A possible first STR property?

[Tomoko Hale]

I have been looking for an STR property and may have found one at a distance. The property is located in a mid-size city with several attractions nearby.

I understand that management fees can vary by location, but this property management company charges 20%. That seems high—does it? Based on my research, this PM company is highly reputable and provides excellent service. My local realtor obtained information from the PM about the property’s income for 2024, along with an estimate of monthly expenses the owner is responsible for. The PM handles almost everything except the decision-making.

Would it be rude or inappropriate if I communicated directly with the PM without involving my realtor?

The house is listed at $350K, including all the furniture. The owner wants to sell for a 1031 exchange, and the property hasn’t been officially listed yet. The location is great, and MTR could also be an option. Resale homes in the area have been selling for about $260/sq. ft., but this property is priced at $296.10/sq. ft. The house is 1,500 sq. ft. in size. How much would you counter if you were in my position? How much income would you at least if you purchase this property?

This will be my first time purchasing an STR, and I have no prior experience. I'm feeling both scared and excited about taking on this challenge.

I’d love to hear about your experiences and any advice you can share.

Thank you in advance!

[Bruce Woodruff]

My thoughts: If you are going to use a PM, hire out the cleaning and any maintenance/repairs, you will be giving away 30+% of your income.

So you need numbers to put on your spreadsheet.....1) what are you estimating for your nightly/monthly imcome? (Hint - go on VRBO and see what your local competition is charging). 2) How much do you intend to put down? Let's say 20%...now let's do the math:

You offer $320k, 20% down is $64k so you finance $256,000 @ let's say 6%....you neglected to mention where this property is(!) so I used 1.5% as a property tax number, and I used $200 mo for insurance. Your monthly 'basic' expenses are $2134. Add a CapEx withholding of 10% ($225) and your PM fee of 20% ($450) to this. So monthly expenses are $2809.

I'm assuming for the sake of this conversation that you charge $150 per night and are occupied 50% (15 nights a month), so your projected income should be $2250 per month.

If the above numbers are accurate, you will have an operating loss of -$559 per month. So no, tis is a horrible deal for you.

Now of course I know nothing about your property (since you provided so little detail) so if this is a huge 5 BR house with pool on a lake somewhere, then you need to adjust my numbers. But basically, you need to run numbers like above to know if a deal is worth doing or not......