Share you STR Economics

[Account Closed]

Hey guys, 

Newbie in the forum, veteran stock investor looking to get into RE. It's very hard to find solid ROI statistics on STRs today. There is plenty of data on daily rates, occupancy rates, and other factors, however, it's very difficult for a "practical investor" to understand the real potential of cash on cash returns.

Looming in the background are the horror stories of AirBNB burning and coming to an end, and how it's very hard to even be cash flow positive in todays market due to saturation and high interest rates.

I would be happy if as many people would share a bit of solid economics of their STR investments. If we can get enough data here I could make a proper summary chart which will give new members a realistic insight as to what they can really expect to make.

Location of property:

Occupancy rate:

Year purchased:

Price paid:

Current property value:

Gross yearly income:

Yearly expenses (if can be broken down, even better):

Net yearly income:

Personal insight from their experience:

I hope this is a legit discussion and we can bring value to newbies like me.

Thanks :)

P.S - If Moderator can change the title to Share your STR Economics, seems the subject can't be edited

[Dan H.]

I will play some of the game. I have 2 sets of STRs (2 units in each set). I will cover the long time STR. My more recent set of STRs is also having some cash flow issues.

Some items, last year I changed PM companies and lost thousands of reviews. When switching to the new PM, we rehabbed the units and the timeline went ruefully wrong. What should have been a knockout year was largely blown. Then one STR unit, despite being an STR since 1999, did not get chosen in the STR lottery that went into effect in May.

Location of property: Mission beach duplex.

Occupancy rate: last year had long down time for rehab. Last normal year was 2019 and frankly I do not remember the occupancy rate but it was very high (over 90%). This year I suspect occupancy will be ~75% on the one unit that is STR. The MTR will have higher occupancy but at a losing money rent rate so it does not matter if it had 100% occupancy it would not cover the bills.

Year purchased: 1999

Price paid: $375K

Current property value: ~$1.8M

Gross yearly income: In 2019 it had $160K rent. Every year since has been less for one reason or another. The reasons include significant COVID lockdowns, poor rehab timeline, one unit not getting an STR license and having to be converted to MTR the same time as ~200 other units in area had to convert to MTR (our unit MTR rent does not even cover the PITI for this unit which means large negative when including PM, utilities, maintenance/cap ex, misc).

Yearly expenses (if can be broken down, even better): largest is 25% for PM.  Utilities are a ~$350/month.  cap ex/maintenance varies.  My misc is larger than most for various reasons including expensive umbrella policy (for various reasons I expect my umbrella to possibly be near highest on BP per the amount of coverage and I have decent amount of coverage).

Net yearly income: If it had never been refinanced it would be having outstanding cash flow. However, it was refinanced in Dec 2021 (not the first time) at max LTV. It is my view that the duplex when properly allocating for maintenance/cap ex is not going to have any income this year. Furthermore, I doubt it will have income for next year. The last year with clear cash flow was 2019. It is my belief that occupancy is not only below last year, but below 2019 however some of this could be the result of having in the 10s of reviews (we are below 100 reviews on both units on both primary OTAs) rather than in the 1000s of reviews. Fortunately, I have made a fortune off this place previous to the last few years and enjoy using it on occasion and letting friends and family enjoy it. I enjoy owning it. In addition, it has continued to have some appreciation; last year may have only been ~$50K or so but overall it has had outstanding appreciation.

Personal insight from their experience: We can afford to have this property underperform. Ideally its performance will improve, but if it does not I have the resources to not have concerns (I have plenty of properties that are producing). I would not recommend someone trying to enter this market today if they need positive cash flow even if they could be assured of an STR license (which in reality they would not get an STR license in this market).

I have made a lot on this property but have not had any noticeable cash flow in the last 3 years (since 2019) and suspect most of the last few years I was negative and will be negative for 2023 (due in large part to having to convert one STR to MTR).

Clearly, I did not sugar coat anything. Hopefully this makes clear that there are challenges in some markets with STRs and not every STR is going to be a Homerun (even though I consider mine a homerun since purchase, it is not a HR of late).

Good luck