Do STR make more sense with my goals?

Question

Since I started educating myself on real estate as a way to invest my money, I have had LTR in the back of my mind. Realistically thinking about what is my goal with RE, I have come to the conclusion it isn't to retire from my job, but reduce the time I put into my job. I enjoy my work, I only work 24h a week( so I have extra time to focus on managing real estate). After taxes, I comfortably save 80k CAD (62k USD) a year. I am a sub-contracted worker, but my work is very mentally and physically demanding. I would like within the next 8 years to reduce this to 12h a week, and would like to replace half my monthly income through real estate.

So with this in mind, my goal is more cash flow. I don't have any experience with renos and don't feel comfortable yet taking on a BRRR project, especially at a distance. Since the start of this year I have dedicated minimum 2h/day to REI education wether thru books, podcasts, market research this forum etc. I am not opposed to putting in the work. From my understanding, STR are more time-consuming. Involve more upkeep. And can result in repairs etc. I am okay with that as long as I am profiting.

I would be investing in the US from Canada. I have about 80k CAD (62K USD) saved at the moment.

When I look in markets like Cleveland, I can buy 2 turnkey properties a year with about 350 cash flow for each. (Not saying this is my strategy but would like to discuss this with members of this forum)

Say my goal is 3.8k USD (5k CAD) it would take me about 10-11 properties to reach this. About 5 years. Not taking into account the additional cash flow, potential equity or anything which would all be reinvested.

If I go into a market where the STR strategy works, based off what I have read and heard I may reach this 3.8k USD number much quicker.

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What are some things I may be overlooking?

Is my current savings enough to get me into an STR market? ( I have looked into some cities in Florida that seem to be in my budget)

Reading some old posts it seems most investors spend anywhere from 4-6h/week per property managing STR is this an accurate number?

Other than being more "passive" is there any reason I should do LTR over STR?

One thing that concerns me is the property sitting vacant most of the year. Is this a valid concern?

Ashley Cross · Answer

STR are successful with proper property management. You'll essentially be building a business. You'd have to really ensure you have boots on the ground to cover any issues that come up. When you start you'll definitely won't be spending 4-6 hours on a STR. It takes time to get your processes and people in place. Also, how often do you plan to travel to the area where the property is? You'd need to ensure you budget for travel expenses as well. LTR are more passive but it's not completely passive. Cleveland is a great market to start because it's a low entry point but with older homes that are priced lower there will be issues and headaches to deal with. A tenant turn or a large capital expense can blow your cashflow for the year. That has happened to me repeatedly with my cheaper homes. No matter what direction you take you need to have a solid team (property manager, realtor, contractor, etc) that you can trust.

Ricardo Hidalgo · Answer

STR is a business and it comes with different challenges in contrast to traditional renting. You will need to adjust rates, constantly market the property, give incentives for bookings, look at the months ahead to see its challenges. It's always changing and you must continue to better your service to bring back quality customers.

Kevin Pillow · Answer

You can always do some research on the Emerald Coast for cities like Destin, Seaside and Panama City Beach. If you're looking for stable regulation and Average Daily Rate growth I think it's worth a second look.

David M. · Answer

@Gurjot Grewal

Be careful with the STR. Its not necessarily going to be "stable."

Since you have 8 years, generating cash flow right now isn't your goal. Yes, there is a dichotomy of REI strategiy between cash flow and equity... Build equity now so you have more to cashflow later. Have you looked at other investments as well that can provide more stable income?

Also, just because you are cashflowing now doesn't mean it will cash flow later... Also, the inverse is true: just because you are NOT cashflowing now doesn't mean you can't cash flow in 8 years. For example, rents could increase.. interest rates change. Or, which most people skip, is you build up equity in your properties and you refi or recast your loan. Your mortgage payments go down. Now you have "banked" equity in case you want to sell AND its cash flowing now. This can help you increase your leverage at the start.

There are many ways to play this game. Good luck.

Account Closed · Answer

I am currently looking to invest in STR as well. From my research, you have to be very careful on the new local government regulations. Lets say for example in the Smokey Mountains, there are working on limiting STR permit to a certain number per person. Also find out if you need to pull permits for short-term rentals. The current LTR we had for our townhome cannot be rent for less than a year per HOA rules. Another things I am considering is also if I can put a team in place, such as the handyman and the cleaning crew. They are the "superstar" for your STR, especially investing from long distance.

James Wise · Answer

We've been doing really well with our Short Term Rental portfolio in Cleveland. The amount of short term rental demand is much higher than you'd expect in a market like Cleveland. Not the place one thinks of when they think vacations but we get a ton of folks coming in for work and wanting to rent furnished properties for 30+ days and things like that.

Ashley Cross · Answer

I have short term rentals in Columbus. Starting was tough because me & my husband were doing EVERYTHING. Now we’re getting to the point where we have a good crew that we’re slowly giving the reigns to. I’m hoping to get into the Florida market next year once I have all my processes in order in Columbus.

Gurjot Grewal · Answer

@Ashley Cross

Thank you for your insight. Have you done any STR yourself? Whats your typical strategy in cleveland if you dont mind me asking. Im planning every 4 months to spend a few days in whichever market I choose. Would you recommend more often?

Before making a purchase ill spend a week in the area.

Do STR make more sense with my goals?

Do STR make more sense with my goals?

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