Moving Overseas for 6 months at a time, Need some advice on Investing

[Eric Piccione]

I'm moving overseas with my wife and daughter to be closer to her family and I'm trying to figure out the best way to proceed.

I work in remote sales so as of recently, my commissions have been great. That said, while we're abroad, I'm trying to take advantage of the time we have when we have good income to set ourselves up nicely from a financial perspective.

In order not to "burn any bridges." We're planning to keep our current primary residence in the states and potentially list it as an STR. That way we have a home base if and when we decide to come back for a few weeks/months.

Doing some research on Airdna, there are only a few properties that have the same features/amenities as us (8 in the whole city) and they range from $250-$1,100/night in the winter.

We'd be one of the only properties in our city with certain amenities (gym and hot tub) So my rationale is that we'll be able to charge highly for a unique experience. My only issue is that our mortgage payment is quite high as we never intended to make our current primary residence a rental in the next 5-10 years. So in order to break even as a STR, we'd need $4,200/m (15% management fee - $3,500 for mortgage + utilities)

Likewise with a LTR we'd break even past $3,200/m which seems more than attainable since comps come in from $3,500-$4,000 for similar listings.

My 2 questions are;

1. Would it be worth to try a STR or just go to LTR for the property to make less revenue but also have less expenses?

2. Since we live overseas and our monthly expenses are much lower, would it make more sense to pay off all or a portion of our home in the states or just look to expand our portfolio?

I feel like I would regret not at least trying a STR for our property as it could work out well for us. At the same time, I to minimize my downside in investments so LTR's would be a more consistent cash flow option (at least to me)

Something my wife and I have thought about doing is at least reducing the principle balance so that whichever option we go for, we at least aren't losing money every month.

Really looking for some clarity here as these next few years are going to be very important in order for us to set ourselves up well for the future.

Thank you in advance for your thoughts and advice on this topic!

[Sean Hudgins]

@Eric Piccione Have you already been quoted the 15% for the management fee? That seems low for STR management, though I am in a beach town, so my prices may be very different.

My advice to you is first to pay down the principle and refi to a point where you will feel more comfortable carrying the payment if you have a slow month as an STR or any vacancy as an LTR. I don't know what that looks like for you, but deciding where you want to be payment-wise is a good starting point.

I think in your situation, starting with it as an STR is a great move. Your revenue is higher, and as you said, it gives you a place to stay when you travel back to the States. The upside to this is that you have a remote job, and if things went terribly, you could always travel back to the US and get your house in order, i.e., furniture in storage or sold, and then either sell the house or rent it long term. Doing the opposite order would likely be more challenging; if you LTR first, then you have a year of tenant wear and tear, and if you wanted to try and STR, you would have to come back and source new furniture.

Investing is always a risk and reward continuum, and if you have the opportunity and the financial ability to weather the storm with the higher risk and reward, then I would do that first with backups in place in the event that it doesn't go to plan. 

[Bjorn Ahlblad]

If your mortgage is low rate money keep it don't do a paydown. Check local laws re STR. If that works it is likely your best option. CF is only part of the calculation and may mislead you. Always look at the overall return.

[Eric Piccione]

Quote from @Sean Hudgins:

@Eric Piccione Have you already been quoted the 15% for the management fee? That seems low for STR management, though I am in a beach town, so my prices may be very different.

My advice to you is first to pay down the principle and refi to a point where you will feel more comfortable carrying the payment if you have a slow month as an STR or any vacancy as an LTR. I don't know what that looks like for you, but deciding where you want to be payment-wise is a good starting point.

I think in your situation, starting with it as an STR is a great move. Your revenue is higher, and as you said, it gives you a place to stay when you travel back to the States. The upside to this is that you have a remote job, and if things went terribly, you could always travel back to the US and get your house in order, i.e., furniture in storage or sold, and then either sell the house or rent it long term. Doing the opposite order would likely be more challenging; if you LTR first, then you have a year of tenant wear and tear, and if you wanted to try and STR, you would have to come back and source new furniture.

Investing is always a risk and reward continuum, and if you have the opportunity and the financial ability to weather the storm with the higher risk and reward, then I would do that first with backups in place in the event that it doesn't go to plan. 

Definitely, We're leaning toward that option as it gives us a Plan B. I would love to arbitrage the $ to get more properties but at the end of the day, if we stumble across a solid STR opportunity, then we're in a good spot to be able to pay down a portion. Our rate is 5.6% so it's not terrible but it's leaving us in a tough position as our necessity for STR income is quite high so paying down a portion would be great. My thought would be to do a rate term where we don't pull cash out but just adjust rates when they go down. (Whenever that will happen)

[Crystal Smith]

Quote from @Eric Piccione:

I'm moving overseas with my wife and daughter to be closer to her family and I'm trying to figure out the best way to proceed.

I work in remote sales so as of recently, my commissions have been great. That said, while we're abroad, I'm trying to take advantage of the time we have when we have good income to set ourselves up nicely from a financial perspective.

In order not to "burn any bridges." We're planning to keep our current primary residence in the states and potentially list it as an STR. That way we have a home base if and when we decide to come back for a few weeks/months.

Doing some research on Airdna, there are only a few properties that have the same features/amenities as us (8 in the whole city) and they range from $250-$1,100/night in the winter.

We'd be one of the only properties in our city with certain amenities (gym and hot tub) So my rationale is that we'll be able to charge highly for a unique experience. My only issue is that our mortgage payment is quite high as we never intended to make our current primary residence a rental in the next 5-10 years. So in order to break even as a STR, we'd need $4,200/m (15% management fee - $3,500 for mortgage + utilities)

Likewise with a LTR we'd break even past $3,200/m which seems more than attainable since comps come in from $3,500-$4,000 for similar listings.

My 2 questions are;

1. Would it be worth to try a STR or just go to LTR for the property to make less revenue but also have less expenses?

2. Since we live overseas and our monthly expenses are much lower, would it make more sense to pay off all or a portion of our home in the states or just look to expand our portfolio?

I feel like I would regret not at least trying a STR for our property as it could work out well for us. At the same time, I to minimize my downside in investments so LTR's would be a more consistent cash flow option (at least to me)

Something my wife and I have thought about doing is at least reducing the principle balance so that whichever option we go for, we at least aren't losing money every month.

Really looking for some clarity here as these next few years are going to be very important in order for us to set ourselves up well for the future.

Thank you in advance for your thoughts and advice on this topic!

Regarding question 1- 1st thing I would do is research if there are any negative legal trends in your area regarding STR; i.e. efforts being in place to make it harder to have an STR such as new licensing. If not then I'd try the STR, but in my opinion you'll reduce your downsize risk if you can get a Long Term Tenant.

Regarding question 2- Paying down your mortgage does not increase your cashflow while expanding your portfolio does.  So expand your portfolio.