Short-Term & Vacation Rental Discussions
Market News & Data
General Info
Real Estate Strategies

Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal



Real Estate Classifieds
Reviews & Feedback
Updated about 2 years ago on . Most recent reply

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

Most Popular Reply

@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!