Short term rentals and appraisal gaps

[Javier Manzanares]

Hey folks,

I'm a rookie real estate investor seriously looking to get in on a short term rental in the Kissimmee, FL market. I've analyzed many deals and made several offers and had none accepted. My current struggle is that properties are selling way above the appraisal values, which for a short term rental means a heavy drop for cash-on-cash returns.

Are all markets currently behaving the same way? What would other experts in this space recommend?

Some more context: I'm looking at STR to bootstrap cash and accelerate growth. I'm planning on self-managing these properties. I have a day job with a good salary W2.

[Zeona McIntyre]

When making competitive offers there are a lot of levers. Many folks only think of price, and appraisal gap has come into the picture lately because of the hot market. Can you put less down and offer more for the appraisal gap? 

Other levers:

-Inspection. You can waive the ability to object on an inspection. This does not waive your right to get an inspection or cancel on an inspection, it just says that you won't ask them to fix things. If you decide to terminate and your agent tells the seller's agent, they often try to save the deal and fix the item, especially if it is something any buyer would terminate on. 

-Close window. Are you able to get all your paperwork to your lender upfront so he can do a quick close, say 21 days vs 30-35?

-Making earnest money (or a portion of it) hard. This is saying that you will pay the seller if you terminate the deal for any reason. 

If you still don't get it, always ask for backup position. Many folks give up and walk away but my clients won 4-5 backups last year so it does happen! 

Good luck.