When Investing in STRs, Don’t Ignore This Important Cost

[Alexa Ferguson]

The short-term rental (STR) strategy is a great way for new investors to get in the game and fast track their journey to financial independence, due to the huge cash flow it generates. This strategy can take on different forms depending on the market in which it is executed. If you purchase a STR in an established vacation destination, such as a Florida beach town or the Smoky Mountains, it often comes furnished and you don't need to worry about setting up your unit.

In a metro area, however, this is usually not the case, and is something many investors fail to take into account when running the numbers on a potential STR. They focus only on cash flow, taking into account typical monthly costs such as mortgage, utilities, reserves, capital expenditures, cleaning fees, etc. While this analysis is certainly important, investors in metro areas cannot ignore the upfront time and money required to get an STR up and running.

In analyzing a potential STR investment in a metro area, include these estimates as upfront costs (these are strictly furnishing expenses, not including any rehab work):

- Living Room: $2k⠀⠀

- Dining Room: $700⠀

- Kitchen: $750⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀

- Bedroom: $1.5k⠀⠀⠀⠀⠀⠀⠀⠀⠀

- Bathroom: $300⠀⠀⠀⠀⠀⠀⠀⠀⠀

You can certainly furnish a STR for more or less, but these are numbers I try to stick to in putting together a nicely furnished rental that includes personal touches and local flair.

If you have any questions about STR investing, please don't hesitate to reach out!