Do I just need more money?

Question

My husband and I have recently decided to start getting into real estate. I personally think I could have a lot of interest in managing short-term rentals, and the tax benefit would help. However, I don’t know how people make money doing this. I read the books, they make it sound great. But when I run the numbers in a lot of locations, you come out in the negative and I’m looking at properties no more than 250 K. And now with Airbnb charging a higher fee of 15%, is this still a way to make money? For just a few examples of where I’ve looked, I looked at South Padre Island, but there is such a surplus of condos that all really look the same, it makes me question how many of these Airbnb‘s go empty. Then I looked at Tuscaloosa, looks great, is affordable, can give you a positive cash on cash return, but they have very strict zoning laws, and the only properties available in the zoning region are $1 million. The Smokies are completely out of the question with cabins going for +600 K. Shenandoah still gave me a neg CoC too. I’m wondering if my budget is just too low, but then again if you’re buying a property that’s a lot more, I still don’t see how you would get cash flow. Is there something I’m missing?

Collin Hays · Answer

You aren't missing anything.  I am going to give you some thoughts on a macro level, and it is important to understand that distinction:  In all of STR history, and that's going back many decades, there was really only one time frame that one could buy a property for 20 percent down and actually turn a positive monthly cashflow immediately.  That period of time was approximately 2010 through 2020.

Why that time?  Because the financial crisis from 2008-2011 sent real estate prices plummeting. I saw vacation homes selling for 25 cents on the dollar. Million dollar cabins selling for $250K, and even less.  Added to those ridiculously low prices were interest rates that were laughably low, particularly from 2015-2020.  So an investor couldn't really lose in this time period, but that bubble of time was an enigma.

Today, prices have recovered, and while interest rates are still quite low, they are double what they were during the golden decade of 2010-2020.

I look at buying vacation RE more as a long-term store of value. Yes, if held long enough, eventually the cashflow turns positive.  But if even if you are somewhat negative monthly, remember, other people are paying off an appreciating asset. Folks don't think twice about stuffing $1000 a month in their 401K.  But it isn't producing any income (yet) either.  So why the double standard?

As for condos, one out of a thousand of those is a decent investment.  Condos are a commodity.  As you mentioned, they are all alike. I'd buy a timeshare before I bought a condo.

Andrew Street · Answer

You’re asking all the right questions. A lot of people get excited by the books and the YouTube channels, but when you actually run the numbers, it can feel like there’s no way to make it work especially with rising prices and Airbnb’s higher host fee.

A few things to keep in mind:- Not all markets are equal. Places like South Padre or the Smokies are oversaturated, so unless you have a truly unique property or killer location, it’s hard to stand out. The numbers often don’t pencil because you’re competing against hundreds of nearly identical listings.- Zoning and regulations matter as much as cash flow. Tuscaloosa is a great example—you can find affordable properties, but if zoning doesn’t allow STRs, your exit options are limited. That’s why due diligence on city ordinances is critical before you even look at cash flow.- Budget vs. returns. You’re not necessarily “too low” at $250K, but at that price point, you’re often limited to condos or markets with high competition. That said, there are still secondary and “drive-to” markets (within 2–4 hours of major metros) where a $200–300K property can perform really well. The key is finding places with year-round demand drivers (universities, hospitals, corporate hubs, outdoor recreation, etc.) rather than seasonal tourist spots only- Cash flow vs. wealth building. Many investors now approach STRs less for massive monthly cash flow and more for tax benefits, appreciation, and portfolio diversification. With bonus depreciation and cost segregation, the tax advantages alone can offset weaker cash flow in the first few years.

To answer your bigger question—yes, people are still making money, but it’s very market- and strategy-dependent. The most successful operators are either:

- Finding overlooked secondary markets where the competition is lighter.- Adding value by offering something unique (design, amenities, niche targeting).+ Or combining STRs with medium-term rentals (travel nurses, corporate stays, etc.) to smooth occupancy and improve margins.

It’s not a one-size-fits-all anymore, but with the right strategy, it’s still very doable.

Dan H. · Answer

The markets you listed have already arrived.  The returns in such markets is the lowest that any buyer is willing to achieve.

Your task is to identify markets that are attractive but are not widely known by RE investors.  There are many destinations that are not yet known but could be the next “wave”, Dollywood, etc.  When I visited the wave, I visited a site in the area that was every bit as spectacular that is virtually unknown.   I will use the initials for those in the know, C.A

Such markets should have monthly rents near or above 2% of the purchase price with expected rent growth as the attraction grows in popularity.  Use a STR revenue tool (airdna, STR insights, etc) to determine the income.   Recognize some of these markets have poor competition and it is not hard to exceed the revenue projection. Use the enemy method to analyze the competition.

If you go to a market like the smokies, recognize your expected return will be the least of what an investor in that market is willing to achieve.

Good luck

Mark S. · Answer

@Kathryn Lewis Comparing a short-term rental to a 401(k) investment is really apples and oranges. Yes, the leverage of real estate can be extremely powerful. On the flip side, with a 401k you’re not going to be up till 1 AM dealing with a guest issue as I was last night with one of my short term rentals.

Collin Hays · Answer

The cost seg is a one-time shot. And all of that will be recaptured when you sell, unless you pull some 1031 gymnastics.

It's a common misnomer that that cost seg gives you a tax deduction. It only gives you a tax deferment.   I am not interested in making an investment based on deferring taxes.

Andrew Steffens · Answer

My 2 cents -

You mentioned "managing" STR's but mostly spoke from an owner's POV.  Managing STR's and owning STR's are two different ball games.  I own 5 STR's and manage about 65 (total) so I do get the POV of both.

The title of your post is "Do I just need more money", and I would say yes, no, and it depends.  A $250k and lower entry point is about the lowest barrier to entry anywhere (you cannot even get in the Tampa market for STR under $350k (or at least be successful) and even then it is rare to find positive cash flow.  There is a lot of lower end inventory because it is the lowest point of entry.  Upper middle and middle tier is competitive but not saturated in a lot of markets, because its harder to get into those price points.

Rosston Smith · Answer

Collin nailed it. I'll add that you'll need to search more for hidden opportunities below the surface of markets you're looking in. Cheaper properties with a ton of value for upside with renovations/amenity stacking. If you're purchasing turnkey as a new operator without top performing amenities it can be difficult.

Joey Banasihan · Answer

Hey @Kathryn Lewis, if you are looking to start investing into real estate and STR is your primary strategy, it is important to recognize that this strategy is high-risk, high-reward. It is a hospitality business first, real estate business second, so you would be focusing on the experiences and amentities at your property and constantly thinking about what aspects will beat out the competition around you. Every market has its nuances and saturations, but folks in our market that are doing well are purchasing and building STRs in the mid-luxury market - $600k+ homes with more than 4 bedrooms, etc.  But if you are looking at this strategy through tax advantages, have you dug into the STR cost-segregation strategy? After speaking to a CPA, depending on if you qualify for that approach, most of the time the "cash-flow" you gain from the property are peanuts in comparison to the savings you get via taxes.  We've helps a few dozen clients do this strategy over the last few years and they've found some great success.  Lots of pieces to this real estate puzzle but taking action will always provide returns.

Jeff Langley · Answer

Colin is spot on.

Your price point is very limiting. If that was me-I’d find a decent non-condo, non restrictive HOA in a Midwest metropolitan red state that is supported by a good school district for plan B. Give the STR a try but be willing to pivot to an MTR or LTR if needed.

Ashish Acharya · Answer

@Kathryn Lewis Great points above!! Especially on understanding how a cost seg really works. Many people actually get started with STRs because of the tax benefits, not just the cash flow. Here’s how it usually works in practice (which you’ve probably read about, but we see a lot):

Investors buy a property in a market they believe in long-term and classify it properly for STR use. They may do a cost segregation study, which accelerates depreciation on things like furniture, appliances, and improvements. That can create paper losses, which, if you have enough income and qualify under material participation rules, can offset other income like W-2 or business income. The key is that this doesn’t magically create cash; it reduces taxable income, which frees up cash elsewhere and can help scale your investments faster.

We also see a lot of new STR investors doing their own marketing on social media or other channels to save on operational costs, which helps improve real-world cash flow. And of course, the area and zoning really matter—you want to buy properties you truly see long-term value in, even if they don’t look amazing from a pure tax perspective at first. When the fundamentals are right, the tax strategy and smart operations become accelerators, not the whole reason to do the deal.

-This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Do I just need more money?

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