STR in a high cost of living area- worth it?

Question

We own a home in Southern California, walking distance to the beach. A few months ago, we moved one town over into a rental townhouse so our boys could be closer to school and friends. I listed our home on Airbnb and have been self-managing.

I chose the STR route because I like being able to keep tabs on the house and stay on top of maintenance and improvements. Also, I've found hosting to be pretty fun and rewarding. I’ve received a ton of nice messages from families who have enjoyed our house and appreciated having it as a home base for their vacations.

Since starting, we've been averaging about $5,000/month in revenue from Airbnb. This number could definitely be higher. But, to be honest, I'm just really picky about guests. The only platform I am on is Airbnb because I really like being able to read guest reviews before accepting bookings, and other platforms don’t offer that. We're friends with all of our neighbors, and it’s important to me that guests are a good fit for our neighborhood, so I’ve definitely turned down quite a few booking requests that didn’t pass the vibe check.

LTR comps in our area average around $5,500/month. I’m trying to figure out whether the tax advantages of STR, combined with the benefit of keeping eyes on the house, make it worth continuing down this path. OR if I’m crazy to be putting in all the extra work that an STR requires, and maybe we’d be better off switching to an LTR.

For folks who have experience doing both—what are your thoughts/opinions?

Grant Med · Answer

@Ashley Bitner what city is the property in? I use all three strategies and I love the STR/ MTR combo. I target MTR clients and in between them I Airbnb the property to keep it occupied. It's the best of both worlds. LTR here in California can be pretty difficult to navigate and if you go that route I would highly consider getting a property management company to create a barrier between you and the tenants. I list my MTRs on furnished finder, AirBNB and VRBO and have had success on all platforms. Just don't have the AirBNB or VRBO leads sign a lease through those sites. The taxes and fees will be outrageous. The trick with furnished finder is to actively contact all the people who are searching in your area. If you wait for them to contact you, you'll be waiting forever while your competition is hustling to fill their properties.

Lauren Kormylo · Answer

I have an LTR and an STR. In your situation, the tax advantages should be about the same. Don't forget to factor a few differences into the equation - with switching to LTR you'll need to move out the furniture etc. and store it somewhere. But your ongoing expenses will be much lower. Your renters will pay all utilities, internet, and lawn care. You won't have to supply linens, TP, paper towels, coffee, soap, etc and won't have to replace broken items or small appliances. Your expensive STR insurance will go way down when you switch to a regular landlord policy. You can still require 6 month or yearly inspections to keep up on maintenance (we do yearly and it's written into the lease). But at the end of a lease, there is always some work to do to get it ready for the next tenant because of wear and tear and deep cleaning.

With MTR, you might be able to make even more money than STR or LTR, while still keeping control of the property, so run the numbers on that. Check out competitors in your area on Furnished Finder and see what they're charging.

John Underwood · Answer

Depends on how you value your spare time and how much of it you have to keep doing the STR option.

Also we get the bulk of our bookings from VRBO. The people on VRBO have been very respectful of our property for over a decade.

Andrew Steffens · Answer

If it were me I would either choose to maximize the income or go LTR, unless the hosting experience is so rewarding to you that it is worth paying for.  As for the tax advantages, that is quantifiable by an accountant to see if it is truly worth it to lose some monthly income potential or not. Good luck!

Ashley Bitner · Answer

This is all great food for thought ... thank you! I am on furnished finders but haven't had much luck. Competitors seem to be charging around $6500/month so maybe that's worth leaning into a bit more!

Carolyn Fuller · Answer

I think you have answered your own question. You are enjoying the work and it allows you to keep tabs on the house. STR is not passive but it does allow the host greater control of their property.

I do both MTR & STR. STR is a lot of work but I enjoy the work and I like the fact that I have more control over the property. Since 80% of my MTR tenants & STR guests are international and Trump has declared war with international visitors and our universities, I might be forced to pivot to LTR.

Bruce Woodruff · Answer

As @John Underwood said, definitely use VRBO. They are a much superior platform IMHO. A little more $$ but worth it.

For me, it would be simply about the money. If you are making at least some $$ and enjoy it, then go for it! YOu get to check up on the house more frequently so better than LTR .

Just my $.02

Ashley Bitner · Answer

Thank you!! I've found a CPA through Bigger Pockets I've been thinking of signing on with, this would be an excellent question for him!

Michael Baum · Answer

Hey @Ashley Bitner, just wondering if it is actually legal in the area the house is at. So many restrictions on STRs in CA so I am curious.

If you want to increase revenue, then listing on VRBO is a must.

Ashley Bitner · Answer

Hi Michael! Yep, I actually secured the permit a few years ago with the city. I've been paying to keep it active each year even though we haven't really put it to use till now. They've since stopped issuing any new STR permits (and who knows what the future will hold for current permit holders) but for now we are "grandfathered in" with our current permit.

STR in a high cost of living area- worth it?

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