Are STR's worth it for a high-income earner?

Question

I am considering venturing into the STR market chasing higher returns (gotta be honest!) after liquidating my long term rentals. My first "trial" STR would be my primary residence on days when I'm not home, which is about half of the month.

After reading pages and pages on BP forums discussing potential issues, my biggest concern is personal liability. I am a high-wage earner (getting a W2 from a Fortune 500 company) with a substantial career growth potential in the future. Feel like it makes me a good target for lawsuits, frivolous or otherwise. Should I even mess with STRs? Or stick with the tried and tested LTRs?

Anyone been in this situation and can chime in, I'd appreciate it.

Julie McCoy · Answer

Anybody can get sued, whether you're operating a STR or LTR.  Have the correct insurance to cover STR activity in your home (Proper and CBIZ are the two major players in that area) AND have an umbrella policy in place.  You'll be fine.

Michael Sjogren · Answer

@Ada Tor What if you could generate better returns than traditional multifamily properties AND use the property whenever you want. This is the beauty of STR/Airbnb properties. I've invested in a number of mastermind groups to build a system where I spend 2 hours/week max to manage my vacation rental (which is 2.5 hours away) which generates me a 20% cash on cash return AND my wife, son and I use it at least once a month.

As far as lawsuits, I have a blended insurance policy created for STR operators that includes $1M commercial liability policy.

Julie McCoy · Answer

No, I have not.  I don't see that an LLC gives me any advantages I can't also have through good insurance policies, and it's a lot less bookkeeping!

Julie McCoy · Answer

Definitely research the laws, but what I understand from it is that you are NOT required to permit service animals in STRs IF you meet certain criteria, namely that you own fewer than (I think 3?) STRs.

AirBNB specifically recommends language pertaining to allergies and service animals - you can state in your listing that you don't accept any animals (don't say "pets") due to allergies and it being a health risk to you or a family member.

Again, definitely look into the laws yourself, but between this being your primary residence, your only STR, and you having allergies, I don't believe you could be required to accommodate service animals.

Michael Greenberg · Answer

@Ada Tor I would recommend a personal umbrella policy of at least $1M.  They're not expensive and will let you sleep better.  You could also consider a solution like slice.io (not .com).  Take a look, they have some nice solutions to ease your mind.  @Julie McCoy I would likely feel the same way even though we just completed a HUGE remodel at my personal home that has a private entrance to a room in the basement.  I use this space as my den now but as the kids venture off it could be an STR - but then again is it worth the uneasiness...?

Julie McCoy · Answer

On a separate note, in this coming year I'm going to be experimenting with using my primary residence as an STR, but I expect that to be significantly more complex than my STR investment properties.  There's a lot more to consider when it's your primary - not just the scheduling, but taking into account the personal items you have there and how to either protect them or keep them out of the way.  With my investments, everything is geared towards short-term stays, and I don't worry about things getting damaged because it's all meant to be replaceable.  I think I'm going to worry a lot more when it's my home and my stuff!

Michael Bishop · Answer

@Ada Tor are you interested in STRs for the higher returns, passive income, or a combo of the two? As a high income earner, there are alternate routes that garnish high returns than LTRs, are more passive (nothing is truly passive) than both LTRs and STRs, AND expose you too much less liability.

Ada Tor · Answer

Eric A, that's precisely why I'm using real estate for passive income on the side! Ultimately, financial freedom is the goal.

However, until I achieve it, I'd like to be smart about it and make sure I protect my livelihood.

Ada Tor · Answer

Scott, thanks for the input. Why do you recommend to stay away from STRs?

Are STR's worth it for a high-income earner?

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