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In this episode, I address another outstanding question from one of our listeners, here is what he said:
“I cannot get enough of real estate however, since hearing the podcast on how you turned your fourplex into short term rentals it has me thinking hard. I got into real estate 4, almost 5 years ago. My first property was a single-family 2 bed 1 bath that has done relatively well. I then went and bought a four-plex 2 BR 1 bath that has done even better. I inherited another single family 3 bed 2 bath when my sister passed, it's a future rental as I put my mom in there, for now, rent-free. I then purchased another single family that I flipped and used that money to buy a brand new 2 BR 2 b duplex. I am currently under contract to purchase another 2br 1 b fourplex the beginning of next month. I was wondering if you could share with me how to go about turning some units into STR as they become vacant. I am a go-getter, I listen and fail often but I fail forward.
Chalk it up to education. Maybe you could do a podcast on how to create the STR from your rentals, I for one would love to hear about it.
I potentially have 12 doors to turn into STR's if the demand is there. Curious on your thoughts and if you could talk about the pitfalls and advantages of STR's. Anyway thanks for your time, I have listened to all of your podcasts and want to say thanks for all the great information you put out there.”
Before we begin, this episode won’t be a complete class on Short Term Rentals, that’s a series of topics that would take dozens of episodes to cover. Instead, this is a reflection on considerations during the process.
Jill and I got started in Short Term Rentals purely to solve a problem. The problem was that one of our seasonal tenants was having a tough time paying rent on two places (mine and his primary home in New England), I know, 3rd world problems, right?
Anyway, we saw an opportunity for a win/win and here is how the mathematics played out. Remember, his goal was to keep spending a few months in Florida, while saving money at the same time.
Originally he was paying $700 per month which equals $8400 annually. After speaking with him, he told me he could afford around $500 per month, and would only need access to the unit three months out of twelve.
By paying me $500 per month for twelve months, I would earn $6000 per year however, I would have the ability to earn an additional $2000 per month for 9 months. That meant that we would generate $28,500 per year in rental income from one apartment that previously only generated $8400 per year. Was it worth me discounting $2400 in rent from the tenant and spending $6000 cash in furnishings? That’s $8,400 investment for a $28,500 first-year income!! That's a return of over 300%
In the episode, I explained my initial (and current) evaluation process in greater detail. For the right property, in the right location, a conversion to short term rental can result in a supercharged rental income, however, this does not apply to all properties. Listen in to get all the details I covered so you too can #LearnToEarn.