3/2 SFR purchased as a Short-Term Rental

[Caleb Drake]

Investment Info:

Single-family residence buy & hold investment in Navarre.

Purchase price: $168,000
Cash invested: $37,500

Single Family Residence 3/2 four miles from the beach that was purchased for a short-term rental property.

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

I rent my personal home out on the Air BnB platform while I'm deployed six months of the year. This model has worked great and afforded me the opportunity to buy a second, income-generating property. The model works great for this area because of the proximity to the beach. I also knew that the home would easily rent as a long-term rental because of the proximity to the local military base. Being in the military I also know how this system works and the quality tenants it produces.

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

I found this deal on the MLS and I negotiated very poorly. I gave a best and final full asking price with a pre-approval letter, and contingencies on financing under 5%, and inspection.

The seller countered with a limit of $2500 in repairs after inspection which we agreed to. I wish I would not have agreed to this because it cost me $2k when the hot water heater went out on THANKSGIVING three months later.

How did you finance this deal?

Conventional Loan with 20% down purchased with my business partner/best friend from college.

How did you add value to the deal?

The home was a rental prior to our purchase and already had new carpet, fresh paint, a brand new roof and new appliances. We added value mostly by adding curb appeal which was needed for our short-term rental business model. We redid the deck in the backyard, cleaned and stained the fence, redid the landscaping and furnished/decorated the home for the tenants.

What was the outcome?

The outcome so far has been great. We are 90% booked in season and around 65-70% booked out of season. When purchasing, I ran the numbers at 65% annual bookings which puts us at ~237 days rented. We are already blowing that projection out of the water and should have enough cash flow in the next year to put a down-payment on another rental.

Lessons learned? Challenges?

Even though the market is really hot here, I should have lowered my offer. The house had fallen out of contract once and the owners were living out of state. We were anxious to buy a place before I deployed and have it set up and running as a rental before I left. That desire left a lot of money on the table.

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

I have an agent and friend who also doubles as my mentor. I have a lending team I work with and I have a preferred inspector.