Seeking Advice: Achieving a 25% CoC Return on Long-Distance STR Investments
Most Popular Reply
Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votesI agree with Trent. I do not know every market in the US but typically speaking popular vacation areas which drive up rates also have high real estate values. If you go to a lower tier destination to find cheaper real estate you will find also get lower revenues.
I would advise to focus on the long term appreciation of the purchase instead of the cash flow!
Vacation Rentals of Florida53 Reviews
25 Replies
- Atlanta · Member since 2022 · 712 posts · 642 votes2y
i think at that price point, and if you cant find an off-market deal, 25% is a hard target to hit. i think 10% might be more realistic.
- 2yAndrew SteffensBusiness MemberTampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
I agree with Trent. I do not know every market in the US but typically speaking popular vacation areas which drive up rates also have high real estate values. If you go to a lower tier destination to find cheaper real estate you will find also get lower revenues.
I would advise to focus on the long term appreciation of the purchase instead of the cash flow!
Vacation Rentals of Florida53 Reviews Quote from @Trent Reeve:
i think at that price point, and if you cant find an off-market deal, 25% is a hard target to hit. i think 10% might be more realistic.
Thank you Trent. It looks like the market is very different from two three years ago. Does the STR market reach a point of saturation?
- Thank you for the advice, Andrew. Long term appreciation is definitely part of the equation. I probably need to lower my exception on the cash flow portion.
Quote from @Andrew Steffens:
I agree with Trent. I do not know every market in the US but typically speaking popular vacation areas which drive up rates also have high real estate values. If you go to a lower tier destination to find cheaper real estate you will find also get lower revenues.
I would advise to focus on the long term appreciation of the purchase instead of the cash flow!
- Atlanta · Member since 2022 · 712 posts · 642 votes2y
Quote from @Allan Pan:
Quote from @Trent Reeve:
i think at that price point, and if you cant find an off-market deal, 25% is a hard target to hit. i think 10% might be more realistic.
Thank you Trent. It looks like the market is very different from two three years ago. Does the STR market reach a point of saturation?
2-3 years ago, everyone was coming out of Covid quarantine and they were spending money on anything vacation wise. numbers now are settling back to normal, but prices on properties havent rightsized yet
- Real Estate Agent · San Diego, CA · Member since 2016 · 308 posts · 173 votes2y
@Allan Pan I have a client that purchased a 1br/loft condo in little italy here in SD that he is using at STR and doing well, which would be closer to your price point.
You just have to be cognizant of the HOA CC&Rs, most of them have restrictions of 30 day minimum rentals.
- Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes2y
@Allan Pan, I think the biggest thing with STRs now is: they are no longer "buy it and they will come". Can you hit a 25%+ CoC on an Airbnb? Yes. But, you need to have a well marketed, unique property.
For example, I look at places like The Cliffs at Hocking Hills (I live in Ohio, so this state park is one of the bigger tourist areas). Or Dunlap Hollow with their A frame and Cave house. I recommend you look at these websites. I.e. The Cave House starts at 780/night, is fully booked for 2024 and taking reservations for 2025 now. If that isn't a success, I don't know what is. But this owner also has 355k Instagram followers because they have a unique property and have built a following for it.
Granted, Cincinnati is not the peak of vacation destinations, and my friends that own Airbnb's here are going okay (at best). I also have several friends that have sold their airbnb's because they simply were not worth the headache of all the work.
So I go back to: people can achieve success in Airbnb. You need a good property with unique features that will get people to "stop scrolling" when they are flipping through Airbnb. But I think, like many people found out during COVID, if you just buy a tract home that looks generic in a generic area, you will get generic returns, which based on my friends and other commenters here seems to range from small loss each month to modest gain.
Also, when you are calculating returns, don't forget that utilities are in your name, you need to pay for internet and Netflix, paper towels, toilet paper, laundry and cleaning supplies, extra sheets, towels, pillows, etc. And more and more Airbnb guests are becoming critical of cleanliness, supplies provided, and check in and check out requirements, while also being more open about leaving less than positive reviews on your property if you charge onerous cleaning fees or don't provide enough toilet paper.
- CO · Member since 2022 · 588 posts · 426 votes2y
25% is acheviable, but not easy to find. Our target is 20% and above so not too far off from yours.
When searching for deals I find it best to go in the non-sexy markets. So not Florida or the Smoky Mountains. I would look in drive-to vacation markets. Often times there is a significant amount of vacation rental infrastructure in place (cleaners, handymen etc.) but you can still easily stand out and have a killer place.
Quote from @Maxwell Ventura:
@Allan Pan I have a client that purchased a 1br/loft condo in little italy here in SD that he is using at STR and doing well, which would be closer to your price point.
You just have to be cognizant of the HOA CC&Rs, most of them have restrictions of 30 day minimum rentals.
@Maxwell Ventura Thank you Maxwell. Do you have the number for that STR? I am curious to see the upfront investment and the return.
Quote from @Evan Polaski:
@Allan Pan, I think the biggest thing with STRs now is: they are no longer "buy it and they will come". Can you hit a 25%+ CoC on an Airbnb? Yes. But, you need to have a well marketed, unique property.
For example, I look at places like The Cliffs at Hocking Hills (I live in Ohio, so this state park is one of the bigger tourist areas). Or Dunlap Hollow with their A frame and Cave house. I recommend you look at these websites. I.e. The Cave House starts at 780/night, is fully booked for 2024 and taking reservations for 2025 now. If that isn't a success, I don't know what is. But this owner also has 355k Instagram followers because they have a unique property and have built a following for it.
Granted, Cincinnati is not the peak of vacation destinations, and my friends that own Airbnb's here are going okay (at best). I also have several friends that have sold their airbnb's because they simply were not worth the headache of all the work.
So I go back to: people can achieve success in Airbnb. You need a good property with unique features that will get people to "stop scrolling" when they are flipping through Airbnb. But I think, like many people found out during COVID, if you just buy a tract home that looks generic in a generic area, you will get generic returns, which based on my friends and other commenters here seems to range from small loss each month to modest gain.
Also, when you are calculating returns, don't forget that utilities are in your name, you need to pay for internet and Netflix, paper towels, toilet paper, laundry and cleaning supplies, extra sheets, towels, pillows, etc. And more and more Airbnb guests are becoming critical of cleanliness, supplies provided, and check in and check out requirements, while also being more open about leaving less than positive reviews on your property if you charge onerous cleaning fees or don't provide enough toilet paper.
@Evan Polaski I checked the places you mentioned. They look fantastic. These guys are professional. It takes quite a while to achieve that level. I don't think a new investor can do that.
You are right that STR is not passive. It is a business and should be treated and run as a business.
Quote from @Brett Deas:
25% is acheviable, but not easy to find. Our target is 20% and above so not too far off from yours.
When searching for deals I find it best to go in the non-sexy markets. So not Florida or the Smoky Mountains. I would look in drive-to vacation markets. Often times there is a significant amount of vacation rental infrastructure in place (cleaners, handymen etc.) but you can still easily stand out and have a killer place.
@Brett Deas It looks like a higher investment is needed to achieve a higher return. Where is your property located and how big is it?
- 2ySarah KensingerPro MemberReal Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
So, we won't purchase anything less then 20% COC. They're definitely hard to find and you'll need lots of patience as you research and look and look! Bill Faeth has been very strict in his 20-30% COC and stills finds secondary markets that put out great numbers. Lately, on his social media account he's been letting on where the markets are, that these deals can be found. It might help you out to look him up on Instagram.
Quote from @Sarah Kensinger:
So, we won't purchase anything less then 20% COC. They're definitely hard to find and you'll need lots of patience as you research and look and look! Bill Faeth has been very strict in his 20-30% COC and stills finds secondary markets that put out great numbers. Lately, on his social media account he's been letting on where the markets are, that these deals can be found. It might help you out to look him up on Instagram.
@Sarah Kensinger Thanks for the suggestion.
I explored Bill Faeth's Instagram and came across his mention of Kenny Bedwell and STR Insights. I found a particular report on https://www.strinsights.com/that lists the best markets in terms of gross ROI, with figures ranging from 6% to 28%. It appears they calculate gross ROI based on gross
income divided by property price. I will still need to calculate CoC myself.
Is this what you referred to about secondary markets that put our great numbers?I am new and unfamiliar with Bill Faeth, Kenny Bedwell, and STR Insights. Given your experience and knowledge in this field, what is your opinion on the credibility of the reports from STR
Insights and whether they could serve as a reliable resource for information. Thanks.have not heard of Bill Faeth or Kenny Bedwell or STR Insights. How credible is the reports?
- CO · Member since 2022 · 588 posts · 426 votes2y
Quote from @Allan Pan:
Quote from @Brett Deas:
25% is acheviable, but not easy to find. Our target is 20% and above so not too far off from yours.
When searching for deals I find it best to go in the non-sexy markets. So not Florida or the Smoky Mountains. I would look in drive-to vacation markets. Often times there is a significant amount of vacation rental infrastructure in place (cleaners, handymen etc.) but you can still easily stand out and have a killer place.
@Brett Deas It looks like a higher investment is needed to achieve a higher return. Where is your property located and how big is it?
We have them up and down Appalachia and they are all 1-2 bedrooms. Currently we don't have anything bigger than that in the portfolio.
- Real Estate Agent · San Diego, CA · Member since 2016 · 308 posts · 173 votes2y
Quote from @Allan Pan:
Quote from @Maxwell Ventura:
@Allan Pan I have a client that purchased a 1br/loft condo in little italy here in SD that he is using at STR and doing well, which would be closer to your price point.
You just have to be cognizant of the HOA CC&Rs, most of them have restrictions of 30 day minimum rentals.
@Maxwell Ventura Thank you Maxwell. Do you have the number for that STR? I am curious to see the upfront investment and the return.
- Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes2y
@Allan Pan, I understand it takes time to build up a following and name recognition, but I think it is possible. While the marketing is key, and should certainly be factored in (influencer stays, paid social posts, video and photography work), the equally important point I was trying to make is you need a product that stands out. These properties do it through design, unique nature of property, and the "natural pools" available on the property.
But I have a friend that is the manager of about a dozen properties in the PHX/Scottsdale market. Granted, I don't know how well they perform financially, but she, too, makes sure the properties are well staged with professional photography, and instagram vignettes throughout her property. All of these are intentional thoughts to get people to stop scrolling through Airbnb and get bookings. And I will note, my friend is very intentional about which properties she manages. They need to have adequate bathrooms for the number of beds, since they are in PHX they have to have a pool, and then she mandates which linens, towels, etc the owners must use in order to create a consistent, positive experience for all guests.
Think like a guest: you don't want your socks to turn black while walking through the house, have a crappy mattress with flat pillows, rough sheets, not enough paper towels or toilet paper, bad wifi, etc.
- 2ySarah KensingerPro MemberReal Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
Quote from @Allan Pan:
Quote from @Sarah Kensinger:
So, we won't purchase anything less then 20% COC. They're definitely hard to find and you'll need lots of patience as you research and look and look! Bill Faeth has been very strict in his 20-30% COC and stills finds secondary markets that put out great numbers. Lately, on his social media account he's been letting on where the markets are, that these deals can be found. It might help you out to look him up on Instagram.
@Sarah Kensinger Thanks for the suggestion.
I explored Bill Faeth's Instagram and came across his mention of Kenny Bedwell and STR Insights. I found a particular report on https://www.strinsights.com/that lists the best markets in terms of gross ROI, with figures ranging from 6% to 28%. It appears they calculate gross ROI based on gross
income divided by property price. I will still need to calculate CoC myself.
Is this what you referred to about secondary markets that put our great numbers?I am new and unfamiliar with Bill Faeth, Kenny Bedwell, and STR Insights. Given your experience and knowledge in this field, what is your opinion on the credibility of the reports from STR
Insights and whether they could serve as a reliable resource for information. Thanks.have not heard of Bill Faeth or Kenny Bedwell or STR Insights. How credible is the reports?
Very very credible! Bill Faeth is a large name in the STR industry and puts on one of the largest STR conferences each year with Micheal Sjogren. STR insights is the next credible STR data software after Airdna. For a bit people thought STR Insights would pass up Airdna, until last fall Airdna rolled out many new features which helped to keep them as the best. Keep doing some research and learn about the leaders in this industry before purchasing a property. Not only will it help you gain confidence, but also give guidance on the best location/property for your needs!
- Member since 2023 · 21 posts · 18 votes2y
Personally I wouldn't bother buying an airbnb at 10-15% CoC. Not worth the headache and time requirement. 20% is an ambitious but realistic goal in today's market.
Quote from @Brett Deas:
Quote from @Allan Pan:
Quote from @Brett Deas:
25% is acheviable, but not easy to find. Our target is 20% and above so not too far off from yours.
When searching for deals I find it best to go in the non-sexy markets. So not Florida or the Smoky Mountains. I would look in drive-to vacation markets. Often times there is a significant amount of vacation rental infrastructure in place (cleaners, handymen etc.) but you can still easily stand out and have a killer place.
@Brett Deas It looks like a higher investment is needed to achieve a higher return. Where is your property located and how big is it?
We have them up and down Appalachia and they are all 1-2 bedrooms. Currently we don't have anything bigger than that in the portfolio.
@Brett Deas Thanks for the details.
Quote from @Evan Polaski:
@Allan Pan, I understand it takes time to build up a following and name recognition, but I think it is possible. While the marketing is key, and should certainly be factored in (influencer stays, paid social posts, video and photography work), the equally important point I was trying to make is you need a product that stands out. These properties do it through design, unique nature of property, and the "natural pools" available on the property.
But I have a friend that is the manager of about a dozen properties in the PHX/Scottsdale market. Granted, I don't know how well they perform financially, but she, too, makes sure the properties are well staged with professional photography, and instagram vignettes throughout her property. All of these are intentional thoughts to get people to stop scrolling through Airbnb and get bookings. And I will note, my friend is very intentional about which properties she manages. They need to have adequate bathrooms for the number of beds, since they are in PHX they have to have a pool, and then she mandates which linens, towels, etc the owners must use in order to create a consistent, positive experience for all guests.
Think like a guest: you don't want your socks to turn black while walking through the house, have a crappy mattress with flat pillows, rough sheets, not enough paper towels or toilet paper, bad wifi, etc.
@Evan Polaski I agree. STR is hospitality business.
Quote from @Sarah Kensinger:
Quote from @Allan Pan:
Quote from @Sarah Kensinger:
So, we won't purchase anything less then 20% COC. They're definitely hard to find and you'll need lots of patience as you research and look and look! Bill Faeth has been very strict in his 20-30% COC and stills finds secondary markets that put out great numbers. Lately, on his social media account he's been letting on where the markets are, that these deals can be found. It might help you out to look him up on Instagram.
@Sarah Kensinger Thanks for the suggestion.
I explored Bill Faeth's Instagram and came across his mention of Kenny Bedwell and STR Insights. I found a particular report on https://www.strinsights.com/that lists the best markets in terms of gross ROI, with figures ranging from 6% to 28%. It appears they calculate gross ROI based on gross
income divided by property price. I will still need to calculate CoC myself.
Is this what you referred to about secondary markets that put our great numbers?I am new and unfamiliar with Bill Faeth, Kenny Bedwell, and STR Insights. Given your experience and knowledge in this field, what is your opinion on the credibility of the reports from STR
Insights and whether they could serve as a reliable resource for information. Thanks.have not heard of Bill Faeth or Kenny Bedwell or STR Insights. How credible is the reports?
Very very credible! Bill Faeth is a large name in the STR industry and puts on one of the largest STR conferences each year with Micheal Sjogren. STR insights is the next credible STR data software after Airdna. For a bit people thought STR Insights would pass up Airdna, until last fall Airdna rolled out many new features which helped to keep them as the best. Keep doing some research and learn about the leaders in this industry before purchasing a property. Not only will it help you gain confidence, but also give guidance on the best location/property for your needs!
@Sarah Kensinger Thanks for sharing! I will still learning.
Quote from @Scott Bowen:
Personally I wouldn't bother buying an airbnb at 10-15% CoC. Not worth the headache and time requirement. 20% is an ambitious but realistic goal in today's market.
@Scott Bowen Any specific market you are referring to?
- 2ySarah KensingerPro MemberReal Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votesHey we all are! The person that thinks they have it all figured out, has lost touch with reality.
Quote from @Allan Pan:
Quote from @Sarah Kensinger:
Quote from @Allan Pan:
Quote from @Sarah Kensinger:
So, we won't purchase anything less then 20% COC. They're definitely hard to find and you'll need lots of patience as you research and look and look! Bill Faeth has been very strict in his 20-30% COC and stills finds secondary markets that put out great numbers. Lately, on his social media account he's been letting on where the markets are, that these deals can be found. It might help you out to look him up on Instagram.
@Sarah Kensinger Thanks for the suggestion.
I explored Bill Faeth's Instagram and came across his mention of Kenny Bedwell and STR Insights. I found a particular report on https://www.strinsights.com/that lists the best markets in terms of gross ROI, with figures ranging from 6% to 28%. It appears they calculate gross ROI based on gross
income divided by property price. I will still need to calculate CoC myself.
Is this what you referred to about secondary markets that put our great numbers?I am new and unfamiliar with Bill Faeth, Kenny Bedwell, and STR Insights. Given your experience and knowledge in this field, what is your opinion on the credibility of the reports from STR
Insights and whether they could serve as a reliable resource for information. Thanks.have not heard of Bill Faeth or Kenny Bedwell or STR Insights. How credible is the reports?
Very very credible! Bill Faeth is a large name in the STR industry and puts on one of the largest STR conferences each year with Micheal Sjogren. STR insights is the next credible STR data software after Airdna. For a bit people thought STR Insights would pass up Airdna, until last fall Airdna rolled out many new features which helped to keep them as the best. Keep doing some research and learn about the leaders in this industry before purchasing a property. Not only will it help you gain confidence, but also give guidance on the best location/property for your needs!
@Sarah Kensinger Thanks for sharing! I will still learning.
- 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
@Allan Pan
I can more easily find a LTR house that generates 25% COC with way less continual work than a STR in this market.
It's also good to be diversified.
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