new to short term rentals,[Calc Review] Help me analyze this deal

7 Replies

The property value is not increasing year over year? Was that intentional? You're short changing yourself there, it will actually make the deal even better.

1-2 percent annually at least.

thanks for the responses.  this house is a short term vacation rental and i am new to using the calcuator on this time of property.  the monthly income is based on daily rental and i put in a conservative 30 % vacancy based on another rental.  based on the analysis it looks good, but i am not sure if it is accurate.  i did not get to the appreciation, repairs ect.  just doing a quick run.

@Anna Stratton I'm not familiar with North Carolina markets (I'm in FL on the beach, lol), but vacation rentals are usually very seasonal with pricing varying seasonally. I noticed that the price/revenue per month here is flat. Is that what you expect. Occupancy in a low rate month is much less important that in high-rate month. Here is FL prices in the peak season are 4 times higher than in low season. Also, I can't really say anything about this analysis because there is very little info about expenses. I very common mistake is to get estimates on expense that do not include everything and then be "surprised" by unforeseen expense. Also, I don't see any reserves in the analysis. Those might already by included in expenses, not sure. If not, there should be some sort of reserves for repairs, replacements and capital improvements. I really hope this turns out into a great profitable deal for you. Keep us posted.

Hi @Anna Stratton .  Love that you're looking at Maggie Valley - my family has had a vacation home there for nearly 20 years (and we've been vacationing there for nearly 30), it's one of my favorite places.  However, re: your pro forma - what are you basing the monthly income on?  There's lots of things that impact a short-term rental's performance and value that won't fit into that calculator, such as how many it will accommodate, does it have a view, proximity to attractions, are the roads difficult, etc.  (ours is up 3 miles of steep grade pavement and then another mile of gravel... but the view is to die for)

I would urge you to be especially conservative with your vacancy rate - Maggie is pretty much dead all through the winter, and over the years I've seen many, many small businesses come and go because they couldn't make it through the low season.  3-4 months of little/no business is the entirety of your 33% vacancy.  And while I love it and it's a beautiful place, I don't know how many people consider Maggie a destination, vs. a stop on the way to somewhere else, like Cherokee or Gatlinburg.  (but, you live in Waynesville so presumably you're there a lot more often than I am - maybe all that has changed!)

Other things you need to factor in: utilities like satellite TV/internet (which, since the house probably doesn't have access to cable, internet can be An Issue), and will the HOAs allow short-term rentals?  (in Maggie, I'd think they likely do, but definitely something you want to know before buying)  Look into if you'll owe any lodging tax or otherwise.  Bump up your insurance line-item - commercial insurance for STRs is something you'll need, and it's notably more expensive than a regular homeowner's policy.  Is the house being sold furnished?  If not, you'll have to furnish it; if it is, you'll still have to replace some things and supply more.

Bottom line, I'd encourage you to look at the deal very closely and make sure you have realistic expectations if you decide to move forward.  It could be great - and certainly will be more profitable than a long-term rental in the area - but I have a feeling anything like $1700/mo cash flow is unlikely in the area.