Investor · Orlando, FL · Member since 2018 · 54 posts · 25 votes
If you have purchased an STR in the past couple years (2020, 2021), how much cash flow are you making yearly? We are searching to invest in a short term rental, but the numbers are not high enough for us. We're seeing about 10K-15K yearly cash flow after running all the numbers at a safe occupancy rate (could be more but we calculate with the lowest numbers). We would use a property management company, it would be too difficult for us to manage it ourselves. This eats up a lot of cash flow.
Is this "good" cash flow? We were aiming for more around 30K per year, but maybe that's unrealistic. Would love everyone's thoughts.
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
5y
Both of mine are doing about $2000- $2500 a month, but I'm in ny first year at STRs. According to what I see on BP, people expect to get 3-5 x the rent they would get for a LTR, and I think that is a reasonable expectation once you are fully established and bringing in private listings in addition to AIR and VRBO.
How are you running your numbers? The best way is to do it yourself by pulling similar properties off of AIR or VRBO sites. Check their rates AND their bookings (how full are they?) Then just do the math.
Of course, for a STR, location is huge, even more so than a typical rental.
And remember, you can always get a house try the STR thang for a while, and if it doesn't work out, turn it into a LTR. You can't always do the reverse....
Investor · Greenville, SC · Member since 2015 · 1k+ posts · 1k+ votes
5y
@K F. So "good"cash flow can only be determined by you and that is the reality. Investments require time/money/risk. For any investment you make you have to determine is the cash flow that I am going to receive (no matter the rate) worth my time and money and risk factor. What might be good for me might not be good for someone else in a different position in life. Also, managing yourself is not as hard you might think.
Investor · Orlando, FL · Member since 2018 · 54 posts · 25 votes
5y
@Ken Boone thanks for your reply. I knew I would get this answer, but I want to make sure we’re not being too picky and missing out on good investments. Of course the more cash flow the better.
We have considered managing ourselves, but we would live 2.5 hours from where we are looking and driving that weekly more than a couple times will get exhausting.
Investor · Flowery Branch, GA · Member since 2019 · 413 posts · 412 votes
5y
Some of this is going to depend on your purchase price and how large of a property you are looking at. I personally go the self-management route and wouldn't look at anything under 20% CoC. With that said whatever management company you are looking into should be able to give you a decent estimate of what they think it will gross.
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
5y
Both of mine are doing about $2000- $2500 a month, but I'm in ny first year at STRs. According to what I see on BP, people expect to get 3-5 x the rent they would get for a LTR, and I think that is a reasonable expectation once you are fully established and bringing in private listings in addition to AIR and VRBO.
How are you running your numbers? The best way is to do it yourself by pulling similar properties off of AIR or VRBO sites. Check their rates AND their bookings (how full are they?) Then just do the math.
Of course, for a STR, location is huge, even more so than a typical rental.
And remember, you can always get a house try the STR thang for a while, and if it doesn't work out, turn it into a LTR. You can't always do the reverse....
@Ken Boone thanks for your reply. I knew I would get this answer, but I want to make sure we’re not being too picky and missing out on good investments. Of course the more cash flow the better.
We have considered managing ourselves, but we would live 2.5 hours from where we are looking and driving that weekly more than a couple times will get exhausting.
Kirsten - We live 3.5 hours from our STRs and we never drive there weekly. Just every now and then when we WANT to. It is all about having a local team. Cleaners you can count on, handymen you can count on. You get those two things down and you only have to visit when you want to. When YOU feel like doing a repair instead of having someone else do it. In the beginning it will take a few trips to get setup but once it is setup and have a good cleaner and handyman you will be cooking with gas.
Investor · Metro East of St. Louis (Illinois) · Member since 2016 · 259 posts · 211 votes
5y
Most folks on here will advise against having a property management company for STRs, though I think that will change over the next 5-ish years as the market normalizes and management rates fall. Keep in mind, self-management doesn't mean you clean the rooms yourself. You just hire a cleaning crew and an on-call handyman.
As for the return, you should be able to do greater than 20% CoC return. The actual dollar value isn't particularly relevant without knowing how much cash you invested into the deal.
Investor · Orlando, FL · Member since 2018 · 54 posts · 25 votes
5y
@Bruce Woodruff thanks for your input. I use AirDNA to look at properties and also use their calculator to get a general idea. If it looks good I’ll run numbers in my own too.
Investor · Orlando, FL · Member since 2018 · 54 posts · 25 votes
5y
@Kirsten F. Just to give people an idea of the property I’m thinking about:
purchase price would be 250k,
avg. daily rate is about $250,
occupancy rate 45%,
property management 20%,
then calculate another 10% for maintenance, mortgage about 19k/yr, and I’m leaving out other costs like furniture and other possible operating expenses...
@Ken Boone interesting, maybe I should consider it, because it would make a big difference in cash flow. Thanks again.
Yes it makes a huge difference! The key is a good cleaner and good handyman with backups for both. And also make sure STRs are allowed in the area you are looking in.
Rental Property Investor · Member since 2019 · 276 posts · 235 votes
5y
I agree with @Ken Boone. Manage it yourself so you can get the numbers you want. I lived 6.5 hours from all five of mine (just moved an hour away for many reasons) and now and 6.5 hours away from my sixth STR. And even though I've lived an hour away from the five for 6 weeks now, I've gone to them once. You can do it!
It's possible to manage without having boots on the ground. Hire a well vetted house cleaner and let them be your eyes! Treat them well (pay accordingly). Many investors manage STR themselves states away. Much bigger cash flow potential :)
Rental Property Investor · Pocono Pines, PA · Member since 2018 · 153 posts · 117 votes
5y
@Kirsten F.
What is the purchase price of the home?
It's important to compare apples to apples. You could look at percents, cash on cash, cap rate or IRR.
But as previously mentioned its not just return, there is the time commitment and coolness factor to every investment. Finding the balance of return / time commitment / coolness factor is what you will need to choose between.
Smaller properties may be heavier cash on cash but will take more of your time, PM or not.
It is possible to find short term rentals that have high ROI and low time commitment if managed properly.
I run pretty large houses, 6 bedroom, 4000 sqft. investment cost was about $190k. They profit about $60k after everything. Revenue $125k. Not including major repairs, since we did all those with our investment cost. 'cash flow' means nothing by itself, it's more a question of, what is the Cash on Cash return %, and is it worth it to you? For instance anything above a 20% CoC, is probably good for an STR, but if it's only $10k a year, it's still probably not worth it, because the amount of work for a smaller house is pretty much the same as a larger house. (although large groups do tend to party, and do break things... so your mileage may vary)
Realtor · Branson, MO · Member since 2018 · 274 posts · 283 votes
5y
Not to strike fear in your heart, but I only see 9 total vacation rentals on Pine Mountain Lake using the VRBO map with an open calendar. Then there are 7 on Airbnb.
Generally if there are less than 20 vacation rentals in a given 3-4-5 mile radius, it's a cause for concern since it just begs the question - how come others aren't doing this? Is it because there's a general lack of interest in booking here? Is there some sort of regulation for that area? Are the occupancy #'s you're using in your assumptions accurate if it's actually pulling from on Lower Whitefish Lake or one of the other lake epicenters in the Brainerd market?
You can always make the justification that if your property is really nicely appointed (nice kitchen, nice furniture, fresh paint, great interior decor), sleeps a bunch of people, has fun amenities (hot tub, swimming pool, pool table, outdoor kitchen area, manicured firepit) and things for people to do: they will book it out regardless of where it's at. But, if you're trying to put something together on a relatively tight budget and purely investment minded those things cost money and reduce your return. Message me if you want to chat further @K F.
Investor · Dorsey, IL · Member since 2020 · 31 posts · 29 votes
5y
@K F. When I was shopping for my STR, my management company said a good rule of thumb to go by is yearly rental income equal to at least 10% of purchase price. After looking for a while and analyzing many deals, I found I liked a 12% minimum better.
Most folks on here will advise against having a property management company for STRs,
@Alex S. I'm curious why you would say this?
Property management with LTRs is the norm. It is 10% and they handle all the tenant screenings, repairs, rent collection, etc. Extremely passive for the investor. STRs don't work like that. The management companies want 20% or more, plus the cleaning fee. That is a HUGE chunk of your cashflow. In many areas (like mine)...there aren't even any management companies because there aren't that many STRs. You just simply can't make the numbers work paying a STR manager unless you just stole the property. Also, it is really easy to self-manage. Hire a cleaning crew. Hire a handyman. Keep tabs on them. Just about everything else can be automated.
I think, as STRs are more normalized over the coming years, we'll see those management fees start to drop and maybe it'll be viable.