Short Term Rental - Long Term Potential

[Carrie Hays]

Investment Info:

Single-family residence buy & hold investment.

We purchased this home (and the one next door) as a fix and hold residential property to be used as a short-term rental that I materially manage. Our primary motivation for purchasing the property was that it sits on a lot zoned for multi-use. Our long-term strategy will be to demolish and redevelop the lots into townhomes. For the next 7 years or so, we plan to operate these properties as STRs.

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

We enjoy the returns on STRs, but we invested specifically in this deal for the long-term potential for development of the lots. Beaufort has strict restrictions on STRs and all neighborhoods are currently at the maximize for STRs, however, with these two houses being on multi-use zoned lots they are not restricted by the usual STR cap.

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

I found this deal through the listing on the MLS and engaged a local agent for the purchase.

How did you finance this deal?

Used a 1031 from a duplex investment to fund the 20% down for a conventional 30 year fixed mortgage.

How did you add value to the deal?

Renovated the interior and exterior of the homes. Converted the property from a long-term rental to short-term rental.

What was the outcome?

The property is producing better-than-expected cash returns.

Lessons learned? Challenges?

If you are going to operate a short-term rental, know the STR restrictions in-depth and allow more time than you think for the permitting process. We were not expecting to have to replace the old windows in the house, but in order to pass the STR inspection we had to.