Super Rookie Here. Looking for direction PLEASE!

[Steve Uekert]

Hello everyone,

My name is Steve and at 46 years old, I'm looking to possibly start a STR business and while I've been doing a lot of research, I guess I'm feeling a little lost (or maybe overwhelmed is a better way of describing it).

For a little background, I'm currently a W2 employee (and have been always). My wife is as well. We moved to Florida 2 years ago and love it here. We're currently outside of Orlando and have been looking to find something in our backyard (within 30ish miles or so)

Our situation:

    -We have pretty much no debt at all, including owning our home. We do owe a bit on a Truck we bought earlier in the year, but that's it. No CC debt or any other consumer debt.

    -Our current home is probably worth around $500 - $550 (with current market conditions)

    -We wanted to focus on having no debt, but now we also aren't left with a lot of capital and very little in retirement (hence our desire to look into real estate to help build wealth and recurring income). Would be nice to retire someday haha.

So, I guess I'm just wondering how to get started since we don't have a ton for a down payment (could probably come up with $25k in cash without touching a current 401k that's not all that large).

Also, the Orlando area (and outlying area) looks to be pretty saturated, but there is also a TON of tourist's that visit here too so I'm not sure if one cancels out the other in this type of business. I would be willing to look at other markets here in Florida such as Tampa, Sarasota, Pensacola or other similar type of places, I just haven't done much research into those areas yet. And, since we're just starting out and wanting to learn the business, we thought it best to stay as close to home as we could for the time being.

Anyway, consider me a dry sponge. I'm willing to learn as much as I can as we look to start into this business. I'd love any advice, tips, thoughts, concerns, or anything else you have to offer a rookie like me.

Thank you all so much and I sincerely appreciate you taking any time you can spare to help us out!

Steve

[Don Konipol]

Quote from @Steve Uekert:

Hello everyone,

My name is Steve and at 46 years old, I'm looking to possibly start a STR business and while I've been doing a lot of research, I guess I'm feeling a little lost (or maybe overwhelmed is a better way of describing it).

For a little background, I'm currently a W2 employee (and have been always). My wife is as well. We moved to Florida 2 years ago and love it here. We're currently outside of Orlando and have been looking to find something in our backyard (within 30ish miles or so)

Our situation:

    -We have pretty much no debt at all, including owning our home. We do owe a bit on a Truck we bought earlier in the year, but that's it. No CC debt or any other consumer debt.

    -Our current home is probably worth around $500 - $550 (with current market conditions)

    -We wanted to focus on having no debt, but now we also aren't left with a lot of capital and very little in retirement (hence our desire to look into real estate to help build wealth and recurring income). Would be nice to retire someday haha.

So, I guess I'm just wondering how to get started since we don't have a ton for a down payment (could probably come up with $25k in cash without touching a current 401k that's not all that large).

Also, the Orlando area (and outlying area) looks to be pretty saturated, but there is also a TON of tourist's that visit here too so I'm not sure if one cancels out the other in this type of business. I would be willing to look at other markets here in Florida such as Tampa, Sarasota, Pensacola or other similar type of places, I just haven't done much research into those areas yet. And, since we're just starting out and wanting to learn the business, we thought it best to stay as close to home as we could for the time being.

Anyway, consider me a dry sponge. I'm willing to learn as much as I can as we look to start into this business. I'd love any advice, tips, thoughts, concerns, or anything else you have to offer a rookie like me.

Thank you all so much and I sincerely appreciate you taking any time you can spare to help us out!

Steve

Okay Steve, here’s the BIGGEST obstacle you have to overcome: you’re uncomfortable with debt.  In my 40 plus years in the real estate industry, I know of no one who started out with limited capital who made significant money without incurring debt, and usually a lot of it!.

So, you have a pretty common misunderstanding; you don’t distinguish between “good” debt and “bad” debt.  Bad debt isn”t actually bad, rather it’s unproductive, and can be bad if overused, or abused.  This is debt taken on to purchase DEPRECIATING, non income producing assets, like cars for personal use, vacations, food, clothing, etc.  Most credit card debt, auto loans, personal loans used for consumer purchases fall under this category.

The “good” debt isn’t actually good, rather its productive.  This is debt that help you acquire assets that either APPRECIATE in value, throw off income, or better yet do both.  So for example a commercial building with a class A tenant paying a NNN rent of $120,000 a year acquired for $800,000.  But you only can come up with $200,000.  You borrow the other $600,000 secured by the property.  In 5 years you’ve collected $400,000 cash flow over your note payments; paid down you’re loan from $600,000 to $550,000, and the value of the property increased from $800,000 to $1 million.  Now these deals are rare, and may not exist in this low interest rate environment, but they do happen.  And you can see that taking on the debt was a good idea.  

In any case, once most investors reach a certain level of wealth, which differs for each person, they either eliminate debt all together, or, better still, they only incur debt for which they have no personal liability.  

However, if someone is so uncomfortable with debt that they can’t emotionally separate debt for investment from debt for consumer items, than they’re probably better off limiting their expectations at to the beneficial aspects of real property investing.  There will still be some benefits such as cash flow and inflation hedge, but the major benefit, leverage, will be eliminated and it will take 30 years to accomplish what can be done in 10 utilizing moderate debt with a moderate degree of risk.