How To Make The Leap

Question

How do you know when is the right time to make the leap? We're considering a STR. How do you know when to pull the plug and purchase your first investment? It's such a big purchase when you have a family with little ones involved.

What were some of the mistakes you made with your first time purchase or running a STR?
What would you have done differently?
Any tips to share, I would be forever grateful!

Thank you!

Tracey Wittke · Answer

@Shannon Vistisen I have invested in Northern MI for the last 8 years. We bought our first STR when our kids were younger and believe me it was a financial risk for us but it’s paid off. The property has about 300k of equity in it if we were to sell it today. I took a chance and bought 8 more properties within the same area over the last 5 years, we actually just closed on one last Friday.My advice… choose the area and watch the market closely. Set alerts on your phone whenever something new gets listed. Call the county and get put on their foreclosure list. Drive around and look for properties that look unoccupied, send letters offering to purchase. Look at FSBO! If you find something WORK your numbers. Every investor invests differently depending on what their end goal is. So there is no “golden rule”. If I can be of any more help let me know. I live in Northern MI and am very familiar with the area.

Jaron Walling · Answer

@Shannon Vistisen As an investor with some experience and knowledge gained from these forums, and friends in real life the STR game isn't what it's cracked up to be for one reason. See below. STR > Flip > LTR when it comes to the level of effort required to manage. It's not an easy buy/hold investment. It's a part-time job in most cases. Go back in time to 2012 when deals were easier to find if you had money. Would you buy a STR? Probably not. You'd buy two long term rentals, cash-flow, and build wealth via massive appreciation depending on where you purchased. In my opinion buying a STR in today's market is a luxury. If you're leveraging a lot, pulling equity, or over paying just to buy the property (I mean lux vacation rental) it's probably not a wise investment choice. If you don't have to do those things you're probably in a great buying position so go after it. Buy the location, build an experience for summer and winter seasons, and have fun with it.

Evan Polaski · Answer

@Shannon Vistisen, my wife and I owned an Airbnb for about 15 months before selling.Pros: we made money, my wife got to implement some fun design ideasCons: she self managed and therefore worked in the hospitality business; monthly, we made about the same as a LTR for a lot more work; continual work, even if it is a couple minutes at a time, those couple minutes come in the middle of dinner, bed times, etc. Even having 3 cleaners on call still left us cleaning the place from time to time. Constantly concerned about reviews, and therefore feel the need to cater to all requests at the risk of getting a bad review. Constant concern about occupancy and making sure your place is rented almost every night.Mistakes: we bought in a great neighborhood for locals, but not the most sought out area for travelers; 1 bed house with sleeper sofa; under budgeted the cost of all the random disposable items (paper towels, coffee, toilet paper, etc).Would my wife and I do it again: maybe. We would certainly look for a more year round vacation destination. We would hire a management company to run it. We would buy a bigger house that can sleep more people. We would not go the "beds and heads" route, per se. Our friend that runs a dozen in Phoenix mentioned that, unless you want a bunch of college kid parties, you generally need 1 full bath per bedroom. We want something unique, i.e. https://thecliffs.house that is no longer reliant on Airbnb.We never had a disaster, a few headaches fighting refund requests with Airbnb, but no major issues. Back to college party issue: you are responsible for all furnishings, sheets, etc. So if a guest breaks the bed, yes you can make a claim to be reimbursed, but you need a new bed NOW. And then you also have the headache of battling Airbnb and the guest to get reimbursed.

Nirmal Khanderia · Answer

Hi Shannon,I am in the same boat as yours. I started by listening to the podcasts for Short Term Rentals on Bigger Pockets. And read Avery Carl's book " Short Term Rental; Long Term Wealth". This book is so complete, practical and business like. Tells you what to do and WHAT NOT TO DO. She makes the entire journey so simple and easy.Now I have scheduled a consult with "The Short Term Shop" for further course of action.

Tim VandenToorn · Answer

“Don’t wait to buy real estate, buy real estate and wait.” Harv Eker I don't know who Harv is, but this is golden advise. =) I would love to chat about my experience and journey if interested. I invest primarily in Single family's and small multi-family units. In my portfolio I have commercial office, short term vacation rentals, and a very healthy amount of long term single family investment properties, mostly in Grand Rapids Michigan. I am also part owner of United Properties of West Michigan, were we manage around 120,000,0000 million in assets under management.

Shannon Vistisen · Answer

Thank you @Evan Polaski That’s helps. Thank you for sharing your experiences. It’s easy to get caught up in the fun aspects of it and not put the “not so fun” logistics of running a STR as priority. The Cliffs is breath taking!!!! They did such a beautiful job with that piece of property. I love that they don’t have to rely solely on Airbnb for business. But they now have given me goals to shoot for. I really appreciate your time and help! It’s helped out a lot and has put things into perspective. Have a wonderful week!

Bryce Clark · Answer

Hi Jason, I agree with most of the other items you said in the thread but this comment. I've certainly heard the horror stories with STR, but also how to stay away from them by doing things the right way and leaning on the software automation available today. I know multiple STR owners with multiple and even large properties that don't spend more than 2 hours(!) a week managing their entire portfolios listed on Airbnb. Once it's set up, of course. It's really possible. I've seen the light! Lol @Shannon Vistisen, you got this! Like Jaron said, utilize AirDNA, learn all that you can. I would say soak up all that you can on Youtube... There's so much helpful info now, more so than even just one year ago. I'm also a Michigander and have been researching up north markets nonstop for the last year. Feel free to reach out!

Bruce Woodruff · Answer

@Shannon Vistisen If you have to ask, you're probably not ready. You'll know when to jump in. You already know your desired market, you have the money and the will to do it....I suspect it's just fear holding you back.I would not wait too long though......the combination of still low interest rates and rising inflation make this the ideal time to buy. Wait too long and the Fed will/might raise rates to slow down the inflation. Then all your numbers change.... for the worse....Ask yourself this - why aren't you buying something today?

Shannon Vistisen · Answer

Thanks @Jaron Walling I do see it as being a side gig to an extent. It's mainly the area that I would be purchasing in. The growth of the location has only grown even before COVID. It's a drive to destination spot for the state and a lucrative vacation rental spot. When looking for the property, it would have to have the capability of renting as a LTR as well - so I have plan B for any reason that the STR doesn't pan out. My main goal is to own property of there. Looking 15-20 years down the road, anyone that owns property in that area will win just in appreciation. I was hoping to gain quick cash flow to purchase another piece of property not to long after the first one. Even if I'm breaking even, I can see it as a win because the appreciation of the owning something in the area. Am I viewing this incorrectly? Or seeing this through Rose colored glasses. I'm hear to learn so anything you may share, I'm all ears. Thanks for the help!

Shannon Vistisen · Answer

Thanks @Tim VandenToorn I would love to talk about your experience in real estate investing. Right now, I’m focusing on a short term rental for our first property. My larger goals are to have a few STR & LTR properties. But starting off with one to get my footing within the field. Thanks for anything that you may be able to share with me!