So Cal - Considering getting into STR, is it really worth it?

Question

We are considering getting into STR with one of our properties in the Murrieta/Temecula area of southern California.  Our experience is with LTRs so we are a little hesitant to do a STR given the uncertainty of the monthly revenue.

The property is a 5 bedroom that should sleep 8-10, with a pool, kids playset, and pickleball/basketball court.  Our research says that we should be able to rent on a STR basis for about $350-450 per night.  Without boring you with our analysis, at a 50% occupancy rate it would net us about the same as renting it out long-term.

Every time I have analyzed converting one of our LTR into a STR the numbers have always looked better as a LTR. Have any of you found the same to be true, or are the STRs incredibly profitable and I am just not understanding the economics of STRs?

Bradley Buxton · Answer

@Richard Chover

I have family in Temecula and love to visit the downtown and wineries.  There does seem to be demand for STR.  Besides the raw numbers there is the turnover and management. You have new guests every weekend this takes time and energy to manage.  I would also consider what is your target audience, is it bachelorette parties, wedding guests, wine tour guests, casino goers, etc? As competition increases you'll have a unique value proposition.

Michael Baum · Answer

Hey @Richard Chover. @Mike Grudzien said it best. Really drill down on AirBNB and VRBO directly. See what the going rate, how many rentals, nighty occupancy and amenities. That will give you a good idea if this will work well or not.

AirDNA can also provide some data for you. I would give https://awning.com/airbnb-estimator a shot.

They pull the same data and it doesn't cost anything. It might not be as in depth but you will see everything around your house.

Mike Grudzien · Answer

Richard,There are so many moving parts.  Start with the monthly nut that you need to cover: those are your numbers and they'll be different for everybody.  Then, is your STR in a high-tourist area?  Have you done comps with other STRs in the area?  What are folks charging for similar properties and how full are their calendars?  Are you going to self-manage or add the cost of STR Prop. Management?  A 5 bedroom will work for one segment of the travel market, not for a single, couple or family of 4 or 5.  I could go on, but you got the idea.  Stick to your research, then make a decision.Mike

Eric DeNardo · Answer

@Richard Chover,

You're in a good area for it with the wineries and casino. I say go for it and see how it works out. First, get your systems in place - automated messages, check-in/check-out experience, find a great cleaner, supplies, and make the place look nice and take great photos. Its more work and you have to be available to answer questions for guests and have pride in giving an great experience for guests.

Richard Chover · Answer

Thanks for the feedback here. After researching it further...  our area has put restrictions in place that limit what properties qualify and for those that do qualify only 300 STR permits will be issued. Our property doesn't meet the zoning requirements, so the decision has been made for us.

STRs do seem like a lot of extra work, with higher risk/volatility, when compared to LTRs.  The most sense I can make of it is that if I wanted a vacation home, but didn't want the burden of the entire cost, then I could use it as a STR so I can make some money from it when I am not using it.  I wouldn't consider it an investment in this scenario.

So Cal - Considering getting into STR, is it really worth it?

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