My New Strategy for Starting out!?

Question

I thought my first deal strategy was to get a MFH with a FHA, and do a house hack. Now I have my dad as a partner and he will loan me half of the 20% down + closing costs to get into the deal. We learned that STR- Airbnb specifically, could earn double NOI. It appears a single family property for ~$100-125k could bring in roughly $30k in NOI on a short term rental in desirable FL areas, and based on rent prices in the area it would be half that NOI for a 12 month tenant. This seems like the best approach for example a condo/townhome in FL because you can find low purchase prices, as in a comparable growth market like the Carolinas or TX.

Does anyone have experience with starting out in short term rentals like this vs. MFH? What are we missing that doesn't make this the best option for starting out? What made it a good/bad deal? Did Airbnb turn out to be cash flowable every month or volatile? If you did remote investing was it manageable over the phone/computer for the most part, with a local property manager? Is 20% conventional the only loan type for this? After year 1 we want to get into a 2nd property.

Jonathan Greene · Answer

Of course, the potential NOI looks better for STR, but the upkeep is much, much more in terms of time and management. To do a first investment as a short-term rental and win, you have to know the market, understand the HOA structure and allowability in FL, you have to know the management costs (could be 15-20%), and the science behind pricing, changeover/cleaning, and competition in the market. I would not advise a condo Airbnb in FL for a first-time investment. FL HOA are some of the toughest around, meaning old people are in control of them and they like what they like, so even when the bylaws look Airbnb-friendly, the reality is not always the case, depending on the area and development. If you like FL, I like long-term rental in the Lakeland area right now because of the influx of jobs coming.

Joe Vairo · Answer

I was in the same boat. I wanted to do a triplex or quadplex, but the cash flow of that vs a STR wasn’t even close. I ended up going with a STR for the first one because the cash flow was that much better.It made it a better deal for us because we can still use it occasionally when we travel to the area but still make plenty of money to cash flow more than that of buying a triplex or a quadplex.In the end it really comes down to what are your goals for the first property. Do you want to have a long term tenant and more peace of mind while have a little bit less cash flow. Or are you willing to be a little bit more risky and go times without a tenant but have the ability to make more cash flow per month. With the STR’s you will have big months bringing in more money then you will have slower months in the off-season as well.The 20% down isn’t the only type of loan you can use, there are possibilities To put less Down, if you use it as a second home/vacation home.

Joe Vairo · Answer

@Jonathan Greene That is a very good point, a lot of the condo HOA's in Florida barely allow you to rent out long term let alone STR. There is a lot of influx of Jobs in the entire central Florida area. It seems like they're continuously building more and more around the area.

Joe Vairo · Answer

The STR is in Orlando. I started looking for both the STR and Multifamily in Fort Lauderdale and South Florida. Then came across a couple different deals that made more sense in Orlando, so then I started looking there and running the numbers.

Joseph Umberto · Answer

@Joe Vairo Thank you Joe, coming back to this late. I'm really not surprised on your response in regard to the cash flow on STR vs. 3-4 unit. I see you're from Ft. Laud is that where your STR is? Same place you were looking at multi-family for the first? Did you use FHA? Thanks for mentioning the second/vacation home loan I'm sure these are common in places like FL.

Austin Drew · Answer

@Joseph Umberto The first property I bought was a triplex through an owner occupied loan. It was a lot of work, rehabbing all three units, and managing the tenants. The cash flow for this building was decent. The 2nd property I acquired in WPB was a STR, and the cash flow for this was about 2-3x more depending on the month, if you get a good PM this will offset the difference in time you would spend managing a LTR compared to a STR. Still allowing yourself to make more cash with a STR.

Joseph Umberto · Answer

@Jonathan Greene @Joe Vairo Noted on both fronts. Johnathan thanks for dropping the truth bomb, I do have personal experience with HOA in FL and this is one of the only negatives you can find when looking at props down there. As far as Central FL I heard Orlando has restrictions on Airbnb? Better in Kissimmee? Lakeland I'll have to dive into.