Time to do a full real estate investing strategy breakdown for each of my properties. I started giving a few teasers in my Highlights on instagram, but thought giving a more detailed breakdown on my real estate investing strategy is critical. I want to provide my real world experience with actual numbers for each of my real estate investment properties. I have a variety of real estate investment strategies ranging from house hacking to long term rent by the room to short term rental properties.
Time to dive into my rental properties in the order in which they were purchased!
When I Purchased The Property
I purchased this property in August of 2019 so a little over 8 months ago. This property was going to be the first ever standalone real estate investment property I would be buying.
Was I afraid? Hell yeah I was.
Was I nervous that I was making a bad decision? Hell yeah I was.
Did I second guess myself? Hell yeah I did.
Here is the reality. It was the week of my 27th birthday and I was continuing on down a path to be financially independent through having a high savings rate and investing in the market. Nothing wrong with that. But I was comfortable. I wasn’t taking any risks. I was playing things safe and I hadn’t yet stepped up and made some big money moves in my life.
I decided there was no more time for playing it safe. It was time to take some calculated risks. It was time to start investing in my future and creating what is going to be my legacy! I woke up at 4am every morning for a full week off from work with one goal in mind. Figure out where I was going to buy my first ever short term rental property investment!
Was it easy? Absolutely not. But nothing in life that is worth pursuing is easy.
Did I do everything right? Absolutely not. But if you expect to do everything right the first go around, you are dreaming. The goal is to try to learn from others mistakes as much as you can and not make those same mistakes. There are certain things you won’t be able to account for. There are certain things you will have to learn on your own as you go through this process.
Within a week, I had 10 offers out on different properties and finalized the negotiation on Ol’ Faithful! More blog posts will come in the near future talking about how I ironed out the location I wanted to purchase in.
Strategy For Property
The strategy for Ol’ Faithful was pretty cut and dry.
Ol’ Faithful would be a dedicated short term rental property investment. This was a pivot in the business model that I did with my first house hack at The OG. To find out more about how I use The OG, read the article where I talk through my investment strategy there.
Staging the property would be focused entirely around creating a Disney theme inside the home. This was a critical piece to the puzzle and adding Disney flare throughout the home would create that much more excitement for my guests. Knowing your core customer is extremely important with the short term rental market.
Automating many of the processes people do manually is critical to creating a great and personalized guest experience. Automating sounds like it would create a less personalized guest experience, but you would be shocked at how personalized I can still make the experience feel for guests.
Ideal guests, were people tourists (or locals) coming into town who wanted to stay at an awesome home near the Disney parks and Universal!
The nightly rate ranged drastically depending on the time of the year. Like any common destination, there are high and low seasons. The goal was to get the property operating between $110-160 per night. This was an exceptional rate to be renting at for such an awesome vacation to Orlando!
Breakdown Of The Numbers
Time to break down the numbers for Ol’ Faithful!
Let’s first look at the purchase of the property.
I purchased this home for $210,000 on a conventional 20% down payment loan. Why conventional? This is one of the ways to finance a loan on an investment property. I did look to classify this home as a vacation second home, but the property wasn’t far enough away from my personal residence to qualify. This left me with a 20% down payment of $61,253.
You may look at the numbers and immediately question how the down payment was $61k when the homes price was $210k. Here is what happened with that.
I originally got the home under contract at $215,000. The appraisal came back at $200,000. There are a hundred things I could point out on the appraisal on why they were off by over $20,000. This was the beauty though. I didn’t fight the appraisal. I knew what the value of the home was based off comps in the area.
Instead of challenging the appraisal, I used the appraisal to negotiate the price of the home down even further. The crappy appraiser actually ended up saving me another $5k on the purchase price of the home.
There was a catch though. Since the appraisal came in at $200,000 that means the bank won’t loan me more than the appraised value. This then meant that I had to come to the closing table with an additional $10k at closing in cash. This would get the price of the loan to exactly what the bank would feel comfortable lending on.
Breaking Down Income And Expenses
Now time to breakdown the income and expenses for this real estate investment property.
Starting with the expenses, as most I am sure are aware, the expenses of a short term rental are much higher than long term renting. This is mainly due to paying for utilities, HOA fees, cleaning fees and pool maintenance. Those are my main expenses at the property outside of some other capital expense money I put to the side for a new AC, new water pump for the pool , etc.
Now for the income breakdown. My target occupancy rate was 80% when I first analyzed the deal. I felt like this was a very realistic number once I got up and rolling. The average nightly rate (although I don’t analyze properties on averages necessarily) is $125. The nightly rate varies drastically depending on the time of the year and the night we are talking about. I leverage softwares that are able to understand dynamic pricing and help to generate more cashflow for the future!
After all income and expenses were paid, I project to make between $600-1000 per month. Again, this isn’t a long term rental where the monthly cashflow is more or less consistent. Good months for short term rentals will look a lot different than long term rentals. This is even more reason why you have to really take advantage of the high season and set prices accordingly!
So that is a breakdown of my expected income for Ol’ Faithful! If you want to see the latest month breakdown of income and expenses detailed out for Ol’ Faithful, checkout this post!
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Thanks again for all the support and continuing to come back each day for new updates in this saga!
Enjoy this article? My goal is to continue posting about my real estate investing journey and path to financial independence through investing! I want to share my journey with real numbers to people can see exactly what I am doing. Are there other ways to get to financial independence? Absolutely, this is not the only way. But this is the fun of personal finance, it is personal! Checkout more of my content here!
2 thoughts on “Real Estate Investing Strategy – Ol’ Faithful Breakdown”
I enjoy reading the numbers!! I’m same age and I invest in OH were the purchase price average for single family houses are $100-120k in class B+/C+ areas.
Did you buy this solo unmarried or split downpayment amount w/ a spouse or bf? During this pandemic, is it converted into a year-long rental instead of airbnb?
Thank you so much for reading and really happy to hear you are investing in real estate as well!
I am just a single guy living in Orlando right now so everything I am purchasing I bring 100% of the cash to the table. For the pandemic, I have converted 2 of my 3 Airbnb’s to 30+ day rentals, and then I have the one Airbnb that my HOA isn’t allowing any new guests in. If you haven’t read those article posts yet, I highly recommend it 🙂 The HOA story is wild and still not over yet.