My First STR/LTR in one unit

16 Replies

Hi BP!

I am under contract for my first rental property. It is a 4 bedroom 3 bath home that has 2 units. The top floor unit is a 3/2 and downstairs is a 1/1. Both units have full kitchens and are rent ready. The total square footage of the house is just under 3k.

My original plan was to LTR the top and do a STR for the bottom. Now i am second guessing myself and thinking maybe I should do the reverse? i am thinking the bigger unit would bring in more, but i don't know how to look into this.

I am new to STR and have not learned a lot about it so my concern is that if I go with the STR for the top and aren't able to rent it out consistently that I will be losing money on the deal because I will have to furnish the top, which is a lot, and will lose out on the larger chunk of the LTR rent for the home.

Any and all advice and suggestions would be appreciated! Also if i missed any details needed feel free to ask!

If you have one long term tenant. They are going to have to be extremely easy going to put up with having a revolving door on the other unit. Sometimes you are going to have loud people coming at going at unpleasant hours and they are going to have to put up with it.

You won't know until you try. STR is hot right now. I would encourage you to go ahead and STR the top unit. If it doesn't perform well then you can turn it into a long term rental anytime you like. Don't go crazy with buying expensive furniture-it's not necessary for STR. Buy clean, comfortable affordable furniture to keep your costs down.

If you do STR, you can switch at anytime to long term rental. But if you start long term rental first and it doesn't work out, you will have to wait a long time until the lease is finished until you can convert it to an STR.

I have a quadplex where I STR 3 units and my tentant/housekeeper lives in the 4th unit. She is an awesome housekeeper/tenant. But I got lucky. I first brought her on as a tenant with a month to month lease. Then it turned out that she lost her job and she became my housekeeper.

That's the cool thing about a duplex. You can do it however you like. 2 long terms, 2 short terms, or one of each.

Make sure to check short term rental ordinances in your city. See what you need to do to comply. Most of the time you just have to apply for a business license and pay a yearly fee.

Just sharing my opinion but 1/1 STR's are limited on upside earnings potential because the ADR is capped. You can't charge guests $500/night if you're only sleeping 2-4 people. (and you don't want to smash 8 people in there for obvious reasons) You mention an upstairs/downstairs split which is going to mean the lower guest or tenant is going to be at the mercy of the noise generated above. If you've got a long term tenant in the 1/1 and STR guests above, that might be a bit of an annoyance and cause some potential issues.
I'd personally go all-in on renting as a 4/3, one listing. You've got ability to charge a higher rate for the property as a whole gives you much more appeal than having a vacation rental with shared space. It will cost more to furnish but be a more attractive place for guests to stay knowing they have the whole place to themselves. Maybe do some # crunching on what you can generate with 2x LT renters vs. what a 4BR STR generates. Let me know if you need any help. 

I would STR both units....why not? As was mentioned, you can always easily go from STR > LTR but not the reverse....

And I also thought about the LTR tenant downstairs at the mercy of the STR partiers upstairs... so if you go STR/LTR, I would definitely do the bottom as the STR/

Just my .02......

@William Beck thank you William. The setup is a little funky for upstairs/downstairs as the downstairs is a mother in law unit essentially so the place has 2 full kitchen as well.

I already have the numbers crunched for the LTR and what it would generate on that. The part i am clueless about and would probably appreciate your help is to figure out numbers for the different scenarios for the str portion.

@Dan Johnson nailed it.

You can always go back to LTR.

While it is true that there is a "cap," in a sense, on a 1/1...it'll rent at hotel rates ~$100/night, which is vastly more than a LTR. I assume this is not a vacation destination.

I have a quad-plex with two LTR tenants in-place with unexpired leases. I do plan to convert them to STR, but so far so good on mixing the two types of tenants. Granted, these are not vacationing STR tenants. They are professionals in town for work or parents visiting their kids/grandkids. They just sleep and eat at the STR.

Let us know what you decide!

@Alex S. You are correct that this is not a vacation destination rental. It's about 45 minutes outside of Seattle,WA.

What is the best way to crunch numbers to help me determine the Airbnb amounts I would be looking at? I think once I am able to do that and estimate furniture Costs I should be able to make a decision. Thanks for your input!

Originally posted by @Jonathan Avellaneda :

What is the best way to crunch numbers to help me determine the Airbnb amounts I would be looking at? 

As we often say......you need to go on your local AIR and VRBO sites and find very similar houses to yours. Do your searches 1 month out, 2 mos out, 4 mos out, Etc...

You'll quickly see how busy your area is, what amenities are popular, and moreover how much they are charging......

Originally posted by @Jonathan Avellaneda :

@Bruce Woodruff thanks Bruce. Is there a place to see how much people actually paid for those listings recently so i can get an idea? I know the pricing changes by the day so not sure looking forward is the complete picture.

Go on Zillow. Look under 'SOLD' listings...