STR Purchase Strategy?

Question

I'm researching to build a plan to buy my first STR.

What are the pros and cons of:

1) Buying a property nearly ready to rent and compete in its market. I.e., there are likely relatively few improvements to be made. I listened to a podcast this week in which the host asked the guest, "What advice would you recommend to your 20-year-old self?" The answer was "always buy the premium property."

OR

2) Buy a property in tougher condition (but in a good location) and significantly invest to make it competitive.

Thanks, Jan

Michael Baum · Answer

We generally try and find places that need cosmetic upgrade requirements rather than a full tilt remodel.

Not as extensive as a full remodel, but make a huge difference when it hits the market.

Jan Dutton · Answer

I've learned that.   To quote a podcast guest "Always buy the premium property."

Stefan St. Marie · Answer

Location is a big one for STR renters. So I'd put that above condition.

Travis Timmons · Answer

We're in the fixer to STR camp, but it sucks. It's stressful, expensive, and a giant pain in the a##. When you get to the other side of it though, you feel like a genius. If you do go that route, make sure that you have plenty of cash or access to it. It's death by a thousand cuts getting a property renovated, furnished, and STR ready. You're probably going to end up going to market with a few warts too...just stuff that you have to short cut because you have to start making money.

Also, if you do buy a project, make sure that the completion of that project can be completed before your market's busy season. It's a nice emotional and financial boost if you can see immediate results. You also don't have to be as good or have everything buttoned up in peak season. Guests are not as picky when there is little to choose from. Don't be a moron and skip out on basics, but you get the idea.

Hope that helps...it's a good strategy that will likely result in higher returns, but I want to be the only stranger on the internet that tells you it is harder and more expensive than you think it will be. Feel free to reach out if you think that I can be a resource or answer any questions.

Jorge Vazquez · Answer

Jan, considering my two decades in investment, I'd recommend focusing on your long-term goals and resources. If you're skilled in renovations and willing to put in the effort, buying a distressed property can offer great rewards. You'll have the chance to significantly increase its value through improvements, creating equity that could pay off substantially in the long run. This approach demands a good eye for potential, patience, and a hands-on commitment.

However, if you're new to real estate or prefer a more straightforward approach, a nearly turnkey property might be a better starting point. It's less about immediate value creation and more about steady income with minimal initial hassle. Keep in mind that in this case, you're paying a premium for the convenience and immediate market readiness.

In both scenarios, emphasize the importance of location, understanding market trends, and aligning with your personal investment strategy. Real estate is a diverse field, and success often comes from finding a niche that aligns with your skills, interests, and investment capacity

Andrew Steffens · Answer

Hey Jan

This is a great question I think I can help with a bit, however the ultimate decision is yours alone and there is no right or wrong answer.  I co-own a Vacation Rental Property Management Company with nearly 100 doors statewide (FL) currently, and also am a Real Estate Broker that assists people find the best properties in the Tampa Bay area.  I am currently working with over a dozen buyers/investors of all price points and all different situations and backgrounds.  The vast majority of my buyers are looking for turnkey, or as close to it as possible.  This is because most of them are out of state and to manage a rehab whether you have experience or not is extremely challenging.  I assist them with certain narrow scope jobs i.e. roof needs replaced after closing, house needs to be painted, or new flooring.  I really do not recommend anything beyond that, but that is my personal opinion.  Navigating permits, contractors, subcontractors and more even if you fly to and stay in the property is very challenging.  Even if everything went smoothly the downtime it took to complete the job could eat a lot the equity you would be forcing in.

Again ultimately you will need to do what works for you and is inside your comfort zone.  It also depends on the property as well, so the numbers could definitely help guide you.  Please feel to reach out if you have any more specific questions.  Best of luck!

Jan Dutton · Answer

Thanks for the replies so far.  One reason I'd consider a fixer-to-STR (thanks @Travis Timmons) is that we've done it one for our primary house, which was a 1930s farmhouse that is now greatly improved.  I didn't do the work, per se, but we did oversee the details. One pro of the fixer-to-STR strategy that I listened to just this morning on the "Short Term Rental Management" podcast is the turnkey location will likely have a greater competition to be purchased.

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