What makes this a decent deal (for buyer and seller)

Question

Hi Guys,I'm thinking about posting a deal and wanted 2nd opinion on numbers. Property is furnished 3 bed 3 bath beach front on FL Gulf (Alligator Point). - Property is currently operating as STR with ~ $75K bookings YTD- House is currently for sale unfurnished for $925k- Furnished with seller finance and existing loan wrap option is $1M (even if possible to wrap current loan??) Any advice is appreciated! Here are some details:

Jeff Langley · Answer

Strictly my opinion here but seems overpriced for those returns. I never rely on 100% of airdna projections. I’d get the current bookings/revenue and break it down and project that. My concern is the coc is under 10% and that’s with a favorable interest rate. Worst case you have to exit the ballon and rates are still high, you’d take a huge cut.

Michael Baum · Answer

Thanks for the clarification @David Masterson.I do think there is a ton of upside to be had with your place. I am a bit surprised that there were zero rentals in Aug or Sept.

Glenna Wood · Answer

You aren't getting any monthly snowbird rentals from Oct to Feb. I was "next door" on St George Island and always had monthly winter rentals. Daily rate goes down of course but you keep income flowing in and snowbirds are almost always great guests. Are you allowing weekend rentals? Looks like you're not pulling in any Tallahassee weekenders in the shoulder seasons.

David Masterson · Answer

Hi Michael Baum, See below for breakdown of 75k. To be more specific: 75k is my net payout. Meaning the 10% Evolve (+ airbnb, vrbo, etc..) fee is already taken out before the 75k payout (only cleaning fee is still within my net payout). You are spot on with the search of this property being 'out of market range pricing' - As Sarah Kensinger noted: 'she suspected use of this mgt company' - that tipped me off to realize this is Evolve strategy - which explains why bookings come in short notice (ie. 3-4 weeks prior). I just assumed that was a pricing strategy best for optimization... As date nears price drops dramatically! Current booking (past and future) average $457/night after cleaning fee removed.Brooklyn McCarty, I'm sure you are correct, monetary returns would improve! At this point, time constraints (as well as personality constraints :-) are reasoning behind using mgt company. PS. Impetus to purchase this property was Avery Carl, Shot-Term Rental - Long Term Wealth book! Good Stuff! Just had to modify strategy to fit my situation.

Brooklyn McCarty · Answer

Self managing would def help your COC!

Michael Baum · Answer

Hey @David Masterson, so you are at 75k for year to date, how many months is that? Also, in your calcs, I don't see the 10% from Evolve? That wipes out the CoC right off the bat. Are you assuming new owners would self manage? I did a quick search on VRBO and nightly rates are just under $300 a night for a 3/3 or 3/4 beachfront. At $295 a night that would be nearly 100% occupancy to hit 105k. I am not in the 20%+ group depending on the property and a beach front place down there is something I would seriously look at at the 10%. Once someone buys it, the would ditch Evolve (I know I would) and go from there.EDIT - I found the house on VRBO. $714 a night average! It seems way above equivalent homes on the point.

Sarah Ziehr · Answer

If you want to free up cash, then the answer is to sell. Also take into consideration what is the outlook in your market for a sale vs short term rental?

David Masterson · Answer

👍appreciate your time / feedback! Thanks.

Sarah Kensinger · Answer

I was suspicious it was Evolve or Vacasa. What you're seeing with your bookings has been pretty frequent with other hosts, many bookings have been happening within 4-6 weeks of the check-in date. If you want to free-up cash definitely go for it, do what works for you! Like I mentioned earlier, most people are fine with 10% COC and with a different management company there's a good chance the property would totally outperform the airdna numbers. So, it might not be that hard to find a buyer.

David Masterson · Answer

It currently is hitting the projected revenue YTD (2% positive above projected). The future projected revenue (remaining $30k to reach the annual projection of $105k gross is the unknown) - bookings seem to hit approx. 3 - 4 weeks prior to stay - meaning I wont known July until early June, August until early July, etc... Evolve is my host (10% fee direct to renter above the gross revenue numbers) with local cleaner / handyman. I'm "happy / ok" with current performance of property, just exploring options to free up cash - Typically I never consider selling my properties (all but this one are LTR), therefore wanted to see what would be attractive / do-able to STR investors. 3-5 year hold period was my assumption when purchasing this STR. I even thought about offering % share of property, etc... just looking for ideas and obstacles. I appreciate the input!