Need you opinion on going from long term rental to short term

[Suhaib Rehman]

Hi everyone
I own a single-family home in Folsom CA. It is a 4 bed 2 bath house built in 1990. It has been rented out as a complete unit for 3 years now. 
My problem is that this house has a negative cash flow.  Mortgage is 3400 while rent is 3200. This excludes 800 a month in property tax. I have not included the insurance which is about 1500 a year.  As you can see, I lose an average of 1100 a month over this house.

I am wondering if a short-term rental could be a better choice for me.  The house is in a great school district. It is for this reason I bought the house but my family does not want to move there.  

How can I reliably calculate the potential income from the house if I switch to short-term rental?  

Thanks

[Shiloh Lundahl]

To answer your question, you can use AirDNA or another short-term-rental income analyzing website or software. When I did my research for buying my properties in Costa Rica, I had one of the big STR management companies like Evolve analyze my potential profits and I used that info to raise money through bringing on partners to buy the properties.

Now that I have answered your question, I'd like to share my questions and possible concerns. 

Are you looking to rent the property as an STR because you are losing money as a long-term rental? If that is your primary motivation then I wouldn't encourage that. The STR model is a different model and where it is at in it's business cycle, the average STR owner is not doing well. Only the above average STR operators are doing well. So you would either need to learn a lot about how to be an awesome STR operator and you would probably need to put into your home $20,000 to $100,000 in adding furnishings, design, and adding amenities to make the property desirable.

If you don't have the time to manage the property then you would probably want a company to do that for you. That can be expensive and will likely cost between 15 and 20% of the revenue (and that doesn't often include the cleaning fees) which may mean that you don't make a profit. 

I would only encourage you to switch your property to an STR if you really want an STR. If not, you may consider just selling it and reinvesting the equity into a different property or properties.