Anyone have experience using the BRRRR strategy with STR?

Question

Hey y'all. I'm a new investor and I'm considering using the BRRRR strategy but renting short term instead of long. I travel nine months out of the year and I've had a lot of success renting my own home through AirBnB over the last four years. It now not only pays for itself but makes a decent cash flow even though that wasn't my original intention. I have a lot of the STR infrastructure already in place in my neighborhood and I think there could be a few rehab deals to be had in my area that would make excellent STRs.

Have any of you ever used BRRRR and STR together? Any hidden pitfalls?

Shelby Pracht · Answer

Yeah, successfully! I bought a condo, moved in to do a live-in rehab/house hack (renting out part of the space on Airbnb while the place was in good condition, working on doing updates when we didn't have any guests). When we finished rehabbing we moved out and now rent the place exclusively as a STR. (We could get about $900 as a long term rental, January we grossed $4550 on Airbnb)

I have not refinanced, but because I lived in the property I was able to get a Fannie Mae loan product where we only put 7% down and pay no PMI, so I don't really feel the need to pull any equity out. We're cash-flowing enough that I'm okay saving up that money for the "repeat" portion of the BRRRR strategy!

Good luck! I think this is such a great strategy!

Ken Graham · Answer

Combining the BRRRR strategy with STR is an interesting concept and something I have explored.

I think a big challenge is fining a lender who will refinance a STR. Most traditional lenders don't offer this type of product.

Ryan M. · Answer

Yeah, our primary home in Houston would rent long term for maybe 1500-2000/month but as an STR it's more like 4000. I totally agree about the location. Good luck in Dallas!

Shelby Pracht · Answer

I do still live in the area, @Karen O.

For awhile I was doing the turnovers myself (and sometimes still will if I'm in town and have nothing better going on, haha) but I have two gals that will go in to do the turnovers for me now that we are growing and have another larger unit. They aren't with a service, just people I know in town with flexible schedules.

I always prep as soon as the guests check out, but that's because we average about 87-90% occupancy, so we're almost always doing same day turnovers. Even if we have a open night, we allow last minute bookings, so I like to have the units clean and ready so that if someone books at 8pm for the same night, (which happens here pretty frequently, haha) that nothing needs to be done and they can go check themselves in.

Let me know if you have any other questions!

Michael Rutkowski · Answer

I did exactly this in my market, and making 25% CAP. Do it. Costs a fortune in startup even if you do the work yourself though. It becomes a lifestyle real quick.

Ryne V. · Answer

@Ryan M. That's exactly what I'm trying to do out in in the DFW area. I think that market hasn't fully been tapped into yet. The cash flow is it produces in certain areas is unbelievable and the way the area is appreciating is an added bonus. No doubt in mind that it can't work. i woulld like to find a place that doesn't need to much work that way you can list it as soon as you furnish it (within a week) and do the minor repairs during the weekdays when the property is vacant. Most important factor is location! From what all my studies have shown, 10 miles can make or break a STR.... Good luck to you. Keep me posted. And if you ever need an STR in Dallas you know where to look.

Karen O. · Answer

Question on your STR:. How do you manage turnover of the space?  Do you still live in the area and do it personally, or do you use a service? And do you prep right after STR leaves, or just before they arrive?  Thx.

Ethan Cooke · Answer

@Ryan M. I think this can be very lucrative in many areas. I am seriously exploring a BRRRR STR on a SFR in San Francisco which started out as a LTR. After buying and rehabbing 2 SFR's in the past 3 years, I have realized that even in a high-rent area like SF, the returns are often much greater on a furnished STR (even with the local 30+ day rental restriction) than with a traditional unfurnished LTR. For example, I have learned that a typical SFR in my neighborhood charges about $5K/mo as a traditional rental and $8K/mo as a furnished rental. Even after costs, the difference is probably +$2K a month (+40%).

@Ken Graham You bring up a good point about re-financing: I'm not sure what it takes to re-finance a STR and would like to hear others' experience.

@Brian Payne - Other than your 1/1 STR in Bakersfield, where else in CA have you had good results with STR investments? I'd love to learn more about your experience since I'm always researching places in CA to achieve good cash flow. Thanks!

Anyone have experience using the BRRRR strategy with STR?

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