All Forum Posts by: Dan Maciejewski

Condos haven't been great for STR since the price appreciation of the past few years. If you're in a building that allows STR, most of the other owners will be also using their condo for a vacation rental. And those owners will mostly have purchased at a much lower price. They will be making good money with lower rents than you will have to charge. And since all the units are basically the same, you will be competing mainly on price. That puts a big downward pressure on rates. Unless all the owners get together and decide to raise rates, the only people that try to raise will have their units rented last.

And the Condo fees usually hit cash flow pretty hard.  I usually only advise (at least in my area) to buy a condo if you have another reason, like you want to be on the water, or want to use it for your second home more than as a rental.  Your situation might be one of those, but I would keep looking at single family homes, too!

I don't trust AirDNA or AVMs exclusively.  I have seen them be spot on with reality and I've seen them be over 40% off on occupancy and ADR.

@Bruce Woodruff is right -- you really need to do your own research.  "You're only researching places that are very similar to your proposed model anyway, not every house in town."  

After running your own numbers on a lot of houses, you'll start to see some patterns. I tell my clients that, for the houses I recommend for STR in the neighborhoods I recommend, they will have very similar ADR and occupancy per price point.  And by very similar, I mean that the only real difference is made by the management, cleaning, and interior design/pictures.  In other words, the starting palettes will be the same for similar property types; it's what you do after the purchase that will make any difference to the initial projections.

"Most places will show you what they are doing a month or two out, then you double-check those places a couple weeks later."  This is the way.  Running the numbers this way is a system, not an event.

Learn your seasonality and booking window.  

Seasonality is the higher and lower ADR and occupancy periods.  In my market we are 100% occupied for, say, Spring Break and Thanksgiving through Christmas.  We drop in January and February, and run about average in Summer.

The booking window for most transient business is 4-6 weeks, but will be farther out for the high occupancy periods.  Your market may be different, though.

Then you just start continually checking the houses that you identify as matches for your projected property.  Track them constantly.  See what occupancy looks like and rates are for different seasons.  Use houses that aren't brand new -- try to only check superhosts.

Also, if you really want to use AIRDNA, I have clients that like a lot of different markets.  Just get one month, and run a ton of data points for your selected property types.  That will give you a great shotgun view of what that market looks like.  Then you can see if your manual method matches what they say, or not.

I'm with @Nathan Gesner and @Matt Mertz.  I'd go with 2 regular water heaters.  Tankless seems to draw a lot of power when in use and you'd probably need a monster for your house.  Also, like Matt says, ask a few local plumbers for their opinions.  They know what they fix more locally.   

There are definitely lenders that can make things happen.  I think the best advice is to keep calling lenders.  

In my experience, especially in your case, brokers are better than most direct lenders. Most direct lenders will only do conforming loans, often with their own overlays that make criteria stricter. Either way, keep calling. FoA has some interesting products. I just closed a house that Host Finance brokered and they used a Finance of America product. Host was built to broker short term rental loans. Also, Visio keeps saying they offer DSCR for STR.

As @Travis Timmons above said, make sure you have the reserves budgeted for the (hopefully) minor repairs, remodels, and painting that all vacation rentals / STRs seem to need.  As an Interior Designer/Decorator, I'm sure you already know the costs for decoration and furnishing, too.  A healthy reserve is a definite must!  I recently had my insurance tell me to "cut back" 8 60 foot oak trees.  After 2 trims they then said, "Lol, we meant your roof is too old -- replace it or we drop you in 3 months!"  A 30k roof later, we had still insurance!

For getting into one, DSCR loans are good. They may want experience, though, or they may only use the projected income from long term leases.

A vacation/second home loan lets you get in with a lower down payment, which will obviously hit cash flow, but at least you will have cash flow.  The interest rates are basically investment interest rates now, though.  The only real upside is the lower down payment.

Sometimes the best bet is to go in with partners.  That dilutes the risk and allows you to get in faster.  A lot of people have friends or family meters that also want investment real estate but never thought about how or what or that it is even possible for regular people.

Get to know your seasonality and how that affects your pricing trends.  You will also have a pretty standard booking window for the property type and season.  Usually 4-6 weeks, sometimes a tad longer.  If you know, and drop your rates before everyone else, you should get the 1st bookings for that month.

But, as always, especially when you're new, if you don't have bookings (and/or great ratings) you are priced too high.  Hire a top Realtor's favorite photographer, stage and decorate beautifully and write great copy,  Offer a new property discount and give those guests amazing service.  Get those 5-star reviews so the algorhythms like you.

For sales:

To tell if a property is in any type of market, you will need to know the recent history of the market, and then extrapolate into today and the near future.  There are a bunch of things to look at (DOM going up or down, cash sales vs financed, types of financing, closed sales going up or down, new inventory going up or down, average & median sales prices trending up or down, etc. . . ) and you'll want t o look at these for each market segment you are interested in.  DO NOT look at the market as a whole -- luxury sales will skew average sales and average sales will skew lower priced sales.  Distressed should be separate from flipped should be separate from "careworn," . . . 

To tell about a buyer's/seller's market, absorption is a really easy metric to use.  This is closed sales divided by active listings.  My market (overall) has had absorption halve from a year ago, so you could say we are trending crazy into a buyer's market.  But in real numbers that's 114% down to 63%.  That's still a crazy strong seller's market.  22% is a seller's market

Also, "months supply of inventory," which is related.  This is how long it would take to run out of inventory if nobody lists a house.  If you're in a very seasonal market, you'll want to account for seasonality.  My market looks like it has 35% less inventory overall than a year ago.  we are down from 1.7 months to 1.1 YoY.  You do need to dig into your target price point and house condition to be really accurate, though.  Just using price point should at least get you an overall average.

For rentals: (it's a little harder because there's no 1 source of rental data. Some people use only word of mouth, some use the MLS, some use FB marketplace, some Zillow, etc. . . )

I pick my target tenant (say, affording a nicely appointed 3/2 pool home near ____) and look across a few platforms to see what's available.  If there's a ton of nice things to choose from, you can say you will need to compete on price or amenities or something.  If there's almost nothing, then you can say its a landlord's market and you can maybe push rents a bit.

You can also track trending cap rates in your target market segment, as well.  

Again, it's better if you start tracking your target market segments and then you can see trends.  A snapshot isn't as useful as a 4D trending picture.

Shore Acres floods.  A lot.  It goes under a few inches when we get a day of rain. Check for how it looks during the storm (Ian) we are getting -- it will be pretty bad.  It's under mandatory evacuation right now.  More and more people are looking at the flood data and the insurance rates are getting pretty high.

Water access/waterfront property does very well and will be considered a luxury rental in most cases.  You will have the downsides of the flood / evacuation zones but you will get the higher returns of a luxury rental on the water which "should" balance it out!  Tierra Verde is a nice area -- it's not in the thick of things but it's not too far to downtown ST Pete or beautiful beaches so it will get the same occupancy I would expect in other nice areas. 

A long Term PM will average about 10%, while a STR PM will average around 18%. You'd may be hard pressed to find something long-term that will cash flow anything meaningful with the current sale prices -- everything's going for a 4 cap or less, at least in Tampa Bay.

But, as @Jason Wray points out, there is a lot of opportunity in Pinellas. That cash will get you into an STR that could have an NOI of anywhere from 55k to 85k. That should cash flow you well over 1,000-2,000/ month (or a multiple of that) depending on how much cash you put in and what purchase price you choose.  

Yeah, I think luxury STR should stay solid. Plus you always have the option to sleep less, while a 2-bed can never turn luxury! Just always make sure you're head and shoulders above your competition and you will always book 1st and book for more.