Underwriting your first Short term rental

Collin HaysBusiness Member

Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes

1y

I've never recommended buying a condo for investment purposes. It is more of a liability.

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4 Reply

Sheldon Huff
OP
Member since 2023 · 10 posts · 4 votes
1y
Quote from @Collin Hays:

I've never recommended buying a condo for investment purposes. It is more of a liability.

Thank you for the heads up!
0 Reply

Lateefah Mathews

Realtor · Atlanta, GA · Member since 2021 · 239 posts · 120 votes

1y

Quote from @Sheldon Huff:

Hey BiggerPockets crew! I'm an active-duty pilot who bought my first deal a year ago (long-term rental) and now found a potential short-term rental in Pensacola's historic district. It's a $385,000 condo, 2-bed, 2.5-bath, 1,288 sq ft, using a VA loan (0% down). I've been digging into AirDNA and Airbnb listings nearby, and here's what I'm seeing:

Slow Season (Nov-Feb): 45-55% occupancy (14-17 nights) at $225-$250/night = $3,150-$4,250 gross, ~$4,000 expenses (mortgage $2,485, taxes, cleaning, etc.). Net: -$889 to $250/month. Listings show 60%+ open days now (March-May), so I’m worried about vacancies.
Busy Season (June-Aug): 75-85% occupancy (23-26 nights) at $275-$300/night = $6,325-$7,800 gross. Net: $1,819 to $3,100/month.
Average: 60% (18 nights), $250/night = $286/month net, scaling to $1,500+ with upgrades ($275-$300, 70-75%).
I've got $15k-$25k to invest (upgrades, buffer), but my reserves are tied up in crypto/stocks, which are down. I'm new to STRs and hesitant—scared it won't rent enough or managing it will be a nightmare after I PCS out of state in a year. I would live in it for the next year while renovating it to be ready for STR once I leave the area. Love the podcasts and have been listening for years, but am I over my head? Is this a great deal?
Looking for military/STR pros to help me run the numbers or point me to a service for beginners to underwrite this. Is this worth the work, or should I pass? Thanks for any wisdom!

Hey Sheldon! Pensacola is a great STR market, but condos can be an issue due to potential rental restrictions, condo covenants, and constantly changing rules, which could hurt your flexibility. Although the numbers look decent, I'd check with the HOA about short-term rental policies and consider possible volatility.

If you’re comfortable with the potential ups and downs of a condo and managing from out of state, it could still work, but keep those risks in mind. Honestly, I would suggest looking at non-condo options for more long-term freedom!

1 Reply

Sheldon Huff
OP
Member since 2023 · 10 posts · 4 votes
1y
Quote from @Lateefah Mathews:
Quote from @Sheldon Huff:

Hey BiggerPockets crew! I'm an active-duty pilot who bought my first deal a year ago (long-term rental) and now found a potential short-term rental in Pensacola's historic district. It's a $385,000 condo, 2-bed, 2.5-bath, 1,288 sq ft, using a VA loan (0% down). I've been digging into AirDNA and Airbnb listings nearby, and here's what I'm seeing:

Slow Season (Nov-Feb): 45-55% occupancy (14-17 nights) at $225-$250/night = $3,150-$4,250 gross, ~$4,000 expenses (mortgage $2,485, taxes, cleaning, etc.). Net: -$889 to $250/month. Listings show 60%+ open days now (March-May), so I’m worried about vacancies.

Busy Season (June-Aug): 75-85% occupancy (23-26 nights) at $275-$300/night = $6,325-$7,800 gross. Net: $1,819 to $3,100/month.

Average: 60% (18 nights), $250/night = $286/month net, scaling to $1,500+ with upgrades ($275-$300, 70-75%).
I've got $15k-$25k to invest (upgrades, buffer), but my reserves are tied up in crypto/stocks, which are down. I'm new to STRs and hesitant—scared it won't rent enough or managing it will be a nightmare after I PCS out of state in a year. I would live in it for the next year while renovating it to be ready for STR once I leave the area. Love the podcasts and have been listening for years, but am I over my head? Is this a great deal?
Looking for military/STR pros to help me run the numbers or point me to a service for beginners to underwrite this. Is this worth the work, or should I pass? Thanks for any wisdom!

Hey Sheldon! Pensacola is a great STR market, but condos can be an issue due to potential rental restrictions, condo covenants, and constantly changing rules, which could hurt your flexibility. Although the numbers look decent, I'd check with the HOA about short-term rental policies and consider possible volatility.
If you’re comfortable with the potential ups and downs of a condo and managing from out of state, it could still work, but keep those risks in mind. Honestly, I would suggest looking at non-condo options for more long-term freedom!
Thanks for the knowledge!!
0 Reply

Sheldon Huff

OP

Member since 2023 · 10 posts · 4 votes

1y

Thank you guys for the feedback! Its one unit of a duplex but is not at all connected to the other unit and only shares a driveway, also does not have an HOA. I guess technically a condo but functions more of a single family home. Thank you guys for the feedback, means a lot!

0 Reply

Andrew SteffensBusiness Member

Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes

1y

Army vet and current STR PM Co owner out of Tampa here. Currently using my VA in my primary, but I just learned of another 0% down option available through Navy Fed from another vet client - have not dug in on it yet. I agree with Collin that condos are not optimal for many reasons. I would recommend a SFR if possible - the numbers without an HOA are more stable and predictable and the income is usually higher with a 3/4 bedroom house.

[email protected]813-563-0877

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1 Reply

Sheldon Huff
OP
Member since 2023 · 10 posts · 4 votes
1y
Quote from @Andrew Steffens:

Army vet and current STR PM Co owner out of Tampa here. Currently using my VA in my primary, but I just learned of another 0% down option available through Navy Fed from another vet client - have not dug in on it yet. I agree with Collin that condos are not optimal for many reasons. I would recommend a SFR if possible - the numbers without an HOA are more stable and predictable and the income is usually higher with a 3/4 bedroom house.
Thank you!!
0 Reply
Sheldon Huff
OP
Member since 2023 · 10 posts · 4 votes
1y
Quote from @Andrew Steffens:

Army vet and current STR PM Co owner out of Tampa here. Currently using my VA in my primary, but I just learned of another 0% down option available through Navy Fed from another vet client - have not dug in on it yet. I agree with Collin that condos are not optimal for many reasons. I would recommend a SFR if possible - the numbers without an HOA are more stable and predictable and the income is usually higher with a 3/4 bedroom house.

Thank you so much for the input, after consideration I don't think its the best idea, thanks for helping!
1 Reply

Jaycee GreenePro Member

Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes

1y

Quote from @Sheldon Huff:

Hey BiggerPockets crew! I'm an active-duty pilot who bought my first deal a year ago (long-term rental) and now found a potential short-term rental in Pensacola's historic district. It's a $385,000 condo, 2-bed, 2.5-bath, 1,288 sq ft, using a VA loan (0% down). I've been digging into AirDNA and Airbnb listings nearby, and here's what I'm seeing:

Slow Season (Nov-Feb): 45-55% occupancy (14-17 nights) at $225-$250/night = $3,150-$4,250 gross, ~$4,000 expenses (mortgage $2,485, taxes, cleaning, etc.). Net: -$889 to $250/month. Listings show 60%+ open days now (March-May), so I’m worried about vacancies.
Busy Season (June-Aug): 75-85% occupancy (23-26 nights) at $275-$300/night = $6,325-$7,800 gross. Net: $1,819 to $3,100/month.
Average: 60% (18 nights), $250/night = $286/month net, scaling to $1,500+ with upgrades ($275-$300, 70-75%).
I've got $15k-$25k to invest (upgrades, buffer), but my reserves are tied up in crypto/stocks, which are down. I'm new to STRs and hesitant—scared it won't rent enough or managing it will be a nightmare after I PCS out of state in a year. I would live in it for the next year while renovating it to be ready for STR once I leave the area. Love the podcasts and have been listening for years, but am I over my head? Is this a great deal?
Looking for military/STR pros to help me run the numbers or point me to a service for beginners to underwrite this. Is this worth the work, or should I pass? Thanks for any wisdom!

I'd check out this financial model https://www.smarthelping.com/2022/05/short-term-rental-real-estate-model.html. I've purchased some of Jason's other models and like them.

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1 Reply

Anja Schaer

Investor · Atlanta · Member since 2022 · 146 posts · 72 votes

1y

Hey Sheldon,

As an STR/MTR host & co-host in Metro Atlanta, I'd say your numbers look tight, especially in the slow season. Living in it for a year lets you test MTR demand and refine your STR strategy. High open nights (60%+) in Pensacola is a red flag—double-check demand. If you PCS, budget 20-30% for a manager. Consider a backup LTR option and connect with an investor-friendly Realtor to gauge demand. It could work, but not a slam dunk.

2 Reply

Sheldon Huff
OP
Member since 2023 · 10 posts · 4 votes
1y
Quote from @Anja Schaer:

Hey Sheldon,

As an STR/MTR host & co-host in Metro Atlanta, I'd say your numbers look tight, especially in the slow season. Living in it for a year lets you test MTR demand and refine your STR strategy. High open nights (60%+) in Pensacola is a red flag—double-check demand. If you PCS, budget 20-30% for a manager. Consider a backup LTR option and connect with an investor-friendly Realtor to gauge demand. It could work, but not a slam dunk.

Thank you for all the great knowledge! I think I can find better specially after reviewing all of the responses, thanks for helping me out!
0 Reply

Stephen Reyes

Member since 2021 · 37 posts · 15 votes

1y

If you are looking at the unit I am thinking of (I am also in Pensacola and know the area well) it is a townhouse not a condo. Actually more of a duplex the owner is separating into two properties. I would be careful about this unless you bought both properties as they are physically attached, they have a "shared driveway" that is on the lot of the other unit and it claims there is no HOA. Also, I like any STR to have the ability to convert to LTR if needed. In my opinion that unit would not provide adequate rent as either. Although the location is good for STR. If we are not talking about the same unit, ignore everything I said ;-)

1 Reply

Sheldon Huff
OP
Member since 2023 · 10 posts · 4 votes
1y
Quote from @Stephen Reyes:

If you are looking at the unit I am thinking of (I am also in Pensacola and know the area well) it is a townhouse not a condo. Actually more of a duplex the owner is separating into two properties. I would be careful about this unless you bought both properties as they are physically attached, they have a "shared driveway" that is on the lot of the other unit and it claims there is no HOA. Also, I like any STR to have the ability to convert to LTR if needed. In my opinion that unit would not provide adequate rent as either. Although the location is good for STR. If we are not talking about the same unit, ignore everything I said ;-)
Yes we are definitely talking about the same property, and good points I think maybe this wasn't the best rental after consideration. Thanks for heads up and would love to meet up and talk real estate if you are local.
0 Reply

Mic Nguyen

Real Estate Broker · pensacola, FL · Member since 2010 · 50 posts · 4 votes

1y

Hey Sheldon, Im also a local Pensacolian and real estate broker with 8 STR's in Pcola. I would say 50% occupancy in winter months is high unless you drop rates to $100-150 per night. Snow birds who visit during that time get gulf front condos for $1500 month. If you need any assistance I'd be glad to help.

0 Reply

Sheldon Huff
OP
Member since 2023 · 10 posts · 4 votes
1y
Quote from @Mic Nguyen:

Hey Sheldon, Im also a local Pensacolian and real estate broker with 8 STR's in Pcola. I would say 50% occupancy in winter months is high unless you drop rates to $100-150 per night. Snow birds who visit during that time get gulf front condos for $1500 month. If you need any assistance I'd be glad to help.

Thanks for letting me know! I would love to connect at some point thanks for helping me out!
0 Reply
Mic Nguyen
Real Estate Broker · pensacola, FL · Member since 2010 · 50 posts · 4 votes
1y
Quote from @Sheldon Huff:

Quote from @Mic Nguyen:

Hey Sheldon, Im also a local Pensacolian and real estate broker with 8 STR's in Pcola. I would say 50% occupancy in winter months is high unless you drop rates to $100-150 per night. Snow birds who visit during that time get gulf front condos for $1500 month. If you need any assistance I'd be glad to help.

Thanks for letting me know! I would love to connect at some point thanks for helping me out!

For sure. Thinking of getting my PPL so would love to talk aviation. We can exchanges tips. Im very active in crypto and stocks as well.
0 Reply

Matthew Becker

Developer · Moscow Idaho · Member since 2024 · 224 posts · 143 votes

1y

I would no buy but at minimum wait to buy a condo in Florida and pay $100K less in a few years.

Based on what I am seeing, that does not sound safe.

Insurance could double, or you can't insure, or they decide the building needs 2M in structural repairs. Don't walk away. Run.

1 Reply

Sheldon Huff
OP
Member since 2023 · 10 posts · 4 votes
1y
Quote from @Matthew Becker:

I would no buy but at minimum wait to buy a condo in Florida and pay $100K less in a few years.
Based on what I am seeing, that does not sound safe.
Insurance could double, or you can't insure, or they decide the building needs 2M in structural repairs. Don't walk away. Run.

Good to know, sounds like it was a pretty risky investment, really happy I posted this before I bought it. Thank you for dropping some knowledge, means a lot!!
0 Reply

Travis TimmonsPro Member

Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes

1y

1. Don't buy a condo unless you have no other options or get crazy deal - it's very hard to stick out from the competition - there are a bunch of identical units. HOAs, assessments, they don't appreciate, it's one more entity that can tell you what you can or cannot do with your property. I say this as the owner of a condo. It's the worst performing property in my portfolio by a LONG shot. My wife and I love going there and using it, though...so we hang on to it. Otherwise, we would have bailed by now.

2. Offseason occupancy of 45-55% may be a bit too optimistic. I don't know that market, though.

3. Do not underestimate the amount of cash it takes to bring a STR to market. A $300,000 property probably requires $100k in cash if non-owner occupied (if you live in it, different story, but just back out the 20%) - down payment + reserves + make ready expenses + furnishing. It is death by 1000 cuts.

4. I'd be happy to help and have nothing to sell. Feel free to send me a DM if you think that I could be a resource.

0 Reply

Ben FernandezBusiness Member

Realtor · Lancaster, PA · Member since 2025 · 169 posts · 97 votes

1y

Penciling this...Deal looks tight unless you can keep your operating expenses below 40%.

At 60% average occupancy and $250 average daily rate you're at $54,750 gross income.

If you can manage to keep operating expenses below 40%, which I doubt because most PM's are charging at least 20% alone before taxes, insurance, turnover/maintenance, utilities, internet, accounting etc... But that brings your NOI to $32,850.

Your debt service is $29,820.

So, at these figures, your cash flow is $252/month.

You also have the expense of rehabbing/furnishing it that you need to determine the break even point for, based upon the monthly cash flow. So, you'd definitely be negative starting out. For example if your expense was $20,000, it would take you 80 months to break even.

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0 Reply

Brandon Gale

Rental Property Investor · Worcester, MA · Member since 2018 · 131 posts · 135 votes

1y

Agree with what others have said about staying away from condos.

Also, I would go about calculating your income differently. No need to calculate based on occupancy and nightly rates, the averages are tough to pinpoing.

I would recommend getting an account with a pricing software (I use PriceLabs but theres other good ones out there too). On most you can subscribe to their Market Analysis tools which are super useful. You pick a specific area and you can look through specific listings and their yearly revenue. Go through and find 5+ properties that are VERY similar to one you are analyzing (location, SF, # of beds, amenities, etc.) and come up with an average yearly revenue, then compare to your expenses over the course of a year. This is more precise in my opnion than trying to pin down specific monthly costs/revenue for each season.

Secondly, something a lot of people don't think of when they underwrite a STR deal. Factor into your calculations that you will most likely not achieve your estimated revenue in years 1 and 2 as you ramp things up. This is mostly due to taking time to gain traction on the booking platforms and working through kinks in your pricing strategy. I would plan for about 20% less revenue than estimates in year 1, 10% less in year 2 and then reaching optimal revenue in year 3.

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Underwriting your first Short term rental

Underwriting your first Short term rental

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