Short term rental investing - Build reserves first!

[Mathieu Dumoulin]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Redstone.

Purchase price: $595,000
Cash invested: $300,000

Triplex on the river, with an office space rented to anchor tenant (10+ yrs on site) and 2 short term rental units booked through the local hot springs.
A stunning property zoned village-residential, very versatile!

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

The building is versatile and there are value elements that are certain to add value on the long term (River front + original building has history).
With 2 small units (±700sqft each), all connected but separate, we can turn the home into 3 living spaces rented short or long term, we can live in one, we can keep one of them as an office space, or we can renovate it as a single family home with an ADU and to sell it for the most $$.

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

After looking for over a year, that was the only attainable investment that was cash flowing in the area.

How did you finance this deal?

We started a family investing company.

How did you add value to the deal?

We changed the booking policy and added 20% reservations. We self-manage as much as possible to cut on cost and save for the next investment.

What was the outcome?

+20% reservations.

Lessons learned? Challenges?

With COVID, we were able to really appreciate the versatility of the building. We put long term tenants (month to month lease) to be able to cashflow while waiting.
For the first 2 years, we didn't use the money we made. We built reserves and we are able to just wait it out without sweating.
When chasing cashflow in the short term rental market, don't forget to build a rainy fund! You have to make sure you can pay the inherent cost of owning real estate if incomes dries up.