New to STRs/Real Estate Investing. How to build portfolio?

9 Replies

Hello and good morning. 
I’ve been lurking here for a while - trying to educate myself as much as possible - but this is my first post. 
A little background: my wife and I are both in our mid-40’s. My wife has worked as an administrative assistant for much of her adult life, and I’ve been working (for over 20 years) in ophthalmology (Retina specialty), as a technician and biomedical photographer. It sounds much fancier than it is. 
We spent the first several years of our relationship (and marriage) helping each other get out of debt. Besides a car loan, we’ve had no “revolving debt” for the past 3 years. We have wanted to get involved in vacation rental properties for several years now, but never truly took it seriously because of our previous debt difficulties.  We have been saving up for our next step (whatever it ends up being) and have around $20k at this point - adding around $1,500 each month. We are both disgusted with our jobs - and are tired of making someone else incredibly wealthy, while we toil away. We are currently living with my parents to allow us to maximize the amount we can save. 
Put simply, we don’t know exactly where to start. Since we are “rookies”, we don’t even know what we don’t know, or what questions we should be asking. 
We are setting up appointments with banks to determine what exactly will be (financially) expected of us when we are ready to move forward. Questions as simple as “what % down for a rental property?” are high on our list. Then we will contact real estate agents in the areas/regions we are interested in to dive deeper and (hopefully) get insider knowledge of local regulations/sentiments regarding short-term vacation rental properties, as well as using tools such as AirDNA.

My current plan (albeit, naive/ignorant?) is to use our savings (as a down payment) to invest in a single family home/cabin in one of the touristy areas within a few hours drive of our home. After some research, 50% occupancy seems very reasonable - with many places sitting around 75% or higher. We would use the profit from this first property to reinvest in another property, then continue to snowball this method into allowing us to quit our current jobs/work towards financial freedom. 
While I haven’t ruled out alternative financing options, at least for the short-term (due to our limited experience in the real estate market), it seems more appropriate to deal with traditional forms of financing. 
I know this was a long intro, but I’d love to hear critiques of my current approach - or challenges to this mindset. If you have any advice or resources, I’d greatly appreciate it. I’m certain this has been discussed on these forums before, but a quick search didn’t point to much recent activity. Questions involving “time frame“ - such as “how quickly can you typically use the profits from a rental property to invest in the next property?”, come to mind. 
Regardless, I’d love some feedback and/or pushback. Thank you for your insight and consideration!

Just a few tips as someone else who just started out recently:

- Plan on 10% down using a "second home loan". Check with banks on specific requirements, I had to buy a place that was at least 60 miles away from my primary residence to qualify.

- You may or may not have to furnish the place, which can be a large expense. Although often times these places are second homes already and the seller will be willing to include furnishings as part of the sale.

- If you can buy a place that is already operating as a short term rental it can really ease you into it. You can look at the existing listing and read reviews to see how people perceive the rental, and catch potential pitfalls or discover areas you could improve. You can also often times ask for their rental numbers when purchasing, or like you mentioned rely on something like AirDNA. You also might be able to continue to use their cleaners and / or maintenance staff, which goes a LONG way to have someone who is already familiar with the house working for you. You likely won't have access to the seller after the sale, so having them around goes a long way. You can also often times keep their pre-existing booked rentals ... this can be a good source of early reviews for your listing to get you up and running.

@David Taylor Good for you for a) getting out of debt, and b) deciding to get into the STR game.

You didn't mention where you are, but if you can get your first STR close (1/2 hr) to you so that you can do the Mgmt yourself, it would be HUGE in term of ROI...... Best to get a duplex and live in one side of it...

But your plan is solid. Don't analyze yourself to death like a lot of people, just go do can get to where you want to be!!

@David Taylor if you want to hop on a call just reach out. I’ll do my best to answer your questions. I have nothing to sell. The key imo is choosing a true vacation rental market and learning to remote self manage. Good luck!

@David Taylor you sound like you have a good basic plan to start with with which is finding the right team. I would recommend following a great group on Facebook called "the short term shop". They are like this community and a wealth of knowledge is posted online. In addition they provide access and resources to agents, lenders, and contractors cleaners etc in the area your looking for.

There is also a page i follow called "airbnb homes for sale" and these are listed homes used as short term rentals already furnished. The seller should be able to provide Financials and rental history.

Good luck!

David - congratulations on paying off your revolving debt! It is late evening and I’m about to call it a day so I will keep this short.

If I were starting off as a real estate investor I would “become a student” by collecting a library of good books from authors like Robert Kiyosaki, Brandon Turner, George Clason, Gary Keller and Robert Irwin to name a few. 

I would also invest many hours listening to podcasts (I really like the BiggerPockets podcast with Brandon Turner and David Greene). 

You can review the podcast title list and focus on those that have short term rentals.

I would also listen to CD’s on RE investing while I drive.

If you can invest closer to where you live it will make things easier. All my rentals are within a 25 minute drive from my home, but I do not have any short term or AirBnB rentals since my area does not attract tourist.

With all of its benefits, I think House Hacking with a duplex or triplex would be a great way to get started investing in real estate. You may want to consider it along with your short term rentals.

I wish you and yours the best of luck on your investing journey.