Should I switch my Nashville long-term rental to short-term?

[Christopher Hall]

I have a 2015 3/2 single family home just north of Nashville in Robertson County.  I've been renting it to the same tenant almost 4 years now.  I'm just making about $250 net each month off of $1900/month rent (about $1,450 total for mortgage, insurance, taxes, etc.) , but appreciation has helped, the tenant is great, I have a property manager.  As long as there are no repairs I have to approve and monitor, it's hands off.  It works for me just fine.  

However, my uncle who handles short-term rentals suggests I might could make much more turning it into short-term rental.  But with that comes more expenses, more insurance, more turnover, more cleaning services (I live 3 hours away) - so much more to deal with.  And I'd have to spend $10,000 to $20,000 I imagine to buy furniture, kitchenware, beds, dressers, etc.  

The extra hassle wouldn't be worth it to me unless I was able to net on average $1,500 a month.  Even if I did that, the first year itself would end up only paying for the furnishings.

This might be a broad question, but here it is - with a $1,450 mortgage, insurance, taxes payment, could / would a nice 3/2 about 40 minutes north of Nashville downtown net enough to be worth it (again, my "worth it" would be netting $1,500 a month on average after mortgage, insurance, listing fees, management fees, cleaning services, etc.)?

[Luka Milicevic]

@Christopher Hall I'll be honest, I'm not as familiar with Robertson county as I am with Davidson when it comes to STR revenue.

Just thinking in broad terms and comparing to Davidson, I'm not so sure you would net that amount. 

Property mgt for STRs runs 18-20%. All of your expenses go up as well. 

If you're wanting to be "hands off" the LTR way is the way to go in your case. I don't think it would be worth it for you given your location and how well your LTR is going. 

Now....if you were actually in Nashville and asked the same question I would stop reading at the first sentence and tell you YES you should convert to an STR.

Keep in mind the above is coming from someone not familiar with Robertson co STRs so don't take this as gospel. If I were you, I'd get on Airbnb/Vrbo and check at what similar listings are running each night. I'd also connect with someone local that is doing what you're considering and ask them about their success in the space and if they have any advice for you. 

[Sydney Tucker]

Hi Christopher, I'm a realtor in the area and I thought I'd run some numbers for you just to get a better picture of the risk/reward of a LTR vs STR.

Currently netting $250 a month on the LTR

If you rented it as a STR on a nightly basis for $135 with an expected estimated vacancy of 56% (average for the area) that's a gross income of $21,681 less your mortgage $17,400 and less expenses such as water electric and internet of an estimated $4200 puts your annual net at $81.

To make the STR profitable for the additional work you'd have to rent it for more than $135 a night and for more nights than the Nashville average of 44% occupancy.

[Christopher Hall]

@Luka Milicevic@Sydney Tucker

Thanks so much to both of you. Based on both of your posts I’ve done a little math and calculated I would have to charge $255 a night (at a 44% occupancy rate) to stand the smallest chance of making what would make this worth it to me. And

• I’m sure I’m missing some expenses (repairs, taxes, insurance, etc.)
• Still my first year in this scenario would simply pay for furnishing the house in the first place

Income - $3,315

Mortgage - $1,450

Utilities - $350

20% management fee - $520

Even this best case scenario would only net me $1,000 a month, and honestly, I would want more to make it worth it. It would be a new endeavor with its own challenges, and I’m fairly content with my LTR right now. I turned this into a LTR just because we moved 2.5 years after buying it and I wanted to rent it to not lose money on the move. And it has done that well.

Thanks for your help!!

[John Williams]

I prefer long term rentals! Consider having the peace of mind of a long-term tenant (you're not worried about short term trends and occupancy - assuming you've screened and placed a quality tenant). Even if you have a manager, you will invest more time time on a STR than you will a LTR (generally speaking) - and your time is very valuable. Stay LTR - just my 2 cents!

-John Williams, Property Manager

Clarksville, TN 

[Steffen Cushing]

i would say it depends on the overall investment strategy. im not really familiar with STR rentals in your area. personally i like the long term rentals, especially if you are trying to be hands off. we have two STR's, one we manage ourselves in FL and the other in Gatlingburg which is managed by a company. even with an STR rental company, i still find myself managing the manager. both require work and are by no means passive. long term (to me) is nice given time investment. hope this helps.