I've been looking for an investment property for about 2 months now in a vacation area that is about 3hrs away from my city. It's overall a good area for STRs. I found a house that I think has potential - AirDNA is estimating 62K/year at 63% occupancy and $273 a night; however, I spoke with a Vacasa rep who thought those numbers were a little high. There is a similar home about 15min closer to amenities doing 61K, at 79% occupancy and $211 a night but with no outdoor amenities or interior design.
I made an offer on the home and it has been accepted. I've also put in my earnest money.
The recent interest rate hikes have taken a toll on this deal for me; however, because now my lender is telling me that because of the changes, I need to pay off more debts to make the deal work. Here are the terms:
Purchase Price: 255,500
Loan Value: 229,950
Sellers Credit: 15,000
Down Payment: 25,550 (10%)
Debt Payoff: ~22,000
Interest Rate 8.12%
This high debt payoff has doubled since I initially started this process (at first it was 10K) and lender is telling me it's due to the interest rate increases.
Because of the debt payoff increase and the cost to furnish (~20K), my CoC is just 5% now (this is if I keep a management fee of 10%, though I'll be managing the property myself). If I calculate the management fee at 0%, my CoC would be 13%.
I'm not thinking this is a good deal anymore but I really need some guidance as this is my first investment property and I don't want to make a costly mistake.
Does anyone have any advice on how this is looking on paper? I'm prepared to walk away if it just doesn't make sense anymore but feel as though I could use the advice of more seasoned investors on this.
Thanks in advance!
