Hey everyone, if you have some time, could you give me some feedback on my entry into real estate game plan? (Specifically STR's) Any advice would be greatly appreciated.
I live in Hudson NC about 20 minutes away from a small town called lenoir. Lenoir sits at the feet of the Appalachian mountains., only 20-30 minutes away from blowing rock, banner elk and Boone.
A lot of people travel out here during the fall (changing of the leaves) and winter (snow sports).
Anyway, my game plan is to
- buy a fixer upper in lenoir on 2 acres of land. (Great deal $80k) I’ll pay cash.
- Renovate the house ($15-$20k) Ill do all the work myself with the help of a few friends.
- Rent out the property ($900 per month)
- Refinance the property
- Use that money to build 3 tiny house cabins on the opposite end of the 2 acres.
- List them on Airbnb for $115 a night
- Ask renter if he would be interested in free rent in exchange for cleaning the Airbnb’s and other useful tasks.
That last one would be icing on the cake.
Similar Airbnb’s in the same area charge $130 per night.
Average Airbnb daily rate is $225
Average occupancy rate is 58%
A bit more info, sorry.
New house value after renovations would be around $120k
ARV is about $95k, I would probably only pull out $60k to build the tiny homes.
I also checked tiny house laws in the area and we are good to go.
So what do you think, does this sound like a solid strategy?
How much does a tiny house cabin cost? Are you paying cash for it or financing it?
Are you sure you can put all those buildings on the land? Mike Tyson once said “everyone has a plan until they get in front of the zoning board” or something like that.
Why buy cash and refinance? If my math is right you’re putting in $100k and pulling out $60k, so about $40K left in the deal. You can finance a single fam at 15% ($12k) and still spend $20k on rehab and have less in the deal...
Think you can (and need to) do better than 58% occupancy.
Other than that, I think I like it.
It sounds like a fun project. One thing I would consider. If you have your tenant running the STR on the property, what happens if they stop performing. Your entire property could end up producing no income. Maybe still charge the rent and then pay them the cleaning fees if they can clean. Maybe pay them for some small maintenance or emergency response calls too if they're qualified to handle those. If they make more than enough to pay the rent then great. If they quit performing, at least rent is still due on the first and you can pay someone else the cleaning fees you're collecting.
This is a Great idea! I am with @Dustin Allen and @Michael Baum about the renter situation. My only concern would be the location in Lenior. My MIL lives there and there are some crappy areas. I would just make sure the neighbors are not junk collectors. With it being so close to Blowing Rock and Sugar Mountain it will do Great.