What is your net income in STR’s?

Question

On your short term rentals how much of that rent do you actually put in your pocket? I understand some of the things you have to pay for such as utilities, WiFi, furniture. But what are some of the other costs associated with STR? A booking company??

Avery Carl · Answer

250-300k will get you a 2 *maybe* 3 bedroom in Pigeon Forge. You can expect to gross (true gross, all monies coming in) $45k ish for a 2 to $55k ish for a 3. I hesitate to give out net numbers as everyone's net is going to be different. Some people will spend more money on capex than others (whether needed or not), some will utilize smart thermostats to keep the electric costs down while some will not, some will hire cleaners that cost more than others. Some won't vet renters as well and have more maintenance costs due to damages etc. The list goes on and on. The best thing to do is to narrow down what the basic expenses are for a property, and work down from there to find what the probable net for your personal management style will be.

Luke Carl · Answer

@Thomas Weidner You bet. It's possible all day long in both of those markets. I'd self manage. In fact I do. I self manage 13 properties in 4 different markets, 5 of which are in PForge. Mostly from my cell phone. Long term and Short term. I've run 22 full marathons, I have a day job, a family, I eat lightning and crap thunder.

Paul Sandhu · Answer

@Thomas Weidner  My cost per booking that I expect to spend is about $30-$50 for replacement supplies plus the cost of cleaning.  My cleaning lady does it for free, plus I get to sleep with her.

John D. · Answer

Our average property grosses about $30k in rents annually, for every $100k cost.  Assuming a mortgage at 70-80% of the properties FMV, and all other expenses, I put between 20-30% of gross rents in my pocket, assuming fully-loaded property management.  Since I partially self-manage, the returns are higher.

My average property cost is around $700k maybe a bit more, though, so the cost of entry is high, and I am sure we would take a big haircut in an economic downturn.

Nancy Bachety · Answer

@Thomas Weidner @Avery Carl is the realtor to turn to after you become familiar with the market, or sooner even. We bought a 2/2 in Oct in Sevierville and put a few dollars into it but we haven't seen those kind of numbers just yet. We're in the midst of the slower winter season but we are hoping to see that pick up for the spring and summer. We are 5 star super hosts in other markets and that helps. Reviews will dictate your return and what you can charge. We started low and are creeping up. That said, once we're established in this market, we expect those kinds of numbers and of course, Avery and Lucas are the ones to turn to for help with that, as are a few others here.

Paul Sandhu · Answer

It also depends on your market.  In some of the tourist locations in the mountains and by the ocean, 3 weeks of gross rent would buy a 3BR house in my market.

Jon Crosby · Answer

@Thomas Weidner  Everything is an expense with an STR.  Property management, mortgage, property taxes, insurance (including increased liability coverage or umbrella coverage), Cable, phone, WiFi, Landscaping, Pool/Spa services, furniture (FFE), snow removal, operational software (digital door locks), supplies (toilet paper, coffee, etc.)...pretty much everything as if it was your own home and more.

STR's have a very high Op Ex Ratio so it's important to have all those numbers (which will change from region to region, and business model to business model) assessed when you are ready to underwrite your deals.

Thomas Weidner · Answer

@Paul Sandhu that’s a great way to keep things in house and cost down! Just don’t make her mad!!!

Andrew Mitchell · Answer

This is highly market dependent but also highly niche dependent. For one of our full time vacation rentals we end up with:

30% management fee

6% property tax

4% utilities (mostly cable with I think 12 TVs in the house)

5% maintainence, furnishing.

1% advertising on our own website, on niche terms pushing users towards Airbnb, vrbo etc

1% legal for LLC and vacation rental permit.

1% consumables and gifts for guests.

0% cleaning as this is covered separately by the renters.

10% mortgage, bought when rates were low a couple of years ago.

Your results will be different as you are in a different market or submarket. Your furnishing and maintenance is likely more than our 5% if you aren't charging $2k-3k per night like we are.

Thomas Weidner · Answer

@Lucas Carl I appreciate your feedback. You have a pretty nice portfolio. Pretty impressive that you manage these yourself. I would have thought that the 5 str would take a lot of time.

What is your net income in STR’s?

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