All Forum Posts by: Axel Meierhoefer

@Steve Vanderlay

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BiggerPocketsRef: Link to threadOriginal Post: @Steve Vanderlay I can tell you that it is possible to successfully complete TK investments for foreigners. I have helped a few people so far (Uk and Canada), non-citizens and have learned that the issue is not really the TK provider - at least not when it comes to the investment.

The issues foreigners are facing are mainly in the area of financing (to take full advantage of the leverage and currently low-interest rates), corporate structure, as well as some TK provider behavior.

On the financing and corporate structure, I was able to develop relationships I make available to my mentoring clients so we can overcome these hurdles, even though it takes some time and effort.

On the TK behavior, it is harder because we all don't have much influence. I find it frustrating that TKs' now openly state that they rather get the sales done quickly by selling preferably to cash buyers (regardless of where they came from) than allowing for financed deals that admittedly take a little longer. I believe it is a short-sighted approach because times might change and demand as well as free cash might dry up and then all the long-term investors who understand the benefits of leverage will have moved to those TK providers who understand it systemically.

It also begs the question if TK providers really have the best interest of the investor in mind as pushing for cash purchases removes one important accelerator of ROI.

@Garrett Gruss Yes, a lot of people think about vacation rental, which is one way, but there are students, as others here have mentioned, then there is corporate travel as more and more business travelers rather stay in STR than a hotel. Then there are traveling nurses and construction workers representing special skills companies that often stay for weeks or a few months and then move on to the next site. There are people renting STR because a family member is in the hospital for weeks of treatment and they like to be close. Then there are events, like weddings, where groups of people stay often 3-5 days to prepare, attend and then recover before going home. I am sure there are more. This is all just to show that there are many ways to use STR.

Yes, we do. There are at least 9 different ways STR can be rented, probably more, so vacation location is only one of many. Naturally, the more ways to rent short-term you can find the better.

I buy turnkey properties or directly form flippers and then have them professionally managed by super hosts, aiming to have as many of the 9 options in place as possible.

The biggest issue I see when people speak about real estate is the fact that most people look at price and appreciation, not at performance and all the variables that drive or hamper performance.

@Brendan M Brown I hear that same story often when people approach me for mentoring.

As Danielle said: It's a journey. I call it the "Investor Journey"

Here is the sequence I suggest:

1. Identify what your mindset is (victim or creator)? I wrote a mindset manual to find out and then work on it

2. Get clarity of your true financial situation and any hidden earnings potential

3. Set your goals (I use the GROWER model in our mentoring sessions)

4. Familiarize yourself with the due diligence criteria and true performance variable (we do this with as litle as $50 analyzing real properties and execute real purchases)

5. Develop a path to the first investment in a full-size, well-performing rental property to get the first cash flow "workhorse" in place. 

Recheck #4 every so often and keep repeating #5 until you reach your Time Freedom Point # where your passive income meets or exceeds your goal set in #3. 

I think the main issue for your partner and possibly yourself is the perspective. If you were to look at it purely as a business, you would develop a strategy that allows the business to generate cash flow, have equity gains through appreciation and keep cost and liabilities low, unless that are covered by other sources, i.e. tenants. 

In my business, I buy my properties from turnkey providers. Maybe people also say I pay too much. What I have found in the last few years is this:

They find the property, renovate it according to SOW, put a price on it at which the property appraises, I get it financed 20/80 and they then manage it for me in perpetuity.

Since I started that strategy I never missed a rent payment, (except during turnover) and got the full appreciation of each property. I could even HELOC that part if I wanted.

@Takahito Torimoto I always recommend keeping your goals in mind and evaluating influencing circumstances. It might seem unlikely, but jurisdiction can change the rules for STR and you can't easily move your properties. If they don't work as long-term rentals, I would be careful about STR.

Also, keep in mind that STR is dependant on disposable income. I personally believe we have been stretching the rubber band a lot in the last few years. It would not surprise me if the continuation of inflation and a substantial correction in the equity markets would make potential renters of your STR's more cautious.

For my own portfolio, I have a long-term perspective focused on passive income with very calculated risks. For me, an STR needs to retain the possibility to revert to traditional long term and still perform. Not sure if your cabins with substantial price tags can do that. Just saying .....

@Takahito Torimoto I believe you should look at the options from another angle. I like your idea of an STR deal to add to your long-term rental already in your portfolio.

In my, admittedly limited experience, STR is not necessarily better when you get a large or expensive property.

So look at the potential STR from a valuation perspective. I would assume you can find a nice one $200K - $300K. That would mean you need max. $60K for downpayment and maybe another $5K for closing, etc. Even if you add $25K to furnish it, you are still not close to your $144K.

If you plan to do your STR in the general Atlanta area but not necessarily in the most expensive parts of the metro, you would not need all of your possible cash-out and can limit it to a number that balances your cash flow at break even. That's would I focus on.

Your premise is right but I don't think you need to go that far. If you apply my suggestion your risk on both properties will be lower. They would be basically self-sustaining.

@Lydia Bar I agree with others here that turnkey and syndication are pretty different and hard to compare. Here is what I see:

Syndication:

You join an organization that has a general manager who helps investors buy a part of a development for a unit price (often $50K or $100K) and the aim is to improve the development and select a location where the appreciation of the development combined with the increased income post-renovation create a valuable deal for larger scale and institutional investors. If the development can be sold in 3-5 years for a great price, the original investors participate in the increase and get that profit proportionate to the units purchased at the start of the syndication. In the meantime, there is potential for cash flow that investors receive either monthly or annually. It's important to know that most syndications are all cash and not financeable and that you often need to be accredited. The deal is very passive because there is management in place that typically owns a good part of the development and you only see reports and bank transfers. Very importantly you have basically no influence on what's happening with and to the development as the group of investors is passive by design.

Turnkey

As with anything you need to deal with the right partners. That applies to Syndication as well. The good turnkey providers find suitable properties, renovate them well and then sell them to you and manage them for you after the sale. That means they have an interest in the quality of the reno. It's true that there are many turnkeys that don't do that but you should not buy from them -same like you do not buy a bad apple, a ****** car, or anything that does not meet your quality standards. The benefit of turnkey is that you can finance it 20% down, 80% mortgage, so with the same money (i.e. $100K as for syndication), you can buy 3-4 turnkey properties. Yes, you have a little more communication with the provider but you are also the sole owner. Everybody is working directly for you and any changes, improvements, tenant approvals, etc. are up to you if you like that to be the case - or you can delegate to your turnkey provider. One can argue that well-performing turnkey properties don't have as much appreciation potential as syndication deals but that's mostly dependent on the location. If they happen to be in the same general location, appreciation will be very similar. I would say that's true for Cleveland.

Overall you decide if you want to put mostly cash or use leverage and financing (which I recommend) and have more or less influence.

I have often found the real hurdle is accreditation. As you are just starting you might struggle to qualify as an accredited investor - which then the decision is made for you. There is syndication that allows non-accredited investors but I would suggest staying away as the risk is often much higher and problems can arise, especially when markets are not appreciating as much as the syndicate had originally promised.

@Jay Gil I agree with Jimmy that some of your numbers probably need adjusting. The insurance is clearly more expensive and I am surprised that you don't show the cost of the mortgage. If I add that in I don't think there will be any cash flow. I recommend using the Bigger Pockets calculator for rental properties you can find under Tools on the site here.

@Tanner Crawley I agree. Everybody should try to stay away from c markets. I always invest in B markets and B class properties. As you could see in my post for Jay I put high importance to the quality of the TK company. That way no self-management is ended and huge repairs like you describe never occurred in my portfolio, probably because the quality of the renovations was high.

That's something anybody and Jay should be concerned about as I am sure he will not fly in from CA for any repairs :-)