I got pushback a couple weeks ago when I said that the operating expenses for a SFH STR could be $100k.

So let me walk you through the underwriting for an STR deal on 1.3 acres in White Mountains NH to show you how we get there and overall how my group evaluates STR deals.

👇 1/ Property

-Currently 2 BR, 2 BA, 1672 sq ft
-Converting to 5 BR, 3 BA, ~2450 sq ft
-Pond on property, nice yard, and outdoor space
-Cabin in the woods-y type feel

This was the first deal my group has made an offer on in 2 months.

The enemy of a profitable and scalable agency or professional services business is billing hourly or by the project.

What @patrickdichter calls the revenue roller coaster.

If you ever have any desire to sell your company or get out of the day to day, check out this 🧵 1/ Understand your value proposition and target customer.

If you have been in business for a while, map out previous projects and clients on a spreadsheet and add details for the engagement, the company, and what their challenges were.

You will start to see patterns.

Two things can be true at once:

Self-managed short-term rental / Airbnb properties are headaches, difficult to scale, and not something to jump into lightly for a quick buck.

AND

A great entry point for rookie real estate investors.

Let’s go through why 🧵 1/ Affordability

Many STRs are in traditional vacation rental markets, and even with recent run-up in prices, the prices in these markets are typically much less than SFHs or MFHs in top MSAs.

I recently started SMB consulting with @patrickdichter at Appletree.

I don't have a huge person network of SMB owners to leverage to build my initial book of business so I am going to give cold outreach a try.

Little 🧵on my process - ~$1400 to send 30k+ emails to 5000+ targets 2/ What I offer:

Many SMB owners are stuck, having trouble increasing sales, understanding profit margin, too bogged down in the day to day, etc.

Appletree has a process for understanding these problems, creating a roadmap, & providing systems & accountability to solve them.

Since my group bought our first short-term rental property in December 2019 in Campton, NH - I often get the question:

"Why STRs in Central NH White Mountains?

Here is some background on a few experiences I had and threads I connected to arrive at this strategy. 1/ Baby boomers buying homes in scenic, low cost-of-living areas

In Spring 2016, my parents sold my childhood home in Silver Spring, MD and used the proceeds to buy a house in Millville DE (~2.5 hours from DC).

The DE beaches are & were super popular for DC area familes.

Many home service businesses are inefficient with how they price jobs and send quotes.

They want each quote to reflect the nuance of the job, which makes pricing jobs and cranking out quotes hard.

🧵on a home services co I worked with to standardize their yard maintenance. 2/ When I started working with the owner, this was his process:
-He would go the customer’s house

-He would put together a custom per-mow quote for that customer

-He would send that quote via a Word doc that the customer had to print, sign, and scan back

There is a massive learning curve to short-term rentals.

Since my group got started in December 2019, here are 3 paradigm shifts that have made us better investors and operators. 1/ Acquisitions-related

When we started, we underwrote deals to the market average revenue instead of digging in and figuring out what factors drive STR above-average performance. This meant that we were only considering average properties.

https://twitter.com/Aldigity/status/1485436964849565697?s=20&t=zYcXq3s1haQ52e3pUZYAOA

I’m 27 yo and have done 4 real estate deals with a 5th under contract.

I’ve never worked for a real estate investment co or made over $60k annually; my knowledge is largely DIY’ed.

The mental model I’ve used for growing:

The goal of each deal is to add tools to my tool belt🧵 1st deal - Aug 2018 - Chelsea, MA condo

Deal basics: 30 year fixed primary home (5% down); coliving-type LTR after owner-occupying

Tools added: developing a thesis; underwriting; offers & negotiation; working with a partner, basics of resi financing

https://twitter.com/Aldigity/status/1481432222242586625?s=20&t=JJWSbf7s7nA2eS_4cSuVLw

Riverview Retreat - Pothos Capital's new 12 acre, 6 BR property in Woodstock, NH - is launched & bookings are rolling in.

What should the cover photo be?

A. Wide drone shot w/ the pond (current one)
B. Closer drone of back of house

Poll in next Tweet

airbnb.com/h/riverviewret… Options

Last week, my group closed on a 12 acre short-term rental / Airbnb property in Woodstock, NH - this deal is a culmination of 2.5 years of STR learnings.

🧵on the thesis, location, value add & guest experience plan, financing, partnership structure, & preview of what’s next. 1/ Property

-Currently 3 BD, 2.5 BA, 3100 sq ft
-Converting to 6 BD, 4.5 BA, 3700 sq ft
-12 acres, mountain views, private pond, & river frontage
-Deck, covered hot tub, and fire pit
-No zoning in Woodstock so no reg risk

zillow.com/homedetails/55…

This hearing is happening right now and being broadcast live:

https://twitter.com/Aldigity/status/1484342166071644166

The City of Laconia - who adopted thorough STR regulations including zoning and registrations - is testifying in opposition to this bill.

https://twitter.com/Aldigity/status/1455673871399522314?s=20

In 2021, my biggest realization was that the best opportunity* for cash flow in Airbnbs / STR real estate atm is not necessarily in buying the RE but selling the shovels.

Here is why 🧵

*Caveat: for more entry level folks without a ton of capital. Not ppl like @imrichardfertig 1. The first is quite obvious - STRs are exploding and is the asset class with largest opportunity for cap rate compression.

COVID, remote work, and Airbnb have permanently changed the game.

https://twitter.com/TheRealEstateG6/status/1476587334598635523

Podcasts are my favorite tool for broad learning & getting exposure to different viewpoints.

Problem: there are 2 million+ podcasts out there.

Here are my 12 favorites that I listened to in 2021 with zero regard for categorical boundaries.

open.spotify.com/playlist/1xKGn… 1. Economics: @tylercowen on the End of the Great Stagnation with @ezraklein

2. Philosophy: @CornelWest with @sullydish

3. The future: @balajis on @tferriss

4. Real estate: @fortforthchris on the Fort’s acquisitions process

Do you want to partner with or eventually sell your short-term rental / Airbnb real estate portfolio to an institutional investor?

Here is an 8 step process for how to think about underwriting & executing an STR deal that be attractive to institutional investors 🧵 Step 1: calculate your all-in initial basis - purchase + any renovations + furniture.

Let's say you are buying a place for 400k, doing 80k in renovations, and spending 20k on furniture. Your all-in basis will be $500k.

Zoning and regulation - everyone's favorite STR risk factor.

@imrichardfertig always talks about buying properties where STR use is included "by right".

What does that mean and how do you know?

STR zoning thread using Thornton, NH as an example. (1/n) Zoning basics: the town creates different "zones" for different areas that then correspond to different use(s).

In Thornton, you have 6 different types of zones.

(2/n)