Keep Str or sell?

Question

So I purchased a cool mid century modern home with a pool back in January, that’s needed a full rehab! I’m closing in on finishing it up, probably another month to go…

based on the setup of the house I believe it would be a great air bnb/ vrbo. Huge pool, with pool house and bar, 3 bd, 3 bath. Questions with short term rentals with a pool, is there anything I can do to protect myself in case of an accident ? Second is it worth to str this vs sell it . Probably can pull 100k on this flip before taxes… anyone with some advice would be greatly appreciated.

Corby Goade · Answer

Great question- I have an STR with a pool. There area a few things you can do to limit your liability:

-Great insurance. Make sure you are covered fully and have an excellent umbrella policy as well. Don't skimp.

-Install a fence around the pool to limit access. You can do something really nice OR there are some basic pool fences on Amazon with removable posts and nylon netting.

-Get a high quality cover for the off season that can support a dog or a kid walking on it.

Finally- since this is your second post, I'm making the assumption that you're fairly new to investing. I don't know the numbers on this place beyond the fact that you have +/- $100k in equity, but I can tell you for a fact that investors don't create generational wealth by flipping. Flipping properties is a job and you are paid and taxed as such. I know you've heard about all of the great tax benefits of real estate investing- they are real and it's amazing, but you get 0 of those benfits as a flipper. On top of that, when you flip, you stop making money as soon as you stop working. No so with buy and hold.

Assuming this place will be at least cash flow positive, rent it out and get a feel for it. You can pull a HELOC on it and still access some of that equity to either scale or improve the property, it's not as if that money disappears, you just have to strategize how to use it.

Nice work- sounds like you have a good one here. Best of luck!

Brian Barch · Answer

I'm in the Atlanta area and know a few owners personally that are doing well.  The film industry brings a lot of transient wealth to the area, and the world's busiest airport is not going away anytime soon.

But to answer your question I think need to understand a high and low range of projected performance.  I'd recommend punching the address into Awning.com/Airdna/Rabbu as well as looking at competitors calendars to try and triangulate best/worst case scenarios.  Once you have that, subtract out Mortgage and ulitilites (and property management if you DON'T plan to self manage).

From there I think you start to get a feel on STR vs sell.

My gut tells me, with the volatility in the STR and real estate markets, not to mention the economy, it would me hard for me to not take a deal that brought a instant ~6 figure profit, and that's coming from a successful STR owner.

Lastly, it's not all about financials....do you want to own/manage an STR?  Please don't let anyone convince you it's passive.  Fulfilling, sure, but passive it's not.

Sarah Kensinger · Answer

I'm not sure if this has been mentioned or not, but you must have a professional look after the pool and keep all the chemicals balanced correctly. There's too much at stake for this to be a DIY, cleaners' job, or a neighbor/friend's responsibility!

Andrew Steffens · Answer

There are a lot of missing variables here that stops me from being able to make a suggestion:

1 - How is the (I assume) Atlanta STR market currently?

2 - What do you project the income would be on this STR?

3 - What is its cost?

4 - Are you prepared to self manage or do you have a manager lined up?

5 - Is the local RE market moving well currently, or would it be sitting a while?

Michael Baum · Answer

Hey @Todd Gentry, sounds like a cool place! Did you check with the city/municipality you are in if it is even legal to do STRs at your house? There are pockets of restrictions all over the greater Atlanta area so check that first.

Next, have you looked at the area on AirBNB and VRBO to see how many are operating? What is their nightly rates, occupancy and amenities?

Take a look at the Awning.com estimator - https://www.awning.com/airbnb-...

Plug in your address and it will pull data on the current rentals performance and give you an idea of what you might be able to do. It pulls the same data as AirDNA and is free! Use it along with pulling the data direct from competitors to get a more rounded idea of performance.

Frank Barletta · Answer

Make sure you have insurance that explicitly covers pool incidents.

Gate the pool.

Create rules around the pool.

Consider waivers.Sell vs. Hold? There isn't enough details to give you an answer here. We would need total cost, sqf, amenities, location, Etc.

John Mathew · Answer

Congratulations on almost completing the rehab of your mid century modern home! It sounds like it has some great potential as an Airbnb or VRBO rental. However, you are right to be concerned about protecting yourself in case of an accident.

One option you could consider is getting liability insurance to protect yourself from any accidents that may happen while guests are using the pool. Make sure to research and compare policies to find the one that offers the best coverage for your needs. You could also consider having guests sign a waiver before using the pool, stating that they understand the risks involved and agree to use the pool at their own risk.

In terms of whether to STR or sell the property, it ultimately depends on your long-term goals and financial situation. STR can be a great way to generate passive income, especially if your property is in a desirable location and has unique features like a pool. However, it also requires ongoing management and maintenance. Selling the property may give you a large lump sum of cash upfront, but you will lose out on potential long-term rental income.

Consider weighing the pros and cons of each option, and consult with a real estate professional to help you make an informed decision based on your specific circumstances. Good luck with your decision!

Trent B Paul · Answer

Hey Todd,

Sounds like you found a great property. A few things you can do to limit liability with the pool is get an insurance policy with great coverage and ensure the pool is secure with fencing and a cover when it is not in operation.

Now to address the question of selling or holding, I believe there are three important questions to be answered.

1) Where is the potential STR located? Are there any venues, attractions, large employers or transportation hubs located nearby where tenants may want/need access to short term housing during all 4 seasons?

2) does the predicted cashflow work towards your goals? To find cashflow, determine What your expenses will be. Consider if you have time/ want to make time to self manage or will you hire professional manager/cleaners? I can provide you with a local resource that can estimate what your vacancy, daily rates and monthly revenue should look like based on your location and condition and can also assist with the professional mgmt if you choose so.

Monthly Revenue - monthly expenses will get you your cash flow.

3) If the property failed as a STR, would it also cash flow as an LTR? Planning multiple exit strategies is important to not taking serious losses in this business.

4) how much could you sell for after renovations. What would be the return on your investment? Would you receive a higher ROI by flipping and selling or holding as a rental? A real estate agent with local market knowledge should be able to give you a range of where your home could sell in todays market after your renovations are complete.Sorry to answer your questions with more questions but the answers to these questions will help light a clear path of where you should take this property. Let me know if I can be more specific or answer any other questions and good luck!

Keep Str or sell?

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