All Forum Posts by: Jerry W.

@Keith Gilad I would definitely listen to @Dave Foster about doing 1031 Transfers.  He helped me do two of them last year.  I am surprised about the information of @Bonnie Griffin Kaake.  I did a 1031 transfer from selliong a rental property and bought 3 commercial properties which I turned one into a vacation rental.  I can see my accountants headache coming from  here

@Nathan Florence, congratulations on owning a VR in Hawaii.  It is good that you bought when you did.  It is a personal preference, but I always go with buying the home I live in over renting if the cost is anywhere near the same as rent, and it usually is.  There are several reasons for that.  First I really like your idea of buying a fixer upper.  You can buy cheaper, fix it up as you can, raise it's value, have it appreciate over time, get a fixed 30 year mortgage, and lock in your rental expense so it doesn't go up over the next 30 years.

Even if you had to pay 8% interest on a house you bought for $500K and paid $100K down payment on your monthly payment would be $2,661 per month.  You could pay taxes and insurance out of the $840 per month left over from what you paid for rent.  Yes there is the cost of fixing it up, but you could rent an extra room or two out as a house hack and maybe bring in an extra $2k to $4K per month.

Just be careful to run the numbers again if you decide to go with a VR again.  If housing costs have doubled your income will be lower as your mortgage payment will double as well if you buy something similar.

In my experience things can go wrong quickly.  I once had a guest come and stay from a camping trip in Yellowstone, and they sent me very nice messages about how nice having hot water and lots of towels and offered to pay a little extra for doing extra loads of laundry.  On the next stay the new guest told me they saw a mouse in the kitchen.  We trapped and caught 2 mice over the next 2 days.  They could have freaked out and thrown a fit over seeing the mouse.  I have no doubt that the mouse got into the camping gear of the prior guests and made an escape into my VR.  (It has happened to me before after I came home from living in a tent for a week)  I still gave a 5 star review to the Yellowstone campers and my second guest also gave me a 5 star review.  They could have cost me thousands in throwing a Karen fit in my rating.  There is no way that we would have known about the mice on the 5 hour turnover between guests.  If it is minor give them a break.  The second guest, he got a gift certificate for a free meal at our local restaurant.  It costs you nothing to be kind. 

@Micah Jackson, this is all about your personal risk tolerance.  @Steve Vaughan really dislikes having loans.  Now @Nathan Gesner has used leverage to buy multiple properties that have massively increased his net worth.

My thoughts are definitely pay off the smaller loan and get a line of credit.  I use one and it has helped me in a big way expand my holdings.  I buy cash using the line of credit, fix it up to rent it, then refinance out.  You can also simply use the money to pay 20% down on several properties.  I don't like doing that with a line of credit as they are created to be paid down every so often and do not have regular payments.  The advantage of a line of credit over a new mortgage on your old properties is that you pay interest on it until you use it.

In my opinion there are opportunities coming to those ready to take advantage of them due to the recent drop in house sales.  

Whatever you decide good luck.

@Anthony Venturini, even if you love cars and worked on your own every weekend, it is different than opening a mechanic's shop.  I would suggest actually managing at least a few vacation rentals before trying to own a business that runs them for others.  I made a lot of mistakes running VRs when I started.  I am probably still making some, but those mistakes moved me along in education.  Making mistakes with other peoples houses isn't fair to them.  Running long term rentals is a business.  Running vacation rentals is a hospitality business.  There is a lot of difference.  It is your money and your life, but maybe work for a VR company for awhile before taking the leap of buying.  Whatever you decide good luck.  If you don't chase your dream you will never catch it.  Merry Christmas  by the way.

@Da Shiek Woodard, you have a pretty varied group of advice. My thoughts are to have a Wyoming LLC then an LLC in each state that you do business in. Have your WY LLC own the other LLCs. I would at the very least do an LLC in the state you own the property in. First it is my understanding that you will need to pay taxes on the income in the state that earned the rent money. Be sure to talk to a tax attorney on any plans to move the money into WY to make sure it is legal. My personal experience makes me follow the advice of @George Skidis.  The protection in my state for an LLC that is run properly is extremely effective.  That might not be true in all states.  In WY the courts give a LOT of protection to LLCs.  I will agree however that anonymity is over rated unless you don't do any of the managing or fixing up yourself.  If you sign the purchase offer, sign the checks to buy it, sign the mortgage, pay the contractor, talk to the prospective tenants, sign the lease, etc. your name is going to be out there.  Run your companies properly.  All income goes into its own corporate account, only business expenses come out.  Hold at least annual meetings and keep minutes.  Get good insurance of at least $500K per property and an umbrella policy for a few million over it.  The cost of a WY LLC is only $50 bucks or so a year.  That in and of it'self is cheap insurance.  Follow the rules.

Good luck whatever you decide.  Merry Christmas.  Congratulations on buying your property and taking action.

@Ruth Blue, congratulations on your new VR.  I have not seen you posting much lately.  Hope the properties are doing well since Covid.  We all got beat up a little there for awhile.

@Clay Asplundh, welcome to BP bud.  I have a few vacation rentals.  I try to pick a theme and put a few things following it in every room.  One is called the Bunkhouse and has lots of horses and cowboy gear, a wagon wheel, etc.  Another one is the Cache, it has some mountain scenes and mountainmen stuff.  Another is called the Rendezvous and has lots of Indian art and pictures.  It has only cost me a few hundred dollars for each, but it makes them unique.

@Jonathan Dempsey, thanks for taking the time to outline this for us.

@Megan Stone and @Bruce Woodruff, as with most things there are good and bad to each decision.  LLCs do reduce your potential liability.  They have to be structured and run properly, but when they do they can really reduce your potential liability.  However normally you pay more to get your loans, you have annual fees and filings costs you don't have with personally owned assets and generally you get longer loans, 30 year ones with things like Fanny Mae or Freddie Mac.  Everything has plusses and minuses, that is the reason there are so many ways of doing investing.  If one way was perfect for everyone then everyone would do it the same way.

By the way Sub S is an election that can be done in Corporations or some LLCs. It is normally used for things like flipping where you have large amounts of income and you want to to avoid self employment taxes as much as possible.  I prefer not to do Sub S Corporations ( I have several that were started many years ago) due to not getting the free stepped up basis when I pass and they go to my children.