All Forum Posts by: Ricky A.

Which "poor" are you---cash poor or time poor?

We're currently in a similar situation. Just closed on a property that we'll use as an STR in the NC High Country. It came furnished, but there are some missing pieces and some pieces that we want to change.

I looked on Facebook Marketplace, and we could definitely get some good pieces for reasonable prices, but it would also require a lot of our time to drive and pick up those various pieces.  So instead we're buying what we need from Wayfair and Amazon, having it delivered to us, and will take it and install it ourselves.  Granted 1) we're not having to furnish the entire place, 2) we can let it ride as-is for a few weeks while not seriously affecting bookings, and 3) we also have time to see what kinds of Black Friday/Cyber Monday deals we can get to save cost.

I put us in the middle of the spectrum of cash vs time being most important because we'll spend more money to get the stuff but save time on the acquisition side.  However, we will still have to spend time installing.  If you're even further on the spectrum of being "time poor" then there are companies that can probably do all of it (from selection to procurement to installation) for you as a turnkey service.

What documentation is needed?  I'm thinking it's probably the settlement statements so they can accurately determine basis (e.g., acquisition price is easy, but there could be other specific closing costs that could be added to basis).

If that's the case, I'd try to see if the following people/entities could find the records (probably in this order):

1. The real estate agents/agencies involved in the deal (Start with who you used as your buyer's agent, but seller's agent should have the records as well)

2. Attorney or title company that closed the transaction.  Not sure, but the name of who closed the transaction *may* be noted somewhere in the recorded docs.

3.  The lender if there was a mortgage involved.  The lender should have settlement statement records, but I bet it would be a painful and slow process to get anything from them.

Good luck!

@Wesley McDavid

I suggest considering various scenarios in which this could go downhill and make sure you have good, mutually agreed upon resolutions/off ramps.

Some that quickly come to mind are:

>>  What happens after 2 years and she's paid back her half of the down payment?  Does she continue to live rent free in exchange for providing the property management?  If so, are the values of those two similar?  If not, one of you may feel you're not getting a good deal the long term.

>>  What happens if she's not good at the property management piece or simply decides she doesn't want to do it anymore?  Is there a way to exit the deal or some other way to replace her that's fair to both ?  Do you have a pre-determined way to measure her performance?

>> What happens if she wants/needs to move?  Does that affect the mortgage?  How is title being held and does that affect this answer?

>> What happens if you two want to go in separate directions?  Can one party buy out the other?  How is buy out price determined?

Having the tough conversations up front and memorializing them in your operating agreement will help save a lot of heartache and hurt feelings in the future.  Basic advice is that, what seems like a good deal to both of you today (because it helps you both get into the game when you couldn't separately), may not seem like a good deal to both of you in the future, so plan for this now.

FWIW, I'm considering doing something similar to help some relatives get a jump start investing.  Basically, they would provide property management to pay me back for their portion of the upfront costs.  PM would be "charged" at a specified market-based rate (like 20% of gross) and that would be used to pay back a promissory note between us.  I think this makes things very clear.  In the rough numbers I'm thinking, that would probably be 4-6 years for full payback.  After that, they could decide if they want to keep doing the PM (and start taking those dollars home) or if they would rather move PM over to a 3rd party.  Either of these is fine with me because I'm already paying 3rd party market rate.

I plan to have specific metrics for performance (e.g., maintaining an average rating of X.Y on Airbnb and VRBO, maintaining a certain SLA on guest response time, etc.).  The Operating Agreement would spell out what happens if they don't hit the metrics (or if they just don't want to continue doing the PM).  Basically, PM would be moved to a 3rd party.  If they're not "fully vested" at that point, they could continue to pay the  promissory note until they're fully vested.  

Operating Agreement would spell out issues like this as well as probably a hundred other things.

Good luck!

Congrats!  Gest of luck on this deal as well as on those to come!

ROFL!

I'm doing Avery's STR Bootcamp right now...I guess the final exam will be building a homemade hot tub!

In addition to appraisal/financing, I would also wonder if it's possible to get it insured (like, liability insurance for guest slips and falls).

But instead of thinking about why it wouldn't work, think about how it could.  I would probably reach out to the TV show Treehouse Masters.  A quick search led to https://nelsontreehouse.com/.  Their site even has a section about vacation rentals.  I bet you could quickly get an idea about financing, insuring, and feasibility from them.

@Dave Foster I'm good.  I got my replacement under contract before my relinquished closed.  Otherwise, I know I would have been stressing...with or without an extension!  

@Omar Ababneh I feel for you.  I'm in the middle of my first 1031. I'm not an expert, but in the research I did for mine, it seems next to impossible to get the timeline extended and would require a federally declared disaster that directly affects you. Again, I'm not a 1031 expert or a QI, so one of them could weigh in better.

Two thoughts:

1.  If there are REIAs operating in your desired location, reach out to them.  Maybe there are wholesalers there with some good off market deals.

2. Consider the actual amount of capital gains tax you're trying to defer.  If it's a small amount, the tax savings could easily be lost if you buy a bad deal too quickly.  If it's a large amount, maybe it makes a otherwise borderline deal a winner.

Good luck!

Yes, contact Airbnb.  Hopefully, they'll be able to corroborate your research based the address she uses as a host matching the address of the guest who booked your place.  I bet if that's the case, it violates their ToS.  

Good luck and let us know how it turns out!

What specific questions do you have?  What are you trying to accomplish?  What are your current roadblocks?

The more specific you can be, the more the community will be able to help.