All Forum Posts by: Steven DeMarco

Southside

Great, thank you for the additional detail and will look forward to any insight that Jim might share.

The Pittsburgh STR market is not (and will never be) comparable to FLA, Smokies, AZ, etc. However, in all of CY2023, over $14M was spent on 2BD listings in Pittsburgh. There is absolutely money to be made. Capturing just 0.2% of that market equates to $36K (my high-end target of revenue). 

I can understand your concerns regarding lack of regulation. In Pittsburgh there are no regulations whatsoever (just have to have a business license). I agree that it is likely a matter of when, not if.

Thank you for reiteration on the options from your perspective - I value your input and will add all 3 options to my list of consideration.

My day job requires working with data so I feel comfortable in spreadsheets :)

If I lived in Pittsburgh (which may happen in the future), I could see myself self-managing. But while I currently live OOS, removing the mental burden of guest communication or constantly being "on-call" is something I realize now how much I value. I may never go back to self-managing - still up in the air on this.

However, I truly believe the value of the PM is worth what they are charging. My listing is consistently ranking high (according to RankBreeze and just browsing on Airbnb) and consistently getting booked for almost the entire month, every month since the PM has been hired. They also guided me through a re-design to improve the property slightly and make it more appealing on the OTAs. This included adding a video game system (retro PacMan), adding central A/C, rehabbing backyard space to include life-sized outdoor games, grill, firepit & seating.

Before hiring the PM, I did a thorough competitive analysis to determine where I could feasibly land revenue-wise if the property was fully maximized to its potential within the existing constraints (location) and with the PM fees. If I can get to the top 10% - 20% (by revenue), this would put me at about $32K - $36K per year and I would be cash flowing up to $1,000/month with those revenue numbers. 

The top 2BD properties in Pittsburgh are located in highly desirable neighborhoods or have a city skyline view. I can't do anything about my property as it relates to these two amenities. However, I am now on par with the other popular amenities for the high-performing properties .. examples include: outdoor space w/ seating, firepit, grill, games, walking distance to nightlife, retro video game, thoughtful mural art, quality pictures & listing details.

My target guest group is a small group of friends or a family that values walkability to entertainment & nightlife and a very short drive to major Pittsburgh attractions. I am less than 10 min drive to colleges, stadiums, conference centers, etc.

Appreciate your response. I think that is fair to pull out the mastermind cost as a personal investment in my own education. I'm learning that the school of hard knocks (aka, actually doing something) has proven to be much more eye-opening than any mastermind course. But the mastermind course contents and participants gave me confidence to do something.

I agree that I can squeak out an OK return if the current course and speed continues. And I have already mentally done the gymnastics to be alright with $500/mo. in cashflow. As long as I don't flop and lose all of my invested capital, I think that is achievable. I completely agree with you as well that $2K - $5K per month on this specific investment will never happen. Which I completely understand (now) is unrealistic.

The Pittsburgh 2BD Airbnb market is doing surprisingly well. AirDNA shows There are a lot of reasons that people visit Pittsburgh for a weekend/long weekend/week. I also lived in Pittsburgh for a few years and know the area well so believe in continued long term appreciation.

Thank you for the words of encouragement, I agree that it is a challenging market.

I am not pretending that I've hit a home run investment. I too am skeptical, which is the whole point of my post. I want some different perspectives. If you think that I'm crazy for buying this property, you're probably right. 

But I'm in the position that I'm in because I wanted to take a leap and figure it out as I go. Part of that process involved maximizing the asset to its highest possible performance (thus all the capital expenses and investment). The property is undoubtedly better than when I purchased it a year and a half ago.

I'm looking for creative ideas or solid criticism that I can apply to my situation. Then I can make a decision based on the options in front of me. 

I'm hoping that once I start seeing cashflow, I will be able to save that cashflow for future Capex. I'm not just going to pocket the cashflow and spend it. I get your overarching point though. Regardless of if it cash flows in the future, I will still have Capex/maintenance/vacancy/etc. and the longer it takes to recoup my investment, the higher chance I will run into large Capex items.

When I ran the numbers performing at the 50th percentile (using nightly rate and occupancy numbers from AirDNA), my annual gross revenue projection was $34K. When you annualize my total income from the past 17 months, it's right around $26K. So given all the capital improvements and running the operation from out of state, my performance has been less than 50th percentile. Not great and probably shouldn't be a surprise for my first go.

In hindsight, yes I slightly overestimated my income potential but I feel that with a well-performing listing and full-service PM, $34K annual is achievable. Where I completely dropped the ball is on the capital investment. To your point, turning a sub $200K place into a high performing STR is not a great idea. I had to pay for a lot of things to get the property into good shape (roof, electric, HVAC, backyard upgrades, furniture, design, etc.).

Your idea to lease/option is intriguing, I had not thought of that option. Could you provide more detail and why that might put me in a better situation financially on this property? I'm happy to do more research if you can point me in the right direction.

(Genuinely asking to understand, not question your intelligence) but why would I focus on Return on Equity (ROE) and not track being paid back on my original cash investment of $130K? If I narrowly look at ROE, does that simply ignore the upfront cash investment and just focus on my efficiency of current equity position?

In my happy path that I projected, with $45K of equity and cash flowing $6K/year, the ROE is 13.3%. In a vacuum, this looks promising, right?

But it took me $130K of cash to get that $45K of equity and a cash flowing asset. Why does looking at ROE help?

Where I sit right now, if I were to cut my losses and sell, I'd be cementing the loss of over $100K. I've done an excellent job at meticulously tracking everything, so I feel comfortable with the "monitor closely to see what a stable asset looks like" strategy. But I value the different perspectives and would like to understand what led you to that conclusion more clearly.

There's no future here where I could get closer to breaking even? Why do you feel that way?

When I initially set these goals, I was still in the "bright-eyed, bushy tail" phase of envisioning my future REI portfolio. Yes, I had a goal with NET profit of $2K - $5K per month per STR.

I now realize that this is only attainable in highly desirable locations and with larger or more unique properties. And you have to put a fair amount (25%+) down, operate in the Top 10% of your market and truly have an outstanding property.

Influencers and social media gurus make it seem like this is much more achievable than it actually is.