Vacation Rental - Is 10% cash on cash too low for first STR?

[Peter Amendola]

Hello everyone!  

This is my first post and excited to be part of the BP movement!  My life was turned upside down exactly 2 weeks ago when my wife said that she will be getting laid off in the next 3 months.  

Instead of brushing off her old resume, wifey surprised me by showing interest in purchasing/self-managing vacation rentals where we live....the Florida Keys (Tavernier).  The Keys have seen extreme price spikes (much like the rest of the country) and average sale prices for single family homes are a staggering 755k.  Purchasing in this market for long term rentals rarely even meet the 1% rule....I should know because I've been suffering from analysis paralysis over the past 2 years trying to make the numbers work! 

I found a vacation rental opportunity and wanted to know if my analysis paralysis is warranted lol The property is in an outstanding location with water views from the roof's observation deck. At $200 average daily rate and a 75% occupancy (thanks AirDNA and airbnb), my estimated monthly cash flow net is $1100-$1200 on average. By putting down $150k (down payment, rehab, furnishing costs), the Cash on Cash return is ~10%. In addition, 150k would be 75% of my entire HELOC availability to buy future properties.

** Shout out to Dave Meyer on BP.  His article and excel spreadhseet helped immensely.  It can be found at:

biggerpockets.com/blog/analyze-short-term-rental

I've read that some investors do not touch a vacation CoC return under 20%, but this is our first opportunity in a high priced market. My wife and I wanted to start local so we can minimize the bumps and bruises....unfortunately, my analysis paralysis is on overdrive lol

Any thoughts would be greatly appreciated!  

Thank you,

Peter and Marie  ("5 o'clock somewhere" playing in the background)