STR home purchase overpriced but still cash flows!?

Question

Found a property in beach area that is definitely overpriced (almost everything is) but with calculations of 70% occupancy high season and 50% low season , and other methods such as enemy method @lukecarl , the property STILL cash flows. Property would be purchased 100% OPM.

This is a desirable vacation spot for potential purchaser as well and would use 4 weeks out of the year !

Would you go ahead with purchase ?

This is a desirable vacation spot for potential purchaser as well and would use 4 weeks out of the year !

Would you go ahead with purchase ?

Jason Stoltzfus · Answer

It seems like covid has inflated some rental markets across the country. So something to consider; if you base your calculations on the past year they could be based on inflated occupancy and rental rates. If you base it on the past 3 years, do they still look good?

Mike Shulman · Answer

It may be overpriced for the cost of the home, but you're buying a business, if it cash flows and you see upside potential it is not overpriced.

John Underwood · Answer

So your return on investment is infinite because your using OPM.

If it still cash flows enough then yes it makes cents!

Joseph Goode · Answer

My wife and I are in the same pickle because some of these homes just 18 months ago were half the price but I guess if it’s gona make money then that’s all that matters right? @Luke Carl

Luke Carl · Answer

The government printed a TON of money. It had to go somewhere. For whatever reason a lot of it went into the value of beach houses.

Collin Hays · Answer

Overpriced is a relative term.

Luke Carl · Answer

Thanks for the shout out! If it makes CASH it's not over priced in my book!

Not to nit pick but yeah slow season will be more like 20% but I think you can count on busy season to be more like 90%!!

I say go for it! The beach is appreciating like crazy!

Andre M. · Answer

50% low season sounds kind of high

Alex S. · Answer

Make sure you are accounting for all expenses, taxes, maintenance, HOA, cleaning, furnishing, etc, etc, etc.

If it cash flows...it cash flows.  100% OPM is nuts.

Why is it over-priced?  I don't understand that part.

Ryan Moyer · Answer

Hopefully it makes whole dollars too ;)

STR home purchase overpriced but still cash flows!?

Most Popular Reply