What makes a “good” STR acquisition if ZIP averages are misleading?

Question

One thing I keep running into with newer STR investors: ZIP-code average revenue gets treated like a target.

In practice, averages mix totally different products—bedroom counts, amenities, operator quality, location quality inside the ZIP, and design. If someone is buying a larger group-oriented home and comparing it to a ZIP-wide average, the underwriting can get fuzzy fast.

When I'm evaluating a property, I'm less interested in "what does the ZIP average" and more interested in:

• What competitive set does this house actually belong in?

• Can the layout/amenities compete there after realistic startup costs?

• Does the purchase price leave room to create the guest experience the thesis assumes?

Not every expensive house wins. Not every cheaper house is the smarter buy. The fit has to hang together.

For those of you actively buying STRs: what filters have saved you from bad deals in the last year?

Mike Grudzien · Answer

ZIP is only one factor of a complex mix.

Matthew Tregoning · Answer

On the layout piece, pick the guest you're trying to serve and follow their day through the house. A family needs different things from a group of adult couples, even at the same occupancy. Where do they eat, put their bags, charge devices and sit together? Managing 20+ rentals makes me pretty interested in those details. A bigger amenity list doesn't fix a house that sleeps 12 but can't comfortably seat them together.

Diana Khan · Answer

@Erika Albert, one filter I’ve learned not to skip is whether the property can actually be used the way the numbers assume. I’ve seen investors get comfortable with the revenue and comps, then find out there was an HOA restriction, permit issue, occupancy limit, insurance problem, or local rule that changed the whole plan. For me, that check comes before getting too excited about the projected income. I also like looking at the backup plan. If the STR strategy stopped working tomorrow, could the property still make sense as a mid-term or long-term rental, or would the deal fall apart? That has saved people from buying something that only works under one very specific plan.

I’d be glad to stay connected too. I like the way you’re looking past the ZIP average and asking what actually makes the individual property work. Since you’re in Texas, I’d still have local counsel confirm anything specific to STR rules or property use.

John Underwood · Answer

An area is the first place to find. I look for someplace I'd like to go on vacation.

Then find the property with a great location, great views and great amenities.

You have to look at everything to find the perfect property at a good price.

Andrew Steffens · Answer

I would look at zip code averages to see where I would want to start looking at properties, but otherwise it is fairly useless data.  Would you rather have the best performing property in the second best zip code or the worst performer in the best zip code?

Michael Eskenasy · Answer

I think you’re framing it the right way. The ZIP average is useful as a market signal, but it’s a weak underwriting target because it collapses completely different products into one number.

I’d go one layer deeper and underwrite the behavioral comp set, not the geographic one: what does this specific house compete against for the same guest, trip type, party size, stay length, season, and booking window?

Then I’d stress-test the thesis against three things: realistic stabilized revenue, the full cost to create the product you’re assuming, and the downside case if you have to operate it more conventionally than planned.

That last part gets missed a lot. A good STR acquisition should still make sense when the “perfect operator” assumptions disappear.

If you ever want another set of eyes on one, feel free to reach out. We do a lot of work around turning those assumptions into an actual property-level decision model.

Garrett Brown · Answer

Comp sets are easily the biggest swing. You want to match as close as possible to the top performers and how your property can get there. AirDNA updated their systems to have better comp sets recently.