All Forum Posts by: Collin Hays

 This is so true.  I purchased a cabin for my mother in the Blackbear Falls subdivision in Gatlinburg last summer.  It's 900 square feet and she paid $270K for it.  $300 psf!   Does it "cash flow"?  Absolutely it does.  It generates about $41K a year.  She paid cash for it, but here are her yearly fees (approximate):

HOA $2600

Utilities  $3000

Insurance $2000

Repairs/maint $2000

Taxes $700

CC fees (her portion) $872

So about $11,200 in expenses, with a net income for her of approx. $30,000 from an investment of $270K.  That's an 11 percent annual yield.  Even if I was charging her a 25% management fee, her yield would still be approximately 8 percent annual, just on the income alone  Find me a CD paying that!

 An actively managed property should be renting for 12 to 18 days MINIMUM, even in January and February.

Numbers are always fuzzy because "profit" means different things to different people.  I don't include a mortgage in measuring profit, because it's not the property's fault that I am having to borrow to buy it.  Whether a property is a good deal shouldn't be contingent upon your financing terms.  That's a bank and personal finance issue.  

Now, I would still expect it to cash flow after a mortgage personally, or it wouldn't work for me.

 Your PM is likely making a profit on the cleaning fee.  Also, go to their website and try to make a sample booking for a couple of nights.  What extra fees are they charging?   Booking fee, hot tub fee, administrative fee, Damage waiver fee.  You might be surprised.  They aren't sharing any of these fees with you, and in fact are shifting $$$ away from rents into their fees.  It's called rent shifting.  I have a video on youtube exposing this.  I can't provide a link because I it might be construed as promoting my own co., so you will need to do your own search for it.  It's very eye-opening.  Go to youtube and use the term vacation management exposed and it should pop up.

Top line. Gross.   

This was a screaming bargain, producing over $57K in rent last year. Was going to put an offer in on it when I got back home this week but too late. Literally right on the Pigeon River.  You just don’t find these any more.  Sheesh.

https://www.realtor.com/reales...

Cherokee NC isn’t going to have RE for sale unless you are Cherokee Indian.  That is a reservation.

And just because a 4br house is priced at $750K doesn’t mean it is “high”.  High relative to what?   If it produces $75K a year in rent, it’s high.  If it produces $150K a year in rent, it’s a bargain.

It’s all about the yield!

It really all depends on the investor.  Some folks want to invest and get their checks.  We have clients in TN from thousands of miles away who have seen their property maybe once.  Several are executives who aren’t interested in taking calls about not being able to get the TV to work or that there’s a snake in the dryer.

These types are glad to pay the 25% and move along.

But if you are wired in such a way that you like to get “down into the weeds” to squeeze out some of that 25%, self management is for you.

But...it’s not really a 25% savings, as when you are self managing, you likely have 12-16% in overhead on the VRBO or ABNB platforms.  

So at the most, you are saving 13-14% to self manage.  Most likely, a self manager will lose that plus some in lost bookings due to slow responses alone.

I’m not pushing management cos, but I think that self managers need to know the true cost of time and money of self managing.  I’ve done both.

All of mine are around 20-22% when factoring in tax depreciation, annual price appreciation, and net rents.

That said, a 12% return from an STR is far superior to the same return from a mutual fund, because you are using your own money to buy the mutual fund, and someone else's money to buy your STR; the guests pay for the investment.

I always prefer to let perfect strangers fund my living rather myself.  

If you could give a little more detail on what “positive cash flow” means, it would help ascertain the quality of your investments.

What are the gross annual rents on each of your STRs?