Rental history: How important is it?

When evaluating a STR for purchase, you need to ascertain not what the property's rental income history is, but what it's performance will be.  Take rental histories with a bit of grain of salt.  Yes, a rental history is one data point that is worth asking for, but a specific property's rental history isn't necessarily an accurate picture of future performance.  

There are a lot of variables that can affect a property's rental history, good or bad:

How many days did the owner stay at the property per year?  If the owners are staying 2 or 3 months per year, which is certainly their right, then that will drag down financial performance compared to peer properties.

If the property has performed very well, it has likely been well-managed.  If it has been poorly managed, it properly is performing well below peers.  Well-managed and poorly-managed can occur in both the self-management and property management world.  It takes WORK to do it right.

If the property is missing a popular amenity compared to peers, it can drag down performance.  We had a client add a hot tub and his rents increased $10K a year. We talked a client into adding WIFI and we saw an immediate bump in rents.  

So don't place too much weight in the rental history of a property.  It's a good piece of information to obtain, yet your real concern is how the property will do going forward.  And to determine that, you are going to need to do some homework.  I'll dive into those weeds in my next blog entry.