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Updated about 2 years ago on . Most recent reply

User Stats

35
Posts
23
Votes
Richard Evanns
  • Real Estate Agent
  • Los Angeles
23
Votes |
35
Posts

Is there a rule similar to the 1% rule for short term rental purchases?

Richard Evanns
  • Real Estate Agent
  • Los Angeles
Posted

Esteemed listmates,

Im looking to buy an STR in a pretty good vacation market here in CA. Im running numbers alot of different ways, but in all my investing (and I am not new at this) my underwriting has been gorilla type math at best, and I have done well (in most but not all!) cases because the market was blazing hot and STRs were a no brainer. But things are changing now.

So I am just curious - assuming I will be paying a PM the usual 20% for at least the first year (which I probably will but not 100% on) - is there any general guideline people have found useful for what is a reasonable price to pay? I have heard people say they apply a 2% rule, but I am seeing 1.5% at the very best, and that ain't that easy to come by, and that is after all the work goes into establishing it.

Or, if measuring by CoC, is there a CoC that people like to hit on STRs? I have heard 20%, but I also cant seem to find that either. Perhaps this means i just haven't found the right deal? Or are these expectations relics of the past when rates were lower and profits were higher?

Curious thoughts and experiences/.

  • Richard Evanns
business profile image
Bigtown Homes
5.0 stars
9 Reviews

Most Popular Reply

User Stats

144
Posts
132
Votes
Kyle Momany
  • Real Estate Agent
  • Tampa, FL
132
Votes |
144
Posts
Kyle Momany
  • Real Estate Agent
  • Tampa, FL
Replied

@Richard Evanns Congrats on getting started!

As an agent & investor, I typically use the 10%, or now 15% rule. Basically, I want my STR to produce 15% of the purchase price in Gross Income. I.e. $1M property would bring in $150k.

Also, I would 100% recommenced self managing, but we can have that conversation separate, if you want to DM me.

Keep looking, maybe dive into a new market!

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