
What's a solid expectation for return on 80-100k investment per month doing STR?
Thanks for all the feedback.

0 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
3y
Look for a great property and a good price and run the numbers.
You won't know till you try and find a property that works.
3 Reply
Wilson Vanhook
Rental Property Investor · Oklahoma City · Member since 2021 · 108 posts · 103 votes
3y
Quote from @Jayme B.:

Is even $80k-$100k enough to get started in this financial climate? Thanks for the help!

Not impossible to reach this goal, but with $100k planning to cash flow $3k per month (a 3% return on your investment per month), and purchase prices/interest rates as high as they are, you're going to have to check all the boxes to reach that goal. Means doing a ton of research on STR's and tons of very specific market research to find a place you plan to target. Again, not impossible, but to me that sounds like a stretch goal to be achieved. What kind of financing are you looking at? Your absolute best bet is probably if you can finance this as a second home loan.
5 Reply
Wilson Vanhook
Rental Property Investor · Oklahoma City · Member since 2021 · 108 posts · 103 votes
3y
Quote from @Jemma Jacques:

Yes you can do it, with $100k you can get 4 SFR in the right town, I have some available for sale in Cleveland right now, one is going for $80k and rents out up to $1250 a month, get a mortgage on that it will cost you $20k (down payment) and about $500 a month mortgage so you can make a good $500 a month income, then do that 5 more times, thats what I did.

You just need to factor in cost of repairs, let me know if you want me to send you my current properties available, I have a nice cashflowing duplex in Cleveland too, cost $127k, cashflows $1800 a month, great tenants

He said he wants to cash flow $3k per month. Don’t think that’s in the ball park of what he’s looking for.
0 Reply
Wilson Vanhook
Rental Property Investor · Oklahoma City · Member since 2021 · 108 posts · 103 votes
3y
Quote from @Jeff Langley:

Yes that is enough if you're able to qualify for a 2nd home loan @10% down, otherwise you'll have to find an STR DSCR. Those are probably the easy tasks compared to finding an STR that profits 3k monthly, that'll be the real challenge. I know we see the "gurus" on social media doing it.

Yeah and most of these so called “gurus” bought a couple years ago then rave about how easy this business is when it isn’t nearly as easy to find those deals in this market. Or they buy in this market and then add value with a rehab but that’s combining multiple strategies. I agree finding the deal will be the real challenge.
6 Reply
Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
3y
Hey @Jayme B.. You are right about risk vs reward. First of all, if you have 100k then that is pretty great.
If you could manage to use 1/2 of it for the down and the rest for setup and reserve you could do a mortgage.
If you do all your homework on the area and property you can win.
If you mean cash flowing 3k net after everything is said and done, that could be tough, even when STRs were maxing out their nightly rates and occupancy.
There is no way to really calculate what 100k is going to get you on ROI.
What you need to do is take a look at this forum. Read everything on here. See what markets people are talking about.
Where are you located?
2 Reply
Tyler GibsonBusiness Member
Real Estate Agent · Orlando, FL · Member since 2017 · 1k+ posts · 2k+ votes
3y
Quote from @Jayme B.:

I feel like having another mortgage is a huge risk for us. I know how it goes - no risk, no reward. Thinking about covering the mortgage, cleaning fees etc and worry about the occupancy rates otherwise you come out of pocket for it gets me worried. I know you have to calculate conservatively as much as possible, but it would be nice to pick someone's brain that has done this before and knows a good deal when they see it. I don't have enough savings to practice haha.
I know my wife loves Orlando, but it seems that market is so dang saturated. We spend a lot of time there, so thoughts are that it would be beneficial.
What's a solid expectation for return on 80-100k investment per month doing STR?
Thanks for all the feedback.

Orlando is saturated, however you can still make a profit here. The thing that investors need to keep in mind when considering short-term rentals is that the operator is one of the greatest factors that will contribute to profitability. With that in mind I will share that while Orlando is a saturated market with thousands of rental units available there are also thousands of bad operators. Investors they come to Orlando with the proper mindset can definitely still make money. Investors need to focus on finding properties that are not too far away from the Disney parks and be prepared to invest in updating the furnishings of the home and doing some sort of cosmetic updates to theme several of the bedrooms. In Orlando the key to profitability is creating a unique experience for your guests. Consider turning the garage into an epic Star wars themed game room, or convert two of the kids rooms into elaborate themed Disney bunk beds. If an investor commits to doing these things guided by a local professional and focuses on operational excellence which includes customer communication and responsiveness and property cleanliness they should be able to reach superhost status on Airbnb and outperform their competition in the market. Your budget of $100,000 and may be able to get it done but you would be in a smaller unit and likely would not see the $3,000 a month net cash flow that you're searching for. It's not to say that it's impossible but it could be challenging in the Orlando market I would say entry price is somewhere around $450,000 for property that will perform well, and you would like we need an additional 30k to 100k to update and theme the home.
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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
3y
@Jayme B.
if 100K is all you have should you spend it on the chance of arbitrarily making 3k a month? no.
if you buy something that is also a strong LTR you'd lower your risk.
3 Reply
Mark S.
Real Estate Investor · Saint Paul, MN · Member since 2017 · 543 posts · 474 votes
3y
@Nicholas L. There are a lot of people who read these wonderful stories about making tons of money in short term rentals, buy something they can’t really afford, and are now starting to regret it. Not saying it can’t be done, but don’t put your family in a precarious financial situation chasing something that is fraught with potential downfall.
4 Reply
Shawn McCormickPro Member
Realtor · Central Florida-Orlando · Member since 2014 · 1k+ posts · 892 votes
3y
@Jayme B. I am in Orlando and to your point, we do have tens of thousands of units here and it is competative. $3k a month here is difficult if you want to net that after all expenses. You would need to be in a $800k house to do that here. You could potentially save money on your personal travel expenses by using the unit since you visit here a lot and that would offset what you need to bring in.
That being said, since you are new and nervous, I don't think looking out of state would be a good idea. The stress of not knowing whats going on at your unit, not having trustworthy cleaners, maintenance and property managers is not a good idea if you are not experienced. Stay close to home in an area that you know and can check on the property, do some of your own repairs and maybe manage yourself while you learn.
As far as rates go, don't stress so much about that, that's what refi's are for. When rates do come back down, your competition of other buyers will be far greater and that will drive prices back up. So pay more in rates (or have the seller buy down your rate as part of negotiations) and refi later. You can change the rate, but not the price of the home. Historically, prices increase 3% a year (not sure what your market does) and most good areas where you want to be, like Orlando, home prices have been increasing double digits each year. So the longer you wait for rates to come down or a 'crash', you will just be sitting on the sidelines.
Do your homework, find a few Realtors that can work with you, join your local REAI and educate yourself from others doing the business and you'll find deals!
Hope this helps, best of luck to you!
3 Reply
Chad McMahan
Residential Real Estate Broker · Sedona, AZ · Member since 2017 · 751 posts · 504 votes
3y
Quote from @Jayme B.:

I've been back and forth on the idea of using our savings to invest in a STR. I've read how it has changed people's lives, but have been super apprehensive seeing how saturated the STR market has become since 2020. I work for myself, have a small kid and one on the way. My wife and I are ready to do something different to replace my income. However, this is a situation where I need to be right the first time. I'd say being right means cash flowing at least 3k per month. Now how do I get to that point and what market to do that? I have no idea.
I thought about purchasing a property using owner finance option and using our savings to build a smaller home. The plan is to use the cash flow to pay the land off.
It seemed like the only option. With interest rates being high, it seems ridiculously dumb to purchase an existing home in this market.
Am I missing something? Seems like another case of dollar short, day late.

Hi Jayme.
I'd recommend you go with 90% LTV 2nd home financing (most likely route) through a conventional lender, or a property that makes sense to occupy part of and rent the rest with a much higher LTV as a primary residence.
I also recommend you cap your purchase price at $500k, so that you have enough cash for furnishing and very minor improvements. Get something that needs very little or no improvement.
I'd be willing to take it on in my area, if you like. My clients and I get strong returns on STR's anywhere from $400k-$2M. Obviously we would focus on $400k-$500k for you.
Wherever you decide to invest, your most critical team member will be a STR specialized real estate agent. They will be your greatest mentor and guide to push the easy button and line everything up and get you great returns. They should have a great STR property manager, lender, contractors, setup for furnishings, and of course direct seasoned experience doing this over and over and over and over and over and over again.
1 Reply
Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
3y
Quote from @Jayme B.:

I've been back and forth on the idea of using our savings to invest in a STR. I've read how it has changed people's lives, but have been super apprehensive seeing how saturated the STR market has become since 2020. I work for myself, have a small kid and one on the way. My wife and I are ready to do something different to replace my income. However, this is a situation where I need to be right the first time. I'd say being right means cash flowing at least 3k per month. Now how do I get to that point and what market to do that? I have no idea.
I thought about purchasing a property using owner finance option and using our savings to build a smaller home. The plan is to use the cash flow to pay the land off.
It seemed like the only option. With interest rates being high, it seems ridiculously dumb to purchase an existing home in this market.
Am I missing something? Seems like another case of dollar short, day late.

I think using $100k down is going to be tough. Im an investor and PM in Tampa, you used to be able to buy a 5br house with a pool near the beach for $750k and make $5k+ a month cashflow especially with a 4% mortgage. Those houses are now $1.2M and those mortgages are 7%+. You can still make good investments here but with that much down it will be hard to cash flow $3k after management and all expenses. As others have mentioned, see if you qualify for a 10% second home loan. If so, there are some $800k houses that do well and you may have enough left over to furnish. There are some that gross $140k-180k per year and after all expenses you could cash flow decently.
[email protected]813-563-0877
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2 Reply
Sarah KensingerPro Member
Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
3y
Highly recommend you check our Short Term Rental Secrets. Very very informative on how to run numbers, markets to pay attention to, and how to make a go of STR's without getting in trouble. It's possible but you have to be willing to learn...maybe even pay money to do that... research research research and don't get into something going off emotion or an attachment to an area, place, etc.! We have been learning and researching for 6 months and we're just now looking to buy and co-host STR's for people.
[email protected]330-557-3021
2 Reply
Sarah KensingerPro Member
Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
3y
BTW we were looking to buy a place in FL, the Destin, Miramar beach area. $100,000 is more than enough if you're ok with a condo and can get a lender to loan on a non-warrantable condo. Yes, they are out there if you look and can put 25% down. Also, you can make $3,000 a month except for the slower winter months especially January and February. I would either set money aside for those months in case you come short or switch to a mid-term rental during that time. The summer months make up for that slow season two-fold! But I know there are other areas in the country very similar also.
[email protected]330-557-3021
2 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
3y
You need to take a step back @Jayme B., because I hear you asking the wrong questions, and with the wrong focus.
First you need to decide if your going to INVEST that capital, or Launch a Business with it. And yes, these are 2 very different directions.
STR is a BUSINESS. Yes, it has a component of Real Estate, but it is NOT Real Estate Investing, it is HOSPITALITY business. The "STR Trail" is strewn with graves marked "I thought it would be easy" and "but the books said". NOT everyone can do it CORRECTLY, well, proficiently, profitably. Problem is many get confused for fact any can do it, with any can do it PROFITABLY, which no, MOST don't. Just look-up AirBnB, look at all the janky places, charging near to nothing, with few to little bookings, and then that "one" jumps out that's booked solid. Now think, that's ONLY those failing now, today, that's not the grave-yard of those who already failed.
STR is a HOSPITALITY Business, and coming into it with anything less than a focus on building a Hospitality business is planning to fail.
And that whole needing a 4-sure homerun hit out the gate, STOP, that does not exist in a startup business of any kind more or less a hospitality business which is one of the single most competitive in existence.
You want assurances, INVEST via a Pro. Yeah, it means lower returns, but that comes with safety. You don't know, so put your $ with someone who DOES. It's just that simple. And than learn from the experience until you grow your knowledge base to be empowered to do something on your own. Book smart is still only book smart and trust me, once in the trenches, with your $ on the line, yeah things are a whole lot different.
This $3k mnthly cash-flow off $100k, not realistic. Not to start, with low risk etc.. Reward and Risk are a married couple, you don't get more of one without more of the other.
12 Reply
Leslie Anne Morris
Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
3y
I tell clients to think about this more as a long-term investing strategy and not a get rich quick, quit your job sort of thing, although that can happen if you buy right and are a wise investor. Heavily weigh options when you’re considering market, that’s the smartest thing you can do to help yourself get started now.
2 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
3y
Just being realistic you won't cashflow $3000 a month on $100k. With $100k a great return would be about $800 a month true net after expenses and more realistic in this market is $600 range.
2 Reply
Jayme B.
OP
Member since 2022 · 42 posts · 16 votes
3y
Quote from @James Hamling:

You need to take a step back @Jayme B., because I hear you asking the wrong questions, and with the wrong focus.
First you need to decide if your going to INVEST that capital, or Launch a Business with it. And yes, these are 2 very different directions.
STR is a BUSINESS. Yes, it has a component of Real Estate, but it is NOT Real Estate Investing, it is HOSPITALITY business. The "STR Trail" is strewn with graves marked "I thought it would be easy" and "but the books said". NOT everyone can do it CORRECTLY, well, proficiently, profitably. Problem is many get confused for fact any can do it, with any can do it PROFITABLY, which no, MOST don't. Just look-up AirBnB, look at all the janky places, charging near to nothing, with few to little bookings, and then that "one" jumps out that's booked solid. Now think, that's ONLY those failing now, today, that's not the grave-yard of those who already failed.
STR is a HOSPITALITY Business, and coming into it with anything less than a focus on building a Hospitality business is planning to fail.
And that whole needing a 4-sure homerun hit out the gate, STOP, that does not exist in a startup business of any kind more or less a hospitality business which is one of the single most competitive in existence.
You want assurances, INVEST via a Pro. Yeah, it means lower returns, but that comes with safety. You don't know, so put your $ with someone who DOES. It's just that simple. And than learn from the experience until you grow your knowledge base to be empowered to do something on your own. Book smart is still only book smart and trust me, once in the trenches, with your $ on the line, yeah things are a whole lot different.
This $3k mnthly cash-flow off $100k, not realistic. Not to start, with low risk etc.. Reward and Risk are a married couple, you don't get more of one without more of the other.

I need the little money I have to work for me short term AND long term, not just long term. I can invest in the stock market and make 7-11% with no effort over the course of 20 years but it does very little to leverage the money I have in the near-term. I want to launch a business. I understand the difference in holding properties in a portfolio vs running a hospitality business.
Positioning yourself with the correct information and research does at times allow someone to have a better outcome the first time than those that do not put in the work to figure it out. I'm just not going to throw down $100k on a property and cross my fingers. Maybe 3k cash flow is unrealistic. That's why I'm on here asking those that have experience. I'm humble enough to learn from those that have done it before. Most don't want to share their knowledge or hand hold.
1 Reply
Jeff Langley
Member since 2021 · 167 posts · 141 votes
3y
Quote from @Jayme B.:

Quote from @James Hamling:

You need to take a step back @Jayme B., because I hear you asking the wrong questions, and with the wrong focus.
First you need to decide if your going to INVEST that capital, or Launch a Business with it. And yes, these are 2 very different directions.
STR is a BUSINESS. Yes, it has a component of Real Estate, but it is NOT Real Estate Investing, it is HOSPITALITY business. The "STR Trail" is strewn with graves marked "I thought it would be easy" and "but the books said". NOT everyone can do it CORRECTLY, well, proficiently, profitably. Problem is many get confused for fact any can do it, with any can do it PROFITABLY, which no, MOST don't. Just look-up AirBnB, look at all the janky places, charging near to nothing, with few to little bookings, and then that "one" jumps out that's booked solid. Now think, that's ONLY those failing now, today, that's not the grave-yard of those who already failed.
STR is a HOSPITALITY Business, and coming into it with anything less than a focus on building a Hospitality business is planning to fail.
And that whole needing a 4-sure homerun hit out the gate, STOP, that does not exist in a startup business of any kind more or less a hospitality business which is one of the single most competitive in existence.
You want assurances, INVEST via a Pro. Yeah, it means lower returns, but that comes with safety. You don't know, so put your $ with someone who DOES. It's just that simple. And than learn from the experience until you grow your knowledge base to be empowered to do something on your own. Book smart is still only book smart and trust me, once in the trenches, with your $ on the line, yeah things are a whole lot different.
This $3k mnthly cash-flow off $100k, not realistic. Not to start, with low risk etc.. Reward and Risk are a married couple, you don't get more of one without more of the other.

I need the little money I have to work for me short term AND long term, not just long term. I can invest in the stock market and make 7-11% with no effort over the course of 20 years but it does very little to leverage the money I have in the near-term. I want to launch a business. I understand the difference in holding properties in a portfolio vs running a hospitality business.
Positioning yourself with the correct information and research does at times allow someone to have a better outcome the first time than those that do not put in the work to figure it out. I'm just not going to throw down $100k on a property and cross my fingers. Maybe 3k cash flow is unrealistic. That's why I'm on here asking those that have experience. I'm humble enough to learn from those that have done it before. Most don't want to share their knowledge or hand hold.

I'm 100% transparent. I'm currently looking for 2-3 more STR's and I'm struggling to find decent COC on STR's that aren't in a good location.
0 Reply
Wilson Vanhook
Rental Property Investor · Oklahoma City · Member since 2021 · 108 posts · 103 votes
3y

I disagree with this statement. People in this community are very willing to share their knowledge and help. You’ve already had a ton of comments on this post alone with people sharing their knowledge and giving great insights.
2 Reply
Dillon Cook
Realtor · Greater Tampa Bay · Member since 2014 · 218 posts · 130 votes
3y
Would agree with 3k/mo cashflow being unrealistic for first time in this market. If you're looking to replace your income, you'll need a few deals and time to pass (with rent increases) to add up to where you want to be. I'm in Tampa and while I don't work with short terms that often, I know the west central FL area is filled to the brim with options. In the long term market, rents are strong, but buying right now is incredibly hard to cash flow.
0 Reply
Andres Murillo
Real Estate Agent · Los Angeles, CA · Member since 2022 · 137 posts · 106 votes
3y
Not sure where you're located but with a budget like that arbitrage might be a great starting point. You can commit much less capital than purchasing a home, test the business of STRs to see how you like it, gain experience and insight needed for higher dollar deals, and collect cash flow. If you decide that being an STR owner isn't for you there are plenty of channels where you can sell an existing STR business.
1 Reply

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