STR vs. Long Term Rental for First Real Estate Investment?

Question

My wife and I have finally saved up enough to start to look into real estate investing and we are debating between an STR in a destination market (think Breckenridge, Tahoe, etc. - likely one 2BR/2BA or 3BR/2BA unit) or longer term rentals in a growing market (think suburbs of Austin, Nashville, etc. - likely two 3BR/2BA units).

Both would be managed remotely, though we have a lot of family in the potential STR market (retired parent who could help) and we could use the STR unit ourselves for 1-2 weeks per year. Long term rental would require a property management company (we live in a HCOL area that we can't buy in).

Ultimate goal of the STR market would be breakeven cashflow with unit appreciation (since we would be using it for vacation as well) vs. long term rental requiring cash flow + long term appreciation.

We would love any advice or learnings from others who made similar decisions when starting out.

Melissa Wesling · Answer

Hi Trevor, when you look into the STR markets, be sure to research the short-term rental regulations. Breckenridge has some new regulations and Tahoe is pretty strict as well. I know those were just examples, but I wanted to mention it. PM me if you'd like to discuss rental friendly markets.
We own short-term and long-term rentals. For us, the long-term rentals are passive. The STRs require much more time from a property management perspective, but also have higher returns. Wishing you success in the new year!

Luka Milicevic · Answer

@Trevor Matern

Welcome to the forums....

If you're going to STR route, make sure you are in an STR friendly area. Think tourist destinations. I would research STR regulations in depth before entering any market.

I'm in the Nashville area now. It's not much for cash flow, more of an equity/appreciation play at the moment. Has been that way for a while now. Let me know if you have any specific questions about that market and I'd be happy to answer them.

Bruce Woodruff · Answer

If you can find an area that welcomes STRs, AND you can find a good team to work with, you will make a lot more $$. And no they are not a lot more hassle or stress. You must find a great cleaner though....

Jordan Moorhead · Answer

@Trevor Matern personally I look at LTR as safer and STR as more risky but I don't have a lot of experience long term with STR, nor do I have data to show what happens if there's a downturn

Kyanne Mader · Answer

Hey Trevor,

STR vs Long term really depends on your goals and risk tolerance

STR is going to likely have a higher cashflow, but you will want to get a really good management company and it is a higher risk.

Long term is smaller cashflow but less risk and long term gain.

I live and invest in the Nashville/middle TN areas so I am happy to discuss any questions you might have about this area.

STR vs. Long Term Rental for First Real Estate Investment?

STR vs. Long Term Rental for First Real Estate Investment?

Most Popular Reply

5 Replies