Buying Multiple STR's as a Newbie

[Michael Harris]

Hi everyone!

I am a 26 year old from Colorado that finally feels ready to take the jump in to buying some investment properties. After a lot of thought, I keep coming back to the short term rental space. I am a lender who has been fortunate enough to save up a good chunk of money over the past couple years. I have enough liquid funds to the point where I could buy multiple properties in different markets and still have a good amount of savings. 

There is a couple reasons that I am considering the STR space.

1) love to travel and it gives me an excuse to do more of it. I know from a pure investment stand point that this doesn't make a difference, but I figure if it gives me a little motivation to work on finding deals it can't be a bad thing.

2) My wife is currently a stay at home mom who has been wanting to find some extra work to keep her busy. I have full confidence that between us we would be able to figure out how to manage STR's long distance. I actually think she would enjoy it.

3) I like the idea of purchasing properties in different areas as a way of diversifying. My thoughts are that if for example I own a home in Branson, Phoenix, and the Smoky Mountains I would be more protected than if I owned three properties in the same area.

Any advice options would be greatly appreciated. My main concerns are based around future STR restrictions, STR's in the case of a recession, and starting having no experieince in the STR space.

To everyone out there helping newbies like me, thank you!

[Melanie Johnston]

@Michael Harris Congratulations on starting your journey toward building your STR portfolio! I have helped a number of BP investors buy STRs in Scottsdale and half of them are first-time investors who manage their properties themselves. So once you lock down a cleaning crew and repair person, managing from afar becomes much easier.

As far as regulations go, this is a hot topic in Metro Phoenix. Five years ago the governor said cities can't regulate the minimum number of days people can rent their homes out. Previously cities like Scottsdale imposed a 30-day minimum stay to protect their largest industry...tourism and resorts. I had a STR rental and we just booked 30-day stays, mostly to Canadians and winter visitors from Chicago and New York. But of course that made "low season" months in the summer a little harder to fill.

Under the new laws, cities can't regulate length of stay, but homeowners associations can. So I encourage buyers to search in non-HOA neighborhoods. I also route buyers away from neighborhoods where I know there is subtle resistance, such as a few pockets in Scottsdale where homeowners have planted "Homes Not Hotels" signs in their yards.

Having said that, there is a lot of hoopla around regulations, but when it comes time to make changes, cities have only imposed minor inconveniences, such as registering your rental to ensure you are paying transaction privilege tax and posting the name and number of a local contact who can be on the scene to respond to any noise calls made to police.

Whenever there are any campaigns to limit rentals, STR owners show up at the state house to defend their property ownership rights, so regulation attempts have been limited to the kinds of overlays I've mentioned above.

No one wants major party houses in their neighborhoods, so choosing your tenant type wisely and setting your STR up in a way that doesn't accommodate huge crowds is a hedge against attracting unwanted attention.

As far as price points, while there are a few condo complexes that allow STRS, the majority of STR buyers are purchasing SFR with pools to maximize their revenue. Budget a minimum of $500,000 for finding a home in Metro Phoenix.

Hope this helps. Feel free to ask me anything.

Melanie