All Forum Posts by: Chase Hoover

It's all negotiable.  Run your proforma with the management fee and see what number works best to give you both the return you're looking for.  You can also try to work with him to figure out how much time/effort he's putting in, figure out a good hourly rate for his time, compare this to your gross income, and see what % that spits out.  If you guys are using automation tools (as you should), the time his time investment shouldn't be too crazy for 5 units.  For properties I've been 50/50 partner in, I managed for as low as 10% however this was too much of a stretch.  25% seems high to me.  

We have 2 boutique motels undergoing renovation in the Shenandoah VA area, a 22-room and a 7-room, both launching in the next 4-6 weeks. Spending a lot of $ remodeling them to modern standards with attractive finishes and amenities. We'll be priced well below cabin rental rates in the area targeting the younger couples looking to spend a few days hiking, hitting the breweries, etc without having to spend $1000+. I think it's a great idea, but ask me again next year once I have data to share!

@Chantal Thomas The Charlottesville/Albemarle County area is very STR restrictive. Essentially you have to live on-site in order to operate an STR.

Nelson County to the south is friendly and very high demand (known for breweries, wineries, distilleries, cideries). Across the mountain, Massanutten is another great STR market (ski resort).

Here's a good breakdown of jurisdictional rules & regulations in the Shenandoah area created by our management partner:  https://www.carriagehousestr.c...

Many tiny house builders offer in-house financing. Be aware that most are several months or even years out from delivery as they're in high demand. You can sometimes find them used on FB marketplace, craigslist, etc. The biggest thing is where to park it - many jurisdictions restrict or prevent them altogether, but a few have emerged as "friendly" tiny house areas - do a google search. You can also find rv parks that have tiny houses or tiny house communities where you can park it and pay a monthly lot fee, just be sure to ask if you're allowed to do STR. You'll want to connect to utilities, otherwise you're running a generator 24/7 and dumping your black water tank every few days.

If it's your first deal and you want peace of mind, steer clear of any HOAs, residential neighborhoods, or residential areas in general. Find areas that are heavily STR and have been this way for decades. We have many areas like this in Shenandoah Valley, Virginia!

@Logan Bosiger Let's connect - I'm just north of you in Waynesboro and have a couple of boutique motel projects we're working on (a 22-room on Afton Mountain and a 7-room on 151)

@Henry Zhu My team would be happy to help! We're a small STR-focused real estate agency in the Shenandoah Valley.

Hey if he's not going to listen to advice regardless, just let him do it and let us know if it works!

Find an investment class, do it over and over again and get really good at it. Don't chase shiny balls. There are a million ways to get rich with real estate, but if you try to do them all, you'll never get there. I'd recommend researching other asset classes besides SFH rentals. There's a reason most people 1031 their initial SFH investments into MFH. Good luck!

Zoning varies widely by jurisdiction.  I'd recommend reviewing the code of ordinances in your city/county and giving the zoning/planning office a call to discuss your plans and get more information.  

However, commercial/business zoning is typically much preferrable than residential as it tends to provide more flexibility.  Since it's currently operating as a commercial hospitality property, the current zoning should be perfectly fine for what you plan on doing, food or no food.  

Some jurisdictions classify differently for "bed and breakfast" versus "overnight lodging" in that the former serves food and has on-site staff (again, this varies widely by jurisdiction).  Review the code and give the office a call and they'll be able to give you the best answer.

In terms of valuation, commercial hospitality properties are more heavily valued on NOI cap rate than sales comps. When analyzing a P&L, there will likely be owners' discretionary expenses, depreciation, etc you'll need to back out in order to try and determine the true NOI. Try to get at least 3 years P&Ls and tax returns (so you can compare pre-covid #s).

In addition to the property's financial performance, an appraiser will take into consideration the sales figures of other B&Bs in your vicinity to determine sales price per sf, price per room, etc.  Do not compare to single family homes.

We buy properties like this all the time - scoop them up for cheap because they're under-performing, remodel, boost NOI by managing it right = significant increase to the property's value. I also buy and sell B&Bs for clients. We have some for sale in VA right now if anyone's looking!