Both of mine are doing about $2000- $2500 a month, but I'm in ny first year at STRs. According to what I see on BP, people expect to get 3-5 x the rent they would get for a LTR, and I think that is a reasonable expectation once you are fully established and bringing in private listings in addition to AIR and VRBO.
How are you running your numbers? The best way is to do it yourself by pulling similar properties off of AIR or VRBO sites. Check their rates AND their bookings (how full are they?) Then just do the math.
Of course, for a STR, location is huge, even more so than a typical rental.
And remember, you can always get a house try the STR thang for a while, and if it doesn't work out, turn it into a LTR. You can't always do the reverse....
Search the internet for the pros and cons in regards to short term rentals and stay out of that business unless you want to own a business similar to running a hotel that requires 24/7 365 days per year management.
Never believe the returns other investors tell you unless they actually show you their tax records. People have a weird way of exaggerating their income and profits.
I have a plumbers helper who makes an average of $800 per week. One week, he worked on a job at the Los Angeles airport where a sewer pipe was broken. Instead of getting paid his usual $20 per hour wages we had to pay him $47 per hour plus he worked some major overtime. So he earned $2200 that week and when people asked him after that job, how much he earned he would tell people he earned $2200 per week.
I've seen several house flippers say they earned $100,000 flipping a house because they purchased the house for $550,000 and sole it for $600,000. They never mention that they paid $80,00 for the cost to rehab, utilities and the real estate commission to sell the houe.
I've net a hundred STR investors because I own a plumbing, HVAC and construction company and they always say something like, "I am making bank on this house because the regular rent is $2100 per month and I am getting $3600 per month by making it a STR". This is a total lie because they fail to tell you it is impossible to have the house rented every day and the cost for a management company to constantly have to keep the house rented and the cost to clean inside and outside the house, change bedsheet, clean bathtubs, toilets, stoves, refrigerators, and make the house in pristine condition for each new guest is very expensive and time-consuming.
As far as I am concerned, any person who wants to make a few dollars more when they have to clean a house every time a guest comes and make that house in pristine condition a hundred times a year exactly the same as cleaning a house for a long-term tenant and then pay the management company and then deal with guests 24/7 and on holidays when they can't operate the air conditioner, or can't figure out how the remote works on every holiday, including Thanksgiving, New Years and Christmas IS CRAZY!
Not all money is good money and in the end even if you make a little more money, not all money is good money' if it tales too much time where you could focus and invest your money into multi-unit properties where I will challenge anyone who tells me they can make more money with STR's without the insane inherent risks and insane additional costs.
There may be many STR investors who are getting filthy rich, but the STR business is not for everyone and you need to do research on the internet to analyze the risks as well as you analyze the rewards.
Most folks on here will advise against having a property management company for STRs,
@Alex S. I'm curious why you would say this?
Property management with LTRs is the norm. It is 10% and they handle all the tenant screenings, repairs, rent collection, etc. Extremely passive for the investor. STRs don't work like that. The management companies want 20% or more, plus the cleaning fee. That is a HUGE chunk of your cashflow. In many areas (like mine)...there aren't even any management companies because there aren't that many STRs. You just simply can't make the numbers work paying a STR manager unless you just stole the property. Also, it is really easy to self-manage. Hire a cleaning crew. Hire a handyman. Keep tabs on them. Just about everything else can be automated.
I think, as STRs are more normalized over the coming years, we'll see those management fees start to drop and maybe it'll be viable.
100% agree with Alex. Also, a lot of times property management companies are way underpricing the property. For example, you're getting a cut of $135 a night 90 days in a row as opposed to using your own pricing software and getting a fluctuating $210-$350 a night or more during those same 90 days. They sell themselves on "being booked up through the end of the year". That doesn't mean anything if they charge the guest peanuts, and you only get half a bag of peanuts. 😄
Self management is easy once you get automated systems up and running, and worth trying yourself for a month or two, and seeing for yourself how much money is possible for how much work.
Running a STR takes more time then a LTR. The time is still very small. A PM can charge 17%-25%. My STR takes a couple hours a week more than a LTR. I agree with @Account Closed up to a point about investors not telling the whole story of there costs. I can tell you from experience my STR total cost is $3200 a month or $38400 annually. The income already exceeds that for the year. Based on the rest of the year the net should be 20,000. My LTR with a mortgage would net 6000. I’ll take the additional time to manage and enjoy the benefits. If I had a portfolio of 5 STR yes my time increases, but in my opinion it’s still worth it and the revenue blows away LTR. I still have a number of LTR. Both strategies have a place in your portfolio.
I think, as STRs are more normalized over the coming years, we'll see those management fees start to drop and maybe it'll be viable.
My STR management company only charges 10%.
I think, as STRs are more normalized over the coming years, we'll see those management fees start to drop and maybe it'll be viable.
My STR management company only charges 10%.
That 10% cannot include the cleaning inside and outside, changing the linens, etc. What is the total percent of your rental income plus the percent for property taxes, insurance, maintenance costs, etc. and what do you have left. How many hours per week do you deal with a STR and how many times do you have to deal with them on weekends and holidays?
I purchased a 30-unit apartment building in San Pedro California about 45 years ago and every unit was furnished. Owning that building was no different that a STR because we charged more per unit than what people paid to rent an unfurnished apartment. The tenants in the 30-unit building were more transient and time it took to constantly clean and re-rent to tenants was a nightmare. So, after about three years an investor made a decent offer. I dumped the building and was very relieved when I used the money to purchase a conventional apartment building where I only had to visit the building once a month to collect the rents and send my maintenance workers to make a repair once in a while.
@Deanna Lawrence What do they provide you for 10%?
@Andrew C. I guess I would have to know what it means to "make the numbers work." I imagine that everyone has a different definition. I spend a couple hours per week on my STRs. I have a handyman, a cleaning crew, automated messaging and reviews, customer interaction, etc. 20% is a huge expense on any income stream for any business.
If you are asking if you could use a STR management company and still see cashflow...yes, depending on your location. That said, it'll be 20% less cashflow than your competitors who self-manage and build systems. That means that I can charge 20% less than you and make the same amount of money. Overtime, that'll price you out of the market.
Like I said above...I think the STR market is in massive flux from disruptive tech. I think management companies will streamline the business and realize that they can make money with way less than 20%...eventually.
Some of this is going to depend on your purchase price and how large of a property you are looking at. I personally go the self-management route and wouldn't look at anything under 20% CoC.
With that said whatever management company you are looking into should be able to give you a decent estimate of what they think it will gross.
@Joshua Strickland - Do you see a correlation between purchase price and CoC? $X purchase price = xx CoC but 2x purchase price = 2.5 CoC? We are looking at getting into the STR game. Currently evaluating a small starter to get our feet wet or jump in with a larger property to can CoC/CoE gains.
@Jonathan Weaver Not necessarily purchase price, but for size of property yes. Larger properties that cost more tend to have higher returns if other factors are equal. In the markets I’m in… 1 bed/1 bath you’re making money, 2 bed/2 bath is good, 3 bed/3 bath is great, 4 bed/4 bath is fantastic, and 5+ is ridiculous.