Starting New STR and Nervous About Market - Would LOVE Feedback!

[Rhonda Greenhaw]

Hey everyone!

We are taking out a HELOC on our home, updating it and adding some great features, and putting it out there as a STR. We live on one of the only lakes in Broward County where you can have boats with motors, and we are adding a pool and spa, outdoor kitchen and patio with roof, as well as converting our carport and pantry/laundry room into a master suite. We are also doing a ton of landscaping and just really going all out to make it "Instagram-able"...we live in between Fort Lauderdale & Miami just west of 95. We are super close to the Hard Rock Casino, and the stadium where the Dolphins play is only a few miles away as well. But best of all - we are less than 5 miles to some of the best sand beaches in the world.

BUT...what happens if we go into a major recession??? This is our entire future we are putting on the line, so I'm super nervous. We have done some analysis on the place - there are a couple of comps on the lake and in our neighborhood that we can compare and I feel confident that we can get an excellent nightly rate and brisk business - we are going to buy a jet ski, bikes, kayaks and a pontoon that will be rentals - the entire place will be a laid back, party with style...BUT, if the economy crashes - I figure the worst that can happen is that we've upgraded our life.

Basically, the HELOC would add about $600 to our monthly bills - which is incredible - and since our house was almost paid off, I did the comps on ARV and I figure we will near double our home value - so for no cash out of pocket, the worst thing would be that we aded $600 to our monthly bills but nearly doubled our home value...So...even if the economy crashes - my partner and I both have day jobs...sooo, I think we should be pretty smooth sailing...

BUT...as I said - I am TOTALLY new to this and would love feedback, criticism, word of wisdom, or a pat on the back (hopefully...).

Thank you all!!!

Rhonda

[David Collier Jr]

I respectfully disagree with "most hosts in FL are struggling" and say the reality is more than likely the exact opposite. At least for me and many hosts I know in Broward. There is plenty of strong demand and S FL will always have a strong travel mkt no matter the current state of the economy. 

During the financial crisis FL saw a visitor drop of less than 3%. There are over 120 million visitors per year (around 80+ million in 2008). If you can't get a small share of that market you're either in a very bad area, offer a poor product or have pricing issues. 

I don't love the area you are describing (lived in Broward 38 years) but if you can see active comps in your immediate area go off of that. 

You mentioned you've almost paid off the home. Take the total principal paid + expected remodel costs. As long as there is room to force appreciation your worst case scenario to me seems to be you have a home worth more than you've paid into it and you will have an increased monthly cost of $600. Point is, don't spend $100k in remodel costs to increase the value of the home $75k. Know your numbers on comps and DO NOT go overboard.  

I would advise against the jet skis. The liability assumed is not worth the potential increase in rental income they may add (which you won't be able to measure anyway). 

Bottom line its all about active STR comps in your IMMEDIATE area. Search around airbnb/VRBO and leave the travel dates blank. Click the calendar on local comps and see what their availability looks like. If nice homes aren't rented often don't think you'll be able to do anything different. Better to take the HELOC and buy a property in a better location.