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.

4 Reply

195 views

Most Popular Reply

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.

6 Reply

See this reply in the discussion

33 Replies

Jump to latestLatest

Sort by

Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Joe Miller:

@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.

Thank you Joe! My friends had the same to say, that the first is the hardest!

0 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Mya, I’m interested in that area too, want to connect? We do not have an agent there.

I can send you the sheet for sure. How are we allowed to connect on here?
0 Reply
Luka Milicevic
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
4y
@Terri-Leigh H.

I'd do a first position heloc on the primary.

Real estate might be scary, but remember you are not re-inventing the wheel. It has been the greatest wealth builder of all time.

What is way scarier is NOT investing and watching your money rot to inflation, and losing out on the opportunity cost of compounding interest.
1 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Luka Milicevic:

@Terri-Leigh H.

I'd do a first position heloc on the primary.

Real estate might be scary, but remember you are not re-inventing the wheel. It has been the greatest wealth builder of all time.

What is way scarier is NOT investing and watching your money rot to inflation, and losing out on the opportunity cost of compounding interest.
*Googles firt position HELOC

So appreciate the encouragement!
0 Reply
Peter Davis
Real Estate Broker · Cape Coral, FL · Member since 2014 · 382 posts · 300 votes
4y
I mentioned this in another post recently on the subject of STR's, that a property manager I know here in Cape Coral believes you have to have as much as 50% down on a property to have it cash flow as an STR. Maybe others here can comment or share their experience on this point. From what I've seen, they're not big money makers cash flow-wise, but more an appreciation play, plus it provides a place in the sun to use yourselves on occasion. She also recommends fencing or hedging in the yard/pool area for privacy and allowing small dog(s) with a pet deposit.
Regarding flood insurance, there's a helpful video that describes FEMA's Risk Rating 2.0 and how it will affect policies: https://www.youtube.com/watch?v=Ute9VV1roeg

1 Reply
Alex Song
Member since 2022 · 13 posts · 7 votes
4y
Quote from @Terri-Leigh H.:

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!

This is actually how I plan on getting my first rental. Refi cash out to pay back the HELOC is always good. Especially if you can force value into the investment/rental property I guess in other terms it’ll be like a BRRRR. But good luck and keep us updated!
0 Reply
Terri-Leigh H.
OP
Interior Decorator · Denver · Member since 2022 · 119 posts · 47 votes
4y
Quote from @Peter Davis:

I mentioned this in another post recently on the subject of STR's, that a property manager I know here in Cape Coral believes you have to have as much as 50% down on a property to have it cash flow as an STR. Maybe others here can comment or share their experience on this point. From what I've seen, they're not big money makers cash flow-wise, but more an appreciation play, plus it provides a place in the sun to use yourselves on occasion. She also recommends fencing or hedging in the yard/pool area for privacy and allowing small dog(s) with a pet deposit.
Regarding flood insurance, there's a helpful video that describes FEMA's Risk Rating 2.0 and how it will affect policies: https://www.youtube.com/watch?v=Ute9VV1roeg

Oh wow, if I had 50% to put down that would be awesome. I dont believe this is how my network down there has done it and they are cash flowing well... I know mine wont be as good because of HELOC, but darn!
0 Reply
Dan Maciejewski
Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 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
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?

Yes -- the taxes will almost definitely shoot up. They are based on the purchase price and we allow owner-occupants to "homestead" their homes which gives you a discount and caps the amount the taxes can go up at 3% per year. AND, you bring the cap with you to your next house, and so on. I have literally seen taxes go from $700 last year to $11,000 after purchase.
See if the county you are looking in has a tax estimator tool on their property appraiser website. Our property appraiser in Pinellas is great and we have the best estimator tool I've seen! PCPAO.org if you want to look.
1 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.