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Peter Drumm
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Short Term Rental or Duplex

Peter Drumm
Posted Jan 14 2024, 08:57

I am going to buy a property that will need a full Rehab. This will be my very first rental property and am trying to decide the best way to rent. So here are the specifics and maybe someone could give me some feedback and point me in the right direction.

Because of its location is why I am leaning towards doing a short term rental. It sits directly across the road from the public boat ramp (by the way it is on Cedar Creek Lake in Gun Barrel City), 1 block from the gas station that sells Ethanol free gas which boaters use, and close to the waterfront restaurant people enjoy frequenting during the summer.  It also has 2 additional lots attached to it that would be perfect for creating an outdoor fire pit area and possibly a sand volleyball court.

However, here is the dilemma, when I inspected this house I discovered immediately that it was designed to be a duplex. The bottom unit is a 2 bedroom 1 bath with laundry attachments and a kitchen. The upstairs is a 2 or 3 bedroom with kitchen and bathroom but no master bedroom. Also, there is a fun bonus room where they converted the attic space into a fully functional upstairs area. 

Now, this will have to be a full remodel from the floors to ceilings, both bathrooms, adding kitchen fixtures and cabinets. I like having a blank canvass to work with because it will allow me to completely create this living space from scratch.

Option 1: Set it up to be a duplex and do not bother with decorating the living spaces and try to keep my costs down by not installing any expensive features.

Option 2: Set it up as an AirBnB as 2 units to rent out, allowing me to rent it as a duplex but AirBnB style.

Option 3: Set it up for AirBnB but as a single family home and utilize the spaces that would have been used for kitchen and laundry rooms and now have bigger rooms such as a master bedroom or an extra living space that i can put a game room in.  Keep in mind I will be doing 80% of this work myself over the next year or so allowing me the opportunity to get more acquainted with rehabbing a property myself and boost my confidence in undertaking the next big project.

Thanks for any advice, been listening to Bigger Pockets for over a year now and excited to take my first big leap!

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Zachary Cain Humphrey
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Zachary Cain Humphrey
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Replied Jan 14 2024, 14:45

I would go with option 2. Make the interior design for both units as nice as possible. The best way to know is use market tools like airdna, mashvisor, rabbu, etc to see how 2 bed properties are doing. With the strategic location of the units it is likely they will do well. Just check to see that the area you are in permits or is zoned for allowing STR. Overall medium level interior pieces, butcher block / quartz counter tops, clean designs. think accent walls like the board baton look and pop of color here or there. Making the str stand out doesnt mean expensive. Zinus mattresses for beds are budget friendly and guests love them! look at other str's on air bnb in your market and try to make yours a little better. get a hot tub on site and you would be set for some great cash flow!

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Michael Baum
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  • Olympia, WA
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Michael Baum
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Replied Jan 14 2024, 14:50

Hey @Peter Drumm, so personally I like number 2 as well.

Not having a master suite isn't a killer IMHO. I would set it up nice and go for the STR route.

What is the view from the property? Killer lake view?

How is the traffic in the summer when the boat ramp is in full swing? Will that affect guests ability to get to the lake or the rental?

Is there a public beach adjacent to the ramp that guests can use? If not how far to the public beach?

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Peter Drumm
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Peter Drumm
Replied Jan 15 2024, 12:30
Quote from @Michael Baum:

Hey @Peter Drumm, so personally I like number 2 as well.

Not having a master suite isn't a killer IMHO. I would set it up nice and go for the STR route.

What is the view from the property? Killer lake view?

How is the traffic in the summer when the boat ramp is in full swing? Will that affect guests ability to get to the lake or the rental?

Is there a public beach adjacent to the ramp that guests can use? If not how far to the public beach?

The lake view is not great because it is blocked by trees. However, there is actually 3 boat ramps that can be used and since this property has 2 lots attached to it, plenty of room to park the boat trailers.

There is a public beach less than a 1/4 mile away.
I really appreciate the feedback from both of you. My wife thought renting the entire property to one person would be better. However, I personally like the idea of keeping it a Duplex instead of a single family residence. this way if later on down the road I want to rent as a duplex I already have the option.

Really appreciate BiggerPockets and its members. Always a great place to come for advice.


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Andrew Steffens
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Andrew Steffens
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Replied Jan 15 2024, 15:16

I would let the numbers guide you. Without seeing what you can get for STR rent and LTR rent and what the cost savings would be for setting up I think it is tough to give you the proper advice.

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Bill Brandt#3 Buying & Selling Real Estate Contributor
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Bill Brandt#3 Buying & Selling Real Estate Contributor
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Replied Jan 15 2024, 15:36

Don’t forget many people have condos that are essentially 2 units like your duplex. They list each unit separately or an option to rent both at a slight discount for larger parties. 

Ps. Do you plan to add laundry for the upper unit? (Either for guests/tenants or the cleaning crew.) or did you mean the downstairs laundry attachments were not really part of the lower unit but attached to it?

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Sarah Kensinger
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Sarah Kensinger
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Replied Jan 15 2024, 17:03

Look at the numbers of each option closely and then decide what would be the best course for you. It's hard to say when numbers would be a major deciding factor...at least for me.

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Michael Baum
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Michael Baum
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Replied Jan 15 2024, 21:03

Hey @Peter Drumm, what you can do is have 3 total listings on VRBO and AirBNB. One for the upper, one for the lower and one for both. Link all the calendars to keep up to date.

That way if someone needs the extra space, they can rent both.

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Mindy Nicol
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Mindy Nicol
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Replied Jan 16 2024, 04:33

Hi Peter,

What does the county consider the house as and how can you legally set this up as a duplex if it is not already with your property appraiser?  If you want to sell it down the line, and you're spending money on the reno maybe that is a consideration. 

I see a lot of property and quite a few handyman jobs by people wanting to learn the trade.  It all comes out in the inspections when they try to sell.  If you can rehab right you will get your money back and I would hire experts to do the big stuff so you know it is correctly done.  You will thank yourself on the resale and not have to pay to re-do things at the time of sale.  Just my 2 cents seeing this all the time with my buyers. :)

What is your experience with STR? What does your market need right now? I would start with STR but depending on how it goes you may want to switch up the business model. In most cities there are too many STRs and occupancy rates are falling. I am just over 12 months in my own STR. I understand now the seasonality and learned the hard way. I have now converted into MTR due to the time it takes and I believe the financials are the same when you take out the higher expenses for STR.

Also with lower prices for the smaller units, they may be easier to rent out, however look at the supply and see what your city is lacking.  Airdna may be a good way to see that.

Best of luck!

Mindy

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Zach Edelman
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Zach Edelman
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Replied Jan 16 2024, 06:57

I think #2 would be the route to go here assuming the turnover and management from two units isn't A) too much headache and B) the added extra effort is worth the additional cashflow. Have you underwrote this deal as a two unit STR? Are you self managing or hiring a PM?

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Peter Drumm
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Peter Drumm
Replied Jan 19 2024, 04:50

All of this is great advice! These were all the options I had bouncing around my head, so it is nice to hear everyones feedback and that a lot of the ideas align with my own.

Good news, I have checked with the city and the POA and it might just be because of where I am located or the fact that it is a smaller town, maybe that is why the regulations are not as stringent.

I like the idea of renting for a lower price or both units for more space just because all the homes in my own POA are lake houses, very large, and much more expensive to rent. Because of the popularity in fishing this lake, lots of guides, and fishing tournaments that go on, I want to cater to the smaller crowds or the fishing community.

I will most likely rent the lower for less (because it is smaller) and upper for more. However, I will keep the price point much lower than my surrounding community. I am also going to offer both units as a whole for a higher price.  

I am also going to to let the pro's tackle the major renovations and I will handle the smaller stuff. Hopefully, in less than a year I can repost the old pictures with the fully renovated STR I completed!

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Dave Spooner
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Dave Spooner
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Replied Jan 19 2024, 12:28
Quote from @Andrew Steffens:

I would let the numbers guide you. Without seeing what you can get for STR rent and LTR rent and what the cost savings would be for setting up I think it is tough to give you the proper advice.


 Agreed!

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Neal Z.
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Neal Z.
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Replied Jan 23 2024, 17:03
Quote from @Michael Baum:

Hey @Peter Drumm, what you can do is have 3 total listings on VRBO and AirBNB. One for the upper, one for the lower and one for both. Link all the calendars to keep up to date.

That way if someone needs the extra space, they can rent both.


 This is what you do. I'd also try and craft a plan where I can complete one of the units first, start operating while work was done on the other.