All Forum Posts by: Dan H.

Without the threat, I would have provided a discount.   Likely less than the 50% they seek.   I would likely still provide the guest the same discount, maybe 25%.  They did experience some inconvenience.

If they leave a bad review I would get it removed due to the extortion attempt.

Does you listing mention the smelly water.   If not it should.

I have 2 units that have airplane noise.   In spite of the listings citing air plane noise, a guest left a one star review largely due to airplane noise.   They also exaggerated what they paid for the unit.   In spite of these two items, VRBO would not remove the review.   It is little different that if a listing stated no parking but guest left one star review for no parking.   VRBO rep did not see it as same thing due to different level of airplane noise but I claim there is also different tolerance level to noise and if you are sensitive to noise, do not rent a unit that states it has airplane noise.

Good luck

I do not invest in properties where my return is small enough that an insurance cost increase can throw the deal south and in my market there is no large property tax increase.   This implies that I pass on purchases that may provide a decent return if everything goes well (everything going well does not happen often enough for me to be comfortable relying on it).  I expect return in excess of $1k/unit.   I am expecting some of my insurance may go up by 40% this year.   Fortunately I am also raising rents.  I expect the rent increases to cover the expense increases, but this year has.been a poor year for market rent increases in my market so my cash flow may be similar to last year (so lower in inflation adjusted dollars).

I was at the #2 visited national park (Zion) Thursday and Friday and it was extremely crowded. I somehow was unaware that this weekend was Memorial Day weekend.   In addition 3 of my 4 San Diego STRs are doing well (one very well as it is at virtual full book into August).   So the slow down is not everywhere

Also lots of signs of the cuts.   One entrance lane on way we took in.   The bathroom at the employee building was closed.   Probably most important of all was water refill stations were shutdown with signage indicated closed for winter; late May is not winter.   The water is key because 1) people are expecting them to be operable and may not bring enough water for their outing 2) it was hot.  I have a lot of hiking experience and virtually never run out of water but I did ~13 miles on Wednesday and ran out of water (2 quarts, official temps in mid 80s but sun temps in the 90s) with a mile left.   I do not need water for a mile (maybe excluding extreme temps) but the temps caused me to use a bit more water than planned.  Less experienced hikers could get into dangerous situations.

 I purchase in San Diego. You know which markets I do not purchase to hold? The markets with the highest rent to price ratio. You know why? These markets have an addition risk and worse projected outlook than the other markets. It is the reason that they have the highest rent to cost ratio.

Note highest rent to cost ratio does not imply best cash flow. There is likely to be more evictions, more delinquent payments, more damage on average at turn over, and most importantly worse market rent (and appreciation) growth.

Do you think it is different on a national scale?

There is poor correlation between initial cash flow and actual long term cash flow. The reason for this is that RE market prices are based on numerous criteria. Some of the big ones are expected appreciation, expected rent growth, and risks.

In most markets, the market with the highest rent to price ratio is the lowest class areas. This is because of the risks and effort to have rentals in that market.

Similarly, the markets with the best initial cash flow typically have poor historical appreciation and rent growth. The properties with poor initial cash flow often have good/great historical appreciation. Rent growth has a strong relationship to appreciation.

The higher rent growth market will always surpass a market with better initial cash flow but lower rent growth given enough time.

On a long term hold, the rent growth is much more important than the initial cash flow.

If I invested $100k in the year 2000 using the same leverage and no extraction of value in both San Diego and Cleveland, which investments do you think would have the better cash flow over the hold? Which do you think would have appreciated more? If the answer is not obvious, remember the relationship between appreciation and rent growth so the answer is the same for both questions. What if i invested $400k today in San Diego and Cleveland, which do you think will have experienced the better cash flow over the next 25 year (clue it is the market that will have appreciated more)?

If you do not desire to purchase local to you, investigate population growth, wage growth, economic diversity, supply/demand with emphasis on supply constraints) and prioritize this data over the rent to value ratio (ie the initial cash flow).

Good luck

I have done quite a few BRRRRs with in San Diego. I believe it is a much worse time to BRRRR than 3 years ago. This is especially true in San Diego but true in most markets

The reason is interest rates have more than double what since q1 2022 and in San Diego RE prices have continued to increase.  End result is that purchases financed at rent ready condition have large negative cash flow.  My last 2 purchases I chose not to refi in spite one being up ~$1m above my costs and the other being up ~$500k above my costs.   I could extract some of the trapped equity, but I would 1) be paying double the interest rate I have 2) would be very large negative.   

In San Diego, and I suspect most markets, the refi appraisals are conservative.  I believe they are extra conservative on a refi    after a value add (the appraiser typically knows what you paid for the property).  I underwrite the refi at 10% below market and hope it comes in only 5% below market.  This surprises many people who have not done many BRRRRs.  

I strongly believe BRRRRs in this market will typically require patience to achieve a good return. I also believe that the current market is more a flippers market than a brrrr market. Virtually all the high experienced local BRRRR investors seem to be taking a timeout from BRRRRs (at least until there is a gift in the market).

I highly discourage your first BRRRR to be remote (OOS).

Good luck

 
good luck

 This is why regular inspections are critical.  Our lease allows us to inspect the units quarterly. We usually only do it this often for new tenants but our goal is to inspect each unit annually.  At inspection tenant is charged for all tenant caused damage and most damage is fixed shortly after the inspection.  The last inspection we performed revealed a broken window (tenant damage) and a very broken sewer pipe (not tenant damage).  Tenant is being charged for the new window.  The sewer pipe was mostly not leaking even though it was completely broken on top.  Plumber will place entire new sewer next week.  Of course tenant is not being charged for the sewer.  

These inspections ideally reduce the amount of tenant damage that exists at move out which helps ensure that the security deposit is sufficient to cover all tenant caused damage.  

Best wishes

Do you know if the sealing of the vents was done by a licensed contractor? If yes, can you determine the contractor?  In my jurisdiction permits are either “owner builder” or contractor and contractor name and license is listed.

In my jurisdiction contractor work is often warranted for 10 years (plumbing and electrical is less).  If a licensed contractor closed the vents, in my jurisdiction this likely is covered for 10 years.

If it was “owner builder”, you are likely SOL.   

Good luck

Quote from @Nir H.:

Sustained Maintenance/cap ex is off by over a factor of 2.  Where is vacancy?   You have first hand experience on why vacancy needs to be accounted for.   Where is PM?  Even if self managing you should include pm if your time/effort has any value.

The COC is only as good as good as the inputs. Reality is this is negative cash flow even at a 5% vacancy rate which I suspect is too low for that market.

It is critical to do accurate and conservative underwriting.

As for two tenants in the first year…. How long was the initial lease?   Did tenant terminate lease early?   If so, did you charge the tenant for the vacancy period?

Neighborhoodscout shows good appreciation for the last year and ok appreciation for this century.   Are you sure your property has not appreciated? It looks like the market has decent appreciation outlook.  Because of this I would likely keep the property.

 https://api.locationinc.com/ga/stockbridge/real-estate

Good luck

Some thoughts:

- If it is hard to place tenants I. The fall and winter, do not have leases end when it would have you renting in these slow periods.   My rentals are in mild San Diego but I still have all leases end in spring or early summer.

- not allowing command strips fr the walls is excessive.  Do any of your tenants not hang stuff on the walls?  I think tenant can claim reasonable number of holes is reasonable and cannot be charged for.   Also what would you charge?   My crew can fill 100 nail holes in less than a couple of hours.

- she sounds like a PIA.   I deal with PIAs but charging above market rent to compensate for dealing with the PIA.  This has the advantage that you are compensated for dealing with the PIA or the tenant provides notice.   This alleviates any tenant claims that the tenant may claim if you were to terminate the lease.  This is the approach I would use.  A couple/few hundred above market rent could compensate for this level of PIA.

Good luck