I have a great realtor who started his own boutique STR business with 4 luxury properties looking to grow to 10. He presented a deal coming up for 600k 3bed/2bath within city limits (5day rentals) no pool. He wrote out below strategy for the next 24months with a planned pool 50k install after 7 months. How needs light preparation for STR mainly paint and furnishings probably revenue neutral first year.
Challenge: I am looking to finance the deal potentially 10yr arm 20% down. I assume between down, closing, and furnishings I will be in for 150K year one. I am looking for creative ways to get the pool financed in mortgage or financed. Don't know if equity will be in property in 10months and if refi will be an option in 10months. Potential is to wait on the pool till year 2 but revenue will be much less. Realtor business owner will manage the property as a master tenent for 25% and 75% myself (hands off). He is doing this with three other investors and confident on his numbers. This is a great area near downtown and top school with 10k sqft land within city limits.
So deal or no deal ? and how could I strategize this any better to keep only 150k initial investment as my max out of pocket with pool?
Taxes: $550/mth
Insurance: $300/mth
Mortgage P and I (assuming 80/20 loan with a 10 year arm at 7% interest with a 30 yr amortization schedule): $3166
Utilities (including lawn, FPL, Water/sewer, Pest, Internet and streaming): $500
Miscellaneous: $200/mth
Total Monthly Cost: $4716
Revenue projections from January 1 through August 1 (at which time you will take it off the market for 4 months to build a pool):
January: 95% occupancy at $350/nt = $10,307
Feb: 95% occupancy at $350/nt = $9,310
March: 100% occupancy at $350/nt = $10,850
April: 95% occupancy at $325/nt = $9975
May: 60% occupancy at $200/nt = $3720
June: 75% occupancy at $250/nt =$5625
July: 75% occupancy at $250/nt=$5812
Total Revenue: $55,600
Mgmt Fee (25%) = $13,900
Total 7 month expense: $33,012
Net Profit: $8688
And here is the Annual Revenue projection with pool beginning December 2023- December 2024:
December: 75% occupancy at $350/nt = $8137
January: 95% occupancy at $450/nt = $13,250
Feb: 95% occupancy at $450/nt = $11,970
March: 100% occupancy at $450/nt = $13,950
April: 95% occupancy at $425/nt = $12,112
May: 65% occupancy at $280/nt = $5642
June: 80% occupancy at $350/nt =$8400
July 80% occupancy at $350/nt =$8680
August: 65% occupancy at $300/nt = $6045
September: 50% occupancy at $250/nt =$3750
October: 55% occupancy at $250/nt =$4262
November: 55% occupancy at $260/nt =$4290
Gross revenue: $100,488
Gross Expenses: $81,714
Net Profit: $18,774
Annual Mortgage Principal paydown in first 10 years: $7K/yr
Total average annual gain beginning with year 2: $25,774
