What's your buying criteria for STRs in 2022?

Question

As STR markets evolve and prices continue to climb, I was curious what criteria folks ares using to decide to make an offer or not. Not specifically talking about market requirements, but more for the property itself. What are your minimum requirements, and have they changed in the last 6 months?

I'll share mine:

- Target CoC of 25%+, 35%+ if a partner deal. This doesn't include PM as we self-manage (we plan to hire a PM once we hit our desired scale)

- Cash flow of $2k

- Break even occupancy (i.e. CoC of 0%) is half of the target occupancy or lower. This is essentially a buffer for error/reduced demand/the unknown. It's a new metric I'm tracking and helps me feel better about high purchase prices.

There are some additional qualitative requirements but from a pure numbers perspective, this is it. Curious what you all are using!

Dave Stokley · Answer

For all the clients I'm advising on new purchases we're targeting 20% COC after all expenses, including my management fee.

We are looking for turnkey SFRs with at least 3-bedrooms, and specifically shifting focus to more vacation-y areas, although there are still some attractive opportunities in and around Cleveland.

Kunal Mishra · Answer

I am doing great with my 15 LTRs in and OOS that were purchased between 2019 and 2020 and I enjoy average 18% return after all expenses. I self manage but the returns are after deducting 25% for capex, vacancy and assuming I pay myself something for managing my properties .

I think I can just repeat and buy in the same markets and with the increase in home prices could still manage 12% returns or find new markets with close to 15% returns.

Question is should I bother getting into STR for 20% return or the return should be north of 25% at least.

John Underwood · Answer

20% COC or better, tourist town where slim chance of STR regulation.

4 or more bedrooms, mountain view, game room, movie room and possibly indoor pool.

Joshua Strickland · Answer

This is a nice set of criteria. Mine is much more simple for better or for worse.1. Does my family like vacationing there?

2. Are other people making money in that market?

3. Target CoC 20%+ at whatever gross revenue I determine from my research. Conservatively

What's your buying criteria for STRs in 2022?

Most Popular Reply