All Forum Posts by: Jayme B.

@Jayme B.

One thing to keep in mind is the shifting supply and demand trends for STRs. In a lot of markets, there was a large boom in STRs following Covid lockdowns going away. There was an influx of people who wanted to get out and travel after being cooped up in their house for the previous 2 years. This led to a boom in the travel industry as a whole. At the same time, many hosts and investors jumped into STRs during this same time period which created an excess of supply in many travel destinations that wound up saturating those markets. In the same since, travel has began normalizing back to 2019 levels. So demand for travel is lowering back to historic levels while the supply of STRs in many markets has increased by a lot. There are still opportunities to find a good investment for STRs but I think some precautions should be done. Don't rely entirely on revenue numbers from 2022 but instead make sure to look at STR numbers in 2019 and previous to get a more conservative revenue estimate to expect. Also do research into what the current occupancy rates are in your market. There is money to be made with STR now, but you may have to compete more now and find ways to make your specific STR standout from the competition in order to attract bookings. This is essentially the spot I am personally in now. I purchased an STR a little over a year ago and my goal is to make it the best STR in our area before I even consider purchasing a 2nd STR. Focus on one STR at a time. Also keep in mind that many of these vacation locations have began changing enforcement and regulations for STRs so make sure to research a lot about pending legal actions and public sentiment of STRs in any market you want to enter and formulate several exit strategies to protect yourself in case there is a shift in the market there.

@Avery Carl I haven't had a chance to read your book yet but it's one of the next books I have on my list to read. Congrats on the success of your book. I have heard great reviews about your book and can't wait to read it. I agree that everyone's journey is different. My wife and I heavily prioritized location when selecting our STR in New Orleans and it has made a big difference. We still have a long way to go before we reach our occupancy goals but are excited at the future possibilities.

One thing that we felt was important in selecting our property was to hedge our bets by ensuring the property would function as a long term rental since we know the current climate in New Orleans regarding STRs is not positive and there have been on-going regulations coming out because of this. 

Sounds like you're out on conventional due to their underwriting requirements. All my DSCR lenders are basically starting at 20% down these days, some up to 30%. You'll have to get clever with down payment or what you're buying. Possibly look at a fix and flip loan. It depends what market you're buying in if that will work or not.

Sounds like you're out on conventional due to their underwriting requirements. All my DSCR lenders are basically starting at 20% down these days, some up to 30%. You'll have to get clever with down payment or what you're buying. Possibly look at a fix and flip loan. It depends what market you're buying in if that will work or not.

I’d say really research the heck out of the market you’re considering because tiny homes / small cabins are not performing well right now, at least in my market. 

Quote from @Jayme B.:

Quote from @John Carbone:

Quote from @Jayme B.:

My mind has been all over the place on how to maximize our money and borrowing ability to achieve the largest return on investment. I've researched finding that 500k home with 15% down + furnishings + closing costs means 100k cash in. An average nightly rate at $200 with 70% occupancy doesn't even cashflow. I don't want to invest that much of my money even if it cash flowed 20k per year. It's tying up too much of my money that I feel can be leveraged better.

Alternative thought process:

I'd like to create a small community of cabins that isn't considered "glamping". No detached bathrooms, showers or tents.

I can owner finance a 5 acre property for 50k ($600-700/mo payment; down payment 10k), put in a well for 5-8k along with a septic 5-8k, grading/dirt work for 2k and build 3 small a-frame cabins myself for less than 60k. Total cost high end = 88-90k. 

The rental numbers: $80 avg nightly rate x 50% occupancy = $1200 / mo. * 3 cabins = $3600 / mo * 12 mo = $43,200 gross profit / year.

$43,200 - $8,400 (land payment) = $34,800 net profit / year

ROI: 38%

I could pay off the land after the first year of operation which would result in an income of $43,200 the 2nd year with the ability to build more cabins.

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I've never developed a property before and would most likely choose an area with loose restrictions and permitting. There are lots of things to consider with this approach vs going the traditional STR route of buying a home. Choosing the best building sites, septic location / size, well location and the proximity of the cabins to reduce cost (trenching, piping, conduit) but still giving enough privacy. Another thought is to have walking paths to each cabin with one parking area to reduce clearing and driveway expense.

If anyone has done this type of STR approach before, I would be interested in consulting with you. I realize that I've just hit the basics with my thought process.

Be easy on me! Haha.

You are underestimating costs on the infrastructure by quite a bit. For $1200 a month, why not find a place where you can do something similar but rent them out as LTR. 

What are the expenses in infrastructure that I'm missing? 

The amounts you are projecting for infrastructure just seem extremely low. Electric alone will cost a significant amount of money, have you seen prices on materials lately? If you are going to build them yourself and do everything then there is a cost for your time to do the project. My guess is your turn key price will be double when you factor everything in getting ready to rent. 

Seems doable, but those low rates and high turnover rate also mean a lot of work to manage for not that much money.

If your ok with that then go for it.