Episode 8: When you should and shouldn’t buy STRs

Episode 8: When you should and shouldn’t buy STRs

1. What are some reasons to consider when deciding whether to invest in nightly rentals or not?

There are several factors to consider. First, you need to ask yourself if you need consistent monthly income. Nightly rentals can have ups and downs in income, unlike long-term rentals which provide a steady income. Second, if you don’t own a primary residence yet, it’s advisable to invest in that first as it usually gives better dividends in the long run. Third, you need to be aware that there are setup fees for nightly rentals, especially if you’re doing a new build. Lastly, you need to be emotionally detached from the property because it’s a quasi-commercial property and you can’t control who rents it.

2. What are the financial implications of investing in a primary residence versus a second property?

Your primary residence usually has a lower interest rate compared to a second property or an income property. It’s also important to note that your primary residence often ends up being one of your greatest assets and can be a key part of your retirement plan.

3. What are the setup costs involved in establishing a nightly rental property?

Setup costs for a nightly rental can vary. If you’re purchasing a property that’s already furnished and turnkey, your out-of-pocket costs might be lower. However, if you’re building a new property, you need to budget for design, appliances, and furniture. This could range from as low as $15,000 for a two-bedroom property, but it usually costs more, especially if the property has more rooms or outdoor spaces that need to be furnished.

4. What should I consider in terms of emotional attachment when investing in a nightly rental property?

When investing in a nightly rental property, it’s important to be emotionally detached. This is because the property is a quasi-commercial space and you can’t control who rents it. There will be wear and tear, and you need to be prepared for potential damages. Some investors struggle with this aspect and end up using the property for personal use instead of renting it out.

5. What should I expect in terms of income when investing in a nightly rental property?

The income from a nightly rental property can fluctuate significantly. For example, certain months might bring in enough income to cover two or three months’ worth of expenses, while other months might be slower. This is different from long-term rentals, which provide a consistent monthly income. It’s important to be prepared for these fluctuations and have a financial plan in place to manage them.

Want more Utah real estate insights? Explore additional episodes and connect with Heather Groom for personalized guidance.