All Forum Posts by: Craig Jones

I'm in contract on kind of a unique property. It's essentially a 4 bed / 2.5 ba SFR semi-attached to a five room motel. It's in a popular year-round tourist destination with a shortage of hotels and heavy restrictions on STRs. Property is exempt from STR permitting because the jurisdiction considers it to be a commercial lodging establishment.

We've been pursuing an SBA 504 loan for it, which was going well until we discovered that the sellers have operated it only part-time the last 12 years -- intentionally blocking 60% of available room-nights because they just weren't up for running it full time in their retirement.  They've also used no rev management whatsoever, just a fixed nightly rate.  So their historical financials suck.  

Because of that, we are getting a lot of "no's" from SBA partner banks.  Even with a solid biz plan showing we can 3X their revenue just by switching to full-time operation and using modern rev management.  Backed up by market RevPAR data.

Looking for lenders who might be more open to looking at an easy turnaround.  As an SBA 504 partner lender or not.

I think it's a hard question for others to answer for you, because it's entirely dependent on the nature of the project and your own interests and aptitude.

I was my own GC (while working a full-time W2 job) on a 6-month remodel of a big house where we reconfigured the interior space, including relocating a staircase, converting part of the garage into an additional bed + bath and replacing the kitchen.  I really enjoyed the process and solving all the problems that came up along the way.  There was a lot of skillset overlap with my W2 job though.  It turns out that coordinating engineers, marketing and sales to launch a software product is not crazy different from coordinating vendors and subs to "launch" a construction project.

I will disagree with everyone who says that hiring subs yourself puts you at a pricing disadvantage vs. prices GCs get.  You can get great prices from young and scrappy subs if you're willing to put in the legwork to find them and get multiple bids.  Most GCs I know have only one or two go-to subs per trade whose pricing may or may not be favorable.  

I'll also mention that both Incline Village (NV) and the Placer County (CA) part of Tahoe have basically the same thing going on with permissive STR permitting. Both are unincorporated places without local control and STR rules set by the county. And both have county governments that are elected mostly by population centers that are pretty far away — Reno for Washoe County and Sacramento suburbs for Placer County. I suspect that preserving the occupancy tax cash cow weighs on county officials more than the concerns of their constituents up at the lake.

Don't get me wrong, I'm not complaining. The year round demand with two peaks (ski season and lake / beach season) combined with a lower regulation threat make them pretty good places to own an STR.

The west side of the lake from Homewood all the way up to the Nevada state line is all unincorporated Placer County on the California side. They have a cap of 3900 STR permits with about 500 still available. All the housing that's around the Palisades and Northstar ski resorts is also unincorporated Placer County.

There have to be thousands of experienced operators scouring the planet for opportunities to buy low and create an outsized cash flow the STR biz. In any location where that's possible, it's quickly reflected in the market price of properties there.

if I had a secret that allowed my STRs to get cash flows that others couldn’t replicate with a similar nearby property, I’d definitely be keeping that to myself 😀

I have a strict cancellation policy and put this language in my house rules:

"Please read and understand AirBnB's cancellation and extenuating circumstances policies. We recommend purchasing travel insurance to protect your funds from the uncertainties of mountain travel, including the possibility of snow storms, road closures, and poor air quality due to wildfires. These are foreseeable events for our area, not extenuating circumstances."

I keep an eye on the forecast and warn guests about inbound weather, even offering that they can come a day early if the house is available.  But I do not refund, even if the interstate is shut down for snow.  We are open for business unless there is some kind of evacuation order.

This past winter there was a big snow event that the media turned into an even bigger, scarier thing.  Which caused lots of guests to pursue extenuating circumstances claims, and a bunch of local hosts had cancellations forced on them by AirBnB.  I pointed out my house rules to support and wasn't subjected to that.  I think this event actually caused AirBnB to update their extenuating circumstances policy a month or two later to explicitly state that road closures elsewhere are not an extenuating circumstance.

Also, if a guest tries to cancel and then no-shows, I contact AirBnB support after the guest hasn't checked in for 24 hours.  Support will reach out to the guest and then process it as a guest cancellation if they confirm they aren't coming.  Aside from opening the remaining days on your calendar, it also prevents the guest from leaving a negative review for sticking to your cancellation policy.

 Well, hmm.  Owner-occupied bed & breakfasts are everywhere though.  None of them are financed?

Looking at a unique property which is a 4 bed / 2.5 ba main house, with what is essentially a 5 room motel semi-connected to the main house via a breezeway.  Each room has its own exterior entrance from the breezeway.

The current owners have operated it as a bed & breakfast the last 12 years, with breakfast served in the main house which is also their primary residence.

By my analysis, revenue from the 5 rooms could cover the debt service and operations of the whole property.  It’s a heavy tourism area with year round demand and tight restrictions on STRs that keep room rates high.  As a pure investment it looks okay, but with a primary residence for my family thrown in at zero additional cost, it looks really really great.  We’re interested in the possibility of continuing it as a B&B, but I think it would work fine without breakfast too.

Sellers are open to owner financing up to 20%.  The question is, who / how to finance the rest?  Residential lenders won’t consider the revenue and object to  the business use an/or partial owner financing.  Commercial lenders object to it being owner occupied.

I don't rely on it.  Many of the "comps" in my market are not really comps.  Lots of properties that are 2nd homes, self-managed by owners who are just hoping to make a few extra bucks, not running a serious business.  Substantial owner use during peak periods.  Also, dozens of properties that have been vacation rentals for 40+ years and not listed on AirBnB or VRBO.  Still bookable only via local property managers.

I ran into this myself just recently.  I confirmed with customer support that they no longer offer the annual subscription for new properties.  Can't think of any way to get around it unfortunately.