All Forum Posts by: Brandon Plombon

Quote from @Pat Lulewicz:

The Triad (Winston, High Point and Greensboro), Fayetteville, and STRs in most larger or touristy markets if you find the right property for the need in that market.

Unless you strike a couple gold mines with STR's, buying a few LTRs in cash flowing markets really won't let you leave your current job...its of course dependent on the amount of income you're trying to replace. If you jump into RE full time and do other activities to supplement your income (wholesale, birddog, flip, realtor), then you create another job; though you might find more enjoyment in that than the current job like I did.

Although there are a lot of DSCR lenders out there, one cautionary point is that without a track record or consistent results over a couple years in RE, banks will still see you as a debt risk without a regular W2 income when you make the jump. Definitely recommend doing both for a year or 2 (preferably 2+ for tax return purposes) so that you can better guarantee financing opportunities.

Please keep your W2 and do not jump in full time as you won't have 2 years of history on your Schedule E and no experience. You will be able to qualify much easier with a W2 income and a small track record vs no W2 income and no track record.

Quote from @Peter B Ana:

Quote from @Jennifer Moraski:

Quote from @Peter B Ana:

We want to rent out a basement apartment in our primary home on AirBnb (or long term rental with standard lease). Would love sage advice on what/how to do this right.

ASSETS
650k equity in home, stock/bond investments in retirement and taxable accounts
No trusts, No LLCs, 2 Kindergarten age kids

ZONING
Town laws suggests that less than 1 week is not allowed. So I can stick to renting it out for 7 days or more. I've never done this before so don't know if this will be financially viable


BASEMENT
The basement has an independent entry and exit, in addition to indoor stairs that lead to the rest of the house.

INSURANCE
Recently switched Homeowners insurance to Travelers because their coverage covers short term rental explicitly (Travelers was the only company with this clause)
Umbrella – Moving to a new company (Markel insurance, not Travelers)

QUESTIONS ON HOW TO DO THIS CORRECTLY

1. Is there any liability risk that puts the equity in my house at risk (~$650k)?
Is there any liability risk that puts the rest of my investments at risk?

2. Is long term rental inherently safer than short term rentals?

3. Should I be using a LLC and/or a trust somehow to safeguard assets? I have never done either so any pointers on where to start would be very helpful.

4. Does having an umbrella insurance from a different company (Markel insurance) than the homeowners insurance (Travelers) matter? Can’t find a competitive rate for Travelers so are forced to go this route.

Thank you so much for any guidance!

Check furnishedfinder.com to see the MTR market in your area. There's risk, work and money to be made no matter how you rent it. Do your homework, analysis and determine what would work best. We are about to create a basement unit in our primary residence and I plan on running the numbers between long term, medium term and short term to see what makes the most sense. I suspect it won't be worth the additional hassle, costs and time to go MTR or STR but that may be different where you live.

An LLC isn't necessary. I just have an umbrella policy with my insurance for my STR.

On the insurance question, I believe you need to have the umbrella policy with the same company as your primary home owners insurance. Basically it will kick if you reach the liability limit of your home owners insurance. Call your agent to discuss. Rates are not very much. 

Good luck!

 Thank you so much for your reply Jennifer. Why do you say that the umbrella insurance needs to be from the same company as the home insurance? The reason I ask is that the Umbrella from Travelers is quite expensive compared to others. If a two carrier setup renders the umbrella suspect, then I'd have to make it work by paying more.

Typically insurance companies want the underlying assets that they are insuring so the home or vehicles in order to offer an umbrella. As there is a lot of risk for an insurance company only charging a couple hundred for a $1MM umbrella policy. They have to sell a lot of policies in order to be whole if they just have one $1MM claim out of thousands. The home/vehicle policies offset the risk. Some carriers simply will not do a standalone umbrella they want the underlying coverage. There are some niche companies that only offer umbrellas over all policies regardless of the carriers. PersonalUmbrella.com sticks out in mind.

Quote from @Dell J.:

 the banks I've dealt with only acknowledge income that shows up on your tax forms as income.   

 If it shows up on your tax return on your Schedule E or elsewhere then yes. I use my primary residence as an AirBNB and show it on my Schedule E. Some lenders may want 2 years of Schedule E history - as others have stated ask your specific bank how they would handle it. Also as @Brandon Rush said I would use 65% operating expense ratio to be conservative if historicals aren't available.

I use Excel for my tracking but I enjoy having it customized.

@Louis P Lessor Congrats on your success! What was the purchase price and how much have you spent on rehabbing the property?

Hi @Joshua Merchant My guess they are wanting your proforma financials - what are your projections for the property. Typically commercial deals are for a 5 year term note which will balloon or have one large payment at the end and then will renew for another 5 year term and balloon again. When these loans renew you will have appraisal fees, title work, loan fees, ect. again. The standard amortization schedule is 20 or 25 years. Most lenders will also require 20-25% down payment leasing the property at 75-80% LTV. Those are the main differences as opposed to a fixed 30 year traditional mortgage

Hi @Wade Luhman nice to meet you! I would love to connect with you. I am based in Mankato, MN but work with investors all over the state. Wishing you the best - Brandon

Hi @Riggies B tang I would recommend looking at local community banks or credit unions in the Cleveland, OH area as they will often be the most flexible as far as rate/terms go.

Never hold rental properties titled in an S-corp.

@Tracy Z. Rewey you are welcome! Let me know if you would want to get together and discuss further