What We Look for When Buying an Investment Property to Convert to a STR
Buying a property to convert into a short-term rental isn't the same as buying a traditional investment property, and it's definitely not the same as buying a home. The criteria are different, the analysis is different, and the upside (when you get it right) is in a completely different league. After years of doing this with our own portfolio, here's exactly what we look for before we pull the trigger on an STR acquisition.
Will It Actually Cash Flow?
The most obvious question, and the one most people don't answer rigorously enough before buying. While sale prices have stalled or declined in many areas, we're still in a high interest rate environment, which makes finding a property that genuinely pencils out more challenging than it was a few years ago. Before falling in love with a property, prospective hosts should run the numbers using STR pricing tools like AirDNA or PriceLabs to analyze their specific market. The goal is to find the pricing sweet spot where realistic occupancy at realistic nightly rates actually generates income after the mortgage, expenses, and management fees.
One mistake we constantly see is hosts calculating revenue based on every available night being booked and forgetting to account for turnover days between guests, maintenance windows, and the inevitable slow stretch that every market experiences seasonally. A realistic projection builds those gaps in from the start. Run your numbers at 65 to 70% occupancy rather than 90%, factor in at least one to two maintenance days per month, and make sure the property still works. If the worst case scenario still works on paper, the good months become pure upside. If the numbers only work when everything goes perfectly, keep looking.
And here's the part that might surprise you: with the right pricing strategy, listing optimization, and a handful of strong early reviews building momentum, the actual income almost always outperforms the conservative estimate. When we were evaluating our first Airbnb conversions, we ran our projections at 66% occupancy to make sure the numbers worked. We're now running consistently at 87 to 90%. Plan for the worst, and let the results exceed your expectations.
Does the Property Have a Differentiating Feature?
In a crowded market, the listings that stay booked aren't always the biggest or the cheapest, rather it’s the ones that give guests a reason to choose them over everything else. A screened in porch (our personal favorite), floor-to-ceiling windows with exceptional natural light, a private backyard, or private parking (a genuine differentiator in the city) can be the deciding factor for a guest comparing two similarly priced options. When you have a property with the same sleeping capacity as competitors but with a feature that makes guests feel like they're getting more value for the same price, you stay booked.
We look for properties that already have that differentiator, or where one can be created with a relatively modest investment.
Is There an Opportunity to Add a Listing (or Two)?
Some of the best STR investments aren't single listings, they're properties with the bones to support multiple if you’re willing to do a little work. An ADU opportunity, a cheap multiplex with good bones that needs some light-moderate rehab, or a property with a finished walk-out basement suddenly turns one purchase into two income streams. These scenarios typically generate 2.5-3.5x the revenue of a listing with the same sleeping capacity when occupied by a long tern tenant. Multiple listings on the same property means multiple income streams, shared vendor relationships, and the kind of operational efficiency that makes a portfolio much easier to manage. We've done this multiple times with our own properties, and the difference in returns is significant. If you're willing to put a little work into the right property, the upside is hard to match.
Can It Tap Into an Underserved Market for Longer Stays?
This is one of the most overlooked opportunities in STR investing, and one of our favorites. We happened upon this at first due to the City of Atlanta’s short term rental restrictions. We quickly realized there is a massive unexpected market for longer stays in Atlanta and have since expended this model to the suburbs (less restrictions, same market opportunity).
Within the Atlanta metro, neighborhoods can differ dramatically in terms of what's available and what guests actually need. In many areas, there are few or no listings geared toward 30 to 90 night stays which leaves a significant gap in the market. Anyone looking to book that kind of stay is stuck choosing between a month-to-month lease (expensive, inflexible, and often in less desirable locations) or paying standard short-term nightly rates for an entire month, which can be astronomically expensive. That's where a 30-night minimum listing with a nightly rate 25-40% below the area's standard short-term rate creates a genuine sweet spot. You’re still generating 150 to 200% of what a long-term tenant would pay each month, while giving the guest a far better deal than their alternatives.
There is a huge market for families between houses, those relocating to Atlanta, contract workers, remote workers hopping between cities, and traveling professionals are actively searching for exactly this and often can't find it. We’ve actually hosted guests who booked for all of these reasons, and more. Further still, especially if the market is saturated with properties with 2 or 3 night minimums, there’s a good chance you make more per month if you’re booking 30-90 day stays due to less holes in your calendar.
The inverse can also be true. We’ve seen neighborhoods with 30 night rates closely mirroring what a long-term tenant would pay which makes it all the more important that the property work as a true short term with 2-5 night stays being the bread and butter.
This is where an experienced STR manager can really peel back the layers to identify if the property you’re considering is a good fit to tap into this underserved market and how to structure your pricing and calendar rules to optimize your revenue.
Don't Overlook House Hacking
Not every STR investor is looking to buy a pure investment property, and that's perfectly fine. Often viewed as a launching pad for first-time investors who aren’t afraid to roll up their sleeves, a duplex, a home with a walkout basement, or a multi-unit property where you live in one unit and rent the other is one of the smartest financial moves an owner-occupant can make.
Run the numbers using STR pricing tools on the rentable space. If the income from that additional unit covers your mortgage, it's a slam dunk. You're essentially living for free while building equity and generating short-term rental income and you have the added benefit of being on-site to keep a close eye on the property. It's not glamorous, but the numbers often speak for themselves.
Thinking about buying a property to convert into a short-term rental in Atlanta? We help clients identify, evaluate, and acquire STR investment properties, and then manage them once they're up and running with discounted agent commissions for management clients. Reach out and let's talk through what you're looking for.