Hello everyone , this is Alexander , army vet , I have house hack in Florida apply the brrr strategy , and move to Texas , bought a house last year in Fort Worth ,currently refinancing with lower interest , I came to Florida for a little vacation for 3 day Holliday , but got stuck cause trip got canceled , I'm currently looking to invest in orlando , I am debating whether to invest STR or LTR , I have spoke to several relators, they have told me Single families are high in price and short term rentals prices area going down due to Covid , I thought it is kind of bold to buy STR, any advices on my decision making? I would greatly appreciate it . Thank you
@Alexander Ferrer tortorelli I work with investors buying STR near Disney and I am not seeing prices drop very much. People are still visiting and that business is starting to get back to pre-covid conditions. You also have to consider that even after we have a vaccine widely distributed people's behaviors will change. I foresee that a good number of travelers will prefer to stay in a house than a hotel due to limiting interactions with other people. I think this may be a new norm. I love long term rentals but it is hard to make the numbers work here in Orlando right now. Most of my clients are looking about an hour away from Orlando for good long term rental deals. Places like lake and polk county even to the east of us in Brevard and volusia county.
@Alexander Ferrer tortorelli
In my opinion, there is no better or worse. It all depends on your strategy, goals and risk tolerance.
Here are some pros & cons:
Pros for STR:
- Potential for higher returns/ better cashflow
- Can be used as vacation homes
- Potential for growth
- Improving management and increasing profits drives appreciation up. You can get an under-performing STR, manage it better and provide better experience and increase property value within a year or so.
- Less potential for big damages by tenants (Property is being inspected and professionally cleaned every few days)
Cons fir STR:
- Liability!!! Make sure you and your PM company are properly insured and operate within the regulations of your state!
- Your property management company makes or breaks these investments. If they are good in what they do you will have a great investments. On the other hand if they are average or bad you may be in trouble.
- Laws and regulations. STR are strongly regulated in certain areas.
- Inventory. This is a business and there will be damaged or missing items which you will have to replace. You should definitely have reserves in case you need to replace a sofa,tv or bed and you should do that immediately or you are hurting your business.
I am a huge fan of STR properties and they can be a great investment! My advice is make sure you put the right team around you and be very careful when selecting a STR Management Company! I have a great one to recommend around Disney!
Pros for Long Term Rentals:
- Stability. STR can vary based on season, demand and management. Long term rentals are more stable and you know what to expect.
- Easier to finance and therefore easier to purchase.
- Easier to manage & less maintenance
- You only deal with one tenant. With STR you will have + tenants per year.
- Require less knowledge - less risk. STR are a niche market and owners cannot know everything about managing. There is so much to know about this industry and this is why is so hard to find a good PM. As an owner, it is very difficult to learn everything and very risky to self manage. You just don't know what you don't know! Long term rentals are much more straight forward.
Cons for Long Term Rentals:
- Lower Return
- A bad tenant can cause a lot of problems. If you don't screen or manage your tenants properly, they can cause huge damages and you can get yourself in a lot of trouble. This is why I always recommend using a good, reliable and honest Property Management Company.
- Limit on rate increase
- Less control over the home
- Payment collection is much harder than in STR. Sometimes you need to chase tenants for rent.
Like I said earlier, none of the strategies is better than the other. It all depends on what you are looking for as an investor.
I work with and know many investors and they seem to be happy with mixing it up. What you see more often is someone with established long term rental portfolio of 4-5 properties buying a STR property as an investment and a place they can visit for a week or two once or twice a year in an area they love.
I hope this was useful!
@Tyler Gibson thank you so much for the advise.
@Alberto Nikodimov thanks for the time you dedicated to explain everything throughly.
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