Biggest mistake you made when buying STR / vacation home?

Paul CoxPro Member
Rental Property Investor · Manassas, VA · Member since 2013 · 193 posts · 156 votes
6y
Not doing it sooner!
4 Reply
Julie McCoy
Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
6y
@John Williams I've been fortunate enough to escape any major catastrophes so far, but here are the things I know are important:
1) KNOW YOUR MARKET. That means regulations, demographics, what's the competition like, what properties are most in demand, how much can you expect to gross, etc.
2) Develop systems. This will take owning an STR from being a second job to being something you barely have to think about.
3) Have cash reserves. That will save your bacon if something like the Covid crisis happens and shuts down STRs for a period of time (or even if you just have a one-person crisis that means you can't rent your STR for awhile).
3 Reply
Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
6y
Watch your price-to-earnings multiple. I am seeing properties selling for such crazy prices that there is little hope to make any money. If you are paying $350K for a property that does $35K, you aren't making 10 percent. ;)
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1 Reply
Jon Crosby
Investor · Roseville, CA · Member since 2016 · 893 posts · 1k+ votes
6y
Hi @John Williams,
Here is a BP blog I wrote many moons ago, but still is probably relevant to at least get you thinking about things. Just remember, STR's are not a 'set it and forget it' type of business and requires the normal discipline and attention any other business would require. However, there are lots of ways to systematize and optimize your business model to reduce the amount of work involved.
Just like buying any business, you need to understand the potential revenue and expenses and make sure the numbers all make sense. For me, cash flow is king so make sure the property pays for itself (at a minimum) and I generally don't like to bank on real estate appreciation as part of my investment potential.

Best of luck and feel free to reach out directly if you have any specific questions.

https://www.biggerpockets.com/...
3 Reply
John Williams
OP
Member since 2020 · 32 posts · 9 votes
6y
Thanks @Julie McCoy!
You mention the importance of “developing systems”. Are you referring to things like having excess supplies on site, having a handyman and professional cleaner on call, getting the lawn mowed regularly, etc?
What other systems should I be thinking about? Any tools or mobile apps you use to help manage the process?
0 Reply
Julie McCoy
Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
6y
Originally posted by @John Williams:
Thanks @Julie McCoy!
You mention the importance of “developing systems”. Are you referring to things like having excess supplies on site, having a handyman and professional cleaner on call, getting the lawn mowed regularly, etc?
What other systems should I be thinking about? Any tools or mobile apps you use to help manage the process?

There are entire threads on that topic in this forum. :) I am mostly referring to communications (with guests, housekeepers, etc) happening automatically.
0 Reply
Paul Sandhu
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
Paying too much. The second house I bought was a 4BR 2Ba, and I paid $28k. It took more than 6 months to recoup my cost. Since then, everything I buy has to show numbers to recoup it cost within 6 months.
The last house I bought, I recouped the cost just during the first occupancy. They were 2 electrical foreman that stayed about a year.
0 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
6y
I would also say not doing it sooner. No major issues.
0 Reply
Mark Miles
Rental Property Investor · Philadelphia, PA · Member since 2016 · 542 posts · 715 votes
6y
Originally posted by @John Williams:
I’m considering buying a second home which I’d rent out in Airbnb/VRBO for part of the year.
What are the biggest mistakes you made when buying a vacation rental? What do you know now that you knew then?

I’ve done it the right way after watching a lot of my friends and colleagues do it the wrong way

So what did my friends and colleagues do wrong? Most of them bought in the Northern US and many of them use property management companies
I realized that all the big money is made by buying down south, and I'm not afraid to invest out of state, and I know that every dollar can only be invested once so I want to invest it where I can get the highest ROI, and that's down south
Also, don’t use a property manager. Either manage yourself or do what I do and outsource to offshore virtual assistants
2 Reply
Joe PrillamanPro Member
Rental Property Investor · Carolina Beach, NC · Member since 2017 · 441 posts · 462 votes
6y
It's a business. Know your numbers and roll the money you make into passive investments!
0 Reply
Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
6y
I'm with

@Paul Cox and @John Underwood

I wish I could go back and smack 25 year old me in the face. But he still would have stayed at the bar with @Paul Sandhu
Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
4 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
6y
Originally posted by @Luke Carl:
I'm with

@Paul Cox and @John Underwood

I wish I could go back and smack 25 year old me in the face. But he still would have stayed at the bar with @Paul Sandhu

I have done really well with Tax Liens that I bought over 10 years ago for $2500 each. I wish I could go back in time and start this earlier and have bought more of these for ridiculous low prices. I just rehabbed one I paid $6500 for that I have under contact for $323,000.00. Talk about a return on investment!
4 Reply
Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
6y
Originally posted by @John Underwood:
Originally posted by @Luke Carl:
I'm with

@Paul Cox and @John Underwood

I wish I could go back and smack 25 year old me in the face. But he still would have stayed at the bar with @Paul Sandhu

I have done really well with Tax Liens that I bought over 10 years ago for $2500 each. I wish I could go back in time and start this earlier and have bought more of these for ridiculous low prices. I just rehabbed one I paid $6500 for that I have under contact for $323,000.00. Talk about a return on investment!

This needs to be on the podcast!
Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
0 Reply
Gerald Pitts
Lender · Asheville NC · Member since 2016 · 469 posts · 317 votes
6y
@Paul Cox and @Julie McCoy beat me to it, so i'll say that I second the need for ...
1. Having done it sooner.
2. Having cash reserves on hand. For me, this happened to be a black swan event like a travel ban, but a roof or an HVAC is not an unexpected occurrence. I got through it, but the scare has motivated me to start building more cash reserves before buying cabin #3.
0 Reply
Paul Sandhu
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
Originally posted by @John Underwood:

I have done really well with Tax Liens that I bought over 10 years ago for $2500 each. I wish I could go back in time and start this earlier and have bought more of these for ridiculous low prices. I just rehabbed one I paid $6500 for that I have under contact for $323,000.00. Talk about a return on investment!

Wow! And here I am thinking that I did well by grossing my purchase price with 6 months of rent. That's just a base hit. You hit a grand slam homer homie.

1 Reply
Avery CarlBusiness Member
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
6y
One thing to add to @Julie McCoy's list. Once you've closed, do NOT micromanage your guests. I have sold hundreds of STR's over the years and there is only one client archetype that consistently can't do it: the micromanager.
For example, staring at your ring camera all day and counting the guests as they check in and then sending messages to the guest demanding money for the extra person. Those guests will leave a terrible review. (And countless other similar scenarios). When in hindsight, had you not looked and not demanded, they most likely would have been great guests and left a great review. Don't be your own worst enemy!
Podcast Guest on Show How to Get More Airbnb Bookings This Spring and Summer Break
4 Reply
Leora Merrell
Rental Property Investor · Member since 2019 · 276 posts · 235 votes
6y
Like most, I wish I had started sooner. I sat on it for nearly a year before taking the plunge. In that time prices went up quite a bit. But it all worked out because I got a brand new place (with the help of Avery) then was able to 1031 into two more brand new cabins on the same road working directly with the builders.
This forum is a wealth of information. I sat and read page after page for a week and went into listing my first cabin feeling pretty confident of what I had set up!
0 Reply
Paul MoorePro Member
Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
6y
You know there may be some Airbnb operators who are in trouble now and ready to ditch their furnished units. This may be a great time to find an existing deal rather than going through the hassle of starting from scratch. And you could help them in the process.
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1 Reply
Holly Hudson
Orlando area and Space Coast, FL · Member since 2018 · 53 posts · 13 votes
6y
@John Williams
Just about everything I know has come from the people above and BP.
If I may add one thing. We have a 2nd home that we have turned into a STR. The area does not have many STR, although they are growing. If this is true of your new location also: Neighbors. Talk to your neighbors ahead of time. Let them know as much as you can to help them feel comfortable. Some neighbors may not mind at all and others may be your 'micro-mangers'.
Although we explain that we want the guests to have fun, as long as they aren't bothering the neighbors, it still comes down to the neighbors live there full time and may have no problem raising their thoughts to the local counsel. We also have guests that mention how lovely it was meeting the wonderful neighbors.
Just a thought if you are in a mainly residential area.
Best wishes!
0 Reply
Mark Futalan
Rental Property Investor · La Quinta, CA · Member since 2018 · 263 posts · 95 votes
6y
@John Williams
A lot of good information already on here.
I would add be conscientious of your neighbors and your community. There is a negative stigma about Airbnb’s that they disrupt neighborhoods because of the frequent turnover of guests and some who party to the late hours of the night, make excessive noise, too many parked cars and trash not properly managed etc.
Make sure you know your cities rules/regulations and that your a responsible owner. Be proactive, talk to your neighbors and give them your information to call so that problems are fixed right away. For the most part, people appreciate that. A happy neighbor goes a long way and can make or break your business.
Lastly, manage your expectations with guests. Define your house rules clearly so that your guests know what to expect. I find that by controlling your expectations, it leads to less phone calls, less problems and more likelihood that your STR business will thrive.
0 Reply
Justin Anderson
Property Manager · Pigeon Forge · Member since 2016 · 199 posts · 208 votes
6y
I agree with basically everything said so far... Not starting sooner, making the numbers work, etc.

For me personally, it's tough knowing the difference between what "I" want versus what the renter expects/wants.

Let me explain... I have several cabins in Pigeon Forge. The style there is definitely not my style.  Lots of shiny pine wood, no sheet rock inside, bear decor everywhere. When I think of cabin, I think Colorado lodge style and that's what I want. A bit more upscale.

Well, the renters expect the pine walls and log exterior. And that pine I don't like that much puts up with the abuse that the guests dish out.  If I were to put in all the little design touches to make it more to my liking, the guests would destroy it in under a month.

Said another way, don't spend your money putting quartz counters and custom tile showers in a class C/D apartments.

So it goes back to know your area, know the amenities that people expect, and don't overspend getting your STR/LTR online.

1 Reply

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