Dump it for the Mello Roos, are new Airbnbs too risky?

Question

Hi BP forum wanted to get seasoned investors inputs on this. Should we dump it because of the undisclosed melloroos? Are airbnbs too risky right now anyway?

We are under contract for a property in Coachella. we are at the end of our contingency period and we found on the title report that we have mello Roos on this property. Approx $300 per mo extra on top of the mortgage and ins/prop taxes. The listing agent did not list it on the MLS. Did not have any disclosures for it. I feel like the agent should disclose Something this important? We usually have a no melloroos and no hoa rule when investing. Did the agent break any rules?

As a side bar- we are locked into a good rate (got a good deal from a friend who is in wholesale lending). It does cut into the profits but the property is worth $530K+, we got it under contract for $515K. It’s a 5 bedroom, 2300 sq ft house, 3 blocks from polo club. We plan to build a pool and if we STR rent it we can make a decent return. We could go long term and make an ok return as well.

Like everywhere else I’m reading that Airbnbs bookings are going to their prior to Covid cycles. We are entering into Low season in the desert and revenue and bookings are dropping in the area.

So long winded but:

1) did the listing agent break any rules? 2) with the melloroos included - is this still a good deal? Any local Coachella investors that can give me some inputs on this?

Thank you! Lena

Account Closed · Answer

Hi thank you for the prompt response back! I did a search and found the county tax records. I confined that they were up to date and saw last years assessment and payments.

This is a mello Roos on top of the city tax. I am unsure on how one finds out about mello Roos or eve how to search. They are usually to cover things for newly built communities - although this house was built in 2006. It was not disclosed on any documents and just surprise showed up on our title papers. Didn’t even come up in the original loan estimated payments with taxes and ins.

The sellers know they pay 2 diff tax bills and didn’t disclose. My agent said it’s usually a separate disclosure agreement like the HOA form during a Sales.

If we go short term it should hit great returns assuming rabbu and airdna data. if we hit STR numbers the added $300 should not break the bank. But I'm hearing and following so many fb groups that indicate Apr is slow as snails.

If I have to go long term, I just did a quick check with the updated numbers cash flow maybe $500/mo if we are lucky. That’s an awfuL return for a $86K investment (down payment and closing).

John D. · Answer

There are 5 bedrooms near the Polo Grounds that would be great deals at that price, even with the additional monthly. And 5 bedroom properties that would be poor buys there. Devils in the specific details.

Rodney Sums · Answer

When I'm considering a property I always go to the county assessor's website (often called auditor or something else) to see what the taxes were and if known, what the taxes WILL be and if any special assessments apply. I ask about HOAs, deed, historical and any other applicable restrictions. The Mello Roo sounds like a form of a special assessment however I'll defer to someone who knows better from the area.

Did you research the property's taxes from the county first?

I'll again defer to a someone local regarding listing agents responsibilities in that area however did the disclosure have a section regarding Mello Roos where they put something other than what you learned?

Last, is the amount you have to pay a deal breaker preventing you from achieving income goals and/or makes it worse than a property without the Mello?

Dump it for the Mello Roos, are new Airbnbs too risky?

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