5 X Cashflow with this Short-Term Rental Conversion

[Matthias Pieplak]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $165,000
Cash invested: $47,500

I bought this move-in-ready 4 bed, 2 bath with 3.5% down, only to change my mind about its strategy a week after closing. In my market rent projections would have put me at 300$/mth cashflow. Instead, I am investing an additional $15,000 (included in the $47k) to set up an Airbnb that is projected to earn $19,000 p.a. Luckily, I already have an experienced Airbnb host at hand who can take over the management once I go live. This will be my first property solely dedicated to short-term renting, which is why this project is especially exciting. I can't wait to see a year from now, how it performed during its trial period, while looking to open up additional short-term rentals in the meantime.

What made you interested in investing in this type of deal?

Move-in-ready single family, good layout and in a stable neighborhood with 11% Cash-on-Cash (initial plan).

How did you find this deal and how did you negotiate it?

MLS/Zillow... Highest offer out of 5 after another buyer's cash offer fell through... Pushed on obvious issues in inspection report to get concessions.

How did you finance this deal?

Conventional, 3.5% down

How did you add value to the deal?

By reading the market and seeing its long-term potential. The property was priced right to sell fast and I was ready. It appraised 12% over asking price. In today's market, one month later and considering the limited local inventory , it could sell for $185k, 25% over asking price (12% over purchase price) with minor upgrades. I.e. it is unlikely to go under water even in a market downturn and even more important the cashflow forecast for a short-term rental conversion is phenomenal.

What was the outcome?

Projected amortization in 2.5 years and $19k p.a. cashflow going forward.

Lessons learned? Challenges?

Once again, I was happy to get a property under contract with a strong offer and get concessions later.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes.