All Forum Posts by: Jerry W.

I recently purchased a commercial property with an office in the front and a large commercial shop in the back.  I converted the office into a 3 bedroom house.  The kitchen is very strange, but it works.  This property is only 2 houses from the river.  The problem is the shop.  It has about a 1800 square foot shop in the back with 12 foot tall garage doors.  It is heated.

With the current setup you have to go through the shop to get to a fenced in patio area.  There is also only one bathroom for the front and back, and it would be extremely costly to add a second bathroom.  I think that I can rent out the shop for about $700 per month possibly more.  If I rent the shop I cannot let the guests from the vacation rental go through the shop for protection of the shop tenant.  I cannot let the shop have access to the only bathroom as it would negatively impact the guests from having a mechanic knocking on the door to use the bathroom while they are in the shower.

I also am having a lot of problems getting insurance on both sides at once due to access to utility shut offs not being available to both the front and back renters.

I see 3 options.  Build a wall in the shop that lets the guests go into the shop but only to the access to the outside patio.

Or I could simply let the shop tenant access the bathrooms and set up rules and let the guests walk through the shop.

Last I could just not rent the shop and let guests park cars or campers or even RVs in it or possibly put up pool tales, ping pong tables, roller skate, etc. in it.

One other idea is maybe just do storage of boats and RVs in the shop with no other uses.

What ideas or suggestions do you have?

Here is the link to the listing https://www.airbnb.com/rooms/6...at link works.

I hope that link works.

I have seen 18% interest before.  So while I don't like rising interest rates when I am borrowing, they are not enough to scare me at the moment.  To be honest the strong increase in housing prices has been the hardest thing to overcome.  I expect interest rates to climb to about 8% before the feds back off unless inflation drops off.  I have normally calculated my purchases with also running them at a 2% increase in interest rates.  I use 5 year ARMs and 15 or 20 year loans, so I have to be ready for a possible 2% increase.  My past loans had a lock of not letting them increase by more than 2%.  I noticed recently however that my last few loans have the rate increase capped at % not 2 %, so I am recalculating.  While I want to keep buying it has been getting extremely difficult to buy even break even deals.  I have had to modify what I am willing to take in risks.  I buy properties with more problems than I used to, and I am taking slimmer margins, and I am doing some houses into STRs.

I keep tea, coffee and creamer in every STR. One does not have water or ice in the door, so I used to keep one bottled water in the fridge for every listed guest. I keep catsup, mustard, salad dressing, and syrup in the fridge. When I started I also used to keep one granola bar on the kitchen table for every listed guest also. I quit doing that 2 years ago and have never noticed the difference.

@Henry Clark, thanks for the information. A couple of things I will point out. First regardless of where you incorporate the laws of the state the property is located in will control the lawsuit. Still unless all of the property is located in the state of the lawsuit it will really help. I really like the LLC laws in Wyoming, but I biased. Wyoming actually passed the first LLC law. LLCs actually can use any tax structure that a corporation can. As to the language about not having to pay out any distributions add language that prohibits any change of ownership or membership of any other members without the unanimous approval of all members.

Another strategy is to have WY be the main LLC and have it be the owner of all of the other LLCs in the different states.

@Adam H., for what its worth, my first STR was a duplex. It has done extremely well. I think quality, location, and price are the primary factors. The fancy side of my duplex is probably in the top 10 in my area as far as how often it is rented and 5 star reviews. I have also changed over a former office with a very large heated shop in back and just started a few days ago with advertising it on AIR BnB. It rented this last weekend for the first time and the folks who stayed there just raved about it.

@Alex Moazeni, I am going to respectfully disagree with @Nathan Gesner even though I only live one town away from him. Now Nathan is a true real estate professional having both professionally managed vacation rentals, currently managing hundreds of long term rentals, and investing heavily himself as well as being a licensed real estate broker. With all of that said first you have to investigate the potential renter like any other renter. How much do they make, do they have other STRs that are doing well? Do they have landlord references personally and from other STR landlords? Can you go to AIR BnB and see some of their current STRs? If all of those things check out why not rent for $200 per month more and have a 2 year lease? If the folks are very reliable I see very little downside. The STRs I see are usually in much nicer shape and in better repair than regular rentals. It is financially in their best interests to keep the property nice. If they are willing to do repairs like replace faucets, rod out the sewer line, touch up the paint, etc. that is a huge bonus. They will probably be using a corporate shell so have them personally guarantee the lease payment and damages. I find it hard to believe that the property will end up trashed like I have had happen way too many times with a long term renter. They are going to have a lot more insurance themselves than regular renters.

I don't see a downside if you vet them well. If you just see $200 more per month in rent and don't investigate more you won't do well as a regular landlord either. I would personally do it if they checked out. If they do amazing at it you can not renew in 2 years and turn it into a STR yourself. I have a fair number of long term rentals and just opened my 4th STR this month. I have been doing STRs about 5 years and LTRs for over 30 years. So I do have some experience.

I am only 80 miles from @Nathan Gesner, but my bookings are slightly softer than last year. Last year was amazing though. I have raised prices about $15 to $20 per night from last year and added a cleaning fee for the first time. Most of my current bookings are private parties who come to fish the local river. I have added another STR that will begin taking bookings in early June. I plan to add a fourth within the month. Bookings are very slow in the new units, but I also notice we have added at least 30% more STRs than last year, and I believe we will nearly double last years number of STRs by the end of summer. I am in a little town in the middle of Wyoming. There about 12 of us doing STRs 5 or 6 years ago. We were in the 40s last fall, we are now over 60 and I suspect will top 80 or possibly 100 by this fall. Most of our new ones are folks who moved here in the last year and out of staters buying 3 or 4 houses to make into STRs. Housing prices have jumped at least 30% since 2020, maybe more.

@Jake Calobeer, answering your question accurately would be more of a book than a post. Wyoming has a huge boom bust cycle I have seen play out many times in the past.  The Rock Springs Green River area has had the normal cycles following the price of oil, but add the coal mines, the power plants, the trona mines and the cycles get really weird and hard to predict.  Cheyenne is getting to be the tip of the front range of Colorado with the added benefit of government money from the Capital helping it through lean times and no state income tax.  Laramie is self explanatory as the only university in WY and the obvious fish bowl of renting to college students and the benefit of cultural opportunities found no where else in the state.  Rawlins?  The city of endless wind and cold, Casper the oil field support center of the state that always booms busts, and booms again.  

Overall Wyoming is in the middle of a massive influx of buyers and the problem is that it has nothing to do with oil, gas, or coal.  It defies all of our old basis for boom bust.  That means predicting how or when or if the boom will die off is almost impossible to say right now.  If I were to take a bunch of money and do a long term investment for the future I would probably hit the Gillette area.  Gillette was hammered by the drop in coal prices.  It had the most wealth generated of any County for many decades.  When oil died and climate change took ahold coal died and Gillette got cancer, the really bad kind.  Hundreds and hundreds of houses were up for foreclosure and you buy them for take over payments.  Massive multifamily buildings were everywhere.  Landlords were happy to get every other months rent.  Now it has some pretty areas, nice and well made homes and of course cheap poorly built house that are falling apart.  None of the areas in WY are booming because of great opportunity, it is simply the population shift from places with politics that folks hated, over pricing, bad crime, and all the other things people hated about the places where the weather was beautiful, but the politics were not.

Since the boom in Wyoming is not tied to the ability to get high paying jobs, I see no reason why it would end.  Gillette has not been bought up nearly as much as most of the other WY towns simply because it had so many unused houses to not be bought out in 6 months.  Sheridan and Buffalo real estate has shot up massively, Jackson went crazy many years ago with Billionaires pushing out the millionaires.  

I would pick out where you want to live in WY and start there, or pick where you want to invest in and move there.  You missed the golden time of the last year, but the party isn't over yet.  Buy warm clothes and coats and see how many houses you can buy 6 months after we get a cold snap where it hits -20 to minus 30 degrees and doesn't get above zero degrees for 3 or 4 weeks .  Lots of disgruntled folks from CA or TX will be moving back and selling cheap.

Just my thoughts, they are worth what you paid for them.  Good luck and feel free to buy me a cup of coffee and some pie if you pass through my area.

@Nicholas Aiolaas, I know that this is tax crunch time so reply if you have time, but don't worry if you don't.  In the early 1990s I bought into a sub S corporation doing real estate investing.  Over the years I have bought out all of the other investors, and I am the sole stockholder.  I understand that that if I die my children inherit my shares of stock, but there will not be a free stepped up basis on any properties the corporation sells because it is a sub S corporation.  

Is there anyway to convert this Sub S Corporation to some kind of LL or sole proprietor?  There are nearly 30 properties in this Sub S Corp., and they have appreciated a lot in value.  Is there any way to convert this to some type of entity that will give the property a free stepped up basis when I die?  Or am I stuck?

@Eddie L., I agree on the price of forming an LLC in WY. It literally takes 15 minutes on the secretary of state website and $103. You can hire a firm to file your LLC and agree to be your registered agent for only a couple of hundred more. The annual fee is only $50 for many, if you own a few million in assets it might $2 or $300. You need to check out your prices you are being charged. Good catch on that @Nicholas Aiola.