Short Term Rental Deal Analysis

[Daniel Pitner]

I'm hoping to get a second set of eyes on this deal. It's a condo (The hoa is STR friendly) in Sedona, Arizona. It's currently being used as an Airbnb and it's annual pre-covid numbers are as follows:

• $116 ADR at a 64% occupancy

There area few comps in the same complex that are used as an airbnb. Those numbers are as follows: 

• $130 ADR, 73% Occupancy (high comp) 
• $92 with 70% occupancy  (low comp) 

Average among all comps: $102 with 68% occupancy . 

With my financing that I have in place I'd be looking at a mortgage of $950 (HOA fee included) . Based on the average comp we are anticipating a revenue of $2108/month. Our anticipated net would be around $831/month once cleaning, utilities, capex, etc is accounted for. We would be putting around $25k into the deal so my anticipated CoC would be around 36%.

I had a few questions I was hoping to get some answers to: 

1) Am I missing something in my numbers? Help me poke holes in my data

2) Is it too risky to buy a STR in our current climate? (we currently have one that has made do, but I'm a little nervous to expand to another)

3) How much in reserves would you put aside for a property like this? 

Thanks in advance! 

[Joseph Bafia]

your numbers are very close to one of our STRs.  We pay roughly that in mortgage on our place and our ADR is a bit higher, but the part that seems to be biggest difference is the "other" expenses, cleaning, utiliites, internet, supplies,  capex, etc. for me are more than $327/month.  could just be a difference in monthly utility bills and cleaning fees (and are you taking into account the Airbnb/VRBO fees)?  Also assume you self-manage...we do.

Happy to share ideas as I'm learning as well with our 2 STRs.

Joe