What is current CoC for STRs with and without 7% interest loan

[Leon Lee]

Hi, Fellow BPers

I recently read "Long-Term Wealth" by Avery, which mentioned a 25% Cash on Cash (CoC) return, and it seemed extremely optimistic compared to current standards. I'm curious about the CoC returns you're experiencing with newly acquired properties.

I did a rough calculation for a property in the metro Atlanta area, near I-75, and the numbers are somewhat disheartening. Here are the details:

Sale Price: $270,000 for a single-family home with 3 beds/2 baths.

Gross Income: $3,500 per month, including nightly rates and cleaning fees.

Expenses breakdown:

• Cleaning and Supplies: 15%
• Maintenance: 7%
• Utilities (Electricity, Water, Gas, Internet, Pest Control, Lawn Care): 10%
• Software: 3%
• Property Management: 15%

With a 25% down payment and a 7% interest rate, after cosmetic updates and furnishing, the property yields less than a 1% CoC return. If purchased with cash, it shows about a 5% CoC return and an annual cash flow of $15,000.

What are your figures like? I've noticed that many expenses, such as utilities and cleaning, don't seem to increase proportionally with gross income like those cabins in Smoky Mountain National Park. This observation suggests that more expensive properties with higher income might be more advantageous. Do your analyses reflect this trend? Is it that easy to just jack up nightly rates nowadays?

Any insights or information you can provide would be highly appreciated!

Best regards, Lee