STR Due Diligence Checklist Before You Make an Offer
A practical checklist covering regulation, revenue, costs, financing, insurance, and property condition to work through before buying a short-term rental.
Regulation first
Confirm STRs are allowed at the address: state, county, city, and HOA. Ask about permit availability, caps, waitlists, owner-occupancy rules, and any pending changes. Get the answers in writing where you can.
Revenue and cost reality check
Build revenue from matched comps and test a downside case. Build costs from line items, including taxes, insurance, cleaning, reserves, and management. If the seller supplies historical numbers, ask for platform payout reports and tax records, not a spreadsheet summary.
Financing and structure
Ask lenders how they underwrite STR income and what DSCR they require. Model the deal at the real rate and down payment, and check that cash flow stays acceptable if rates or occupancy move against you.
Property and operations
Order an inspection with STR use in mind: heavy use stresses HVAC, plumbing, and appliances. Check sleeping capacity against local occupancy limits, parking rules, and safety requirements such as smoke and carbon monoxide detectors. Price the furnishing budget honestly, and confirm utilities, internet quality, and how you will handle cleaning and turnover.
Know your exit
Decide what you would do if STRs became restricted: rent it mid-term or long-term, or sell. A deal with a workable exit is safer than one that depends on a single outcome.
FAQ
- How long should due diligence take?
- It depends on your contract deadlines and how responsive local offices are. Start the regulation questions first because those answers can take the longest.
- What is the most common thing investors skip?
- Confirming the rules for the specific address, and stress-testing revenue. Both are cheap compared with a purchase that cannot operate as planned.
- Should I hire professionals?
- For large purchases, a local attorney, an inspector, and an insurance agent are commonly worth it. This is general information, not legal or financial advice.