Tillamook County Oregon Coast STR First Timer

[Benjamin Hanson]

Hi everyone, I've been browsing BP for several years now but never pulled the trigger. However, now I'm in the process of buying a property along the Oregon coast a couple blocks from a beach with the intention of making it a STR. It's an old 2/1, about 700 sqft that has not been a rental before. There's unfinished space that may allow for another bedroom but I haven't been able to get into the property yet. I used airdna to get some income estimates but the number they give seems unrealistic as it includes a lot of beach front/ocean view places.

I've reached out to some local realtors and management companies but would love to hear your advice. Specifically:

1) Are there are smaller management companies that I should look into? I won't be in the state so using a manager seems like the best option.

2) Who do you use/what should I expect for insurance and maintenance rates? It doesn't appear to be in a flood zone, but it's not far from one.

3) Is there a rough estimate of expenses that I should use to see if the deal makes sense? The larger management companies start at 25%, plus insurance, utilities, ...what else? I've tried to break it down below but some values are just guesses.

4) Are there local lendors? I've reached out to Visio and Conventus but am open to anyone that loans on STRs.

5) Are my numbers realistic? I've made quite a few assumptions and it shows a negative cash flow. But there are a lot of STR in the area so somehow others are making it work.

Thanks everyone for your comments, analysis, and connections!

[Taj Richardson]

Hello Benjamin,

Here are some answers for you:

1) Are there are smaller management companies that I should look into? I won't be in the state so using a manager seems like the best option.

Yes, Reach out to Kiwanda Coastal Properties. They are the best small STR management company in P.C.

2) Who do you use/what should I expect for insurance and maintenance rates? It doesn't appear to be in a flood zone, but it's not far from one.

For insurance you are going to want to use an insurance brokerage on the Oregon Coast, I usually recommend PayneWest Insurance in Newport, but there are others as well. For verifying flood use floodfactor . com. Your insurance is going to be around $100 a month and you likely won't need flood insurance on top of that. For maintenance your most common maintenance cost items are going to be landscaping, replacing sheets, towels, and kitchen items mostly, factoring around 5-10% a year is reasonable for ongoing maintenance costs.

3) Is there a rough estimate of expenses that I should use to see if the deal makes sense? The larger management companies start at 25%, plus insurance, utilities, ...what else? I've tried to break it down below but some values are just guesses.

For a small home you won't get a 25% management fee, you will likely be more at 30-35% for most management companies. These higher fees usually come with much better marketing of your home so can more than be offset by a lower commission from a small company with a much lower marketing budget.

4) Are there local lendors? I've reached out to Visio and Conventus but am open to anyone that loans on STRs.

Stick to Oregon based mortgage brokers for your best STR loan options. I highly recommend Andy at Newland Mortgage.

5) Are my numbers realistic? I've made quite a few assumptions and it shows a negative cash flow. But there are a lot of STR in the area so somehow others are making it work.

Homes on the Oregon Coast will not cash flow in 9 out of 10 cases with less than 30% down. Your numbers are OK but you are underestimating costs. You should pencil in 30% management fee and your total utilities should come in at around $400 a month total (including cable/wifi). Get cable, it will pay for itself in 2 extra bookings a year and people still watch cable by more than double steaming services. 

Keep in mind, cash flow is not the only reason to invest in a home on the Oregon Coast. In the last 20 years average home appreciation has been at about 9%, that is significant and should not be dischound just because a vacation rental doesnt' cash flow in the first few years.