All Forum Posts by: Carlos Carbajal

Agree with Allen!

But really you want to try and determine what the actual gross revenue is from an AirBnB similar to what you are trying to build.  Couple of different ways to do that:

1. Try AirDNA - youll need to pay some money to access the date in your region but it does a pretty good job of estimating revenue from the airbnb and VRBO properties in your area.  Note that the fewer listings there are in your area the less accurate it will be

2. A better route would be to contact soome AirBnB hosts directly.  You will get turned away by some but a few will likely share some high level numbers with you esp. if you want their advice and expertise.  Some people will feel like you are competition but some people will feel like they are mentoring someone a little bit. I did this is Sedona AZ and it worked out well for me!

Here is a tip if you have tenants that insist on paper checks:

Don’t accept the check by mail. Only accept a photo of the check via text or email.  That’s all you need to deposit the check. 

Once you have a clear photo of the front of the check just bring it up on your computer screen and use your mobile banking app to deposit the check. I have done this for years and it works great across any bank. 

For the back of the check you can just reuse any check back with your signature endorsement. Your mobile banking app will just accept this as a valid back of the check your tenant gave you. 

Alternatively you can print out the photo of the check and deposit that using your mobile banking app,

I’ve been doing this for like 7 years and it eliminates “I mailed the check” discussions. 

And yes it will work with most money orders esp those from the US Post Office.  

Roku TV's and spare Roku remotes just as others have said. 

This is the way.

Los Angeles is almost identical to San Francisco in their eviction laws. I cut and pasted the allowable reasons for eviction from the Just Cause Ordinance for LA County which I think you are already familiar with.

I have been a property manager in rent/eviction controlled cities (SF, Oakland) for many years and I can echo what most people are telling you here. If the tenants are paying their rent on time then a buy-out (cash for keys) is probably your only realistic option. 

The courts will take a dim view of a landlord who attempts to evict on a minor lease violation. The law says tenants are allowed to cure lease violations in any case so that is not a realistic path unless it's something major and remains uncured.

Tenants at 50% of market rent are common in rent controlled cities and the farther below market they are the more motivated that are to keep their apartment.

There is a rough formula that developers will use as a starting point for calculating a buy out which is basically 3 years of the spread between market and existing rent. In your case that would be about $32,400 (36 months x $900) but sometimes tenants will take less if they are already thinking of moving.  But often they won't move unless it's significantly higher.  6 figure buy-outs are not exactly rare in SF. 

Tenant is at-fault

• Failure to pay rent
• Failure to cure a violation of the rental agreement
• Creating a nuisance or causing damage to the property
• Using the rental unit for an illegal purpose
• Failure to renew a similar rental agreement
• Failure to provide the landlord with reasonable access to the rental unit
• The person at the end of the lease term is a subtenant not approved by the landlord

• The owner or immediate family member will move into the rental unit
• Resident manager will move into the rental unit when required by law or by an affordable housing covenant or regulatory agreement
• Demolition, substantial remodel, permanent removal from the rental market, or conversion to non-residential
• Government order to vacate
• HUD owns and is selling the property
• Residential Hotel being converted or demolished
• Conversion to affordable housing

Hi Keith-

I run a traditional property management region and also a vacation rental firm in addition to managing my own portfolio of rental properties. In my experience traditional property management firms are not an area of the industry that breeds excellence. There are a few great ones in each region I think, but the business overall has high switching costs for the owner so doing the bare minimum (or less) is often the norm. On top of that the traditional property management business tends to favor firms that scale to lots of units under management which can lead to dilution of service and individual attention.

So if you don't have a lot of units to manage and have time on your hands you can absolutely do it yourself. Many owners do. Here is my take for what it's worth. I am in the San Francisco Bay Area, your mileage may vary.

1. For renting out apartments I don't see any need for MLS in my area and we don't use it except for high-end single family homes. Vast majority of our leads come through Zillow network (70%+). Craigslist is still a player here (lots of bad leads to filter out) and Facebook Marketplace is rapidly becoming a big lead generator esp. with age 35 and under demographic.

2. Vacancies will probably eat up the majority of your time. Make sure you have a way to take *excellent* photos and a good walk through video of your units. Make sure to include exterior shots of the building. COVID forced us into figuring out a way to do self-showings so depending on your comfort level you could allow that via pre-screening and a photo of the prospective tenants DL.

3. AI is becoming a big deal in property management (I know, I was surprised too). We use AppFolio as our management platform and we have an AI chatbot (called Lisa) as part of our subscription and although she has limitations she has been a game-changer for us in lead response and scheduling showings and post-showing follow-up. Lisa automatically engages with every single lead and answers questions about the property and automatically schedules showings based on a predetermined schedule. She replies 24/7/365 and prospective tenants are pleasantly surprised how quick and engaging she is. Most tenants do not know she is a bot. Not having this type of technology is probably the biggest downside to managing on your own unless you have enough units to justify an AppFolio subscription.

4. The second most time-consuming part of self-management will be repairs. If you have a good handyman and don’t have a lot of units you will probably be ok. But this part ican be difficult and complex if you have lots of units because at a certain point you need a software management system where tenants can submit their own repair requests and you can quickly email/text those to the handyman and also pay the handyman quickly via direct deposit.

5. You probably already know this but never rent to anyone when you have not run the credit score yourself via a service like Transunion Smartmove of similar service. Don’t take print outs or PDFs of credit scores they are very easy to fake.

6. Lease documents you sound like you have a handle on but if you don’t most regions have a local landlord association you can join for a nominal fee that has good attorney reviewed/court tested leases. But the best leases would probably be from the Texas Association of Realtors (TAR)

7. If you do end up coming back to find a professional management firm I would try to find one that handles vacation/short-term rentals in addition to traditional property management. You are likely to get a much higher caliber of firm because managing AirBnB type properties is a whole different ball game in a different league. Those properties are management intensive and require lightening fast response times and a staff of pros who are used to operating in that kind of high-touch, high-expectation environment.

Good luck to you!

@Joe Splitrock

I have lived the Silicon Valley area for almost 20 years and I would say there is a lot to see here. One of the old dinosaurs like Oracle or HP moving out of the area is one thing, but a new flagship company like Tesla moving HQ out of the area has people talking and wondering. Is this the start of a bigger trend? Could be.

Recruiting senior talent into the Bay Area has become difficult over the last decade as the housing costs have made it a harder and harder sell for people esp if said talent is moving a family into the area. A single college grad can still swing it with an apartment, but someone with kids who needs a good school district and a single family home is now saying “no thanks” more than ever and the tech firms are all noticing it.

My sister works at Apple and she says for most positions Apple is opting not to hire in Silicon Valley. Better talent for a lower cost can be had elsewhere.

It’s not time to write an obituary for SF Bay Area since Stanford and UC Berkeley isn’t going anywhere and we still have the strongest talent pool of tech workers and VC firms in the world but it’s very possible that our days of being the One center of the tech universe are coming to a close.

@Jones Udo-Akang May Montana does these. https://people.rate.com/may-montana-239533

@Don Johnson sounds like you have some real potential here. Exciting!

Agree with @Paul H. your next step is to dive into the details of the zoning and see what the parking requirements are. In your area you probably will require at least 1 spot per unit and possibly more for 2 and 3 bedrooom units. Parking requirements are often the single biggest driver of what your project looks like in terms of design and unit mix. 

In the simplest terms for maximizing cash flow you want to build the max number of units with the max number of bedrooms for each unit. So as an example if you can build 30 units all 3bed/2ba that’s the max cash flow that’s better cash flow than 30 1BR units. But parking requirements and also city requirements on unit mix will probably limit that just keep in mind a 2 or 3 bed unit makes significantly more money than a studio or 1 bedroom and the cost to build the larger unit is not significantly more esp when you have economies of scale on a 30 unit project. 

Also be sure you look into “density bonus” which is a California law that allows you to build *more* than 30 units if you designate some of the units for lower income folks. This is a major tool used by developers in the Bay Area to get more units and boost the cash flow even higher. Here is an overview. 
https://www.reubenlaw.com/cali...

I would also look into utilizing SB35 which is another state law that can get you planning approval within 60-90 days which is light speed compared to the 12 to 24 months it normally takes - or longer if there is community opposition to the project. You do have to designate some units lower income to utilize this very powerful law. https://www.jdsupra.com/legaln...

I think you might want to find some local developers who might be willing to “mentor” you for some compensation. You are at the beginning stage of scoping the viability and cash flow which is what developers always start with! Good luck sound exciting !

My understanding from other developers is that bank money is the best way to finance a ground up project if you can get it because the money is relatively cheap (I am paying about 4.5% interest on my loan). 

But bank money is the hardest to qualify for as well although 6 houses should be something banks would like since it's a straightforward housing build and SFH are desireable.

The banks seem to really weigh previous ground up experience heavily so if you’ve done that before which sounds like you have then that will work in your favor. Your general contractor will get scrutinized by the bank pretty closely too. Esp wrt to financial health and previous ground up experience.