STR Analysis for Dummies

27 Replies

Hi all,

Newbie here. Thinking of purchasing an STR condo. It's a bit convoluted because I can use both, the property management company (51%! cost but house keeping/check-in included) or I could bring in the business myself through VRBO/Airbnb/ For that I would have to pay a $55/check-in cleaning fee and $42/check-in fee (possibly by-passable). Planning on financing 20% HELOC and 80% Loan. I prepared a spreadsheet with an assumptions tab but there are so many variables, my head is spinning. It's a mountain resort with things to do year-round with April/October/November being slow. Listings for similar properties is about $90/night. Assuming a 30% vacancy to be safe. HELP! Am I too pessimistic? I will try to attach my spreadsheet if I can figure out how. TIA!

Updated 8 months ago

Maybe this will work: The assumptions tab drives most of the variables. I don't know how else to share it.

We need way more info. Purchase price and actual location would be nice :) 

If it's a condo that actually allows STR then the mortgage will be "non-warrantable" which brings a whole other mess of worms that are possible to navigate but it'll make your profits go down pretty quick.

We’ll also need to know what your goals are. Are you trying to... 

A. Cash flow a couple of bucks? 

B. Cash flow hard and buy a bunch of units and quit your job? 

C: Have a spot to spend time that pays for itself or only loses a minimal  amount? 

Typed on an iPhone while watching football 

Hey @Elena Casey . That is a tough one. I assume you are trying to take advantage of winters at Attitash and summers for North Conway? Bartlett is a good choice due to lower taxes.

I would be a little hesitant to pay those fees if I didn't have to. There are several ski condo's right at the base of Attitash, but also some cool houses not that far away.

I am a big fan of self management. That check in fee really cuts into the nightly rate. I will post some more ideas in a few.

@Lucas Carl purchase price $85k. Reno costs $3k. Taxes $652. HOA $315, Utilities 55-105 (summer AC higher), housekeeping $55-$65. Hospitality Tax 9%. Insurance $459. Goal. Well I guess FOMO and guts to start somewhere reasonable. :-)

@Michael Baum that's right! Plus, on days with no bookings, I'm within driving distance for own enjoyment with the little ones :-) All in all: Purchase price $85k. Reno costs $3k. Taxes $652. HOA $315, Utilities 55-105 (summer AC higher), housekeeping $55-$65. Hospitality Tax 9%. Insurance $459. And you're right. I'm REALLY not a fan of the check in fee. $42/night? Really?

Welcome @Elena Casey

Taxes $652 PER YEAR?. HOA $315 PER QUARTER?, Utilities 55-105 PER MONTH? (summer AC higher), housekeeping $55-$65 PER CLEAN??. Hospitality Tax 9%. Insurance $459 PER MONTH???.

Cumbersome numbers. But at least you have a handle of the numbers. How much to furnish???

Do you have an EXIT plan? Is Long Term possible? Do you have STR hosting experience?

My first purchase last year was a 2nd home (cabin) for us to enjoy in the mountains in NC. Bought with no intention to rent, but after we saw we only used a few times per year, we thought we'd dabble in STR. Learned quite a bit and realized that we could save money and manage on our own. We've done fairly well and found a housekeeper in that area who is amazing along with a handyman who handles small issues. We do all ours through VRBO and managing one property hasn't been bad for us. I quickly learned how to use the VRBO tools, templates, etc. We charge the housekeeping fee as part of the rental so that just passes on to the housekeeping fee. I'm not an expert by any means, but can answer any questions as best as I can.

Good luck! We just bought our 2nd one in the same area, but haven't decided if we're going LTR or STR on the 2nd one.

Hey @Elena Casey , ok so I think I figured out which condo you are looking at. The biggest issue I see is resale later. Most of those places have been on the market nearly a year. So you know that it will be harder to move if you need.

Also, I don't think it works for a LTR. I am not sure if that will be an issue for you.

For me, it would be a pass for a couple of reasons. One is possible special assessments. I would go back and look through the HOA notes about any special assessments in the past. What did they cover etc. It was these types of SA's that kept us from buying something similar in Bend, OR.

The other of course is you are beholden to the front desk for pretty much everything. Frankly I don't see anyway out of that. If they decide to increase the charges, you will be on the hook. Add to that the long time to resale, I would pass.

I love the area though. We almost bought a BnB a long time ago in the North Conway area. I would start to look at something different, maybe a SFH of some kind. Run it yourself.

@Elena Casey My STR right over the pass in Campton NH area with similar numbers. I conneted with a few owners myself before buying and it was helpful so let's talk. I've learned more than I ever imagined in the last year and many of my assumptions coming from a decade+ on the LTR side were inapplicable to STRs. A couple quick observations:

You should be renting at far more than $90/night.

Most towns in NH area right now actively debating banning AirBnB rentals because, well, NH is about 5-10 years behind the rest of the world for anything related to technology and they're staring to see the inevitable corporate STRs and AirBnB arbitragers ruining it for the smaller, independent owners. Bartlett's got a long history of vacation rentals, but you should be extra diligent in finding out what the existing laws area and what the state of town/HOA discussions are around them. Many are changing.

April and November will be your lost months, but summer rents itself in NH.

October is a huge month due to NH’s world class foliage.

$100/turnover is underestimating cleaning costs. Market rate in the area is anywhere from $100-$150. Your cleaner is the single most important part of your STR business: he/she will make or break you and if the association provides them you may still need another person to handle replenishing supplies.

@Cliff H. A couple other suggestions for your spreadsheet:

Expenses are low. Is heat included? What about Internet? Community WiFi will often be insufficient for most guests so plan on your own at $75–$100/mo.

Renovation costs seem low. Is the place furnished and the furnishings recently updated? Many STRs in New Hampshire lose revenue by never investing the capital up front and over time to keep their place up to date. I invested $10k into mine and was a very modest changeover versus most of what I see on the New Hampshire market.

Competition of Bartlett is intense. Lots of supply and the market has quickly discovered AirBnB which means even more rentals hitting the market over the next few years. Be sure it is something unique to stand out.

If your rental is primarily for your own enjoyment lower your revenue estimates and come up with some reasonable way to gauge the enjoyment you, yourself, will gain from it.

There’s professional AirBnB rentals intended to be world class STRs and there are those rentals filled with awkward family photos that are very clearly owners first that as a renter I am all too familiar with and far less likely to rent.

At the end of the day take your time in finding the right place. Several good observations from others here and FOMO is you’re own worst enemy as an investor: great deals/finds something takes time. I looked for 2 years before landing on what I consider one of the best properties I’ve owned.

Good luck and welcome to the forums!

If the management company is charging 51% of your gross bookings it will be very difficult to make any money. Think if you could manage yourself in a property that is in the same area and not give away most or all of your profits.

All you need is a great cleaning service and a way for the guests to check them selves in by themselves. 

So if you had a lockbox or automated keypad door lock and a cleaning service you could replace the PM. Add a handyman service for repairs and your all set.

Wow! You guys are amazing! I didn't actually expect to get this much useful feedback. I truly appreciate it. Today is tough with running around like a chicken with its head cut off but when I have a breathing moment, I will respond to each and ask any residual questions. I just wanted to take a moment to thank you all! I was agonizing yesterday over my math not making this look like a good investment. Today, I feel a little less crazy. It's bitter sweet. We don't own anything aside from our primary residence. So I was excited to make our first move with all financing lined up. But once I started digging, my brain was painfully brutal with my heart.

I would never rent in a Home Association or private Community. It's sometime in the future they might make your short-term rentals more of a nightmare.

vacancy rate is almost totally meaningless. the Higher your occupancy the higher your maintenance needs. I can be 100% occupied  at $5 a night and 0% occupied at $10,000 a night.  Pricing and the nature of your particular Market is everything. You will rent many Friday and Saturday nights. Other days may be a challenge. It also depends on how much competition you have. If you're not near a ski area you might not rent during the winter. Spring is likely to be somewhat of a challenge. Autumn should be excellent.

What you posted can't be right. Here's what you posted:
"... For that I would have to pay a $55/check-in cleaning fee and $42/check-in fee (possibly by-passable). . . Listings for similar properties is about $90/night."
$55 + $42 > $90. So either rentals are North of $180 a night or nobody is using AirBnB.

I see that others have posted about needing more cost information, so I won't get into that.

@Nancy Bachety all your assumptions are correct except HOA fees are per month and insurance is per year. I finally figured out how to share the link to my spreadsheet with all the info if you're interested in taking a peek. But given the feedback given by others I have even more serious reservations than before. The advice in this thread is invaluable. I don't have an exit plan. I guess I've done okay with my retirement funds up to this point and thinking that a couple of properties would be a nice addition. Still young and trying to husstle :-)

@Michael Baum Oh it's a gorgeous area. I live in Maine but love hiking and camping there! Although I prefer skiing at Gunstock. The peak has a gorgeous view of lake Winnipesaukee!

I was concerned about the resale and appreciation value as well. I can't imagine an average appreciation of even 2%. All the other costs taken into consideration just don't seem to promise a reasonable cash flow. I was so hopeful. A couple of friends of mine own a condo there and are happy with it but I'm a number cruncher. Lol. It's a blessing and a curse.

@Cliff H. Thank you very much for taking the time to provide advice and offer your thoughts. It also helps that you are familiar with the area. It's a very small resort condo (600 sq feet or so). Rents for as high as $135/night during the peak season but as low as $59-$69/night off-season. That's why I'm assuming $90/night. The place does come fully furnished but lots of things are outdated although functional. The reason I assumed $3k for repairs is to install a ventless washer/dryer but yes. It feels like I'm way underestimating it. The bathroom vanity needs to be replaced and a bunch of cosmetic work needs to happen. Probably should be more like $5-$10. Which makes it even less attractive to pursue.

Oh and it wouldn't be used very much by the family. I view this first as an investment and second as a getaway. When it doesn't interfere with income :-)

How do I keep up with he regulation changes? News?

Board meeting minutes? Thank you again! It means a lot. I feel unpleasantly "immature" at all of this.

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