LTR vs STR as first investment

[Scott Deetlefs]

Good day BP community.

My wife and I are looking to invest in North Carolina. We are in the process of becoming permanent residents (still a 1 to 3 year process for us), which kind of limits us with regards to loan and financing options. 

We have been saving up for a down payment on an investment property, but we are at a bit of a crossroads with what step to take next.

On one hand, we want to get in the game as soon as possible and have considered getting an LTR property first, so we can begin to learn about the ins and outs of REI. We could potentially afford a relatively good property, we have about $50K to $60K towards a down payment (not great, but good). We have seen a few properties that are within our budget, but would obviously do some more thorough analysis on the properties before pulling the trigger.

On the other hand, we have been more interested in STR's since we planned to start investing in real estate. But considering we have to go with the traditional 20% down payment, we know we do not currently have the budget to get an STR that would stand out and have all the amenities that we would like to be able to offer and be in a great location.

So I would like to ask for some advice from all the experienced real estate investors on BiggerPockets.

Do we get in the game now? And could start making a small amount of cashflow and start gaining appreciation with an LTR.

Or do we continue to save up and get a better property in a good location with the amenities we would like to offer with an STR? Better cash flow, but not sure how long it would take to save up for something worth it.

Maybe I am overthinking it too much.

I know it is not as simple as I am making it seem.

So, any advice would be greatly appreciated.

[Jason Taken]

Hi there,

It sounds like you and your wife are at a crucial decision point in your real estate investment journey. Let's break it down.

First, congratulations on saving up for a down payment and considering your next steps carefully. Here are some points to consider:

**Long-Term Rental (LTR) Property:**

- Getting into the game sooner can be beneficial. You can start learning the ropes of real estate investing and begin generating some cash flow.

- With $50K to $60K, you can find a decent LTR property, but make sure to do thorough analysis on the property's potential for cash flow and appreciation.

- LTR properties often have more stable income streams, but they might not offer the same level of cash flow as a well-managed STR.

**Short-Term Rental (STR) Property:**

- STRs can offer better cash flow, especially if you can find a property in a high-demand area with good amenities.

- However, you mentioned you don't currently have the budget for an STR that meets your criteria. Saving up for a better property might take time, but it could be worth it in the long run.

- Consider using tools like the BiggerPockets calculators to run numbers and see what kind of cash flow you can expect from different types of properties.

1. **Analyze Your Finances:**

- Use the BiggerPockets calculators to see how much cash flow you can expect from an LTR property versus an STR.

- Consider your current financial situation and how much you can afford to invest.

2. **Research and Network:**

- Talk to other investors who have experience with both LTR and STR properties.

- Join local real estate groups or forums to get insights into the North Carolina market.

3. **Evaluate Your Goals:**

- Are you looking for quick cash flow, or are you more focused on long-term appreciation?

- Consider what type of property aligns better with your long-term goals.

4. **Consider Alternative Options:**

- If you can't afford an STR now, think about partnering with someone or exploring other financing options that might help you get into the STR market sooner.

### Conclusion:

Don't worry about overthinking it; it's good that you're considering all your options carefully. Take your time, do your research, and don't hesitate to reach out if you need more specific guidance. Good luck with your real estate journey!

Feel free to ask more questions or share more details if you need further advice.

[Jeremy Rosen]

Hi @Scott Deetlefs, I'm in a high-level STR mastermind with lots of operators in NC who're successful. Would be happy to connect you with them and share your contact info.

[Nathan Gesner]

Quote from @Scott Deetlefs:

The short-term market is saturated. There is always room to add another property and make a decent return, but it requires enough knowledge/experience to create a rental that is unique enough to attract renters away from the competition. It's going to take a lot more work to be successful with that.

[Scott Deetlefs]

Quote from @Nathan Gesner:

Quote from @Scott Deetlefs:

The short-term market is saturated. There is always room to add another property and make a decent return, but it requires enough knowledge/experience to create a rental that is unique enough to attract renters away from the competition. It's going to take a lot more work to be successful with that.

So are you saying we should go with an LTR first and develop some knowledge/experience before getting into STR's?

[Scott Deetlefs]

Quote from @Jason Taken:

Hi there,

It sounds like you and your wife are at a crucial decision point in your real estate investment journey. Let's break it down.

First, congratulations on saving up for a down payment and considering your next steps carefully. Here are some points to consider:

**Long-Term Rental (LTR) Property:**

- Getting into the game sooner can be beneficial. You can start learning the ropes of real estate investing and begin generating some cash flow.

- With $50K to $60K, you can find a decent LTR property, but make sure to do thorough analysis on the property's potential for cash flow and appreciation.

- LTR properties often have more stable income streams, but they might not offer the same level of cash flow as a well-managed STR.

**Short-Term Rental (STR) Property:**

- STRs can offer better cash flow, especially if you can find a property in a high-demand area with good amenities.

- However, you mentioned you don't currently have the budget for an STR that meets your criteria. Saving up for a better property might take time, but it could be worth it in the long run.

- Consider using tools like the BiggerPockets calculators to run numbers and see what kind of cash flow you can expect from different types of properties.

1. **Analyze Your Finances:**

- Use the BiggerPockets calculators to see how much cash flow you can expect from an LTR property versus an STR.

- Consider your current financial situation and how much you can afford to invest.

2. **Research and Network:**

- Talk to other investors who have experience with both LTR and STR properties.

- Join local real estate groups or forums to get insights into the North Carolina market.

3. **Evaluate Your Goals:**

- Are you looking for quick cash flow, or are you more focused on long-term appreciation?

- Consider what type of property aligns better with your long-term goals.

4. **Consider Alternative Options:**

- If you can't afford an STR now, think about partnering with someone or exploring other financing options that might help you get into the STR market sooner.

### Conclusion:

Don't worry about overthinking it; it's good that you're considering all your options carefully. Take your time, do your research, and don't hesitate to reach out if you need more specific guidance. Good luck with your real estate journey!

Feel free to ask more questions or share more details if you need further advice.

 Thank you for your response.

Lots to take in and think about.

[Madri Koppe]

I would think through what your goals are and what makes the most sense. If you know already you aren't in a position to operate the STR at the level needed to be successful, I would focus on LTR and getting experience and look to do a STR later.

[Nathan Gesner]

No, I am saying you need to really know your numbers before jumping in. Long-term rentals have existed forever and are a proven investment vehicle. Short-term rentals tend to do better with cash flow, which is increasingly difficult in a saturated, heavily regulated market. I believe short-term rentals can still work, but you need to really be on your game.

[Mercy Odey]

Depending on your goals, you can start with a short-term rental (STR) through rental arbitrage. Consider renting a furnished house that includes the amenities you want to offer. This strategy allows you to generate income while saving up for a long-term rental (LTR). Additionally, you can rent it out as an LTR during the off-season to ensure a steady cash flow. I know some landlords who accept rental arbitrage and have properties with good profits; I can connect you with them if you're interested. Check your direct messages for more information.