STR Cash Flow Analysis First Time - What do you think?

Question

Hey everyone. My wife and I are ready to invest in our first STR. I know BP has rental calculators and I will likely use them in the future. However I wanted to do this manually so I can learn it myself first. I would love your feedback on these financials and to let me know my blindspots! I am sure I have plenty!

PS - I used a current listing in the area we want to invest but this is just for an example. I am running the numbers on as many properties as I can. Thank you for your help!

Link to the cabin I used in this exercise - https://www.realtor.com/reales...

Brian Wilson · Answer

@Waylon Smith A few things that stick out. I would have money for landscaping accounted for (leaf cleanup is going to be a thing next to the house) at least I would think to some extent based on the photos. No values for cleaning fee's or insect inspection. Also, how did you come up with your CAPEX values? 145/MO seems light in my opinion.

Phillip Austin · Answer

You're probably self-managing since it's your first STR, however, it doesn't hurt to go ahead and plug in property management. You may decide to explore that option down the road.

Mike Williams · Answer

I own a similar cabin in Ellijay, just south of your project. I experience about 50% occupancy, plus the blocked out dates for me and my family puts it at about 60% occupancy. There are plenty of examples that have higher occupancy over the last couple of years, but if you can research 2019 numbers, you might get a more real picture of "normal".

It's a beautiful place and I think it was priced well, so good job snatching it up!

Todd Goedeke · Answer

@Waylon Smith you may want to be more conservative on your occupancy rate using 60% and 65% to see what cash flow looks like.

Insurance cost seems low for a STVR. Did you factor in cost for Umbrella Liability policy?

Sewage lists no expense. You will need septic pumped out periodically.

Your budget for Airbnb expense should be at least 12% of revenue.There is no entry for merchant processing fees or are you doing zero direct bookings?

What is the purchase cost and amount paid down? Add to the Down payment the amount paid for furnishings to come up with an ROI , cash on cash. If you can t average an ROI(ConC)of at least 25% you should consider:1. Buying less costly property or 2. Triple net lease property to a management company in return for being a passive investor receiving a guaranteed 20%+ ConC return from management company( after leverage at 20% down payment).

January Johnson · Answer

In case you need to connect with a local STR expert personally, The Short Term Shop has 2 agents in Blue Ridge - Yok Re and Christine Nix.  You can find them both at their first name@ the same URL as mine (see link, below).

Brian Barch · Answer

I’m an investor in the north ga mountains. I’ve seen that cabin before! (No worries, we aren’t buying again for a bit.)honestly, the calculators are all a commodity at this point, and 3/4ths of the line items are known values.

I would join some Facebook north ga mtn groups and ask for cleaner Recs.Then get a few quotes so you know what you are dealing with.  if it helps you at all, since i just had to get quotes a few months ago myself, we pay $59/mo for pest, inclusive of termite. We also pay $160/mo for full hot tub maintenance. $90 for a giant stack of fire wood cut and stacked (we don’t need monthly). Internet is $60/mo, and thankfully we only need yard care (no yard as we are on a mountain) maybe 2X/year. Cleaners on turnoverbnb were $140-$180, but we were able to find $90-120 when we actually talked to locals.

Happy to connect about the n ga mountain market if it helps you at all!

Lyndsay Zwirlein · Answer

Excited for you guys!! Like Leslie said, I would want a better understanding on cleaning fees. If it's $200 per turn and you have at least 4 per month that's $800 and your CF right now is about $1k per month.

Also on your mortgage, what assumptions are you using?  The P&I seem low.

Leslie Anne Morris · Answer

You are likely missing some items. Namely, cleaning fees. Those are typically pass through - so maybe you’ve accounted for this. Pass through meaning these come out of your rent and you pay them through to the cleaner (keep in mind you do pay commission on these). Painting / etc how did you come up with this figure? I usually use maintenance capex figure of 10% if it’s not brand new construction with a builders warranty.

Brian Wilson · Answer

I had a furnace replaced in my duplex last year (cheap furnace) 8k from an investor friendly company. Flooring (unless you're doing it yourself). Is about $2-3/SF right now. So realistically since it's a smaller project you'll probably spend 5k on flooring. Another 15-20k on a roof. You're at 33k. Whatever numbers you decide to use, make sure they are recent. Then, take what year you think you'll need to replace the big items, HVAC, roof, flooring, etc. Then isolate them with an escalator in your sheet. You want to account for future dollars. While your rents may or may not go up, you need to escalate now to know the value of the property before you. For labor escalations I would do, 3% per year, for materials 2% per year.

Waylon Smith · Answer

Lived in North Georgia my whole life and didn't think of leaves! Good catch. Yes I didn't know what to plug in for the exterior log treatment and cleaning after each stay. I will work on that. For Capex values.... I factored in roof replacement (once), painting (few times), HVAC (once), flooring (once), etc. then divided that total ($35K) across a 20 year time period. May be way off on this calculation?

@Brian Wilson

STR Cash Flow Analysis First Time - What do you think?

Most Popular Reply