All Forum Posts by: Bradley Chapple

The loophole of financing a property as a primary residence with very favorable terms, living there for a year, and then converting it into a rental has been discussed a lot.

I’m curious if it works similarly with a second home. With a second home, I know there are rules for STRs and how many days it can be rented out to avoid the tax consequences and so on, however, I’m not having much luck finding a clear, BS-free discussion about just converting a “vacation home” into a 100% long-term rental.

I have a lot of family out-of-state and I thought I might be able to kill a few birds with one stone if I were to buy a second home near family with 10% down and a low-ish interest rate, travel there a few times to visit the kinfolks (and performing some DIY rehab work each time), and then finding a tenant a year after the purchase date.

Obviously, I’m just trying to do the right thing and avoid committing mortgage fraud and having the loan called due, or having to refinance it as an investment property, which could be expensive considering we don’t know where rates are doing to be a year from now.

Anyone have any knowledge, experience, or just plain old opinions on doing this?

Joe, I was just about to ask a similar question... namely the 10% for "property management" + the 15% maintenance fee upcharges + the 8.33% placement fees. I have always been curious about what the 10% actually covers anything (besides collecting rent) since most property management companies seem to charge extra for everything they do for you.

I'm not asking this because I'm cheap, either. Cheap isn't exactly the right word for someone who seeks to understand what their money is getting them, because anyone who does otherwise is probably a fool... and you know what they say about fools and their money.

I enjoy having civil discussions with people of differing opinions. It's how we learn and grow. So please take anything I say with a grain of salt. I was only trying to point out that a conflict of interest doesn't necessarily have to be there for someone to believe it's there. Belief is a powerful thing, and it's rarely based on hard facts or tangible proof.

I have never been a PM, so it should go without saying that I don't have all the facts. But, when I owned my IT consulting business, I had a "No solution, no charge" policy which I used to mitigate any perceived conflicts of interest. I never wanted my clients to think that I simply came in, poked around for a few hours, and then handed them an invoice without solving their issue. If I didn't have that policy, would I ever take anyone for a joy ride? Absolutely not. But clients don't know that, because they don't know me.

Granted, I know residential property management isn't the same. I get it. But, human nature is human nature, regardless of the industry. With that being said, this perceived conflict of interest highlights a vulnerability that exists in the PM industry that leaves it open for disruption by a new type of PM who comes along with a different model that eliminates it. All of this is theoretical, of course, and I'm only playing devil's advocate, but if I can't discuss this type of stuff here, I don't know where else I ever could. :-)

I love stories like these. A quote by Will Rogers that I have always loved was, “Don't let yesterday take up too much of today.” It sounds like you didn’t.

Do you plan to keep using the “Nomad” strategy to continue acquiring new buy-and-hold properties?

Thank you for the words of encouragement @Cassi Justiz. Yeah, that’s the plan, anyway. You know what they say about plans, though. I can hear God laughing now.

We intend on visiting the areas before we invest somewhere. I’m a pretty trusting person, but I’m not the type of person who could drop 20 to 30 grand on a property sight unseen. Plus, the wife and enjoy traveling, regardless of the destination. Real estate might give us an excuse to get out more often.

100% agree. Conflicts of interest can be tricky and they're usually most damaging at the subliminal level. Although I think people usually have the best of intentions, there's always that shadow of a doubt where the investor is wondering, "But, are they really trying to fill that vacancy?"

Sometimes I even wonder if the first month's rent for filling a vacancy is a conflict of interest. I know that statement will ruffle some feathers, because after all, the PM is spending money on marketing, walk-throughs, credit checks, etc. I get it. But, it often makes me wonder what incentives the PM has for keeping the tenant in the property when they make more money from turnovers. Keeping the tenants in the property is what makes the investor the most money. Turnovers can be profit-killers even before the PM takes a huge chunk.

That's definitely the plan @Andrew Rosenberg.

We've been priced out of our local market, so we're going to have to look east.

Hello, everyone. I have been on BP for a little while now and even upgraded my account to Pro in order to use the analysis tools. But, then I realized I never posted an intro here. So, here we go...

I grew up on a farm in Southeast Georgia, about an hour north of Jacksonville, Florida. After high school, I moved around a lot to satisfy my wanderlust, spent a lot of time in Oklahoma (in and around Tulsa) and eventually made it far enough west to settle in Northern Colorado.

Like many people here, my REI journey began when I listened to the audiobook "Rich Dad, Poor Dad" while on a road trip in the early 2000s. That's when Robert Kiyosaki planted that powerful seed. At the time, however, I broke. I don't even know if broke is the right word for it. The kids were still young and we could barely keep them in diapers and still pay the bills. We owned our home, but it was almost repossessed countless times. Having money to invest in real estate was a pipe dream because we were only a couple of paychecks away from being homeless ourselves. So, that seed went dormant for a while.

Fast forward 15 years to 2019. Our careers have progressed, our kids are grown and (kind of) on their own, our revolving debt is down to zero, and the seed that Kiyosaki planted so long ago has started to grow. We have one SFR (our previous home) and we do our own version of house hacking by renting our downstairs MIL suite to two of our adult children. Currently, we manage our one SFR and the tenant is great, but that's probably the only one we'll manage ourselves. Our next buy-and-hold properties will, more than likely, be out of state.

Our plan is to acquire around 10 to 20 properties over the next 5 years and then using the next 5 years to pay them off, swap out the bad apples, etc. This should allow us to retire about 5 years earlier than we otherwise could. The goal is to get to eventually work our way up to $10K per month in cashflow. We may not need that much to retire once we get there, but that's our "safe" number that should provide a buffer for medical insurance/emergencies, travel, and provide care for our aging parents.

So, there you have it... The real estate version of me, in a nutshell. If you want to know anything else, ask away. I'm mostly an open book and hope to use this forum to meet others with similar goals and maybe even develop some friendships that extend beyond real estate.

I wish all of you a happy and healthy holiday season and the best of luck in 2021. Stay safe, everyone!

@Edwin L.

My guy @Nate Sanow might be able tell you a little more about that area.

This thread is gold, especially to a buy-and-hold newb like me. With so many lessons learned, sage words of advice, and positive encouragements from those a little further along, it should be required reading for anyone starting out.

@Nic S. Thanks for kicking off this conversation and being so transparent when describing your struggles, and to all the other BP’ers here who took the time to share their own challenges. Also, a huge congrats on getting started and taking such MASSIVE action, even if you scaled a little too fast. Nothing ventured nothing gained, right? To you and everyone else here, I wish you a much more profitable and healthy 2021 and beyond.