Investor · millersburg, OH · Member since 2020 · 5 posts · 4 votes
I received a lead on a 6 unit STR property that the owner wants to sell. It has been established for several yrs now and seems like a great performing property but lacking in a few areas like some technology and modernizing units. I will be walking the property with the owner on Monday and would like to know how everyone else calculates what a STR is worth. I will be getting the performance history for the past few yrs on Monday. It is located in Ohio In a popular tourist area.
ps. I currently own 1 STR so I'm not a total newbie. But this is definitely alot bigger opportunitity for me.
Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
3y
Value based on sales comps, not based on what the income (STR) that the value generates is. This is how residential assets are securitized in the MBS market, and how they are lent on as well. As a result, you may find yourself with some lending difficulty if a seller is charging too hefty of a premium based on the STR income of the property they're selling.
Property Manager · Cleveland, OH · Member since 2015 · 699 posts · 799 votes
3y
I wouldn't value a property based on its STR income because appraisers don't consider it. This severely limits your exit options since it won't appraise for a traditional buyer.
I wouldn't value a property based on its STR income because appraisers don't consider it. This severely limits your exit options since it won't appraise for a traditional buyer.
I believe this would be considered a commercial property to a lender tho, right? Its has 6 units with a history of STR income. Are you suggesting I go off of a LTR valuation for the offer? I'm afraid if I do that i will under value it and lose it to some one that values it differently. Thanks for your help.
I received a lead on a 6 unit STR property that the owner wants to sell. It has been established for several yrs now and seems like a great performing property but lacking in a few areas like some technology and modernizing units. I will be walking the property with the owner on Monday and would like to know how everyone else calculates what a STR is worth. I will be getting the performance history for the past few yrs on Monday. It is located in Ohio In a popular tourist area.
ps. I currently own 1 STR so I'm not a total newbie. But this is definitely alot bigger opportunitity for me.
PLEASE show the property to someome doing deal. You will earn a fee, if they buy it. Learn then apply what you learn. YAou are not ready yet to even look at it. If you do not know what its worth then you should not be looking at it ,
I received a lead on a 6 unit STR property that the owner wants to sell. It has been established for several yrs now and seems like a great performing property but lacking in a few areas like some technology and modernizing units. I will be walking the property with the owner on Monday and would like to know how everyone else calculates what a STR is worth. I will be getting the performance history for the past few yrs on Monday. It is located in Ohio In a popular tourist area.
ps. I currently own 1 STR so I'm not a total newbie. But this is definitely alot bigger opportunitity for me.
PLEASE show the property to someome doing deal. You will earn a fee, if they buy it. Learn then apply what you learn. YAou are not ready yet to even look at it. If you do not know what its worth then you should not be looking at it ,
So collect a few dollars now and miss out on a few thousand dollars a month in income. How will I get ready if i just stand by and watch others snatch deals out from under my nose. If I don't purse deals I will regret just sitting on the sidelines watching others have success.
I wouldn't value a property based on its STR income because appraisers don't consider it. This severely limits your exit options since it won't appraise for a traditional buyer.
I believe this would be considered a commercial property to a lender tho, right? Its has 6 units with a history of STR income. Are you suggesting I go off of a LTR valuation for the offer? I'm afraid if I do that i will under value it and lose it to some one that values it differently. Thanks for your help.
Yeah that’s a fair point. I’d still be careful! Good luck.
I received a lead on a 6 unit STR property that the owner wants to sell. It has been established for several yrs now and seems like a great performing property but lacking in a few areas like some technology and modernizing units. I will be walking the property with the owner on Monday and would like to know how everyone else calculates what a STR is worth. I will be getting the performance history for the past few yrs on Monday. It is located in Ohio In a popular tourist area.
ps. I currently own 1 STR so I'm not a total newbie. But this is definitely alot bigger opportunitity for me.
PLEASE show the property to someome doing deal. You will earn a fee, if they buy it. Learn then apply what you learn. YAou are not ready yet to even look at it. If you do not know what its worth then you should not be looking at it ,
So collect a few dollars now and miss out on a few thousand dollars a month in income. How will I get ready if i just stand by and watch others snatch deals out from under my nose. If I don't purse deals I will regret just sitting on the sidelines watching others have succe
Its called taking your punches learn 1st, You have zero experience, but you want to take on a 6 unit, It will not end well. Do you know how to evict, costs of repairs, are you paying cash or funding do you have it lined up? Why is this owner speaking with you if you are not ready to close if agreed upon. You do not even have a deal or know if it is a deal,
Who knows maybe the experienced person can get this for a good price and pay you,25k, 50k, who knows. But you are not ready, You could lose your shirt even if you got it ,
learn then apply what you learn, deals are everywhere, I get 10 a week sent to me,
Real Estate Broker · Staunton, VA · Member since 2019 · 194 posts · 216 votes
3y
Is it 6 dedicated units? If they weren't STR, could each of the 6 units be rented LTR? If so, this would be considered a commercial property and a commercial appraisal would be ordered by your lender (confirm this with your lender to be sure). The appraisal will take into consideration the financials of the property, as well as the replacement cost and local sales data.
Start your analysis by getting as much finanical data from the sellers as possible - P&Ls, tax returns, booking reports - for at least 3 years. Look at the expenses - are there management costs included? Other discretionary spending?
Try to boil everything down to get a true operating NOI for the past 3 years. 2020-21 numbers are going to be inflated, so take that into consideration. Once you have a solid base NOI, figure out a cap rate to put on it. Around here, a turn-key hospitality property (without third-party management in place) will trade around 10-11%.
Real Estate Broker · Reno, NV · Member since 2023 · 267 posts · 297 votes
3y
Classification breakdown.
It's multifamily residential. That's how it will be comped/appraised. Even if it's cash flow is STR throw market LTR rates on there for a valuation analysis.
Current operation. STR, basically a multifamily complex running like a hotel. A specialized business operation that not everyone will adapt the property to.
Lending. Will require a "commercial" loan. I wish this was called a "DSCR multifamily loan" because there is nothing "commercial" about multifamily.
Property Manager · Delray Beach, FL · Member since 2023 · 4 posts · 2 votes
3y
I agree with some of the other folks that this is a commercial deal and will likely be valued on it's financial performance. If it's operating as an Airbnb and their are records to support the income then you can value it as you would any other business or commercial property. Just apply whatever your cap rate or hurdle rate is to the project and the highest you can pay is a price that nets you that rate. The key is getting a good understanding of true revenue potential and true expenses. For short-term rentals I would factor in a discount to future income as the market is becoming somewhat saturated. On the expense side I would lookout for cleaning expenses which can make or break you with short-term rentals. What is your plan for cleaning? Can you find a way to do it just as good but cheaper than the current owner? That could be a value add. Lastly I would make sure you consider the regulatory environment. I don't see short-term rentals as a settled issue in any area really. If the laws change and you have to come up with a different exit strategy, do you have one?
Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes
3y
I’d start by asking the seller what they’re looking to get. Then get their financial history and do your underwriting. You’ll quickly know if there’s a deal there or not…or what your ‘number is.’ Valuation can come secondarily.
It's only worth what comparable sales say they are worth. It being a STR has no bearing on its worth.
Here in the smokies though a property zoned for no short term rental can be worth easily up to 50 percent less in value. Any idea how appraisals work in situations like this?
It's only worth what comparable sales say they are worth. It being a STR has no bearing on its worth.
Here in the smokies though a property zoned for no short term rental can be worth easily up to 50 percent less in value. Any idea how appraisals work in situations like this?
Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
3y
Value based on sales comps, not based on what the income (STR) that the value generates is. This is how residential assets are securitized in the MBS market, and how they are lent on as well. As a result, you may find yourself with some lending difficulty if a seller is charging too hefty of a premium based on the STR income of the property they're selling.
Value based on sales comps, not based on what the income (STR) that the value generates is. This is how residential assets are securitized in the MBS market, and how they are lent on as well. As a result, you may find yourself with some lending difficulty if a seller is charging too hefty of a premium based on the STR income of the property they're selling.
How is the value determined let's say a like kind home that sells for 1m zoned for allowing str, and a block away in a subdivision that prohibits short term rentals, will the home still have a 1mil value and be comped against others even though the market wouldn't pay close to 1m. If that's the case, then there are some SEVERELY overpriced homes in sevier county that banks could be on the hook for if there is 0 calculation of STR revenue
There is a property right now across from dollywood that has dropped the asking price in half after it was determined no zoning for str
Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
3y
All comes down to the sales comps that the appraiser uses. I would think though that in markets with a lot of STRs, such as Dollywood, appraisers at this point know to use sales comps for STRs that are other STRs.
All comes down to the sales comps that the appraiser uses. I would think though that in markets with a lot of STRs, such as Dollywood, appraisers at this point know to use sales comps for STRs that are other STRs.
So then it does matter what the rental numbers are.
Investor · millersburg, OH · Member since 2020 · 5 posts · 4 votes
3y
@Zach Edelman It will be impossible to find a comp for a 6 unit STR in the area with similar bed/bath count ,acres, views, and amenities. I belive this would be considered a commercial property or what am I missing .
@Zach Edelman It will be impossible to find a comp for a 6 unit STR in the area with similar bed/bath count ,acres, views, and amenities. I belive this would be considered a commercial property or what am I missing .
You are correct. Commercial space has still not adjusted to give value to commercial assets for their STR ability. STR still is in it's infancy as an asset class and commercial assets being unable to be valued based of their STR income potential is a perfect example of this.