My wife and I own 2 - 4bed/4bath townhomes in a college town. They both will be self managed and produce positive cashflow and a strong COC ROI.
My question is related to us considering shifting our focus to add a short term/vacation rental to our portfolio. What pros and cons are there to making this shift? And what general advice do you have around this combination and/or strategy?
One Con to short term rentals, Its harder to find lenders who want to lend on them because they are looked upon as more risky. But their is a ton of money to be made if you are in the right area!
Pros - cash flow (depending on market) and portfolio diversity
Cons - completely new business venture, will need to build a different team for STR.
You get equity pay down and potential for appreciation with both, which is the real wealth builder.
The other two answers hit the pros and cons on the head.
I think all that's left is the math. For the STR side, grab the AllTheRooms data for your area and download the CSVs for 50th and 75th percentiles of Occ Rate and ADR for your number of rooms and occupants.
From there it's simple enough to calculate and compare annual revenues, depending on how well you think you can do. With very careful management hitting the 75th percentile shouldn't be that difficult.
You can go deeper, but this is a quick and cheap back of the napkin type math for STR.