Should I buy this STR?

Question

Purchase price $700,000

Downpayment $300,000

Monthly payment $2,225 (including taxes and insurance)

Rabbu monthly estimates: $6867

Self-managed (super host)

When I estimate supplies and Capex, I see a monthly net of $3837.

I'm an experienced property manager but newbie investor so I appreciate any advice! What am I missing?

Travis Timmons · Answer

My back of the envelope/short hand underwriting is that a property needs to do 15% of the purchase price in gross booking revenue. And in my very seasonal market, I need the annual PITI to be equal to or below the gross booking revenue for my 2 busiest months (July and August). If it does not fit that, it's a pass for me unless there is some equity or value add upside.

This deal, on the surface, is not something that I would buy unless you think that you can outperform that Rabbu estimate or if there is a secondary reason (ie high appreciation, waterfront property for personal use, etc.).

Joel Clifft · Answer

Thanks to everyone who commented. You've given some great resources and things to consider. I appreciate the helpful feedback!

As a new investor I see a theme in the responses: be careful to count every expense! It's easy to overlook things like utility bills, etc.

Time for me to develop a system that checks all of these boxes!

Diego A. · Answer

Hi @Joel Clifft

The cash on cash in this property based on the numbers that you shared is 15% so it seems to be a good investment with the little data that I have, even though the GBR formula gives 11% which I believe is the reason Travis won't invest.

One thing is that you look monthly estimates from different tools such as AirDNA, AirBnB, etc. I have seen that sometimes they are off on the estimations depending on the location.

Your calculation will depend on the amenities that you have in the property against the other properties in the same location.

Kate Stoermer · Answer

Use another source in addition to Rabbu (I use Rabbu and AirDNA).  Understand that marketing and management can signficantly influence how well a property performs 20, 30 even 40% above (or below) average - which is what these data sources are telling you.   And I would never tell someone to buy based on numbers alone without understanding  market positiong and management strategy  so as to understand the likelihood of actually achieving at least average - if not above.

Benjamin Louie · Answer

@Joel Clifft

Congrats on running the numbers so clearly, Joel looks like you’ve done your homework. A few things I’d double-check before jumping in:

• Rabbu estimates: They’re helpful, but I’d compare with AirDNA or even a manual comp check on Airbnb/VRBO. Sometimes Rabbu can lean optimistic depending on the market.
• CapEx & reserves: You mentioned it, but make sure you’ve built in enough buffer for big-ticket items (roof, HVAC, furniture refresh). Those costs hit harder with STRs.
• Seasonality: Does the $6,867 average hold year-round, or is it skewed by peak season? A slow shoulder/off-season can throw off projections if you’re not ready for it.
• Financing risk: With $300K down, your leverage is low (which is safer), but it also ties up a lot of capital. Just be sure you’re comfortable with the opportunity cost.

Rabbu estimates: They’re helpful, but I’d compare with AirDNA or even a manual comp check on Airbnb/VRBO. Sometimes Rabbu can lean optimistic depending on the market.

CapEx & reserves: You mentioned it, but make sure you’ve built in enough buffer for big-ticket items (roof, HVAC, furniture refresh). Those costs hit harder with STRs.

Seasonality: Does the $6,867 average hold year-round, or is it skewed by peak season? A slow shoulder/off-season can throw off projections if you’re not ready for it.

Financing risk: With $300K down, your leverage is low (which is safer), but it also ties up a lot of capital. Just be sure you’re comfortable with the opportunity cost.

On paper, a $3,837 monthly net looks solid, but reality often runs tighter with occupancy swings and surprise expenses. If comps and seasonality checks line up, though, it could be a strong first STR investment.

Benjamin Louie · Answer

@Joel Clifft Joel, those numbers look strong, but I’d double-check Rabbu’s estimates against real comps since they can be optimistic. Make sure you’re factoring in reserves for big CapEx items and the seasonality of bookings. Also, confirm local STR regulations are stable and transferable. If those check out, this could be a solid deal given your management experience.

Tyler Divin · Answer

I would put it into BNBCalc.  Dig into every expense, analyze the comps in detail, and stress test it based on high, medium, and low performance using percentiles.

Josh Ball · Answer

I am curious where you're getting $400,000 mortgage for $2,225 monthly including taxes & STR insurance?

Make sure you aren't quoting with general homeowners insurance as STR insurance can be significantly higher.

Andrew Steffens · Answer

Curious as to why a nearly 50% down payment? Im not sure what market this is, but in my market (Tampa) you would be better off putting that $300k down on a waterfront $1.2M home that produces $15k in gross income.

Should I buy this STR?

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