Hi, Fellow BPers I recently read "Long-Term Wealth" by Avery, which mentioned a 25% Cash on Cash (CoC) return, and it seemed extremely optimistic compared to current standards. I'm curious about the CoC returns you're experiencing with newly acquired properties. I did a rough calculation for a property in the metro Atlanta area, near I-75, and the numbers are somewhat disheartening. Here are the details: Sale Price: $270,000 for a single-family home with 3 beds/2 baths. Gross Income: $3,500 per month, including nightly rates and cleaning fees. Expenses breakdown: • Cleaning and Supplies: 15% • Maintenance: 7% • Utilities (Electricity, Water, Gas, Internet, Pest Control, Lawn Care): 10% • Software: 3% • Property Management: 15% With a 25% down payment and a 7% interest rate, after cosmetic updates and furnishing, the property yields less than a 1% CoC return. If purchased with cash, it shows about a 5% CoC return and an annual cash flow of $15,000. What are your figures like? I've noticed that many expenses, such as utilities and cleaning, don't seem to increase proportionally with gross income like those cabins in Smoky Mountain National Park. This observation suggests that more expensive properties with higher income might be more advantageous. Do your analyses reflect this trend? Is it that easy to just jack up nightly rates nowadays? Any insights or information you can provide would be highly appreciated! Best regards, Lee

This is why you don't read books for this nonsense. It gets outdated quick. Go figure out why you're looking to invest, then kind of work backwards and be conservative.

A few suggestions: 1. You have to complete the analysis with the sale of the property. What are the returns after a few years of owning the property, not just in year one. It needs to be a good long-term investment. 2. I believe your gross revenues aren't good on this property, so you're forcing the strategy on the wrong property. You're at $1855 after your STR related expenses (other than maintenance). Probably better off as a long-term rental. If you're committed to the strategy, consider adding a yurt or camper in the backyard with a hot tub, and your revenues go up substantially, if well-executed. You gotta doing something unique - not just rent space competitive with a hotel rooms. Those days are over. 3. If you target 20%+ CoC, you'll find it. This is very doable in Atlanta area. It's a good metric to emphasize because cash is scarce and tends to run out quickly. However, a tiny deal with 30% cash on cash is not as good as $10 million a 15% CoC deal. 4. Being less active is important to scale. STR take effort to set up and manage. Keep this in mind because your time is scarce too. It's a fair strategy to get things going, but unless you turn it into your side hustle and scale up hosting, for example, it's a time suck and will keep you from your other ventures. Be sure to put a price on your time.

I have been investing in vacation rentals since 2005. Ridiculously high returns were only possible in about a two-year window during that time. There was a brief market imbalance that quickly resolved. Don't count on 25% returns. I could have written a book about how good an investment that silver is, during the massive run-up in the 1970s, and for that moment in time, the book would have been entirely accurate. Silver is a wonderful asset to hold, but like real estate, it's really a good store of value more than anything else.

Hey Leon Its not as easy to find high performance properties as it once way, but here in the Tampa metro area you can still achieve a straight 15% CoC and even as high as 30% when leveraging a low down payment loan.

Yep that pretty much sums it up. We are in a different market than when the book was written. There may be some deals to be had, but I have found none that match my risk tolerance in the last year. I am no expert but I believe we are still in somewhat of a stalemate condition. There are folks that want to get out of their over leveraged non cash flowing properties that were purchased during the peak, but they wont sell at a loss. There are buyers, but they don't want to buy at a premium, especially due to the current rates. The "deals" that exist are most likely getting handled off-market. When anything close to reasonable hits the market, there are still enough buyers that it gets pounced on fast. And yes, your observation, of more expensive properties with higher incomes can be advantageous, but that is more of a general statement. In general the returns are greater the larger the property. Again, that is a general statement. But keep in mind, the debt/risk ratio is also higher and you typically have to deal with more issues. i.e. large groups tend to trash a place more often than small groups. And finally, no it is not really easy to jack up rates anymore. The COVID years were a gravy train with rates jacking up every few months. Those days are gone. In my market, we have 6 bedroom cabins that were bought during peak, slashing their prices that now compete with 2 bedroom cabins, because they are desperate to get bookings to cover their high mortgages. I know a number of folks who have really worked hard with Rankbreeze to get their property to the front of the list, but they have all told me the only thing that moved them now is price - and that would be a lower price. At a 5% CoC, I would be dumping my money in a hands off, no stress CD vs an STR. An STR is a job that is not worth the 5% for ME. It may be for someone else, but not me personally. There are other reasons to invest at 5%, but if cash flow is one of them, then it's not for me.

It's very hard to find COC 15%+ unless you do creative financing, but like already mentioned it's still around if you look hard enough and have patience. I have underwritten so many properties in the last year, and very few had a decent COC return. That's when the investor needs to decide if appreciation is better than cashflow. Some just want to break even and get that appreciation, while others want cashflow. Size of the home doesn't necessarily mean better cashflow, like some assume. You would think that is the case, but more often than not a small property in the right area can be a power horse! If you do happen to find a larger more expensive property there are systems, process, and pricing strategies so you don't need to worry about people coming in and damaging the property. For STR to be profitable marketing is the game, not lower prices, so make sure your PM has some great guest marketing if you decide to go the STR route.

What is current CoC for STRs with and without 7% interest loan

Short-Term & Vacation Rental Discussions

2yFollow

What is current CoC for STRs with and without 7% interest loan

Leon Lee

Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes

Hi, Fellow BPers

I recently read "Long-Term Wealth" by Avery, which mentioned a 25% Cash on Cash (CoC) return, and it seemed extremely optimistic compared to current standards. I'm curious about the CoC returns you're experiencing with newly acquired properties.

I did a rough calculation for a property in the metro Atlanta area, near I-75, and the numbers are somewhat disheartening. Here are the details:

Sale Price: $270,000 for a single-family home with 3 beds/2 baths.

Gross Income: $3,500 per month, including nightly rates and cleaning fees.

Expenses breakdown:

Cleaning and Supplies: 15%
Maintenance: 7%
Utilities (Electricity, Water, Gas, Internet, Pest Control, Lawn Care): 10%
Software: 3%
Property Management: 15%

With a 25% down payment and a 7% interest rate, after cosmetic updates and furnishing, the property yields less than a 1% CoC return. If purchased with cash, it shows about a 5% CoC return and an annual cash flow of $15,000.

What are your figures like? I've noticed that many expenses, such as utilities and cleaning, don't seem to increase proportionally with gross income like those cabins in Smoky Mountain National Park. This observation suggests that more expensive properties with higher income might be more advantageous. Do your analyses reflect this trend? Is it that easy to just jack up nightly rates nowadays?

Any insights or information you can provide would be highly appreciated!

Best regards, Lee

1 Reply

76 views

Most Popular Reply

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

Right now I am buying more distressed LTR houses.

I can buy one for 30k to 40k that I can put 25k into and it rent for $1300 a month.

These aren't advertised anywhere you have to go find them. We bought 3 of these in 2023. Some we haven't even started the rehab on.

Then I got 3 more houses in 2023 from tax sales.

Sold 2 for 50% to 75% profit and kept one that is free given the profit from the other 2.

You have to be able to pivot to what works when the market changes.

3 Reply

See this reply in the discussion

25 Replies

Jump to latestLatest

Sort by

Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
2y
Hey Leon
Its not as easy to find high performance properties as it once way, but here in the Tampa metro area you can still achieve a straight 15% CoC and even as high as 30% when leveraging a low down payment loan.
[email protected]813-563-0877
Vacation Rentals of Florida53 Reviews
Website View Page
1 Reply
Ken Boone
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
2y
Yep that pretty much sums it up. We are in a different market than when the book was written. There may be some deals to be had, but I have found none that match my risk tolerance in the last year.

I am no expert but I believe we are still in somewhat of a stalemate condition. There are folks that want to get out of their over leveraged non cash flowing properties that were purchased during the peak, but they wont sell at a loss. There are buyers, but they don't want to buy at a premium, especially due to the current rates.

The "deals" that exist are most likely getting handled off-market. When anything close to reasonable hits the market, there are still enough buyers that it gets pounced on fast.
And yes, your observation, of more expensive properties with higher incomes can be advantageous, but that is more of a general statement. In general the returns are greater the larger the property. Again, that is a general statement. But keep in mind, the debt/risk ratio is also higher and you typically have to deal with more issues. i.e. large groups tend to trash a place more often than small groups.
And finally, no it is not really easy to jack up rates anymore. The COVID years were a gravy train with rates jacking up every few months. Those days are gone. In my market, we have 6 bedroom cabins that were bought during peak, slashing their prices that now compete with 2 bedroom cabins, because they are desperate to get bookings to cover their high mortgages.
I know a number of folks who have really worked hard with Rankbreeze to get their property to the front of the list, but they have all told me the only thing that moved them now is price - and that would be a lower price.

At a 5% CoC, I would be dumping my money in a hands off, no stress CD vs an STR. An STR is a job that is not worth the 5% for ME. It may be for someone else, but not me personally. There are other reasons to invest at 5%, but if cash flow is one of them, then it's not for me.
1 Reply
Leon Lee
OP
Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
2y
Quote from @Andrew Steffens:

Hey Leon
Its not as easy to find high performance properties as it once way, but here in the Tampa metro area you can still achieve a straight 15% CoC and even as high as 30% when leveraging a low down payment loan.

Andrew
Thank you for the encouraging news! Do you have more specific numbers on these potential deals? By looking at the breakdown of the numbers, it will definitely help me and other investors to figure out why there are differences and how we should pivot in our business strategy.
Thanks again!
Lee
0 Reply
Leon Lee
OP
Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
2y
Quote from @Ken Boone:

Yep that pretty much sums it up. We are in a different market than when the book was written. There may be some deals to be had, but I have found none that match my risk tolerance in the last year.

I am no expert but I believe we are still in somewhat of a stalemate condition. There are folks that want to get out of their over leveraged non cash flowing properties that were purchased during the peak, but they wont sell at a loss. There are buyers, but they don't want to buy at a premium, especially due to the current rates.

The "deals" that exist are most likely getting handled off-market. When anything close to reasonable hits the market, there are still enough buyers that it gets pounced on fast.
And yes, your observation, of more expensive properties with higher incomes can be advantageous, but that is more of a general statement. In general the returns are greater the larger the property. Again, that is a general statement. But keep in mind, the debt/risk ratio is also higher and you typically have to deal with more issues. i.e. large groups tend to trash a place more often than small groups.
And finally, no it is not really easy to jack up rates anymore. The COVID years were a gravy train with rates jacking up every few months. Those days are gone. In my market, we have 6 bedroom cabins that were bought during peak, slashing their prices that now compete with 2 bedroom cabins, because they are desperate to get bookings to cover their high mortgages.
I know a number of folks who have really worked hard with Rankbreeze to get their property to the front of the list, but they have all told me the only thing that moved them now is price - and that would be a lower price.

At a 5% CoC, I would be dumping my money in a hands off, no stress CD vs an STR. An STR is a job that is not worth the 5% for ME. It may be for someone else, but not me personally. There are other reasons to invest at 5%, but if cash flow is one of them, then it's not for me.
Ken,

Thank you for the valuable insights from South Carolina! Your perspective on the potential risks of property damage from large groups in higher-end rentals is something I hadn't fully considered. I'm interested in seeing some of your numbers for a clearer comparison. The "1% rule" for long-term rentals and "2% rule" for short-term rentals seem still relevant, with properties now showing only roughly 0.5% monthly rent-to-purchase price for long-term and just over 1% for short-term in my market. Given the current high interest rates, achieving positive cash flow seems challenging without significant value additions and refinancing when rates drop.

As someone who began as an investor before moving into short-term rentals, I view the 5% Cash on Cash (CoC) return differently. If these properties are not cabins but are located near metro areas, particularly in Sun Belt cities, they are likely to appreciate significantly. For instance, house prices have nearly doubled since I purchased another property in early 2020. Additionally, short-term rental properties often experience less wear and tear compared to those with long-term tenants, which is advantageous for owners of recently renovated properties. Moreover, the absence of eviction processes and the potential for tax deductions through depreciation are significant benefits. Therefore, I don't equate a 5% CoC in real estate with a 5% return from a Certificate of Deposit (CD) due to these additional factors, at least for now :-)

Looking forward to hearing more about your experiences and insights.
Lee
0 Reply
Ken Boone
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
2y
@Leon Lee I live in SC, but my STRs are in the Pigeon Forge market. My numbers honestly are irrelevant, because all of my STRs were purchased with low interest rates, i.e. 4.25 and less, and all were purchased prior to the boom. I was seeing 30 - 40% CoC on my purchases. Those days are definitely gone.
And what you stated is true, there are different reasons to invest and different reasons for being content with a 5% return. I am thinking that the major appreciation is done in my market for awhile, so only interested in cash flow. I am not saying that there will not be appreciation, but I don't think it will be the double digit appreciation we have seen in the last 3 years.
Setting appreciation aside, my main point with bringing up the CD at 5% is this. The 5% I earn on a CD = zero work, absolutely zero work. Again, appreciate aside, if I have to work for that 5%, then I have to figure out how much my time is worth. Unless that 5% is a LOT, it is not going to be worth my time. That was my point.
1 Reply
Leon Lee
OP
Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
2y
Quote from @Ken Boone:

@Leon Lee I live in SC, but my STRs are in the Pigeon Forge market. My numbers honestly are irrelevant, because all of my STRs were purchased with low interest rates, i.e. 4.25 and less, and all were purchased prior to the boom. I was seeing 30 - 40% CoC on my purchases. Those days are definitely gone.
And what you stated is true, there are different reasons to invest and different reasons for being content with a 5% return. I am thinking that the major appreciation is done in my market for awhile, so only interested in cash flow. I am not saying that there will not be appreciation, but I don't think it will be the double digit appreciation we have seen in the last 3 years.
Setting appreciation aside, my main point with bringing up the CD at 5% is this. The 5% I earn on a CD = zero work, absolutely zero work. Again, appreciate aside, if I have to work for that 5%, then I have to figure out how much my time is worth. Unless that 5% is a LOT, it is not going to be worth my time. That was my point.

Hey Ken,

Thanks a ton for the info! I'm with you on the 5% CoC thing, especially considering the likelihood of not seeing strong appreciation anytime soon. I'm still in the phase of expanding and figuring out if I should keep buying more properties, so your insights are super helpful.

Cheers,
Lee
0 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
2y
Right now I am buying more distressed LTR houses.
I can buy one for 30k to 40k that I can put 25k into and it rent for $1300 a month.
These aren't advertised anywhere you have to go find them. We bought 3 of these in 2023. Some we haven't even started the rehab on.
Then I got 3 more houses in 2023 from tax sales.
Sold 2 for 50% to 75% profit and kept one that is free given the profit from the other 2.
You have to be able to pivot to what works when the market changes.
3 Reply
Sarah KensingerPro Member
Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
2y
It's very hard to find COC 15%+ unless you do creative financing, but like already mentioned it's still around if you look hard enough and have patience. I have underwritten so many properties in the last year, and very few had a decent COC return. That's when the investor needs to decide if appreciation is better than cashflow. Some just want to break even and get that appreciation, while others want cashflow. Size of the home doesn't necessarily mean better cashflow, like some assume. You would think that is the case, but more often than not a small property in the right area can be a power horse! If you do happen to find a larger more expensive property there are systems, process, and pricing strategies so you don't need to worry about people coming in and damaging the property.

For STR to be profitable marketing is the game, not lower prices, so make sure your PM has some great guest marketing if you decide to go the STR route.

[email protected]330-557-3021
1 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
This is why you don't read books for this nonsense. It gets outdated quick.
Go figure out why you're looking to invest, then kind of work backwards and be conservative.
2 Reply
Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
2y
Hey @Leon Lee, so on the things you need to pay for. Cleaning should be a pass through cost. Supplies you will need to get unless your cleaner brings them.
Maintenance might be on the high side. I don't think we are at 7% a month. We have a rigorous maintenance schedule on all hard systems to get repairs down to a minimum.
Plus you can self manage with the right cleaner and handy person on the team. 15% seems a little light to me. It will depend on the area and services offered.
0 Reply
Leon Lee
OP
Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
2y
Quote from @Sarah Kensinger:

It's very hard to find COC 15%+ unless you do creative financing, but like already mentioned it's still around if you look hard enough and have patience. I have underwritten so many properties in the last year, and very few had a decent COC return. That's when the investor needs to decide if appreciation is better than cashflow. Some just want to break even and get that appreciation, while others want cashflow. Size of the home doesn't necessarily mean better cashflow, like some assume. You would think that is the case, but more often than not a small property in the right area can be a power horse! If you do happen to find a larger more expensive property there are systems, process, and pricing strategies so you don't need to worry about people coming in and damaging the property.

For STR to be profitable marketing is the game, not lower prices, so make sure your PM has some great guest marketing if you decide to go the STR route.

Hi Sarah,

Loved the insights in your post, especially about marketing – that's an area I've been grappling with lately. Email campaigns are tricky since Airbnb keeps those addresses under wraps (looking at StayFi now). We've got a website through our channel manager, but direct bookings are still few and far between. Why do you think Airbnb and VRBO bookings still dominate, making up about 85% of bookings for many (although we get a good number of mid- to long-term guests through word-of-mouth for our listings)? It seems like guests prefer the security of those well-known platforms, which makes sense given how common online scams are these days. I'm diving into email campaigns now, but wow, they're a time sink! In your experience, what are the most cost-effective marketing strategies?

0 Reply
Leon Lee
OP
Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
2y
Quote from @Michael Baum:

Hey @Leon Lee, so on the things you need to pay for. Cleaning should be a pass through cost. Supplies you will need to get unless your cleaner brings them.
Maintenance might be on the high side. I don't think we are at 7% a month. We have a rigorous maintenance schedule on all hard systems to get repairs down to a minimum.
Plus you can self manage with the right cleaner and handy person on the team. 15% seems a little light to me. It will depend on the area and services offered.

Hey Michael,

Thanks for the update! Just to clarify, when I talk about the $3,500/month gross income, that total includes both nightly fees and the cleaning fee, so we've got to take out the 13% for cleaning. About the maintenance, could you give me an example with some specific numbers? I get that for a cabin bringing in $8K a month, spending $560 (7%) on maintenance might seem high. But for a single-family home near a metro area making $3.5K a month, $245 (which is 7%) on maintenance doesn't seem too excessive. After all, even a simple job like tightening a towel bar can start at $50, and handyman rates are at least $40/hour. I'm also factoring in a bit for capital expenses, i.e., HVACs and roofs as I am holding them long-term. This is why I'm curious if larger properties with higher income might be more profitable, both in terms of cash flow and CoC, especially since many expenses don't really change proportionally with the property size. But it seems Sarah said not necessary.
0 Reply
Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
2y
Hey @Leon Lee, yes I suppose that it would cost more in the big city.
Are you so far away you can't visit one or twice a year? We are about 7 hours away and I am there about 4 times a year. I deal with all those little things.
The only time I call for service is when it is an emergency. Like a clogged drain.
0 Reply
Sarah KensingerPro Member
Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
2y
Quote from @Leon Lee:

Quote from @Sarah Kensinger:

It's very hard to find COC 15%+ unless you do creative financing, but like already mentioned it's still around if you look hard enough and have patience. I have underwritten so many properties in the last year, and very few had a decent COC return. That's when the investor needs to decide if appreciation is better than cashflow. Some just want to break even and get that appreciation, while others want cashflow. Size of the home doesn't necessarily mean better cashflow, like some assume. You would think that is the case, but more often than not a small property in the right area can be a power horse! If you do happen to find a larger more expensive property there are systems, process, and pricing strategies so you don't need to worry about people coming in and damaging the property.

For STR to be profitable marketing is the game, not lower prices, so make sure your PM has some great guest marketing if you decide to go the STR route.

Hi Sarah,

Loved the insights in your post, especially about marketing – that's an area I've been grappling with lately. Email campaigns are tricky since Airbnb keeps those addresses under wraps (looking at StayFi now). We've got a website through our channel manager, but direct bookings are still few and far between. Why do you think Airbnb and VRBO bookings still dominate, making up about 85% of bookings for many (although we get a good number of mid- to long-term guests through word-of-mouth for our listings)? It seems like guests prefer the security of those well-known platforms, which makes sense given how common online scams are these days. I'm diving into email campaigns now, but wow, they're a time sink! In your experience, what are the most cost-effective marketing strategies?

You're correct that the main reason people still use Airbnb/VRBO is the trust factor. And they know a company will back them up if something goes sideways. When it comes to direct bookings you need to advertise to past guests and utilize google business reviews. We have not tackled anything direct yet, but that is on our goal list for 2024!

I would tread lightly with StayFi right now, I can't tell you how many hosts have had connection issues with them the last 6 months or so. StayFi is aware of it and working on whatever is the matter, but if you decide to go that route be aware you many have connection problems. I know some hosts ask for emails from guests as a way to "stay in contact" while they are at the property, but some people are not aware of laws etc. you need to follow when collecting such items on your own.

As for cost, and to be honest more importantly time-effective marketing strategies, I would check out Go STR Marketing or Market My STR. You do need to pay a bit for the marketing but if you can get some repeat guests to build up your direct site, and save you a bunch of time, it's worth every dollar.

[email protected]330-557-3021
1 Reply
Sarah KensingerPro Member
Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
2y
Quote from @Leon Lee:

Quote from @Michael Baum:

Hey @Leon Lee, so on the things you need to pay for. Cleaning should be a pass through cost. Supplies you will need to get unless your cleaner brings them.
Maintenance might be on the high side. I don't think we are at 7% a month. We have a rigorous maintenance schedule on all hard systems to get repairs down to a minimum.
Plus you can self manage with the right cleaner and handy person on the team. 15% seems a little light to me. It will depend on the area and services offered.

Hey Michael,

Thanks for the update! Just to clarify, when I talk about the $3,500/month gross income, that total includes both nightly fees and the cleaning fee, so we've got to take out the 13% for cleaning. About the maintenance, could you give me an example with some specific numbers? I get that for a cabin bringing in $8K a month, spending $560 (7%) on maintenance might seem high. But for a single-family home near a metro area making $3.5K a month, $245 (which is 7%) on maintenance doesn't seem too excessive. After all, even a simple job like tightening a towel bar can start at $50, and handyman rates are at least $40/hour. I'm also factoring in a bit for capital expenses, i.e., HVACs and roofs as I am holding them long-term. This is why I'm curious if larger properties with higher income might be more profitable, both in terms of cash flow and CoC, especially since many expenses don't really change proportionally with the property size. But it seems Sarah said not necessary.
Yes, for example, there is a STR in one of Ohio's vacation markets that is less then 1000 sq feet. Projected revenue is nearly 6 figures! It all depends on where you look and gathering the patience of Job.
[email protected]330-557-3021
1 Reply
Leon Lee
OP
Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
2y
Quote from @Michael Baum:

Hey @Leon Lee, yes I suppose that it would cost more in the big city.
Are you so far away you can't visit one or twice a year? We are about 7 hours away and I am there about 4 times a year. I deal with all those little things.
The only time I call for service is when it is an emergency. Like a clogged drain.
Michael

Yeah, things definitely cost more now than before the inflation. I couldn't find a cleaner with $150 per clean in a 3be/2ba SFH in a slightly rough neighborhood. Also, I try to scale up my business and outsource as many tasks as possible. I have two STRs that are literally 3 minute drive away and I try not to do things myself. You are definitely a better host! LOL
0 Reply
Leon Lee
OP
Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
2y
Quote from @Sarah Kensinger:

Quote from @Leon Lee:

Quote from @Sarah Kensinger:

It's very hard to find COC 15%+ unless you do creative financing, but like already mentioned it's still around if you look hard enough and have patience. I have underwritten so many properties in the last year, and very few had a decent COC return. That's when the investor needs to decide if appreciation is better than cashflow. Some just want to break even and get that appreciation, while others want cashflow. Size of the home doesn't necessarily mean better cashflow, like some assume. You would think that is the case, but more often than not a small property in the right area can be a power horse! If you do happen to find a larger more expensive property there are systems, process, and pricing strategies so you don't need to worry about people coming in and damaging the property.

For STR to be profitable marketing is the game, not lower prices, so make sure your PM has some great guest marketing if you decide to go the STR route.

Hi Sarah,

Loved the insights in your post, especially about marketing – that's an area I've been grappling with lately. Email campaigns are tricky since Airbnb keeps those addresses under wraps (looking at StayFi now). We've got a website through our channel manager, but direct bookings are still few and far between. Why do you think Airbnb and VRBO bookings still dominate, making up about 85% of bookings for many (although we get a good number of mid- to long-term guests through word-of-mouth for our listings)? It seems like guests prefer the security of those well-known platforms, which makes sense given how common online scams are these days. I'm diving into email campaigns now, but wow, they're a time sink! In your experience, what are the most cost-effective marketing strategies?

You're correct that the main reason people still use Airbnb/VRBO is the trust factor. And they know a company will back them up if something goes sideways. When it comes to direct bookings you need to advertise to past guests and utilize google business reviews. We have not tackled anything direct yet, but that is on our goal list for 2024!

I would tread lightly with StayFi right now, I can't tell you how many hosts have had connection issues with them the last 6 months or so. StayFi is aware of it and working on whatever is the matter, but if you decide to go that route be aware you many have connection problems. I know some hosts ask for emails from guests as a way to "stay in contact" while they are at the property, but some people are not aware of laws etc. you need to follow when collecting such items on your own.

As for cost, and to be honest more importantly time-effective marketing strategies, I would check out Go STR Marketing or Market My STR. You do need to pay a bit for the marketing but if you can get some repeat guests to build up your direct site, and save you a bunch of time, it's worth every dollar.

Hey Sarah,

Thanks a bunch for the info! About marketing, I've got a question for you. We're thinking of collecting guests' emails and phone numbers from Airbnb for marketing, but we want to be super cautious about it. Our plan is to include something like "Feel free to send your working email and phone number with us to our team so that we can better coordinate for any emergency during your stay" in our message asking for their estimated time of arrival. This way, we hope to gather contact info from both current and future guests. What do you think? Is there a risk of getting us banned from Airbnb for this? We've gone through Airbnb's privacy policy regarding off-platform communication, and it seems like it might be crossing a line. Curious to hear what you and others in the community think about this approach.

Thanks again!
0 Reply
Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
2y
I have been investing in vacation rentals since 2005. Ridiculously high returns were only possible in about a two-year window during that time. There was a brief market imbalance that quickly resolved. Don't count on 25% returns.
I could have written a book about how good an investment that silver is, during the massive run-up in the 1970s, and for that moment in time, the book would have been entirely accurate. Silver is a wonderful asset to hold, but like real estate, it's really a good store of value more than anything else.
[email protected]806-672-7102
SMOKY MOUNTAIN FALLS INC.51 Review
Website View Page
1 Reply
Sarah KensingerPro Member
Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
2y
Quote from @Leon Lee:

Quote from @Sarah Kensinger:

Quote from @Leon Lee:

Quote from @Sarah Kensinger:

It's very hard to find COC 15%+ unless you do creative financing, but like already mentioned it's still around if you look hard enough and have patience. I have underwritten so many properties in the last year, and very few had a decent COC return. That's when the investor needs to decide if appreciation is better than cashflow. Some just want to break even and get that appreciation, while others want cashflow. Size of the home doesn't necessarily mean better cashflow, like some assume. You would think that is the case, but more often than not a small property in the right area can be a power horse! If you do happen to find a larger more expensive property there are systems, process, and pricing strategies so you don't need to worry about people coming in and damaging the property.

For STR to be profitable marketing is the game, not lower prices, so make sure your PM has some great guest marketing if you decide to go the STR route.

Hi Sarah,

Loved the insights in your post, especially about marketing – that's an area I've been grappling with lately. Email campaigns are tricky since Airbnb keeps those addresses under wraps (looking at StayFi now). We've got a website through our channel manager, but direct bookings are still few and far between. Why do you think Airbnb and VRBO bookings still dominate, making up about 85% of bookings for many (although we get a good number of mid- to long-term guests through word-of-mouth for our listings)? It seems like guests prefer the security of those well-known platforms, which makes sense given how common online scams are these days. I'm diving into email campaigns now, but wow, they're a time sink! In your experience, what are the most cost-effective marketing strategies?

You're correct that the main reason people still use Airbnb/VRBO is the trust factor. And they know a company will back them up if something goes sideways. When it comes to direct bookings you need to advertise to past guests and utilize google business reviews. We have not tackled anything direct yet, but that is on our goal list for 2024!

I would tread lightly with StayFi right now, I can't tell you how many hosts have had connection issues with them the last 6 months or so. StayFi is aware of it and working on whatever is the matter, but if you decide to go that route be aware you many have connection problems. I know some hosts ask for emails from guests as a way to "stay in contact" while they are at the property, but some people are not aware of laws etc. you need to follow when collecting such items on your own.

As for cost, and to be honest more importantly time-effective marketing strategies, I would check out Go STR Marketing or Market My STR. You do need to pay a bit for the marketing but if you can get some repeat guests to build up your direct site, and save you a bunch of time, it's worth every dollar.

Hey Sarah,

Thanks a bunch for the info! About marketing, I've got a question for you. We're thinking of collecting guests' emails and phone numbers from Airbnb for marketing, but we want to be super cautious about it. Our plan is to include something like "Feel free to send your working email and phone number with us to our team so that we can better coordinate for any emergency during your stay" in our message asking for their estimated time of arrival. This way, we hope to gather contact info from both current and future guests. What do you think? Is there a risk of getting us banned from Airbnb for this? We've gone through Airbnb's privacy policy regarding off-platform communication, and it seems like it might be crossing a line. Curious to hear what you and others in the community think about this approach.

Thanks again!
Sure anytime! I enjoy helping other hosts out on here and I've been pretty scarce since the new year, so this has been fun! Plus, it was a good day to catch me!

As for the email list info...I thought of this video right away that Thanks for Visiting made a few months ago. It should help you figure out the right way to collect emails. Why do Airbnb hosts procrastinate in starting an email list?
[email protected]330-557-3021
1 Reply
Ken Boone
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
2y
@Leon Lee So I capture emails two ways. Through my direct website, there is a sign up page, however, the reality is, you are only going to pick up a very small handful of emails that way.
The other way is through Hostfully Guidebooks. I use hostfully Guidebooks to provide my cabin manuals if you will as well as stuff to do in the area type information to my guests in digital form. In order to access the digital guidebook, the guest has to agree to the terms and leave their email. This is where the bulk of my emails come from.

Using this method, not only gets me the email of the person who booked, but it also gets, me the spouse, the brother, the brother wife's, the grandparents, etc.. Same concept as StayFi, where you have an active capture portal. I'm sure StayFi will collect a higher rate of e-mails than Hostfully's guidebook, as not everyone bothers with the guidebook, but just about everyone will want wifi.
0 Reply
Leon Lee
OP
Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
2y
Quote from @Ken Boone:

@Leon Lee So I capture emails two ways. Through my direct website, there is a sign up page, however, the reality is, you are only going to pick up a very small handful of emails that way.
The other way is through Hostfully Guidebooks. I use hostfully Guidebooks to provide my cabin manuals if you will as well as stuff to do in the area type information to my guests in digital form. In order to access the digital guidebook, the guest has to agree to the terms and leave their email. This is where the bulk of my emails come from.

Using this method, not only gets me the email of the person who booked, but it also gets, me the spouse, the brother, the brother wife's, the grandparents, etc.. Same concept as StayFi, where you have an active capture portal. I'm sure StayFi will collect a higher rate of e-mails than Hostfully's guidebook, as not everyone bothers with the guidebook, but just about everyone will want wifi.

Ken
This info is super useful, thanks! Since you've already put in a lot of work gathering guest emails, I'm guessing reaching out directly through Airbnb for their emails might risk a ban? Also, have you considered text message marketing? Looks like we've got more phone numbers than emails in our database.
Thanks
Lee
0 Reply
Ken Boone
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
2y
Quote from @Leon Lee:

Quote from @Ken Boone:

@Leon Lee So I capture emails two ways. Through my direct website, there is a sign up page, however, the reality is, you are only going to pick up a very small handful of emails that way.
The other way is through Hostfully Guidebooks. I use hostfully Guidebooks to provide my cabin manuals if you will as well as stuff to do in the area type information to my guests in digital form. In order to access the digital guidebook, the guest has to agree to the terms and leave their email. This is where the bulk of my emails come from.

Using this method, not only gets me the email of the person who booked, but it also gets, me the spouse, the brother, the brother wife's, the grandparents, etc.. Same concept as StayFi, where you have an active capture portal. I'm sure StayFi will collect a higher rate of e-mails than Hostfully's guidebook, as not everyone bothers with the guidebook, but just about everyone will want wifi.

Ken
This info is super useful, thanks! Since you've already put in a lot of work gathering guest emails, I'm guessing reaching out directly through Airbnb for their emails might risk a ban? Also, have you considered text message marketing? Looks like we've got more phone numbers than emails in our database.
Thanks
Lee

I have not looked into text message marketing.
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Collin Hays:

I have been investing in vacation rentals since 2005. Ridiculously high returns were only possible in about a two-year window during that time. There was a brief market imbalance that quickly resolved. Don't count on 25% returns.
I could have written a book about how good an investment that silver is, during the massive run-up in the 1970s, and for that moment in time, the book would have been entirely accurate. Silver is a wonderful asset to hold, but like real estate, it's really a good store of value more than anything else.

People need to read this apart of signing up on BP. Everyone comes on the run up, buys in and creates the excess liquidity then sells at the fall.
0 Reply
Rick Baggenstoss
Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
2y
A few suggestions:
1. You have to complete the analysis with the sale of the property. What are the returns after a few years of owning the property, not just in year one. It needs to be a good long-term investment.
2. I believe your gross revenues aren't good on this property, so you're forcing the strategy on the wrong property. You're at $1855 after your STR related expenses (other than maintenance). Probably better off as a long-term rental. If you're committed to the strategy, consider adding a yurt or camper in the backyard with a hot tub, and your revenues go up substantially, if well-executed. You gotta doing something unique - not just rent space competitive with a hotel rooms. Those days are over.
3. If you target 20%+ CoC, you'll find it. This is very doable in Atlanta area. It's a good metric to emphasize because cash is scarce and tends to run out quickly. However, a tiny deal with 30% cash on cash is not as good as $10 million a 15% CoC deal.
4. Being less active is important to scale. STR take effort to set up and manage. Keep this in mind because your time is scarce too. It's a fair strategy to get things going, but unless you turn it into your side hustle and scale up hosting, for example, it's a time suck and will keep you from your other ventures. Be sure to put a price on your time.
1 Reply
Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Leon Lee:

Quote from @Andrew Steffens:

Hey Leon
Its not as easy to find high performance properties as it once way, but here in the Tampa metro area you can still achieve a straight 15% CoC and even as high as 30% when leveraging a low down payment loan.

Andrew
Thank you for the encouraging news! Do you have more specific numbers on these potential deals? By looking at the breakdown of the numbers, it will definitely help me and other investors to figure out why there are differences and how we should pivot in our business strategy.
Thanks again!
Lee

Hey Leon I actually curate a list weekly of pre-vetted properties in the Tampa area with their projections attached, feel free to shoot me a DM and I can add you!
[email protected]813-563-0877
Vacation Rentals of Florida53 Reviews
Website View Page
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.