Are STRs a path to lifestyle building?

Question

I am a "traditional" LTR guy, you know? ...But I have really itching to get into STRs or short term rentals (specifically vacation homes). I'm currently working on quite a bit right now but would like to create a plan with a real path to purchasing my first STR in 12 months.

So for you experienced players out there, what you say to me (STR newbie) if i said i want to build a few STRs in different markets for my family and me to visit as awesome vacay destinations?

My idea is a mountain house, beach house and ski lodge. (one of each) I am thinking Gatlinburg/Pig Forge, some FL market, and some east coast ski resort area (no idea where though)!!!

Any tips?

like.... how do you finance these? second home loan? Vacation home loan? Investment loans?

Also: referrals on lenders?

This has been an ongoing vision for me for a few years now. I figured I'd voice it here and now for the first time! Any feedback would be amazing!

(Yes, this is a jumbled post and I may be a crazy person. Well, crazy about real estate, whose with me?)

Aubrey Maldonado · Answer

@Zachary McDonough Love the idea! This is part of my husband's and my vision for our future and it's awesome to see others with the same idea! It's also a good strategy for buying property in a hot seller's market. If you're in the right STR market, it gives you the opportunity to have a better rent-to-price ratio, meet the 1%/2% rule, and higher cash on cash ROI. The downside (as people have mentioned) is STRs are much more hands-on. It's pricier to hire short-term rental property management if you don't want to do it yourself. I have yet to come across a good STR property manager in my area, so we're currently doing it ourselves. We just started with our first short-term rental this month and we are pleased with how it has gone so far. We have a townhouse 5.5 miles from N. Topsail Beach in NC. We used a VA loan to purchase the property so it started as our primary residence before we converted it into a short-term rental.

I know others who have used vacation property or second home loans and they're great options for this strategy. Mostly because they require less cash to get it going. From the lenders I've spoken to, the vacation property/2nd home loan allows you a 10% down payment as opposed to conventional investment property financing where you need 20-25% down most of the time. You do have to live in the property a certain amount of time for it to be considered a vacation home; but with your strategy, I'm guessing this shouldn't be a problem. Hope it helps!

Jake Cohen · Answer

@Zachary McDonough I think this is a great option. I started on the LTR path but went short term in 2017. I now have properties in Steamboat Springs, Denver and Gulf Shores. We spend time in each place each year and it has been a great addition to our life. The money from the properties is significant and having built in vacation spots is a great bonus. One thing I struggle with is being able to not work while we are on vacation.

Good luck with the plan!

Ken Boone · Answer

@Zachary McDonough So here is the deal.   Build one in the right market and they will come.  Then you will learn about prime daily rates.  The thing is when you and your family would want to use it would most likely be the prime time.  Which means you will be giving up lots of dough to go at that time.  Just something to think about.  Nothing wrong with that if that is what you want to do.  As far as different places, I think that would take some time.  So start with one learn the game and then move to the next.  All of mine are in the same location.  I would like an alternate location, but I know my location so well it would be a lot of extra work to have one someplace else.  You have to establish new contacts, a new team, new cleaners, new handymen, new etc...  So my theory is that if I want to visit someplace else, I'll just use the money from my STRs at the location I know and and go wherever I want when I want.

As far as financing, you have a lot of options, a 2nd home loan will work for you first, and if your next one is in a different location you can do another 2nd home loan.   I love doing STRs so have fun with it.

Joshua Strickland · Answer

@Zachary McDonough you are spot on with this. I own in the same vacation markets as my family vacations to, so we get the added bonus when we want to spend time there. We’ve also really come to like vacationing in the off-season due to less crowds and obviously we want to rent it during the high times.

For lenders check out Movement mortgage and Element funding.

Paul Sandhu · Answer

Oops.  I mean 4. 4 shotguns from Accokeek. I forgot Beretta is part of Benelli.

Paul Sandhu · Answer

I've got 3 shotguns from Accokeek. Running STRs take up much more time than LTRs. Mine are a full time job.

John Underwood · Answer

Absolutely.  It is good to have different types of RE investments.

Vacation rentals are more work but more fun too. Especially if you have them in a vacation destination that you and your family can also enjoy.

I love my LTR's but I plan on adding more vacation rentals to the RE portfolio.

Zachary McDonough · Answer

@Paul Sandhu

Gotta love Berretta

Bruce Woodruff · Answer

Vacation rentals are amazing. So many uses and a money maker as well....! I wish they had been a thing 30 years ago..... :-)

You have LOTS of research to do... This forum will be invaluable to you if you use it right....

Are STRs a path to lifestyle building?

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