One BIG property or two smaller properties
Member since 2022 · 43 posts · 25 votes
Running into a wall here and would love your thoughts and insights as I try to scale as a new investor. We have a chunk of cash to work with which I had originally planned to buy three STR properties with (traditional mortgage, 20% down) BUT I found a larger property with a larger price tag that looks to cash flow very well if done right. So my question is...do I spend 2/3 of my cash on this one property or stick to my original plan and look for three properties with a more moderate cash flow? Thanks everyone!
One bigger property can make more with less effort than 2 properties.
Just curious, is there a healthy demand for the bigger properties?
I have a 6 bedroom, 4400 sq ft mountain cabin that can sleep up to 23 people.
Wow I can't believe how full it stays. One group checks out another arrives in the afternoon.
Once again, this is completely dependent on area. Many vacation areas are pretty much immune to a recession. The worse the economy gets, the better we do.....
Running into a wall here and would love your thoughts and insights as I try to scale as a new investor. We have a chunk of cash to work with which I had originally planned to buy three STR properties with (traditional mortgage, 20% down) BUT I found a larger property with a larger price tag that looks to cash flow very well if done right. So my question is...do I spend 2/3 of my cash on this one property or stick to my original plan and look for three properties with a more moderate cash flow? Thanks everyone!
Ultimately, all other things be equal or about equal, location + Airbnb rental rates should be your determining factor.
Once again, this is completely dependent on area. Many vacation areas are pretty much immune to a recession. The worse the economy gets, the better we do.....
Once again, this is completely dependent on area. Many vacation areas are pretty much immune to a recession. The worse the economy gets, the better we do.....
On average, I’m sure many had a very tough time and many throughout America, particularly if they were recent buyers and paid too much, went into foreclosure and lost properties.
Once again, this is completely dependent on area. Many vacation areas are pretty much immune to a recession. The worse the economy gets, the better we do.....
I will say that ours only did better during the pandemic. It is located on Lake Coeur d'Alene in north Idaho. Idaho was opened up earlier than most and we had no slowdown in bookings during the pandemic. Just our personal experience.
Well for example, mine were. Some actually increased their booking during Covid. Seems like when people get freaked out and locked up, they like to get away from the big cities and head out to the country. Imagine that.....
If you knew stuff, you'd know that people that travel have more expendable income than the norm. Not rich, just middle class and upper mids. And that a short trip for a couple days does not affect them even a little bit.
Running into a wall here and would love your thoughts and insights as I try to scale as a new investor. We have a chunk of cash to work with which I had originally planned to buy three STR properties with (traditional mortgage, 20% down) BUT I found a larger property with a larger price tag that looks to cash flow very well if done right. So my question is...do I spend 2/3 of my cash on this one property or stick to my original plan and look for three properties with a more moderate cash flow? Thanks everyone!
When I was in the Air Force, a phrase we would hear often is, "two is one, and one is none", meaning you should always have a contingency/back-up, whether its planning, equipment, etc. because given a long enough time horizon things will at some point go sideways. I say this, because we are in unprecedented times, and no one knows how things are going to play out- whether the U.S. economy gets Volcker'ed and interest rates get pushed into the teens (personally I don't think that will happen, this is just for illustration purposes) and eventually brings inflation down to the target 2% we were used to, or the Fed eases us into a new normal of 4% from here on out, the havoc it could potentially wreak on the economy in the process either way and the effects this will have on the investing landscape.
With this in mind, in my opinion, I would go with 3 'smaller' units as opposed to the 1 'bigger' unit. You would have a more diversified cash flow so if they do take a hit you could weather it better, while potentially getting more long-term appreciation in general. In addition, if the chosen market doesn't quite pan out and you have the 1 property it can limit your 'out' options, whereas with 3 units if you need to peel off 1 and sell it to save the portfolio or keep it afloat, you have that ability. Either way, good luck to ya' and congrats on your success!
Well for example, mine were. Some actually increased their booking during Covid. Seems like when people get freaked out and locked up, they like to get away from the big cities and head out to the country. Imagine that.....
If you knew stuff, you'd know that people that travel have more expendable income than the norm. Not rich, just middle class and upper mids. And that a short trip for a couple days does not affect them even a little bit.
See:
Airbnb hosts are planning to sell off their properties because of the pandemic
Thanks for the article @Jon Q.. I think that each owner has different experiences. Like I said, we didn't see any slowdown at all and had out best 2 years. This year is slightly better than that and we have quite a few bookings for 2023 and 2 for 2024 already.
Some areas will see great travel and some will see less. The pandemic was a unique phenomenon, very different from a recession. With the shutdowns, people just couldn't go to an area. The recession will not prevent travel, just make it harder for families to pay to go somewhere.
People will usually find a way to pay for a decent vacation. I also feel that with the pandemic causing so much isolation people will want to get together for a fun week. Maybe at our lake house!
Yea I think that was a typical CNN anecdotal article. It was dated May 2020 right when things were starting to ramp back big time with bigger rates in the vacation destination markets. Which means all of the interviews for this article and what not happened prior to that date when things looked scary right. I mean if I remember right it was end of March beginning of April when we took about 40k worth of cancellations. Then about 3 weeks later we started booking like mad at higher rates. I'm sure STRs in non vacation markets suffered due to lack of business travelers for quite some time. Many vacation destination locations didn't take a long term hit, except in locations that were shut down by state/city governments. It was a brief bump and then the market took off. The other thing in that article was in the beginning where it says "finally after the long dry spell" What???? The big hit came in March through April.. So the long dry spell was 2 months? So many questions if you stop and analyze that article.
It is always an opinion of which markets to go into with an STR. I prefer the vacation destination markets because I do not think they are secure from a recession but I believe a hit from a recession will not be near as bad as non vacation destination markets. Also, it gets back into buying right doesn't matter what market. You have to buy right. I can take a major hit on every one of my properties and still be profitable. Folks that did not buy right can't do that. Gets back to knowing your market as well.
Bottom line @Marcelle Abel continue to do your homework and make a decision that YOU are comfortable with. Everybody has a different style of investing and what makes them comfortable. Talk to other investors in your market that have been around for awhile. Ask them how bad the market was affected by the crashes in 2000 and 2008.
In a way, I think the pandemic had a positive effect on vacation rentals. Being locked up in the big cities caused people to look for a healthy alternative, which in many cases (especially ours) turned out to be the country lifestyle.
Now once they have seen the alternatives and also learned about and used platforms like VRBO and AIR, they are coming back in droves.....