Need advice on a deal

[Zachary Rosa]

Looking for input on this deal I have under contract. Here are the facts.

Home price :736,000

Rate:5.75

Cost for rate:14,000

Down payment :25%
prop manager:25%

Property is in NH 

the property is 10 beds with an indoor pool and sauna and the current owner is getting about 9,000 a month in rent. Very little updates needed besides a possible septic issue in a few years. Owner currently self manages and does not have it on air B and B. I believe with a few update the property could bring in about $11,000 per month. 

What do you think?

[John Underwood]

Quote from @Mike Smith:

@Zachary Rosa When you ask for help on BP analyzing a deal, it's very helpful if you include all your calculations.  You indicated that it had cap rates 8.5 - 12.  Does that include all expenses and correct nightly rates/vacancy:

1. Management fees - whether you are self managing or not, they need to be included

2. Property taxes

3. Insurance

4. Utilities

5. Cleaning

6. Handyman stuff - broken door knob, toilet paper holder came loose, etc

7. AirBNB/VRBO fees/credit card fees

8. Normal wear and tear - carpets, furniture, etc has a limited lifespan, especially with STRs

9. Capital expenditures - replace roof every 20 years, repaint every 10 years etc

Do not believe the sellers numbers as they typically leave off a large portion of the expenses listed above.

Then figure out your true STR nightly rates and occupancy numbers. Most sellers will give you their rates/occupancy for the highest month, when there will be months with much lower rates and/or occupancy figures. Use a service like AirDNA COMBINED with your own market research.

If you write out all above in a post, you will get much better and more specific feedback.

@John Underwood It's great to encourage people to self manage, but we are talking about a STR with 10 beds. I don't feel a single family STR can be managed in 5 minutes a week after you answer guest questions before booking, during booking, handle misc small repairs, pay all the utilities, etc.

 I hardly ever have any questions. I have a very complete listing with pictures and descriptions. I have a book at the house with all the information anyone could need. My main question is do I rent my boat. I reply you can rent one at the marina. That took about 10 seconds to type. That comes out of my 5 minute weekly time. I have a bunch of long term rentals. I spend very little time on them because I have systems in place. Text message for a leak, forward it to handyman I am done. 

I easily did this when I had a full time W-2 job, which I don't anymore. There is no PM that can do as good of a job as I can, but I put in the time in the beginning to build my empire and train contractors and tenants. Now I spend my time acquiring more properties and it is fun not work.