How to Buy and Succeed with your First Short Term Rental Property

By the time you finish reading this blog, there will be ZERO doubt that you can buy and have success with your first short term rental…I am going to explain exactly how my wife and I went from living in an apartment 2 years ago, to owning our own home, 3 Short Term Rentals, and 7 acres of pristine property overlooking Kentucky Lake that we plan to build on soon. I will show you how to find a great market, How to identify a great property, How to run numbers so that you aren’t doing any guess work on profitability, and I will show you a very easy way to get the right vendors quickly so that you can have success right out of the gate with a dependable team.

I wanted to write this while the info is fresh and while we are having momentum in the moment rather than years later when the early steps aren’t so clear. With the purchase of our 3rd property just a few days ago, we marked a really big goal off of our dream board that stemmed from a dinner 2.5 years ago.. I made a post about it and had a TON of messages from friends asking questions about buying their first STR, (Short Term Rental) so I figured I would outline it here to give you the confidence and the knowledge that you can do it too, but first… Let me share where we are today.

1. We own a 2 Bed 2 Bath Condo right on the Beach in Gulf Shores that we purchased on July 16, 2020 for $421,000. The mortgage is $1,400, the HOA is $600, and the other expenses are about $1,000 per month totaling about $3,000 per month in expenses. The condo brings in on average $5,000 per month leaving us with close to $2,000 per month in profit each month. Today, the property is worth $560,000. Here is that Property — -> https://www.airbnb.com/rooms/44786925?guests=1&adults=1&s=67&unique_share_id=a1225cc2-8772-4da8-bcf3-89437672e318

2. We own a beautiful Cabin in Blue Ridge, Georgia that we purchased on October 5, 2021 for $820,000. Our first guests were on October 24th, and the cabin has done over $10,000 per month in gross revenue ever since. We already have over $50,000 in bookings for 2022. Our expenses are.. $3,050 for the mortgage, and $2,000 per month in other expenses such as utilities, cleaning, etc. We are making between $4-$5,000 per month NET on this property.(Disclaimer.. we are putting all current profits into renovations. We are turning the garage into a world class entertainment room and we are converting the large bedroom upstairs into built-in bunkbeds.) Even crazier… The market is so hot that someone has already offered us over a MILLION dollars for this cabin and we have only owned it for 4 months! Here is that property — — >https://www.airbnb.com/rooms/52391109?guests=1&adults=1&s=67&unique_share_id=4abb5f35-0344-4e8a-bf42-20fe1c08efcb

3. We just bought our first property that was over a million dollars.($1,050,000 to be exact) We are under contract currently and will close on March 1, 2022. It’s located right on the lake in Crane Hill, Alabama. Based on our research, Our mortgage will be about $4,500 per month and total expenses around $6,500. Our estimates suggest we will make between $12-$14,000 per month on this property. We also believe this property will be worth about 1.3–1.4 Million in less than 2 years. Here is the listing since it’s not active on Airbnb yet. https://www.flexmls.com/share/67IYJ/21A-CO-RD-2201-Crane-Hill-AL-35053 (UPDATE.. THE LISTING IS NOW LIVE WITH ALMOST $120,000 IN BOOKINGS FOR 2022) HERE IS THE LISTING: https://www.airbnb.com/rooms/575907427142799554?guests=1&adults=1&s=67&unique_share_id=78d95dc9-bc60-402c-a8c6-14cae87b9197

4. We own our own home in Franklin, TN that we bought for $464,000 in March of 2021 and is now worth over $600,000.

5. We own 7 acres in Erin, TN overlooking Ky Lake. We paid cash for this at $112,000. We love this, but this was probably our dumbest decision. We bought emotionally, and although the view is to die for, and we could build a gorgeous place on the land… If we had researched the market, and ran the numbers, this would not have made sense. However we could most likely sell it for more than we paid for it and we are chocking this up to a personal purchase.

So how the hell did we get here? Well it all started at dinner right around Christmas of 2019. My wife and I had a crazy idea that led to everything. We had just come back from a wedding where we stayed at an awesome vacation rental. I just remember thinking.. man… Whoever owns this place, probably gets to stay whenever they want, and make money on it the rest of the year. We actually ran the math… We paid $350 per night to stay there and we looked up the house and found that it was worth about $600,000. A typical mortgage for that would be about $3,000 per month and so we realized that they only had to rent it 9 days per month to pay the mortgage! Even crazier is that if they rented it just 20 days per month, they would make $7,000 per month. Take away mortgage and expenses, that is still around $2,000 per month PROFIT while the property is paying itself off.

Then the idea hit! What if we just bought a place in all the areas we would love to travel? We could stay whenever we want, and rent it out the rest of the time! It’s like vacationing for free to our own homes, while they pay for themselves from other people’s vacations! GENIUS RIGHT?

Funny as it sounds, I could not get the idea out of my head. So we made a list… We started with 3. We wanted a Beach place, a Cabin, and a Lake house.

Our favorite was the beach and so we chose to start there first. We knew NOTHING about short term rentals, but if you know me or my wife, the first step to anything is finding a mentor. Turns out there are awesome Facebook groups that have thousands of STR owners in them and you can ask questions anytime you want. We joined a couple of groups and just started paying attention and asking questions.

Some of the questions were…

1. What is the best market to purchase in now?
2. How do you research a market?
3. How do you run numbers so that you know the property will pay for itself?
4. What size property makes the most profit margins?

Don’t worry, I will answer the questions for you shortly… I just want to finish the story first.

After a couple of months, we found that Gulf Shores was a great market to start. It was only 6 hours away, the beaches were beautiful, and it was far less expensive than places like Destin or Miami. Guess what we did next? We asked the Facebook group for the best realtor in Gulf Shores!

Sure enough, we got lots of recommendations, and after making a few calls, we found the perfect realtor. She specialized in Short term rentals, owned some of her own, and could help us find exactly what we were looking for. Based on our comfort level and her recommendation, we decided to keep things very simple at first. We were busy with our primary careers, and didn’t want to spend 30 hours per week managing a property.

She recommended we find something completely turnkey. That means a place that is being sold fully furnished and was already a rental. This was the best decision we ever made and it saved us a ton of mistakes. We found a condo in Gulf Shores right on the beach. It was in a gorgeous community, it was being sold fully furnished, and it had been a rental for 10 years already! It also had a full renovation the year prior so we knew that it would not need anything major for several years.

This eliminated a lot of headaches for us. Because it was a condo, we wouldn’t have to deal with landscaping or exterior maintenance. We wouldn’t have to decorate or furnish it because it was sold turnkey, and finally, we could run the math easily because it was already a rental so we could see how much it was making before buying it.

One of the conditions we made when we offered on it, was that the sellers would spend a little time teaching us their system and how they manage the property.

THIS WAS THE SINGLE SMARTEST THING THAT WE COULD HAVE POSSIBLY DONE.

They spent hours with us, showing us the bookings, the messages they send, the rental agreements, how they deal with guests, how they handle problems, how they track inventory, and more… We were so grateful. The thing that excited us most was that they were managing the property successfully and they were in their 70s!

On Aug 17, 2020 we got our first Airbnb payment of $851.29 for only 4 days and we were in heaven. We knew in this moment our crazy idea just a year earlier was going to work!

We use their system today with a few minor tweaks, and now we have a close friend who we taught our system to, who manages our properties for us.

After a full year of the condo, we realized that it more than paid for itself, and so we were ready for our next property. I was still in the Facebook group and so I had been paying attention to different markets for many months. We were only 3 hours from Gatlinburg, TN, so naturally it made sense to focus on a cabin for our second property. We followed our same plan. Let’s find the best realtor in the market, make sure we find a cabin that is fully furnished, already a rental, and then run the numbers.

After a few months of looking at properties in Gatlinburg, we became a little concerned because of how expensive they were. Several articles came out calling Gatlinburg the best market to own an STR in the country and so investors were buying everything. Homes were selling over a hundred thousand dollars more than asking price. We were like….. Ummm Hell No. After a little research, I found that also 3 hours away from us was an up and coming market, also perfect for cabins, full of mountains and lakes, but much cheaper. It was Blue Ridge, GA. Being only an hour from Atlanta, we thought this would be perfect. It’s great to have a vacation destination that is close to a large city. Again, we got referrals, found the best realtor in the market, he put us on his list so that we could see every new property that hit the market, and we just waited till the right one came along. It took 7 months before we found it.

Why?

Because we learned something valuable with the beach condo…. With Short term rentals… the most important thing that sells it are the pictures. There might be thousands of rentals in an area, so what separates yours? It must blow people away with the photos. What photo is the most crucial? A GREAT VIEW. We found that people booked our condo like crazy because our main photo was the beach from the balcony. That’s what people wanted. So we looked at hundreds of Cabins before we found one that took our breath away. When we found it, we moved ASAP! It was turn key, right on a private lake, and it was already a rental. It grossed $95,000 the year earlier and we discovered it was severely mismanaged by a property management company and so we felt that with our system, the cabin could do over $120,000 per year or more. We paid $820,000 for our cabin that we named The Blue Ridge Lakeside Retreat.

Let me stop our story here, and instead focus on giving you the steps and strategies so that you can get started. This is not a complete detailed roadmap. That would be a book or a series of blogs. What this is however, is a complete roadmap to getting STARTED and HOW to find the correct information.

1. Educate yourself! Join a Facebook group full of current STR owners. This is the best place to learn and ask questions, as well as see other people’s posts. I spent months here before making any decisions. There is only one group I recommend and it is called Build Short Term Rental Wealth https://www.facebook.com/groups/284886002732508. It is ran by my good friend Bill Faeth and he is the most active moderator I have ever seen. He owns lots of successful rentals and he also keeps the group positive. Some of these other groups are so negative I had to leave them.
2. Decide on a market or a couple of markets that you want to buy in. Then set criteria for your property itself. Use your own criteria, but my criteria is typically.

A. A market that people enjoy going to all year round or at least most of the year. (This is why we won’t buy a ski property. Beautiful yes, but usually very expensive and the market is only half the year. Who wants a property that’s vacant the other half of the year?) Cabins, Beach, Mountains, and Lake Properties have a great year round market, but MAKE SURE you check how the seasons are for that market.

TIP: One of the things I love about the beach is that in the winter, Snowbirds will reach out and rent our condo for 1–2 months at a time. I give them a discount, but they pay way more than our expenses and we don’t have to do any cleaning for a long period of time. Retirees from up North love to come down South for the Winter.

B. Furnished

C. An existing rental

D. Something that creates a WOW factor like a view, a unique location, unique amenities, or anything that sets it apart from others.

E. Less than 4–6 hours away from me so that in case of emergency, I can get there.

3. Find a lender and determine your budget. I won’t go into massive detail here because there are a lot of factors such as your comfort level, risk tolerance, debt to income ratio, etc. Your best bet is to talk to a strong lender and get a handle on what you qualify for. SECRET!! Our beach property was bought as a second home and not as an investment property. This allowed us to put 3% down vs. having to put 20% down! After that one, we had to put much more down but I wanted you to know that you might not have to do that with your first one!

4. Once you identify your markets, Identify the top realtor in that market and reach out to them. I typically ask for a referral in the Facebook group. Let them know what you are looking for as specifically as possible, your budget, your timeline, and to be added based on your criteria to their list. Once you are on their list, every day or two you will get an email of any new properties that hit the market based on your criteria.

5. MOST IMPORTANT STEP!! I Can’t believe how many people don’t know about this or buy an STR without doing this. Run your numbers!!! How? airdna.co. Airdna pulls all the data from Airbnb and VRBO from every single listing in real time all over the world! You can literally type in a zip code or city and see every single STR in the whole city, how much they charge, how often it’s rented, how the market is growing and every other data point you can possibly imagine. You should NEVER EVER have to guess. This is the ultimate tool for running the numbers. I will go to the website, put in the zip code, and then put in the data for what I am looking to buy. For example…. I will put in 3 Bedroom, 3 Bath, and it will tell me how much the average listing makes per day and per month if you are in the 25th, 50th, 75th, or 90th percentile. Once I do the math and I add in additional fees such as taxes, utilities, cleaning fees, and supplies, I will add it all up and determine how much I should make in profit. YOU WILL GET BETTER AT THIS AS TIME GOES ON.

ONCE YOU PURCHASE:

1. Find your vendors: The realtor is typically the KEY to getting your vendors. Another reason we use the top realtor who understands STR’s is because you need referrals for good vendors such as your cleaner, handyman, plumber, etc, and a good realtor will have all of these on hand always.
2. YOUR CLEANER IS THE KEY TO THE KINGDOM: Don’t ever forget this. 5 star reviews are critical to your success in this business. After good photos, it’s the first thing I look at before I rent a place. The 3 most important keys to a 5 star review is

A. Great Communication and responsiveness

B. Cleanliness

C. Accurate description of your property.

You must make sure that your cleaner is highly recommended, very responsive, and does what they say they are going to do every time. Your cleaner represents the first impression your guests have, they communicate how the guests treated your property so that you can leave an accurate review for them, and they are the ones that implement the thoughtful touches that you decide to put in place.

3. Go to the property, make sure everything works, establish amenities, do a complete inventory, and make sure things are simple for the guests. This is actually an important step. Everyone is different and every property calls for different strategies but here is our philosophy for our own properties.

Have large Tv’s in the living room and each bedroom. (People enjoy relaxing)

Have a nice Coffee Bar with options. (People love their coffee)

Make sure important things are easy and obvious such as Wifi password, how to work remotes, where to put things, etc.

Find ways to be thoughtful or creative to enhance the experience. Guestbooks, Chocolates, handwritten cards, or just anything that you think would be “a little extra.”

4. Have professional photos taken: Why people post their rentals with shitty photos blows my mind, but so many people do it. This is an easy way to set you apart from half the listings. Invest the money! It’s the first thing people see and make a decision based on.

5. When listing on Airbnb/VRBO, Fill everything out and make sure your description is accurate but written in a way that is attractive. BE A PROMOTER! SELL YOUR SPACE! Don’t write boring shit that will make someone sleepy. Here is one of the properties my friend Bill Faeth owns…(He runs the Facebook group!)

6. Be a responsive communicator. When a guest inquires or has a question about the property, chances are they are looking at several properties at the same time. I make sure I respond within 2 min. When the guest checks in, I make sure they got in, had no issues, and that everything looks great. Sometimes I check in one more time just to make sure they are having a great time, and then I leave them alone to enjoy their trip. Responsiveness and Communication are so important to 5 star reviews and the perks that come along with it.

Conclusion:

My personal opinion is that travel is only going to pick up drastically over the next several years. With all of the pent up demand from Covid, I would not be surprised to see the 5–10 golden years for the Short Term Rental industry. Personally, I have made way more money here than I ever did with a long term rental, and there is just something so satisfying about creating an experience that people truly thank you for after they leave.

Remember.. I did not cover everything and I want to make that clear, but I did cover most of what you would need to get started. Sometimes just showing you WHERE to find things is far more important than a 20 page checklist. My advice to you is to move the needle and take action if you are truly interested. We jumped before we knew everything and learned along the way. If you manage your own property, there is a lot of room for margin and error and so don’t be afraid to take calculated risks if you feel good about it, and you have ran the numbers.

Never would we have thought 2.5 years ago when we were in an apartment with no investments that today we would own $3 Million in real estate that more than pays for itself. Funny thing is…. The hardest part was just making the decision to start. Once you build a skillset, Momentum is just around the corner. I have always believed and continue to believe that the key to financial and time freedom for anyone, is the ability to buy an asset, and learn how to manage it so that it pays for itself, and makes a profit. When you can do that…. It’s all just repeating the process until you are where you want to be…

Wishing you massive success my friends!