All Forum Posts by: Jerry W.

Sorry, got so bust giving advice that I didn't answer and of your questions.  

1.)  I inve3st locally.  In the middle of Wyoming.

2.)  Despite only having modest growth for the last 30 years, the last year has seen massive growth in housing prices and rents.  I know of several buyers who have moved here and bought a house to live in, then promptly bought 4 or 5 more houses to use as vacation rentals.  When I started doing VRs about 5 years ago, I didn't even make enough to pay the utilities for the first 6 months.  After that I made just slightly less than a regular LTR makes.  The next year it went crazy.  I now gross 4 to 5 times more than my regular LTRs.  

2.a.)  Competition went from 12 VRs when I started to 49 when I looked earlier this week, and I am positive we will be over 60 before summer hits.  For a town of 2,700 people that is a big increase.

2.b.) Home values have soared. I believe that much of this is being driven by the big exit from East and West coast states. I am doing a large number of deeds to buyers from CA, WA, OR, even TX and oddly FL. I get calls from RI, VA, MA, etc. looking for rentals. I believe Covid, taxes, and politics are the primary factors with the folks I ask.

2.c.)  I have not seen much regulation yet, but our local county commissioners have started adding some rules for VRs.  Most deal with parking, sewer systems, and roads.  They are poorly done, but I can see them getting stronger.  Unfortunately folks who do a bad thing cause the need for restrictions.  I expect out town to eventually get into this as local motels are screaming about losing business to us.

3.) Predicting the future is much harder. We went from having 60 to 80 houses on the local MLS at most times to having 12, and those are horribly overpriced. All the reasonable priced houses have been bought. I foresee even more competition. I see a lot more VRs being added. This will mean more competition. Whether that will drive prices down is anyone's guess as Covid has shaken the tree so hard it is difficult to say what normal is anymore. There will be more regulations. People do not like change in their neighborhood. We will lose a fair number of people doing VRs as the novelty wears off and it gets harder. We will probably see a lot of luxury VRs springing up in odd places. People will get creative as well.

4.) Strategies are also tough.  I think a great strategy is to buy a really nice house and VR it.  I have not done that yet.  My strategy has always been buy a distressed house and fix it up.  While I don' think the market will shift soon if it does I will be able to weather it, while the guy who paid $100K more for his house might not make it.

I have started buying commercial properties and converting the offices into houses to do VRs.  I expect to get my first one operational in less than a month, and hopefully another will follow this summer, and another hopefully by early next year.  

I cannot speak on other markets as I am only doing VRs locally.  Financing is better than it has been for a long time, but I expect that to get tougher in the next few years.

@Sean Bramble welcome to BP. I know that current wisdom says go to massive tourist destinations to buy a vacation rental, but you would be amazed at how many folks are always going somewhere near us that we don't consider vacation areas or are passing through an area. During the middle and end of 2020 with nobody flying, I have a massive amount of people staying at my STR who traveling to Yellowstone and other national parks. They had no intention of spending time in my town, and would arrive late and leave early. I also had a fair number of fishermen who would rent for a few days to a week and would not only fish the local river but use my house as a base to fish in a 70 mile radius. We do have a fair number of tourists in the summer, but I get a lot of one night stay travelers. Don't overlook the girl next door, she might be a gem.

@Gp G., I think it is just a line of credit unless you reside on the property.  I have a line of credit secured by 2 rental units.  It has been amazing for speeding up my acquisition of property.  Instead of waiting for a bank to do an appraisal, then go before the loan board, then set up the paperwork to sign, I can just pay cash and buy right now, then go through the long drawn out loan process.  I try to do a few updates then get financing.  This results in often having a lot less money in your deal, without paying for mortgage insurance.  Then get your loan and pay your line of credit back.

@Stacy Edwards , welcome to BP.  I mostly do long term rentals, but have 2 STRs in the form of a duplex.  Just today I added a third vacation rental.  It has a traveling professional in it until June, but then bookings are open.  I hope to add a fourth VR soon.  I bought a commercial property with an office and shop.  I hope to VR the office into a house, and rent the shop out separately.  We will see how it goes.  Find some niche or new idea and just try it.  That is how I got started.  Post here if you need advice on it.

I have been buying properties as aggressively as possible for the past 2 years now. Opportunities have dried up, but even properties that are breakeven I have gone hard for. I reached a conclusion that housing would not be going down for several years so I see now as the time to buy despite prices being so high. I currently have more houses needing fixed up than I have time to handle, so I am making deals with contractors to JV some fix and flips. We will see how that goes.

I forsee inflation running hard for a few years.  The price of fixing up the properties I have bought is pretty steep compared to a few years ago.  Despite gas prices skyrocketing I think vacation rental demand will be strong.  Fewer folks flying to Europe for vacations.  Trips to National Parks will stay high, and interest rates will probably climb a little.  Time will tell.  Thanks for sharing your thoughts.

@Nick Furukawa, I would recommend an LLC if you are comfortable with using one. Depending on the tax structure you choose it can simply be added to your 1040 tax return. However you will not be able to get the cheap 30 year Fanny Mae or Freddie Mac loans if the property is not in your personal name. Forming an LLC at least in Wyoming is easy, it takes 15 minutes and $102 on your credit card bill. More important is drafting a good operating agreement and understanding how to operate one so that you don't negate it's liability protections. Read a few books on LLCs and decide yourself. You can get hire companies to file the LLC for you and serve as your registered agent for less than $200 and some much cheaper. You can Clint Coons and Anderson something his form to file some for $15 or $20K also. You might go for something closer to $400 or $500 that will work just fine.

Thanks for the upbeat words @Account Closed.  I have seen plenty of significant events, some I was old enough to understand some not.  I remember the helicopters leaving Vietnam as we pulled out with people trying to cling to them to get away, and the fall of Vietnam only a week later.  I knew the draft was no longer going to scoop me up after my 18th birthday, even though we still had to register.  The idea of global thermal nuclear war was pretty traumatic.  That was really the reason for Vietnam, and Korea where my dad served.  I know it affected my dad fairly hard, but he only occasionally talked about it, usually when he and his brother got together, since they served in Korea together. 

I wonder how the economic fallout will be.  Oil has obviously skyrocketed.  I talked to my father and mother in law and heard their tales of World War 2 and rationing.  We have been blessed to only having police actions where we don't really worry about if we will lose and be invaded, we just don't like hearing about deaths of our soldiers.  I am sure most of us are torn between not wanting World War 3, but wanting to stop violent dictator from taking over large parts of the world even if it means war.  Hitler invaded and took over several countries without intervention of other countries to appease him.  It didn't stop his aggression, it just gave him fewer enemies to fight when the rest of the world finally realized he was never going to stop, and he would never be satisfied until he ruled the world.

I didn't mean to bring about a political discussion, but wanted to know what the effect of war on our investing.  I am a history major, but none of my history studies told me anything about how people made lots of money other than those making war supplies like guns, ammo, planes, tanks, jeeps, medical supplies, etc.  I wonder what it did for land values, demand for rentals, and other things.  I suspect that it depressed the value of land and rental rates.  Now after the war ended the economy boomed and land prices and populations boomed.  Anyway, hopefully this will end soon and the Ukraine can recover without more loss of life and economy.  Even if they repel Russia, which is not likely, the scars to their country will be deep.  What will it's effect be on our economy?

Dan,

My first real estate was basically for housing.  That occurred several more times as I bought and moved.  My first pure investment/rental property was during a depression in my area and I had just spent a few months looking at real estate, nearly every third house was for sale on many blocks.  I was talking to a realtor who had showed me a lot of houses that I did not buy, and someone I had bought a desk from walked by and mentioned that he had a house for sale because it had an IRS lien on it and we just take the lien being paid for the house.  Neither the realtor nor I could even afford that, but we joined forces and were able to buy it together.  I researched and figured out the lien, and he and I both managed to get a loan.  We fixed it up ourselves, we even installed used carpet.  I am embarrassed to say that I had no idea what rents were going for, but I knew from shopping for my own house that the price was at least half of what everything else I looked at, even in the depressed market.  That partnership lasted for over a dozen years, and in that time we added nearly a dozen more houses, each barely paying it's own way.  There was no big evaluation fulfilling living experiences, or my readiness for real estate investing.  I just knew it was a good buy, and I figured it would make me extra money towards retirement someday.  My experiences of buying and selling my prior houses (mobile homes) had always netted me a profit and cheap living costs, so one more extra house I would not be living in would be a good idea.  Over the next 30 years I bought out my partner on generous terms (he drove a hard bargain) and it now has a net worth of over a million dollars.

My point is that even without seeing the big picture and having a big plan for a life of real estate investing, even knowing what is and is not a deal and taking action can be very rewarding.  You have to learn as you grow, and there are learning pains, but real estate is very forgiving.  Small steps over 30 years can result in a pretty amount of wealth.

Thanks for posting and best of luck to you in your future investing.

Congratulations @Justin Lee. The house looks really nice. I can see the appeal as a STR. Good luck on it.

@Michael K Gallagher, thanks for your insight.  I try to keep a pretty upbeat and grateful attitude, but for some reason reviving the ghosts of the cold war hit me pretty hard.  I had honestly believed that we had left most of that political garbage of live the politics I tell you or die or I will melt the world in an atomic fireball stuff was behind us.  Maybe it is the nearly identical actions and reactions to Hitler in world war 2 that makes it so eerie.