Is any str profitable now with 25 percent down?

Question

I'm looking at the numbers and with interest rates seeking 6.5. Housing prices the way they are and cleaning fees can anyone make money on str in long beach if they get in the game now?

John Underwood · Answer

It depends.

On the property, the location, purchase price, demand in the location etc.

Yes you can make it work but you must do your do diligence and run the numbers.

Collin Hays · Answer

Of course!  You only need to find one good deal.

Robert Ellis · Answer

Yes. build to rent in urban core adjacent neighborhoods. traditionally in our market in Columbus Ohio existing inventory was good 2014-2020. as prices rose, the cost to build started to match existing inventory prices because of supply shortage, especially for 2-4 multiunit dwellings. around that time we started to look at new construction and land. we found that land is a 12 month or more supply in our market which makes it a buyers market and you can design any structure you want in new construction. if you like a layout or floorplan all you have to do is design it. after that we looked at the right unit mix and Floorplans and layouts. we started looking at high rent per square foot layouts that were better than single family. Single family home rentals average $1.61 lease price per square foot nationally if you look at the conglomerates that own thousands of houses. apartments average more than that. I live in Miami Florida and I pay over $3 per square foot in rent with some going as high as $5. I live in the city / brickell in a high rise where it's close to transportation. I could never buy land in brickell it's more than 300 million per acre. but in columbus I can buy an infill lot for 40-60k within 1mile of Downtown Columbus. we looked at hundreds of Floorplans and found that 2 bedrooms seemed to be better than 1 and we wanted a tight compact floorplan that could get high rents. rents are higher Downtown Columbus and property values are higher Downtown Columbus by more than 40%. after that we wanted 4 units but it was commercial so we stuck to 3 units because it's residential. in February of 2024 we submitted our first design of a stacked triplex that is 2 beds 1 bath. after design changes, we now have about 7 approved in our market. all of the underwriting of banks is based on long term rentals. These are 668 square feet and will rent $1600-$1800 depending on the urban adjacent neighborhood. that's rental prices of $2.39 to $2.69 per square foot. that's on a long term rental. on a short term rental the prices would be higher but we haven't had any clients do that yet. The average new build in columbus is $220 a square foot but the average downtown is greater than $275 per square foot. That means we can build, rent, refinance, repeat. I think the right investor would do 2 units long term one unit short term. this strategy allows you the greatest flexibility. we are also developing an extended stay hotel that's 58 rooms. the size of the average room in that is 216 square feet and rents for a target $80 per night. our development cost per room is 100k per room with hard construction. the smaller you go the more money you make. if I was to suggest anything it would be to focus on the smaller part of the market and on multiple unit dwellings and finding and identifying markets that meet similar numbers. that will probably be midwest markets. I hope this hleps! keep going after it. run lots of numbers and do a lot of underwriting. feel free to reach out at any time if you need help in your market. these properties that are 3 units are rented and then a cash out refinance that not only makes money but returns full capital to the investor on DSCR loans similar to the interest rate you mentioned above.

James Carlson · Answer

@Tobias Joneses

I don't know the Long Beach market, but here in Colorado, another high-priced area, you can still do well with short-term rentals, but ... it's harder than it used to be.

My STR investor clients that succeed are doing a few things. They're all obvious and simple, but do require work. And they all fall under the category of "bring your A game."

Buy unique. If possible, buy something different. An A-frame, a treehouse, a home with views, etc. ... they all kill on Airbnb. Or create something unique ... a game room, a killer outdoor space, a wall-papered wall, etc.

Great amenities. Install a sauna or a game room. Hot tubs are great. A hot tub is shown to increase STR revenues by 30% or so. Go above and beyond. I had a client in the mountains outside of Colorado Springs buy a star-gazing dome for his vacation rental.

Hire a designer. You can't thrift-store-buy your way to profitability. You've got to stand out and a professionally designed space is an easy way to do it. Clients who bought just outside of Denver hired a designer, and their ADR is outperforming their competition by around 20%.

Don't skimp on photos. If you pay half a million to $1M for a home, another $30k for furnishings and then shoot photos on your iPhone, you should be banned from investing ever again. Hire. A. Professional. And maybe do multiple sets of photos? Full sun and sunset, for example?

Not saying it's a sure bet if you do the above. But it definitely puts you ahead of the game. Good luck!

Andrew Steffens · Answer

I have no idea about Long Beach - but I have plenty of clients buying in Tampa with similar rates who are turning profits even with management.

Tobias Joneses · Answer

Thanks for the reply, and this is with 25 percent down? I can make the numbers work is i put down 85 percent but was wondering if anyone doing 25 percent is still making a lot.. California is another world

Jesse Rivera · Answer

I'm no expert in STRs, but I do know that getting registered for a STR in Long Beach is difficult. They only allow a certain number of non owner occupied STRs, and the there is a waiting list. My neighbor did STR on 2 properties in Long Beach, but only allowed 30+ day rentals so that he did not have to register with the city.

Myrtle Mike Thompson · Answer

@Tobias Joneses The answer to your question about making money on STR in Long Beach very well be "NO".  Have you explored any other markets?  Here in the Myrtle Beach area there are plenty of deals that will cash flow with a 25% down payment.

Garrett Brown · Answer

I would imagine Long Beach is complicated to get into the STR game but I don't personally invest there so not sure. I have some friends who went into Big Bear Lake and Crescent City and did well if you are looking to stay in CA.

Is any str profitable now with 25 percent down?

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