All Forum Posts by: Caroline C.

Since you already own the property in your IRA, it is a given that you need to hire a property manager, people to do repairs, and you'll need to have the custodian handle all contracts and money in/out.

Generally the question of whether to do long term rental or short term rental has to do with the location, quality of house, local rental regulations, typical nightly price, expected annual occupancy rate, availability of short term rental property managers, etc etc etc. Those are the kinds of questions you need to answer, and whether you own the property personally or in an IRA is less relevant than those things. As with anything, you'll find people successful with it and some that are not successful - the factors above are what is important.

Since you are using an IRA, make sure you have enough reserve funds in there to handle up front expenses or unexpected repairs. Otherwise you'll have to make a contribution to make those payments.

@Adam Sandow You've kind of hit the nail on the head. It definitely works if you get a tenant in there that pays rent and stays for a few years and the place doesn't need a lot of repairs. If the tenant turns over every year then you will not make monthly cash flow, although you have many other benefits such as debt paydown, tax deducations, etc. Cash flow is much better at the lower end of the rent spectrum, and that is how a lot of investors make money, but it is risky because those tenants sometimes have problems paying, and turnover can have costly repair expenses.

Placement of good tenant is most important factor, and unfortunately with fees PM's charge, their incentive is not necessarily to put the best tenant in place - they often receive late fees, and they receive a fee every time they place a tenant. That is why you need strong due diligence on the PM side of it.

Yes your numbers are conservative, but that also gives you buffer for cap-ex, so not a bad strategy. With price appreciation in Jax last 3-5 years, hard to make things work now at that price point.

Over time I've built a portfolio of approx 15 out of state investments, so that when one or two have an issue, the rest of the portfolio evens things out. In the beginning when we only had a couple of investments, each vacancy or capital expense was painful.

@Joel Fernandes You are right that most operators will show you the rosiest numbers and minimize things like capex and vacancies, so at least you are going into it with the right mindset and asking the right financial questions. Keep in mind that it will be harder to cash flow if you are excluding C and some B properties.

For all the due diligence you do on the TK provider and the numbers, the other thing to understand is that ultimately the success of your investment will depend on the tenant placed and the property management. If you have a good tenant that pays every month and stays for 3+ years, then even a marginal-looking deal will be great. But if you have a property that turns over every year or you have a tenant that stops paying mid-lease, then the best looking deal will be a loser/money pit. Do a deep dive on the PM, and don't hesitate to go elsewhere if needed, and make sure you can exit your PM relationship with 30 days notice. With the right PM with deep experience with it, you can make C+ / B- properties work.

@Gary Harrell If you've already picked a market, best bet is to find a REIA meeting there, visit the market timed around one of their meetings, meet some local people, and ask lots of questions and for some referrals. Meet local TK companies face to face and look at their work firsthand.

@Aaron Rowzee TK is just a shortcut for purchasing property quickly. Criteria should be the same as purchasing any property. Due diligence on location of the property, contingent on inspection before closing and meeting rehab schedule, and heavy due diligence on the property management arm. I also visit the operation before putting anything under contract to look at properties newly renovated to see what a finished renovation looks like.

We backed out of a contracted TK purchase twice. First time was because property rehab was consistently delayed beyond original promised date, then when finally finished, in our inspection there was a structural issue noted that the TK company would not fix. We had 2 under contract with them and backed out of both - 2nd one was even further behind stated schedule. Second time (different provider, different market) it was again because provider was very far behind rehab schedule without notifying us what was happening, and in fact lied to us about progress. Backed out of that too. We also passed on another provider in another market because their prices were too high - way over market value for location.

With all that said, we have successfully purchased a few TK from a few providers in a few markets and been happy.

@Mark DiRocco When we started buying investment properties, we first picked a location we wouldn't mind visiting, that we thought we might want to spend time in eventually in retirement, and a place that was within a 1-day drive so we could get there easily and cheaply if needed. And also a market much cheaper than the expensive market where we lived, New York City. Then we visited the location multiple times (mini vacations - ie: long weekends), and used friends of friends to get an introduction to a realtor, who helped with a lot of the boots on the ground stuff. We have since invested in 3 other markets and picked each of them for various different reasons, but always visited the locations and made local contacts ourselves before rushing into something.

Keep in mind that it will be hard to cash flow if you are spending upwards of $250k, so with those kinds of funds you might want to focus on getting multiple properties or a multi-family.

@Joyce Ong Sounds like you are acting as the property manager for the property - most property managers will charge a percentage of the revenue, like 15%-25%, not a percentage of the profit. When insurance and taxes are due once per year and repairs can happen whenever (ie: expenses are not consistent each month), splitting 'profit' 50/50 is probably complicated to figure out, unless you are paying 50% of all expenses or reconciling who owes who at the end of the year. You also want to be protected in case your relationship hits a bump in the road.

I'd send an invoice once per month for a percentage of gross revenue. Sounds like you need an accountant to weigh in on your business arrangement and his taxes...

Do you mean you are trying to decide what to do with a particular single family home - make it short term rental or long term rental? Not sure what you mean by 'shakes out even', but if your net earnings will be about the same for both, then I'd definitely go with long term rental - way more hands off and less work. People go short term rental because the income has potential to be much higher - but it is a lot more work, both in the setup and ongoing management.

We've done short term rental investments in a vacation destination, and long term rentals in US cities where people commonly rent.

@Dan Tyson

@Account Closed I would be up front and tell them which property you are looking at and that you are trying to decide if you will keep them as PM or not.

Depends of course on your market, the time of year, and how booked you are for the next few months. I have 4 bookings with 301 views in last 30 days, for 1.3%. Don't think I've ever seen it over 3%.