All Forum Posts by: Pretty Khare

This is my first post on BP so my apologies if I over explain. I purchased a 5 bedroom home my sophomore year of college, house hacked it through school and also fixed it up. I just graduated and am ready to move out of it. I have roughly 100k in equity. Should I:

A: Sell it to get the equity out and reinvest in multi family, or STR.

B: Keep it as an STR and do a HELOC. I am unsure of this option as I used BPs Airbnb revenue estimator and it calculated I could make 75k gross revenue. Can anyone attest to the accuracy of airdna and the BP Air BNB tool?

Any suggestions are greatly appreciated!

John has a good suggestion renting it by the room if it is in a high demand college location. I would advise against selling the property because there are other ways to unlock the equity without having to sell a revenue generating house and losing some of that equity to transaction friction (closing costs, commissions etc.)
the accuracy of STR rent estimators vary by locations. Try googling for "enemy method" which is another way of verifying STR revenue estimates.
Also, See if you can get a HELOC before moving out of the property. It is much easier to get a HELOC on a primary residence than if you do not live in it.

4 Votes

Quote from @Claudia Salinas:

Hi,

I’m looking to buy my first short term rental and would love a bit of guidance. I truly appreciate anyone’s feedback!

- Are there any loan programs or strategies that are better for STRs?

- How do you evaluate an area to determine if it is a good place for an STR investment?… For context, I visited the Blue Ridge mountains in north Georgia and I think it's a beautiful area that many would want to visit but this is only my personal experience. I'm afraid since I am not well traveled I M just easily impressed, lol.

- What are the cons of listing with a company like AirBnB?… I’ve read a few posts on their site from hosts about cancelation fees, tech issues including algorithmic affects, etc.

Hi Claudia. You can usually leverage a vacation home loan with 10% down if you meet certain criteria for property use. If you are serious about STR, I would recommend the bigger pockets book Short Term Rental Long Term Wealth. It is a quick 130 page read and worth the $15 investment to get educated. It answers a lot of questions that beginners like you and I have.

3 Votes

Quote from @Nicole LaVee Woolley:

Quote from @Pretty Khare:

Quote from @Tanner Woolley:

My wife and I are going to be buying our first property as a short term rental. We know it's a lot more management, and we're good with that since the cash on cash should be a lot higher than LTR. We're going to be buying in the next couple Months and plan on putting in between 80-100k between down payment and furnishing/upgrades. We're in Austin currently and are thinking of doing the San Antonio area, kind of close to sea world/six flags. Does anyone do STR in San Antonio? I'm nervous about the place not booking enough.

Is there anywhere else people have invested in Texas that they think would be a solid spot? Doesn’t have to be a home run. I’m getting analysis paralysis 100% as I’m a CPA and way over crunch and analyze things. Thank you!

Did you end up by a STR in Texas? If yes how is it doing? Thanks

We did and got one in San Antonio. We love it! It has done very well this year so far. We got one over by the airport rather than by Sea World. It does have a pool which has been the number one factor for us I believe in our success. We are considering getting another one as well, as I really enjoy managing the rental a lot

That is great to hear. Congrats. Are you managing it remotely from Austin? Can I connect with you to get any tips for doing this?

0 Votes

Quote from @Carlos Ptriawan:

Quote from @Zane Abner:

For a STR is there a target % of purchase price that generally equates to a successful STR property? Similar to the 1% rule.

This is from 2021 data. The highest cap rate for STR in US is only at smoky mountain, it's around 12-14% cap rate gross.
In other places, the average cap rate is about 4-5% ; not much different than the SF counterpart.

The vacancy is about 65-70%. The lesser the number of the room unit, the higher is the cap.

This is very interesting. Thanks for sharing. Where is this data from? AirDNA? How are people making money in markets other than Smokey’s if the average vacancy is 65-70%

0 Votes

Quote from @Joe Rivera:

@Tanner Woolley we have a beach condo in Galveston and one in Surfside. They both are seasonal but did very well this summer. We also purchased a single family house in Fredericksburg, that we are remodeling and will be turning into a short-term rental here in the next few months. There are a lot of good places to invest around Austin, like Dripping Springs, and Wimberley.

That is awesome , Joe. How is the Fredericksburg home doing?

0 Votes

Quote from @Tanner Woolley:

Did you end up by a STR in Texas? If yes how is it doing? Thanks

0 Votes

Quote from @Zane Abner:

Quote from @Jonathan Dempsey:

@Pretty Khare

These are great numbers, awesome to hear about the niche in Tampa.

To quickly sift and compare apples to apples, the minimum a property gross to purchase price ratio needs to be 1.67% in markets I underwrite in.

So for a 500K house, gross rent would need to hit at least $5000x1.67%, or $8,333 gross.

Generally I see STR expenses to be between 35-40% of gross if you have management in place, cleaning revenue, maintenance, utilities, etc.

Being conservative this leaves 60% of gross as NOI typically. If you want 1% rule on NOI (a minimum standard for a good deal in STR), then you'll need 1.67% gross (1/.6).

I know @Josh Messinger is seeing this in the Poconos as this is a market I invest in heavily, and I’m sure most of those Tampa rentals mentioned are in a similar boat.

STR is my sole focus, always ready to chat STR if you reach out!

Live Free,

To quick clarify, the 1.67% you’re referencing would be per month correct?

Yes that 1.67% is monthly which translates to 20% annually.

0 Votes

Quote from @Josh Green:

@Zane Abner

I'm in the greater Tampa Bay Area and I'd say most properties me and my clients pursue have the following criteria:

PP: $250k-$400k

CoC return (1yr): 25-45%

~15-25% gross revenue to PP ratio

~15-25%+ cap rates

Mostly turnkey (other than furnishing)

Those values go up or down based on the area and creativity/comfortability of my clients as far as how they want to run their business. As you can see by the numbers, they might not be the #1 top market returns in the US, but they are very good in my opinion. You get an "all-around" investment with good forward appreciation projections, buffer against recession (lots of business, amenities, events, vacation, education, healthcare, etc), and exit strategies (high rent to price ratios generally speaking for a desirable metro). PLUS a great place to also vacation yourself 😎

Josh are these properties in Tampa city or in the beach? Trying to understand what area would attract STR guests

0 Votes

Quote from @Joshua Messinger:

Hey @Zane Abner!

My team and I currently only buy properties that have a 20% CoC return or greater with conservative rates. Anything below that we see as a poor investment for an STR.

Another one I like using is finding properties that cost $100/sqft or less than that. These ones are usually good for value-add/renovation projects.

I hope this helps and if you have any questions please don't hesitate to reach out!

All the best,

Josh

Josh - In which markets are you finding properties to buy at hundred dollar per square feet or less? Just curious

0 Votes

Quote from @Zane Abner:

For a STR is there a target % of purchase price that generally equates to a successful STR property? Similar to the 1% rule.

Gross revenue to purchase price is a good indicator. 10% is the minimum you can use for quickly screening properties. Anything above 15% could do well and above 20% will be a jackpot. Of course in STR, your income depends primarily on how well you manage the property, so your miles may wary.

3 Votes

All Forum Posts by: Pretty Khare

Pretty Khare has started 8 posts and replied 83 times.

Post: I need opinions please, fairly new investor

Post: STRs for First Investment

Post: Location for STR somewhere in TX?

Post: STR Revenue Target vs Purchase Price

Post: Location for STR somewhere in TX?

Post: Location for STR somewhere in TX?

Post: STR Revenue Target vs Purchase Price

Post: STR Revenue Target vs Purchase Price

Post: STR Revenue Target vs Purchase Price

Post: STR Revenue Target vs Purchase Price