What is a good STR ROI in your opinion?

Question

Hoping not to get my bubble burst but we currently have 3 STVRs and looking to acquire our 4th. 1 is at the beach and the others are in the mountains. The one at the beach has been on the STVR market for about 4 years and one of the mountain houses has been on for about 15 months. Just curious as to what type of return constitutes a good return on a STVR based on others experience. I saw one post earlier that got me a little curious b/c someone was asking about acquiring a property for $70k that did $10k annually in rentals and a lot of the comments were negative. We purchased our houses for $425k, $315k and $374k respectfully- the first 2 with conventional mortgages and the last in cash and all have positive annual cash flows. We have our 4th currently under contract and have seen the past owners rental history and based on that this one will cash flow positively too....

We have been fairly proud of our performance thus far but just curious as to if we are above, below or on par....thanks in advance for comments....

Mike V. · Answer

20%+ or what’s the point?

If you’re really savvy you can piggy back a BRRR and create infinity roi.

Have one unit where I’ve pulled out more than I’ve put in, used it to buy another rental, and it’s still ooozing cash flow.

Nathan Gesner · Answer

What do you mean by "positive cash flow"? How much did you out into the to start? What is annual income and expenses? Have you accounted for all costs, including the time spent managing them?

Nobody can tell you if they are good investments without knowing the numbers. Personally, I think 12% is a good return but others may feel a good return is as low as 8% or no less that 17%. What is good for you and your goals may not be the same as others.

Mark Miles · Answer

These are the kinds of ROIs you should be targeting, courtesy of @Avery Carl, currently found all over the southern US:https://theshorttermshop.com/c...

Tim Schroeder · Answer

Didn't you have to buy the property (cash or down pmt plus costs) in the first place out of pocket? That's equivalent to the money invested in the mutual fund. Guests aren't paying for the investment, they're generating the income which would be equivalent to the interest and dividends on the mutual fund. I know we're mixing apples and oranges here, AND getting off topic, sorry...

Michael Baum · Answer

@JR Woolf, ours is sitting at around 10.2%. It's not as much as most others and we are OK with that. It is paying for itself and we have a place we can use. I grew up in the area and wanted a home there for a long time. This is the way we can afford to pay for it.

This year we are on track for about 13% assuming bookings continue the way they have been going. We are only a single season rental for the most part with bumper time for biking. Actually the bumper time is getting booked faster than usual.

Also, we will be looking into some longer term rental for the winter. Hitting up the local hospital and school district.

Collin Hays · Answer

All of mine are around 20-22% when factoring in tax depreciation, annual price appreciation, and net rents.

That said, a 12% return from an STR is far superior to the same return from a mutual fund, because you are using your own money to buy the mutual fund, and someone else’s money to buy your STR; the guests pay for the investment.

I always prefer to let perfect strangers fund my living rather myself.

John Underwood · Answer

I would say 20%.

I am getting 40% and much more on long term rentals because I buy them cheap for cash. I have found ways where people have given my houses. The return is almost infinite. I usually have to put some money into these to make them nice.

STR's usually require a mortgage for most people so that cuts into your net cash flow.

Tim Schroeder · Answer

With respect, I think 8-12% is a poor return considering the work involved in STRs. I can get 8% all day long in an index mutual fund, for zero work, low risk, and compounded returns over time. I would want to see 20-30% CoC ROI every year. My first STR actually does better than that. Second did about 20%. Just bought another and it should perform similarly.

What is a good STR ROI in your opinion?

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