All Forum Posts by: Daniel Kauffman

Another thing to consider is that the other LLC with your wife appears to be a property management company. I believe in North Carolina, that if a property manager is going to lease, rent, or list, or offers to perform any of those acts, he or she will need a real estate broker's license. Basically, there may be limitations or restrictions that result when you separate property ownership from property management.

As Gareth briefly discussed, passive and active income may be treated differently for tax purposes. 

I highly recommend putting your short-term rental in an LLC or similar. Some banks are more friendly toward short-term rentals. I have heard that Quicken Loans will let you use Airbnb or other short-term rental income to support a loan. However, this might not work if you don't yet have short-term rental income. If you put the property in an LLC sometimes banks prefer a 25% down payment. Why are you setting up the LLC's? Are you setting them up for tax purposes, to limit liabilities, or something else? If you have 2 LLC entities, likely your wife's earnings will be viewed as active, while your earnings will be passive.

$10,000 might be a low estimate for interior design and furnishing all 3 units. From my experience, I would estimate closer to $30,000 or ($10,000 per unit). Guests value high quality furnishings. Do you have any experience with short-term (Airbnb) property management? Do you have a North Carolina real estate broker's license? The 3 highest revenue generating comparable properties (2, 3 and 5) are only available about 130 days out of the year. 

Those sound like some serious and counterproductive restrictions. Sometimes legislative bodies will write an initial draft of a bill with super harsh restrictions and then lessen the restrictions in response to public backlash and in an effort to pass a bill. In negotiation this tactic can be referred to anchoring or asking for the moon and stars. Most cities would likely be best off with limited restrictions (limiting enforcement time & costs) other than enforcing any already existing health and safety laws. Then imposing a nominal annual registration fee and an additional tax on short-term rental income. Many cities already have taxes on hotel income (9.5% in Baltimore), so the short-term income tax seems fair even though many hotels get other benefits and tax breaks from many cities. One final thing to beware of is that once a law is in place, it's much easier for them to make additional restrictive amendments to that law. So, they might pass a law that appears fine, but then add in additional restrictions in the future. Good luck with your battle with local government. A lot of cities are going through a similar process right now. 

I'm not a lawyer and this isn't legal advice. You might be able to set up a separate legal entity (single member llc), so that you could legally lease the property on a 12 month basis to that entity at $1,050 per month, and then that entity could sublease on a short-term basis on airbnb. Given your vacation location, your returns will likely be much higher on Airbnb than with a standard 12 month lease, but you will either have to manage the property yourself or pay a management company. Also you will have higher initial costs (furnishings), and higher monthly costs (utilities, cleaning fees).

Why did you leave Evolve? Do you have an Airbnb listing? 

It looks like you were successful in Ocean City, MD. I understand that diversification can be beneficial. Is there anything else that's driving you away from Ocean City? Wouldn't it be easiest to use your experience in Ocean City to replicate the process and improve on your initial results? If you have multiple properties in the same area there would likely be some benefits of scale. Also, you are likely to have learned a lot during your initial investment. 

@Lawrence Johnson - Can you get a loan in the states for a property in Puerto Rico (A U.S. territory)? Are the re-hab costs higher in PR than other places? Are most investors concentrated on San Juan? 

Good question @Braner Dantas. In my opinion Airdna has the best tools and data that I have found for accessing Airbnb performance. Airdna's nightly rates generally seem fairly accurate but their occupancy estimates tends to be incorrect. For example: the actual nightly rate in our Baltimore property has been $298 vs Airdna has our property listed at $282 in their MarketMinder and their Rentalizer estimates $224. Their Rentalizer estimates our occupancy rate at 42%, however, we have maintained an occupancy of 70-90%. Their occupancy is likely off because people often rent through multiple platforms. If you have 100% occupancy but list your home on 2 platforms (50% homeaway, and 50% airbnb), then it might just show you at 50% Airbnb occupancy on Airdna. So, if you really want to accurately estimate occupancy, I recommend talking with local property managers or superhosts. Another great way to estimate occupancy is to look at the calendars of your competitors. You can see which days are available vs. booked in the next 30 days and estimate occupancy based on the number of days that are already booked.