All Forum Posts by: Thanh Lu

Quote from @Thanh Lu:

For owners with a small portfolio (1-3 STR), how did you decide between self management vs hiring a vacation rental company? If you have a larger portfolio, are you still self managing? I am just starting out and have 1 STR.

Would love hear the pros/cons that you took into consideration when deciding how you want to manage your STR.

Self managing STR properties, from afar, while maintaining other employment, is only a possibility because of the new technology made available in the last 10 - 15 years.  When I got into the STR space in 2015, I needed my daughter to be available on a full ti e basis as PM.  While I do believe that some of the posters on BP are able to do a quality job self managing their portfolio of STR properties, they are spending a lot more time doing it than they’d like to admit.

10 years ago in many markets STR provided outsized returns.  As more people placed more properties in STR inventory, and as more municipalities taxed and regulated the industry, the profitability of the overall industry has reverted to a much more aligned (lower) risk adjusted return.  So, we now find most areas where the cost of PM leaves but the general real estate passive investment ROI for the investor hiring property management.  PM fees are high, exactly because so much work is required in managing STR.  If you want to do it yourself, be ready to answer text messages at 3 AM, solve problems within a 2 hour window, deal with contractors who aren’t able to “turn” a vacancy quick enough, and guests who want “instant” gratification.  Since STR “lives” on reviews, being “right” because of the contract the guests signed might be the most expensive “right” you’ve ever experienced.

So what’s left for the “wanna be” STR investor in today’s market?  Well, STR can work well for people who own a vacation house for personal use, and just want to generate some extra income when not in use.  Also, for those whose BUSINESS (as opposed to just investment) is STR, they can scale successfully while their experience and knowledge of the industry may allow them the opportunity to uncover and recognize those few opportunities that will provide a much higher than market risk adjusted ROI. 

Here’s what I did when I withdrew from the STR programs.  I went to both MTR and LTR of FULLY FURNISHED units.  Not some basic furniture with a couple of sets of silverware thrown in. I’m talking about upper middle class quality furniture and furnishings withEVERYTHING included.  In 2014 it cost me about $42k to do this.  The original six month tenant I had extended the lease 9 times and stayed a total of 5 years, paying me about $15k over market rent annually.  So by spending $42k I collected an additional $75k over 5 years, and then sold the furniture through a consignment store collecting $8k as my share.  Has almost no management headaches and my only cost for the tenant was a $1500 fee to a Realtor.