The stars are aligning in such a way that we may be in a position to buy the home we lived in and loved in Concord, NH, before moving to NC to be near my family. I’ve been wanting to do STR for a long time as well, so I thought it could be a perfect situation: we could STR the house except when we want to use it for our own vacations.
However, I’m having trouble making the numbers work and was hoping people here could share their advice and experiences. Having two mortgages would be too much of a stretch for us without rental income, so I ran several scenarios. This is a 2,400-sf house with 3 br, 1 1/2 baths, which also has an area in the back that used to be an in-law but was converted into regular living space. (Now it has just the half-bath and no kitchen.)
The house is in an area with a 1% vacancy rate, and people I know who rent out apartments there say they get people asking to send in a deposit without even seeing the place. AirDNA suggests that an average to shoot for is $117/night and a 73% rate of occupancy. I used these numbers to be safe, even though I see that similar rentals in the area are more like $150/night, at least now through the end of the year.
The scenarios are:
- STR for entire house.
- STR the main house, convert the rest back into an in-law for a LTR or medium-term rental (30-180 days) for $2,500/month. (I had a call with FurnishedFinder and discovered that Concord is on the top 100 cities for traveling nurses, and 30-40% of them come as a couple, as a group, or with families.)
- MTR the entire house at $2,500/month.
- MTR the main house, convert the rest back into an in-law as a LTR or second medium-term rental. (Main house $2,500/month, in-law $1,300/month.)
The up-front costs I’m estimating are $20k for the main house (mainly furnishing) and $22,000 to get the in-law set up (adding shower and mini kitchen, furnishing, etc.).
I took into consideration NH’s lodging tax of 9% per stay, ABB’s 3% fee, and property management (since we live in NC). I figured property management at 20% and also calculated a scenario where I instead have a co-host at 10%. I also factored in insurance as well as $4k/annually for repairs and maintenance (using the 1% rule of thumb where you set aside 1% of the value of the house each year).
I was very conservative with the numbers just to be safe: The LTR prices for the house and in-law could/should be more, I overestimated the costs for furnishing, etc. I’m also not sure if the lodging tax applies to MTR and LTR, but I factored it in just in case. Zillow says the house is worth $375k, but it’s a hot market there so I budgeted $400k.
No matter which way I look at the numbers, we end up in a big hole—without even counting the up-front costs of getting the place(s) set up.
Am I missing something? Sorry for the ignorance, but we are brand new to this. I know people who do ABB or LTRs and they are not wealthy by any means…so how does one manage to buy a second house, rent it out, and make it work on an average income?
Thanks so much for any advice, experiences, etc. you can share. And I’ll say it again, we are super newbies to please be gentle.