All Forum Posts by: John Ferguson

I think this is a personal question, as it depends on what you can get doing other things. Myself for example, can get 7-10% in stocks/bonds, 10-12% in Hard Money Loans. So anything better than 12% would be a good cash on cash return. However, with the inherent risk (and reward of appreciation) I would say no less than 15% but I will only do 20%+ as well. If it is possible for you to qualify for an investor loan and you find a decent fixer upper in a good STR area you could do a BRRR an really maximize CoC return.

Hey John!

Great to meet a fellow Phoenix-ian!

The PHX market is a bit crowded with STRs/AirBnB at the moment. A lot of landlords have reported not as optimized returns this year. Also with Scottsdale's now stricter rental and license policies, it's definitely a scenario to keep in mind. 

Definitely not trying to deter you from this, just wanting to play devil's advocate. There are definitely STR deals to be had, it's just a bit harder in today's climate.

What parts of town are you targeting for the STR?

Looks like you are in Phoenix. I'm in Scottsdale/Phoenix/Mesa so I have a pretty good idea of what's going on in your local market.
Well, you start with the numbers.
Add up your monthly costs - mortgage payment, insurance, property taxes, power, water, internet, pool maintenance, landscaping, HOA, STR fees, etc. That gives you a monthly nut to crack. It takes time to ready an STR, so factor in holding costs of a couple of months. And your time and effort.

Then combine

1. rehab/updating costs to the out of pocket amount to

2. furnish a house that people would want to stay at.

Those are more expensive than it seems at first.

Now you have three numbers. The amount you'd need to get started, the monthly costs and the cost to furnish. For most STRs right now (it's summer and 111 degrees) bookings are on the light side. According to AirDNA and AllThe Rooms you can generally expect about 60% to 65% occupancy after you have a few positive reviews. Getting those reviews can take a few months.

So now, you go to AirDNA and look at how much people are getting for their properties, take a look at the pictures so you can see what people are paying for and calculate the return.

I can run the specific numbers for you over coffee and explain them to you to see if that is the direction you want to go. Most people, when we sit down and go over actual numbers decide that simply joint venturing with me for a greater return and less hassle better suits their goals. But, I'm always happy to sit down with anyone, as I do with folks from SoCal and locally, and go over their investing options, especially if they want to make 401(k)s and IRAs work for them, even if they insist on STRs. It just takes a little specialized information to succeed.

Nothing less than 20% for sure! Tony Robinson has an analyzer you can download and of course a how-to video on how to use it.

For me it depends on the property. Sometimes I just love the property that I would be willing to indulge 15%. That would be somewhere I would want to visit from time to time.

Like @Leslie Anne Morris said, in this market, 20% would be considered a good return for sure.

Previously I looked for 30%, in this market I'm around 20-25%. It also depends on what I'm looking to add to my portfolio. Territory, quality of property, etc. I might be willing to accept a lower ROI because I'm satisfying other goals on rounding out my portfolio.