1st investment property as a vacation home for personal use/STR

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1st investment property as a vacation home for personal use/STR

Alex Duncan
Member since 2022 · 5 posts · 0 votes

Hello!  I am new to this forum, found it via the podcast and very excited to see all of these resources and advice available.  Over the last several months, I have been reading, listening and studying up on financial independence.  I am 38, I have a successful career in medical device sales management and have a relatively high income of $250k+ per year.  I really enjoy my job but it is extremely demanding and leaves little room for much else.  I am here because the concept of becoming financially independent through real estate is easy to understand and appealing, I at least have some experience in buying and selling 4 different homes (all primary residence) and I can have some level of control in the outcome.


I have a decent amount of capital available, about $300k liquid (that would require me to sell a few stocks/ETF's), I have nearly 50% equity in my house valued at just over $1M, and a healthy 401k etc.  My wife also has a decent amount of capital but we keep our finances mostly separate, and she is very conservative with her money.


I am ready to buy my first investment property, and I want this to be a property used for personal use as well as short term rentals.  Looking in Grand County, CO, likely Winter Park, Fraser, or Tabernacle (I live in the Denver area).  Likely a 2/3 bedroom condo.  I had a great conversation with a Realtor in the area today and am learning more by the minute
I also saw there was a thread on here dedicated to Grand County that I got some valuable information out of.  


Given all of the information I have shared, how would you go about doing your research to make your first investment as successful as possible? Basically, what would you do if you were me?  I realize this question is a bit vague, but appreciate any guidance!

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Jason MuthPro Member
Investor · Newburyport, MA · Member since 2015 · 58 posts · 40 votes
4y

Hi Alex - I found myself in a similar position when we bought our first investment property in 2016.

We went the Airbnb route, and now have 3, with a 4th being built as new construction.

Decided on markets about 1.5-2.5 miles from Boston, where we live, and they ended up being both cash-flowing and appreciating markets.

Not to say that you should go with STRs. Just saying that it's an idea if you do your homework, build your systems, network with people already doing it, are willing to invest some hand-on time while you learn the space, and get a but lucky (regardless of how prepared we are, luck is always a factors in anything we do, isn't it?)

Fast forward to the end result (well 5+ years later), and looking at my portfolio of assets now, and I feel very comfortable in how diversified I am. The troubles in the stock market that impact my retirement accounts so far this year haven't been fun, but they certainly have not been devastating because my real estate is acting as a counterbalance. I wish I had figured this out a few years earlier. But I've doubled my annual income in that period without relying on raises from my W-2. And now we have a ton of tax benefits from the investments.

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  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    4y

    @Alex Duncan

    Congrats on the big first step. Most of our Airbnb investors are in the Denver and Colorado Springs metro areas, and the surrounding front-range mountain towns, but the concepts are the same. There are infinite steps you could take if you want to break down how to buy a vacation rental into the minutiae, but I'd follow the KISS model -- Keep It Simple Stupid. 

    • First, know thy laws. First, make sure the city or county you're looking in allows short term rentals. Winter Park, Grand Lake, and Tabernash all allow them. But be aware -- and this is true for most mountain homes you see -- while the property has a city in the address line, they're likely actually in the unincorporated county and are subject to any county STR rules, not the city's. (Shameless plug: We're talking Airbnb laws in Colorado this Tuesday, though we won't cover details of the area you're interested in.) Also, if you're buying a condo, read the declarations. There should be a section for "Uses" and then likely a "leases" section. Most ski town condos allow STRs, but not all.
    • Second, find a good agent. This means one that knows what you can and can't do and knows how to run numbers and help guide you in the STR rental model. The agent should be able to help you with the first part above and the third part below.
    • Third, find a good lender. Just general good real estate purchase advice. What do you qualify for? What's the mortgage with 10% down and a second-home interest rate? What's the mortgage with 20% down and an investment loan rate?
    • Fourth, start running specific property through AirDNA. You've got a rough idea of your mortgage (from step 3). Now look at AirDNA's revenue projections for specific properties. Take out 40-50% to be conservative for costs (including 25% for management), and see what's left. Is it more than the number from step 3? Good, that's cash flow, and hopefully there's a lot.
      • All sorts of ideas about what makes a "good" return. I hate the real estate rules. (See the recent death of the "1% Rule" as proof.) I see people say you should make $100k gross for every $500k in property price or that you should get 20% Cash on Cash. Those are good rules of thumb, but they're just that, and not every market will support that. 
    • Fifth, buy a home, stage it, post it on Airbnb and VRBO, and start making money.

    I wish you the best in your search. Cheers!

      2Reply
    • Jason MuthPro Member
      Investor · Newburyport, MA · Member since 2015 · 58 posts · 40 votes
      4y

      Hi Alex - I found myself in a similar position when we bought our first investment property in 2016.

      We went the Airbnb route, and now have 3, with a 4th being built as new construction.

      Decided on markets about 1.5-2.5 miles from Boston, where we live, and they ended up being both cash-flowing and appreciating markets.

      Not to say that you should go with STRs. Just saying that it's an idea if you do your homework, build your systems, network with people already doing it, are willing to invest some hand-on time while you learn the space, and get a but lucky (regardless of how prepared we are, luck is always a factors in anything we do, isn't it?)

      Fast forward to the end result (well 5+ years later), and looking at my portfolio of assets now, and I feel very comfortable in how diversified I am. The troubles in the stock market that impact my retirement accounts so far this year haven't been fun, but they certainly have not been devastating because my real estate is acting as a counterbalance. I wish I had figured this out a few years earlier. But I've doubled my annual income in that period without relying on raises from my W-2. And now we have a ton of tax benefits from the investments.

      3Reply
    • Chantal Duame
      Realtor · Denver, CO · Member since 2017 · 15 posts · 19 votes
      4y

      Hi Alex, I used to be in pharma sales and felt it was soul sucking. I’m thankful for it though because I spent a ton of time driving from doctor’s office to doctor’s office listening to BiggerPockets and real estate investing books. Today I’m a realtor and just purchased by 4th property near Denver and short term rental all of my properties. It’s the most lucrative way to invest in real estate. It is a bit more work but I don’t spend more than an hour or two a week managing all my properties because there are lots of great tools to automate it. I would consider comparing investing in a single family home versus condo- the returns are significantly higher when buying a cabin. 

      2Reply
    • Catie Lawrence
      Flipper/Rehabber · Arvada, CO · Member since 2019 · 63 posts · 47 votes
      4y

      Congratulations! 

      Real Estate is one of the best ways to build wealth - and financial freedom! I was in your shoes as well, although didn't make quite as much ;) Through real estate, I was able to leave my W-2 last September and go full-time into the RE world. We short-term rent our house, and have short-term rented our investment properties as well. It's a great way to get in the game and get big returns. @James Carlson had great advice that I definitely echo. AirDNA is a great resource for the STR market.


      I'd factor in seasonality as well - perhaps using the rental yourself in the lower seasons. Talking to local resources is key - agents and maybe reaching out to Airbnb hosts in the areas you want to be to see if they'd be willing to talk to you. I love the Fraser area, spend quite a lot of time there - and have a friend who just purchased a condo in WP. She does pay the management company to run the Airbnb - think a lot of the HOA's up there mandate that.

      Cheers to you and feel free to reach out to chat more! I'm in Arvada.

      1Reply
    • Alex Duncan
      OP
      Member since 2022 · 5 posts · 0 votes
      4y
      Quote from @Jason Muth:

      Hi Alex - I found myself in a similar position when we bought our first investment property in 2016.

      We went the Airbnb route, and now have 3, with a 4th being built as new construction.

      Decided on markets about 1.5-2.5 miles from Boston, where we live, and they ended up being both cash-flowing and appreciating markets.

      Not to say that you should go with STRs. Just saying that it's an idea if you do your homework, build your systems, network with people already doing it, are willing to invest some hand-on time while you learn the space, and get a but lucky (regardless of how prepared we are, luck is always a factors in anything we do, isn't it?)

      Fast forward to the end result (well 5+ years later), and looking at my portfolio of assets now, and I feel very comfortable in how diversified I am. The troubles in the stock market that impact my retirement accounts so far this year haven't been fun, but they certainly have not been devastating because my real estate is acting as a counterbalance. I wish I had figured this out a few years earlier. But I've doubled my annual income in that period without relying on raises from my W-2. And now we have a ton of tax benefits from the investments.

      Thanks for the response, this is inspiring!  Do you manage the properties yourself or do you work with a property manager.  In either case, about how much of your time does this take?
      0Reply
    • Alex Duncan
      OP
      Member since 2022 · 5 posts · 0 votes
      4y
      Quote from @James Carlson:

      @Alex Duncan

      Congrats on the big first step. Most of our Airbnb investors are in the Denver and Colorado Springs metro areas, and the surrounding front-range mountain towns, but the concepts are the same. There are infinite steps you could take if you want to break down how to buy a vacation rental into the minutiae, but I'd follow the KISS model -- Keep It Simple Stupid. 

      • First, know thy laws. First, make sure the city or county you're looking in allows short term rentals. Winter Park, Grand Lake, and Tabernash all allow them. But be aware -- and this is true for most mountain homes you see -- while the property has a city in the address line, they're likely actually in the unincorporated county and are subject to any county STR rules, not the city's. (Shameless plug: We're talking Airbnb laws in Colorado this Tuesday, though we won't cover details of the area you're interested in.) Also, if you're buying a condo, read the declarations. There should be a section for "Uses" and then likely a "leases" section. Most ski town condos allow STRs, but not all.
      • Second, find a good agent. This means one that knows what you can and can't do and knows how to run numbers and help guide you in the STR rental model. The agent should be able to help you with the first part above and the third part below.
      • Third, find a good lender. Just general good real estate purchase advice. What do you qualify for? What's the mortgage with 10% down and a second-home interest rate? What's the mortgage with 20% down and an investment loan rate?
      • Fourth, start running specific property through AirDNA. You've got a rough idea of your mortgage (from step 3). Now look at AirDNA's revenue projections for specific properties. Take out 40-50% to be conservative for costs (including 25% for management), and see what's left. Is it more than the number from step 3? Good, that's cash flow, and hopefully there's a lot.
        • All sorts of ideas about what makes a "good" return. I hate the real estate rules. (See the recent death of the "1% Rule" as proof.) I see people say you should make $100k gross for every $500k in property price or that you should get 20% Cash on Cash. Those are good rules of thumb, but they're just that, and not every market will support that. 
      • Fifth, buy a home, stage it, post it on Airbnb and VRBO, and start making money.

      I wish you the best in your search. Cheers!

        Thanks James!  Do you have any thoughts or opinions on the Grand County market for investment properties?  Also, my goal is really to "retire" from my regular job around 5-7 years from now, are short term rentals a good area of focus or should I be looking elsewhere?  I having been catching up on the podcasts and David Greene mentioned that he does not view short term rentals as passive income.  Also, I learned that the property managers in the Grand County area charge between 35% and 50% of revenue on the rentals, that really surprised me they would be that high!
        0Reply
      • Alex Duncan
        OP
        Member since 2022 · 5 posts · 0 votes
        4y
        Quote from @Catie Lawrence:

        Congratulations! 

        Real Estate is one of the best ways to build wealth - and financial freedom! I was in your shoes as well, although didn't make quite as much ;) Through real estate, I was able to leave my W-2 last September and go full-time into the RE world. We short-term rent our house, and have short-term rented our investment properties as well. It's a great way to get in the game and get big returns. @James Carlson had great advice that I definitely echo. AirDNA is a great resource for the STR market.


        I'd factor in seasonality as well - perhaps using the rental yourself in the lower seasons. Talking to local resources is key - agents and maybe reaching out to Airbnb hosts in the areas you want to be to see if they'd be willing to talk to you. I love the Fraser area, spend quite a lot of time there - and have a friend who just purchased a condo in WP. She does pay the management company to run the Airbnb - think a lot of the HOA's up there mandate that.

        Cheers to you and feel free to reach out to chat more! I'm in Arvada.


         Congratulations on reaching your goals!  I would love to take you up on your offer to connect!  Would be happy to buy you lunch or coffee and hear your story.

        0Reply
      • Alex Duncan
        OP
        Member since 2022 · 5 posts · 0 votes
        4y
        Quote from @Chantal Duame:

        Hi Alex, I used to be in pharma sales and felt it was soul sucking. I’m thankful for it though because I spent a ton of time driving from doctor’s office to doctor’s office listening to BiggerPockets and real estate investing books. Today I’m a realtor and just purchased by 4th property near Denver and short term rental all of my properties. It’s the most lucrative way to invest in real estate. It is a bit more work but I don’t spend more than an hour or two a week managing all my properties because there are lots of great tools to automate it. I would consider comparing investing in a single family home versus condo- the returns are significantly higher when buying a cabin. 

        All of these responses are really opening my mind, I figured the condo route was the easiest and is what I am used to renting when I go to the mountains, but a cabin could definitely work.  Sounds like I need to do a lot more research and broaden my view.
        0Reply
      • John Krauklis
        Denver, CO · Member since 2017 · 33 posts · 21 votes
        4y
        Great plan.  I got heavily involved in str in Denver that made me some good money.  I bought a house in Avon, co in between Vail and Beaver Creek.  In 2018 it was $770,000 for a 5 bedroom, 3 bath house that needed a renovation.   The family and I spent the summer up there and I renovated it while enjoying the incredible outdoors all around. We put a hot tub and a fire pit in.  Now it pulls in $150,000 a year gross with about $50,000 in mortgage payments and overhead a year.  We use it a lot too.  Christmas to New Years is easily $30,000 of income.   I have gone with the big house niche and it’s worked out great.  It seems the hardest thing to find out about mountain properties is real rent numbers so there are mine.  
        now I am building new construction houses in Denver and about to move my family into a nice one in Bonnie Brae 
        good luck!
        0Reply
      • Jason MuthPro Member
        Investor · Newburyport, MA · Member since 2015 · 58 posts · 40 votes
        4y
        Hi Alex,
        We manage the properties ourselves with some help on the ground - for example, I have a guest at one of them now and he reporting hearing some chirping noise. I assumed it was a smoke detector or sump pump battery, because this has happened before. But when he told me where he heard the noise, it was coming from another unit (it's a 4-unit building in Provincetown). So I called our property manager, who are on retainer for issues such as this. I've called them in a pinch maybe 5-7 times over the years, and they are great. Showed up same day and let me know it was indeed another unit's smoke detector.

        I handled all of that while leading an all-day roundtable meeting with corporate folks in town.

        Just be prepared for stuff like that. Usually, the systems take care of themselves. And as long as you've invested time in building systems and having some type of eyes on the ground (for example, in NH, my neighbor cleans and takes care of snow removal), it's a couple hours each week at most for the majority of guests. Sometimes I get chatty people who text about a number of things. But usually I don't.

        If I decided to scale, I'd need more help on the ground. But Airbnb and VRBO take care of the marketing, I'm the primary point of contact with communications because I do it well, and my places are as full as I'd like them to be - which isn't to say 365 days. But any gaps I have are seasonal and expected.
        0Reply
      • James Carlson
        Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
        4y

        @Alex Duncan

        I know a lot of the STR markets in Colorado, but Grand County is not really in my wheelhouse. I'm sure they allow them there, and something tells me that Grandby Lake is a pretty big draw, but I don't know much more than that. I'd poke around AirDNA. (And if you're really bored, you can listen to me drone on about Airbnb laws in and opportunities tonight at 6 p.m.)

        To your larger question. Can you stop doing your W2 and focus on STRs? Yes, at a certain point in your progress, you definitely can. I have clients who are working toward that. If you're self-managing, then you could be pulling $3,000/mo per 4br house in the Denver area. (Or up to $5000-$6000/mo if you have a big house in the mountains.) You don't need too many of those before you can make it full-time. No, it's definitely not pass if you're managing yourself, but any serious property manager will take on so much stuff, that you're pretty much hands-off if that's the path you want to go. 

        Those rates sound like ski-town rates. Which is to say crazy high. I know some good short-term rental property managers that handle everything and charge 25% for everything. 

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