My Plan: Please poke holes in it :)

[April C.]

Hi BP,

I have been researching, reading and listening to everything I can find in REI for the last few months. I feel that settling on the plan to follow is the biggest hurdle. I am pretty sure I now understand my investment goals. Pipe dreams or possible?

My primary goal is to create generational wealth and future financial freedom by investing in Real Estate, specifically the STR market. My secondary goal is to have a few nice homes my family and I can vacation to several times a year near our home in Austin, Texas.

My background is I own a home with significant equity, a business I started that does not require my personal full time involvement (my husband is full time however which we would like to change), I own the office property that is rented to our business in Austin. We have about 50$k cash saved to invest. We have credit ratings around 830 personally and business credit ratings in the 530s.

My plan is to use our cash to put a downpayment on our first STR in Canyon Lake Texas and pull the remainder of the loan as a cash out refinance on our current home - IF we do not qualify for a standard loan as an investment property/vacation home. AIRDNA shows 40k ARI and the purchase price is $250k.

We would budget about 10k on furnishings. Ideally, I manage to start then turn over to a manager down the road. Assuming it all goes well- buy another in a different city.

Questions and thoughts welcome!

April

[Stephen Stokes]

@April Clark it is just my personal beliefs so take it what it is but if you want to get into the hoteling business you should invest in a hotel. The STR craze has the opportunity to become at some point highly problematic with so many people buying "empty" houses. Just imagine if everyone that currently owns rental property converts them into STR...The rentals will do great and STR will face massive competition. At some point the margins have to come back in line but right now they are commensurate of the risk reward you prefer to take. I prefer the get rich slow through traditional rentals route as everyone needs a place to live and this method is time tested to withstand the ups and downs of the market. It has worked for so many people and built so many success stories well before STR became so hot.

I tend to stay away from what is hot at the time because I follow the logic of those like Warren Buffet who believe boring is more sexy. For example, tech stocks in the late 90's, or now for that matter will not find themselves in my portfolio. My friends will laugh and tell me I am losing out on sooooo much opportunity because my rents are 1/10th what they could be if I converted to STR but some day I will laugh when they go belly up in the down market while my tenant filled units keep chuggin along. I don't care about today, I care about the long term generational wealth and it seems you might be along the same thoughts so I thought I would share my personal rationale and why I chose long term rentals as my path to building wealth in real estate.