To Airbnb or Not to Airbnb

Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes

Hi all,

Newbs here. We have a TON of money in equity on our primary, want to get into RE. Our friends, many, have done the STR thing in Cape Coral and can't say enough good stuff.

The appreciation is there, the growth is there, the solid history is there, the STR market is booming.

However we are scared. It’s just all new. We do have a great support system there with experience so that helps.

How do these numbers look? It cash flows small but still flows, it’s the making use of our money that is appealing. How do our assumptions look?

My husband makes spreadsheets for a living if you can’t tell! Happy to share this one if that isn’t against rules.

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Gene Livingston

Investor · Kyle, TX · Member since 2015 · 113 posts · 102 votes

Quote: However we are scared.

I'm not your financial advisor, but perhaps you SHOULD be scared, especially if you are risking your home equity. STR's should be cash flowing A LOT, not just a little. First thing, since you are close with people who are successful in your target market, see if they will share their numbers with you. Find out why and how they bought where they bought. maybe get connected to others within their network, like mortgage lenders, handy-men, make ready services...etc. I'd say, be a quick study, ask questions, research carefully, and be slow to act at first. In our current RE market/macro economy I'd say there's no need to rush. And, if there are multiple offers...walk away. Its really easy to buy a house; it's much harder to buy one correctly.

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Matt Dombrowski
Investor · Ft Myers, FL · Member since 2021 · 13 posts · 16 votes
4y
Not sure if I'm doing something wrong but image is too small to see any numbers for me :)
2 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
2 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Matt Dombrowski:

Not sure if I'm doing something wrong but image is too small to see any numbers for me :)
Shoot. Not wrong! I tried again:)
1 Reply
Gene Livingston
Investor · Kyle, TX · Member since 2015 · 113 posts · 102 votes
4y
Quote: However we are scared.
I'm not your financial advisor, but perhaps you SHOULD be scared, especially if you are risking your home equity. STR's should be cash flowing A LOT, not just a little. First thing, since you are close with people who are successful in your target market, see if they will share their numbers with you. Find out why and how they bought where they bought. maybe get connected to others within their network, like mortgage lenders, handy-men, make ready services...etc. I'd say, be a quick study, ask questions, research carefully, and be slow to act at first. In our current RE market/macro economy I'd say there's no need to rush. And, if there are multiple offers...walk away. Its really easy to buy a house; it's much harder to buy one correctly.
6 Reply
Matt Dombrowski
Investor · Ft Myers, FL · Member since 2021 · 13 posts · 16 votes
4y
Hard to say about income without knowing more about the property but off season might be a bit high. Bedrooms? Pool/Amenities? Canal? Gulf access? For a STR in Cape Coral I assume there's a pool (and if not adjust income numbers downward appropriately) but I don't see a pool maintenance fee which will run you ~$80/mo. Management fee seems low. 8% is fine for long term rentals but quotes I've gotten for STR managers are anywhere from 10-25% depending on how full-service you want them to be. Repairs estimate seems a touch low...some people like to do 1% of purchase price ($333/mo) or 5% of gross income (~$250/mo). I don't see any reserve for CapEx. Insurance seems low with current rates and property taxes will be higher 2nd year after re-assessment.
3 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Gene Livingston:

Quote: However we are scared.
I'm not your financial advisor, but perhaps you SHOULD be scared, especially if you are risking your home equity. STR's should be cash flowing A LOT, not just a little. First thing, since you are close with people who are successful in your target market, see if they will share their numbers with you. Find out why and how they bought where they bought. maybe get connected to others within their network, like mortgage lenders, handy-men, make ready services...etc. I'd say, be a quick study, ask questions, research carefully, and be slow to act at first. In our current RE market/macro economy I'd say there's no need to rush. And, if there are multiple offers...walk away. Its really easy to buy a house; it's much harder to buy one correctly.

Thanks Gene, I really appreciate your time and insight. We are in close contact with their network. Which is why we have property management at a much lower rate. I have not asked their numbers as if there is one thing ive learned from BP its that everyone's number are unique to them. I thought since we are essentially having someone pay off our assets and we are in an area of decent appreciation, we could cash out in a refi and pay off the HELOC, that this might make sense. Perhaps not… Using the HELOC with the high assumed rate (it'll be variable after 18mo, it is 3.5 now) is probably what is killing our cash flow but it is also our only option for 20% right now. I will say that the amount of HELOC we are looking to use is about 1/5 of the equity we have in our primary.
Again, thank you for your time!

0 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Matt Dombrowski:

Hard to say about income without knowing more about the property but off season might be a bit high. Bedrooms? Pool/Amenities? Canal? Gulf access? For a STR in Cape Coral I assume there's a pool (and if not adjust income numbers downward appropriately) but I don't see a pool maintenance fee which will run you ~$80/mo. Management fee seems low. 8% is fine for long term rentals but quotes I've gotten for STR managers are anywhere from 10-25% depending on how full-service you want them to be. Repairs estimate seems a touch low...some people like to do 1% of purchase price ($333/mo) or 5% of gross income (~$250/mo). I don't see any reserve for CapEx. Insurance seems low with current rates and property taxes will be higher 2nd year after re-assessment.

Thank you! This is very helpful!
3 beds, 2 baths, really nice with pool and large lanai, in the southern western and eastern tip of the Cape. From our network of 8 STR owners we are actually lower during the high season than they are for the same, they are at 300 per night with almost 100% occupancy. We are using a friend for maintenance including house keeping and pool, which is why it is much lower, they are a management couple and offer at 8%. Good to know on repairs. Insurance is correct for the specific property we are looking at, not in flood zone. Good to know about taxes, these are the prices after assessments just paid, but I will look into that!
0 Reply
Rong Tan
Member since 2022 · 36 posts · 26 votes
4y
Great info. Thanks Terri. We are building in Cape Coral and still deciding to go STR or LTR. Let us know how you are proceeding.
fyi. The property management is usually 20% for STR , are you doing the listing?
1 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Rong Tan:

Great info. Thanks Terri. We are building in Cape Coral and still deciding to go STR or LTR. Let us know how you are proceeding.
fyi. The property management is usually 20% for STR , are you doing the listing?
Hi Ron, exciting! Good luck.

I will come back and respond.

We have a small husband wife team doing the management at 8%.
0 Reply
Stetson MillerBusiness Member
Real Estate Broker · Fort Myers, FL · Member since 2019 · 576 posts · 423 votes
4y
Hi @Terri-Leigh H.,
Others have already mentioned holdbacks for repairs and capex, but I would like to reiterate that those are necessary to add into your calculations. Also keep in mind that with insurance issues in Florida right now, if the property has an asphalt shingle roof, lifespan is only being allowed to reach 15 years and you will be required in most cases to replace after that
Otherwise, your tax debt is low, this should be estimated at about $5,000 annually based on a sale price of $400,000. See following link for future estimates:
https://www.leepa.org/taxestim...
One other question I had reading through your spreadsheet, what months did you account for being the busy season and off-season? My recommendation for slightly conservative occupancy numbers would typically be Oct-Mar at 90% occupancy, Apr-Sept at 50%. Your nightly rates do look to be accurate though. One way to potentially increase income could be adding a 4th bedroom if it's possible somewhere within the property and the square footage allows it
[email protected]850-259-2910
Stetson Miller Realtor545 Reviews
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1 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Stetson Miller:

Hi @Terri-Leigh H.,
Others have already mentioned holdbacks for repairs and capex, but I would like to reiterate that those are necessary to add into your calculations. Also keep in mind that with insurance issues in Florida right now, if the property has an asphalt shingle roof, lifespan is only being allowed to reach 15 years and you will be required in most cases to replace after that
Otherwise, your tax debt is low, this should be estimated at about $5,000 annually based on a sale price of $400,000. See following link for future estimates:
https://www.leepa.org/taxestim...
One other question I had reading through your spreadsheet, what months did you account for being the busy season and off-season? My recommendation for slightly conservative occupancy numbers would typically be Oct-Mar at 90% occupancy, Apr-Sept at 50%. Your nightly rates do look to be accurate though. One way to potentially increase income could be adding a 4th bedroom if it's possible somewhere within the property and the square footage allows it
Thanks Stetson!

I will add the omissions you suggested! Those are the exact dates I had in my assumptions for occupancy , I will rework to your estimations. Nothing I have looked at has potential for an addition BUT we are certainly planning on "sleeping porch" offerings of a bunk, or day bed etc.

Interesting about tax, I am going off actual numbers as of 2021, and all have had their assessments for city water and sewage. Would it really jump that high? As for roofs, that is in our consideration when looking!

What do you think of cash flowing so low monthly but getting the HELOC money out and working for us?
0 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Stetson Miller:

Hi @Terri-Leigh H.,
Others have already mentioned holdbacks for repairs and capex, but I would like to reiterate that those are necessary to add into your calculations. Also keep in mind that with insurance issues in Florida right now, if the property has an asphalt shingle roof, lifespan is only being allowed to reach 15 years and you will be required in most cases to replace after that
Otherwise, your tax debt is low, this should be estimated at about $5,000 annually based on a sale price of $400,000. See following link for future estimates:
https://www.leepa.org/taxestim...
One other question I had reading through your spreadsheet, what months did you account for being the busy season and off-season? My recommendation for slightly conservative occupancy numbers would typically be Oct-Mar at 90% occupancy, Apr-Sept at 50%. Your nightly rates do look to be accurate though. One way to potentially increase income could be adding a 4th bedroom if it's possible somewhere within the property and the square footage allows it

Where do you see CapEx fitting in there on the sheet? Would CapEx and Maintenance be a single line item?
0 Reply
Stetson MillerBusiness Member
Real Estate Broker · Fort Myers, FL · Member since 2019 · 576 posts · 423 votes
4y
Quote from @Terri-Leigh H.:

Quote from @Stetson Miller:

Hi @Terri-Leigh H.,
Others have already mentioned holdbacks for repairs and capex, but I would like to reiterate that those are necessary to add into your calculations. Also keep in mind that with insurance issues in Florida right now, if the property has an asphalt shingle roof, lifespan is only being allowed to reach 15 years and you will be required in most cases to replace after that
Otherwise, your tax debt is low, this should be estimated at about $5,000 annually based on a sale price of $400,000. See following link for future estimates:
https://www.leepa.org/taxestim...
One other question I had reading through your spreadsheet, what months did you account for being the busy season and off-season? My recommendation for slightly conservative occupancy numbers would typically be Oct-Mar at 90% occupancy, Apr-Sept at 50%. Your nightly rates do look to be accurate though. One way to potentially increase income could be adding a 4th bedroom if it's possible somewhere within the property and the square footage allows it

Where do you see CapEx fitting in there on the sheet? Would CapEx and Maintenance be a single line item?
One way or another, unless you have had some recent major items replaced like roof or AC, then capex and repairs together should be 8-10%, or 5% repairs and 3-5% capex holdback
[email protected]850-259-2910
Stetson Miller Realtor545 Reviews
View Page
1 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Stetson Miller:

Quote from @Terri-Leigh H.:

Quote from @Stetson Miller:

Hi @Terri-Leigh H.,
Others have already mentioned holdbacks for repairs and capex, but I would like to reiterate that those are necessary to add into your calculations. Also keep in mind that with insurance issues in Florida right now, if the property has an asphalt shingle roof, lifespan is only being allowed to reach 15 years and you will be required in most cases to replace after that
Otherwise, your tax debt is low, this should be estimated at about $5,000 annually based on a sale price of $400,000. See following link for future estimates:
https://www.leepa.org/taxestim...
One other question I had reading through your spreadsheet, what months did you account for being the busy season and off-season? My recommendation for slightly conservative occupancy numbers would typically be Oct-Mar at 90% occupancy, Apr-Sept at 50%. Your nightly rates do look to be accurate though. One way to potentially increase income could be adding a 4th bedroom if it's possible somewhere within the property and the square footage allows it

Where do you see CapEx fitting in there on the sheet? Would CapEx and Maintenance be a single line item?
One way or another, unless you have had some recent major items replaced like roof or AC, then capex and repairs together should be 8-10%, or 5% repairs and 3-5% capex holdback

Got it! Most have been recently renovated with these items done in the last 3 years, but I will include!
0 Reply
Terry Garza
Investor · Fort Myers, FL · Member since 2017 · 9 posts · 4 votes
4y
Hi Terri: May i ask how you are able to be located in a no flood zone at the south west end of the Cape? I thought most of the Cape is in a flood zone. Is it your property elevation? Thank you kindly.
1 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Terry Garza:

Hi Terri: May i ask how you are able to be located in a no flood zone at the south west end of the Cape? I thought most of the Cape is in a flood zone. Is it your property elevation? Thank you kindly.

Hi Terry, the properties we have looked at are all in Flood X with minimal risk. I think it has been mitigated by structures put in place in that particular area. It is the very first factor and roof age, our broker has been looking at for us.
1 Reply
Stetson MillerBusiness Member
Real Estate Broker · Fort Myers, FL · Member since 2019 · 576 posts · 423 votes
4y
@Terry Garza I've found Southwest to be a bit arbitrary. Personally, I would consider anything South of Veteran's Pkwy to be South Cape, but I've heard other people say everything South of Pine Island Rd is still considered South Cape Coral. Either way though, you really only run into major flood zones South of Cape Coral Pkwy and along all other coastal areas, with some exceptions of course

@Terri-Leigh H. I'm sorry I just realized I missed your first response! In Florida, a tax re-valuation is triggered upon sale, so while the previous tax payment may be a good indicator if the value hasn't changed significantly (if the property was previously sold recently), but otherwise those actuals listed are likely way off from what you could expect to be paying post-sale. In addition to that, when looking at listings on Zillow, Realtor, etc, rarely do you have an indication if that tax value reflects a homestead exemption or not, which you as investors would not be able to take advantage of
[email protected]850-259-2910
Stetson Miller Realtor545 Reviews
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1 Reply
Kerry BairdPro Member
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
4y
@Terri-Leigh H., there is a STR forum here on BP where you can ask specific short term questions and likely get a few more eyeballs on your assumptions. I used AirDna for my ZIP code to get an idea of how many houses were up for rent as STRs, what their income was, the lead time they experience on average, seasonality and so forth...my properties are in the Space Coast, Central Florida on the East Coast.
You are wise to use a portion of the HELOC, as using it all will hurt your DTI, similar to a credit card.
1 Reply
Terrell Garren
Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes
4y
I've repaired 22 buy/holds and built 4. Your spreadsheet puts the totality of mine to shame. You are clearly ready!
2 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Terrell Garren:

I've repaired 22 buy/holds and built 4. Your spreadsheet puts the totality of mine to shame. You are clearly ready!

Ha ha ha Terrell… my hubby is an engineer. There is no overboard when it comes to excel for him.
1 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Kerry Baird:

@Terri-Leigh H., there is a STR forum here on BP where you can ask specific short term questions and likely get a few more eyeballs on your assumptions. I used AirDna for my ZIP code to get an idea of how many houses were up for rent as STRs, what their income was, the lead time they experience on average, seasonality and so forth...my properties are in the Space Coast, Central Florida on the East Coast.
You are wise to use a portion of the HELOC, as using it all will hurt your DTI, similar to a credit card.

0 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Kerry Baird:

@Terri-Leigh H., there is a STR forum here on BP where you can ask specific short term questions and likely get a few more eyeballs on your assumptions. I used AirDna for my ZIP code to get an idea of how many houses were up for rent as STRs, what their income was, the lead time they experience on average, seasonality and so forth...my properties are in the Space Coast, Central Florida on the East Coast.
You are wise to use a portion of the HELOC, as using it all will hurt your DTI, similar to a credit card.
Thanks Kelly, I will look at those forums, I have a little.

I need to bite the bullet on AirDNA!
0 Reply
Mya Toohey
Real Estate Agent · Tampa Florida · Member since 2013 · 630 posts · 303 votes
4y
@Terri-Leigh Huleis
Do it!!!! I'm a short term.rental specialist in the Tampa Bay area, including, Clearwater and St Petersburg Florida. The market is crazy and if you learn the Market and the systems take your life easier, you should do it. Just as a work of advice when looking, make sure that the estimated gross revinew is at least, at the least, 10% of the purchase price. So, 400,000 house needs to make at least 40k a year to survive. I have numbers ranging around 60k for that price house. 15-20% is where you will see a profit after the first one to two years of breaking even with all the costs involved. Some properties produce more than that here. I find them all the time. Some people buy on profit, some buy on what they want to retire to...so, really it's up to you.
1 Reply
Mya Toohey
Real Estate Agent · Tampa Florida · Member since 2013 · 630 posts · 303 votes
4y
@Terri-Leigh Huleis
I would love to see his spreadsheets...
0 Reply
Joe Miller
Real Estate Broker · Columbus, OH · Member since 2021 · 203 posts · 247 votes
4y
@Terri-Leigh H.
There is definitely a lot of stuff flying around on this thread. My personal advice is be prepared for headaches. My first STR was a disaster- I had people throwing 20+ people parties in the small 1B1B apartment, someone had female issues on my light blue kitchen chair and the cops were called multiple times. but I LOVED it, made money and would do it all over. You will learned so much.
Your first one will by far be the most difficult. You will make SO many mistakes but keep pushing. If it were easy everyone else would be doing it too. Lean on your friends who have done it and gone through it all. Bounce ideas off of them. Do your due diligence, to the best of your abilities, then rip that bandaid.
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