Short term rental's cash flow is not great, should I walk from the purchase agreement

[Emily Poerio]

I am new to investing and after a few deals that had multiple other offers that I didn't win out; I did execute a purchase agreement last weekend but doing more analysis on the property and potential rates being 7.5%, appears to be very tight to limited cash flow. I am getting into investing for a few reasons: flexibility, build diversity in investments and tax benefits. The location is great on this property (2 miles to the Island / 5 mile to Dollywood), no HOA and sq ft ~ 335 (2bd / 2.5 ba) but getting very nervous as will be first deal and would love some input here or mentor input as continue down the path of investing and learning.

Thanks in advance!! 

[Wayde Hall]

Quote from @Emily Poerio:

I am new to investing and after a few deals that had multiple other offers that I didn't win out; I did execute a purchase agreement last weekend but doing more analysis on the property and potential rates being 7.5%, appears to be very tight to limited cash flow. I am getting into investing for a few reasons: flexibility, build diversity in investments and tax benefits. The location is great on this property (2 miles to the Island / 5 mile to Dollywood), no HOA and sq ft ~ 335 (2bd / 2.5 ba) but getting very nervous as will be first deal and would love some input here or mentor input as continue down the path of investing and learning. Thanks in advance!!

First off, great job with at least trying! So many don't even make the jump and Im glad you are actively moving forward in your journey! 

Analysis wise - theres a ton of variables that come into play when seeing how well a home will perform. A perfect example from my day today, lol, I showed two homes, 2-bed A-frames next to one another, one was producing 120k, the other under 70k (Both with views). Production depends on the owner and the home. Have you considered getting a pricelabs subscription and getting a little more in depth #'s on amenities, management experience, review count, pools, view vs non-view, etc? AirDNA I find to be somewhat Lackluster on homes that have unique features if the home you have fits that. Pricelabs provides much more information from the Market dashboard tool.

Also, ask your agent! See what they have to say and if they have data you can review! An agent cant do analysis for you, and I never encourage you use someone elses #'s, but you can at least get info from every source possible. 

You did the exact same thing I do. Napkin math on offers to get a rough idea, then a deep dive when under contract. If things don't work out, protect your $! Become more familiar with your analysis, take a beat and digest that info, and if you decide to back out its on to the next one. 

Smokies is awesome, I hope you join the club! Hard barrier to enter, but its a very resilient market. Great when it comes to being an owner long-term.