Have you done out-of-state/town STR for at least 5 years?

[Amir Khan]

I've never done STR but have plenty of experience with LTR. While I understand the fundamentals of STR, I would like to understand bit more. If you have done STR as out-of-state and/or out-of-town investor for at least 5 years successfully, can you please provide some feedback on following:

- What is the overall real estate strategic play when using STR? (Example: BRRRR allows initial investment recouping and profits)

- For someone who has done STR for over 5 years, can you tell me whether cashflow stays relatively predictable?

- Regarding managing your STR, how hard is it to maintain your team/boots on the ground (cleaning crew/RE agent/handyman)?

- On an average, what percentage do you allocate to management (your team) which allows you to operate your STR?

- Do you find substantial challenge when running a SFH vs multifamily (2-4) units at STR? How do the margins differ?

- What is the alternative strategy if STR use is banned where your property is located?

- Is the primary form of listing your STR been on Airbnb and Vrbo? If they both disappear, how would you market/list your STR?

Thanks!

[Collin Hays]

Quote from @Amir Khan:

I've never done STR but have plenty of experience with LTR. While I understand the fundamentals of STR, I would like to understand bit more. If you have done STR as out-of-state and/or out-of-town investor for at least 5 years successfully, can you please provide some feedback on following:

- What is the overall real estate strategic play when using STR? (Example: BRRRR allows initial investment recouping and profits)

- For someone who has done STR for over 5 years, can you tell me whether cashflow stays relatively predictable?

- Regarding managing your STR, how hard is it to maintain your team/boots on the ground (cleaning crew/RE agent/handyman)?

- On an average, what percentage do you allocate to management (your team) which allows you to operate your STR?

- Do you find substantial challenge when running a SFH vs multifamily (2-4) units at STR? How do the margins differ?

- What is the alternative strategy if STR use is banned where your property is located?

- Is the primary form of listing your STR been on Airbnb and Vrbo? If they both disappear, how would you market/list your STR?

Thanks!

 So for your questions...

1. The "play" depends on what your goals are. My mother bought two STRs for $500K cash, for retirement income. Those net her about $60,000 per year after all expenses. The price appreciation is merely a bonus, as she isn't selling. If you are financing most of your STR, the goal is for other people to pay off your investment. That is realistic. Any "extra" income is gravy, and pretty unrealistic for the first few years.

2.  Cash flow is predictable, as long as you aren't basing your model on 2021 and 2022 years, which were bubble years with the Fed sending out everyone free checks, the pandemic, etc.

3.  Maintaing "boots on the ground" isn't a struggle at all for some, and a nightmare for others.  It all depends on who you find, how reliable they are, and the relationships that you develop with them.

4.  If you are self-managing, there are no management fees to allocate.  You are paying yourself to manage. It's a part time job. I would argue that self-management generally has costs that rival the management fee:  1)  Inability to be attentive to guest inquiries in a timely fashion, resulting in lost bookings, 2) Inability to quickly respond to repairs and maintenance during the guest's stay, "we are lost and can't find the property", and lots of other surprises, which result in refunds over the course of a year.  And as a self-manager, you incur fees to list on either VRBO or Airbnb, which amount to 8-11 percent of rents per reservation. 

If you pay a management company, your fee will be from 20-40 percent. Whether that's a savings or a cost to you depends solely on how good a self-manager you are, and what the value of your time is.  If you are a brain surgeon, managing a rental probably isn't worth the value of your time. 

5.  Margins in STRs vary greatly.  It all depends on what you bought it for, and what you can consistently rent it for.

6.  If STRs were banned where mine are, I would be up a creek with no paddle.

7.  VRBO is our choice, for several reasons.  We do not use Airbnb, nor recommend it.  We use other channels as well, in addition to our own dedicated website.  

Hope this helps!