Niche short-term rental, will it work?
Hi everyone, I'm looking into entering a very niche market of providing a "Crash pad" to military officers going through long training courses. These individuals are on 3-5 month assignments, and are reimbursed for housing expenses of at least $60/day (or more, depending on the availability of on-base housing), and so I would be able to charge a minimum of $60/day/room. I would buy a nice, newish, large house with 6 bedrooms for about $270,000, and with all 6 bedrooms rented, the income would come out to $10,800/month. Obviously, I don't expect %100 occupancy, but even at %50 the numbers look descent. This is a proven business model, and there are about 15 other houses doing the same thing around the base I am looking at. I don't think the market is totally saturated yet, and even if it is getting close, I think there is a lot of opportunity to market better than most of the competition. Most of the others do not have very good websites, only one them allows online booking, and I would be sure to market at the very specific niche through Facebook and Google.
That said, I realize occupancy rates are going to be the biggest unknown, and this being a niche, I'm not sure how much I can expect any help here. That said, I'd be interested in any input you may have. Do you think I'm asking the right questions?
Here's a basic rundown of what I expect expenses to be:
SETUP:
House: $270,000 ($54,000 down payment)
Furnishings: $40,000
Website: $3,000
Incorporation/Lawyer/CPA fees: $1,500
Advertising: $1,000
Monthly expenses:
PMI: $1,400
Cleaning service (200/week): $800
Premium TV: $125
Utilities: $400
Internet: $80
Maintenance: $200
TOTAL monthly expenses: $3,005
Income at 100% occupancy: $10,800
60%: $6,480
40%: $4,300
Soooooo…the numbers look good to me, but what do you think I might be missing?
I am selling a house (a previous home of mine, and not a good cash-flowing rental) to finance most of this, but I will probably need additional financing. I figure I can cover the down payment, and most of the furnishings if I had to, but I’d like to get a small business loan of some sort to cover as much of the setup as possible. What kind of loan, and what type of lender might be willing to finance a business like this? I’m thinking I wouldn’t ask for more than about 20k, but I’d like to commit as little of my own money as possible.
How do you think this idea compares to more traditional investment strategies, like buying inexpensive multi-family units? I don’t really like the idea of spending so much on furnishings (non-appreciating assets that will only be worth pennies-on-the dollar at some point in the future) but on the other hand, the total return on investment seems very good.
Thanks for reading all of this, and I would appreciate any input!