All Forum Posts by: Jerry W.

@Isaac S. I understand what you are attempting to say, but you keep throwing in lots of words like laughing at your ignorance and arrogance, you very obviously attack him on his politics, and throw in about 3 cups of extra sarcasm.  Some of your points have merit, but are delivered in a style that is offensive to most folks.  Feel free to give advice, but lay off the personal attacks.  Your last posts have been fine.  This site is about real estate advice, not attacking a persons political views.  There is plenty of room for politics on other sites.  Thanks for posting.

@Greg Cook, when it comes to real estate law every state adopts it's own laws.  You cannot count on the laws in your state being anywhere the same as a different state.  Some attorneys are licensed in more than one state, but few are experts in the law of both states.  You can easily look up the statutes of each state when it comes to landlord tenant law and contracting to buy land.  Often realtors where you are buying can give you a lot of general information even though they cannot give legal advice.  If you are in doubt about some law, read the statutes.  If you still have questions then consult a professional about the law, yes including an attorney.  Ignorance of the law is not a defense.

The most significant event in my not so short life was in 1989 when the Berlin Wall was torn down.  A country that had been divided for decades by a concrete wall and machine guns simply ceased to exist.  People were killed trying to escape across that wall, and no one wanted to enter.  Everyone knows about World War 2 and the cold war that came out of it.  Very few who are investing now had to worry about a global nuclear war that might erase all life on earth.  The fall of the Berlin Wall signaled to many of us, that other than some small country getting their hands on a nuclear weapon the threat of nuclear bombs had passed.

Now that threat has been resurrected by Putin in the invasion of Ukraine.  We are all horrified at the complete lack of concern shown by bombing and invading a country that is quite similar to ours in many ways.  Nuclear arsenals have been placed on high alert.  None of us know how far this war will go, how long it will last, and whether it will spiral into World War 3.

I do not mean to lessen in any way the seriousness of the invasion, but we all must face that it could have massive impacts on our investments and may present opportunities or dangers to our livelihood.  It is my opinion, not backed up with any facts that it could dwarf what occurred with Covid if it continues to grow.  It is my assumption that in times of great danger that people become more careful, spend less and think more about security than luxury.  It could mean fewer homes bought, fewer vacations, less money spent on consumables and more money saved.  Governments tend to spend more on military budgets and overseas aid and less on domestic expenditures.  While I hope for a quick resolution, even the economic measures being employed are affecting everyone of us right now.  I hope it works and we can see an end to the bloodshed and misery.  I fear it will not.

What do you foresee for our country, our economy and real estate investing as a whole.  I am not seeking to capitalize on the misery of others, but I do not want my family to suffer from my lack of planning from this earth shaking event.  Please share your thoughts and facts without creating political division, and please suggest things we can do to help the unfortunate victims in this.  One thing I have heard is booking vacation rentals in the Ukraine to send money to the hosts even if you obviously will not be going.

Thank you and keep the people of the Ukraine in your prayers.

@Serge Velet, this is not rocket science. It takes 10 minutes to create a WY LLC. Your operating agreement is very important. Your tax structure should be discussed with your accountant. A sub S helps keep the amount you pay active participation taxes on down, but creates difficulties in passing property on and getting the free stepped up basis. You can simply have another person file the LLC to keep your name off of it. If you materially participate in it however staying anonymous will be almost impossible. Just don't pay someone $10 or $20K for their secret sauce anonymity package. They are not that different from the same thing offered from most regular attorneys who don't hype their service.

@Bruce Woodruff, I have to admit that there is liability in nearly every single thing we do in life.  You can accidntly hit someone while driving or be hit, you can have someone trip on your property and get hurt.  You having a vacation rental is probably extremely high on the list of dangerous activities.  You could rent to a psycho who murders everyone, you could have one bring in a bomb, one could be a terrorist, you could have one have a horrible disease that everyone dies of, one could run into your house with a vehicle, the list of things that could go wrong is endless.  Luckily we have folks like @Isaac S. to point all of them out.

I have run vacation rentals for about 5 years I think, and except for maybe 3 guests I met I have thoroughly enjoyed meeting and visiting with them.  I have shared wild game meat I have harvested myself, helped change tires, given rides, drank whiskey, (theirs not mine), and the list goes on.  Many became friends and some come back year after year and we have fish fries, and often a drink.

It is the western way to be friendly and helpful.  I enjoy people and enjoy running my business.  Covid made the job harder and less fun, but even then I enjoyed meeting and visiting.

I get that we want them to have a good time.  There is a reasonable chance that if someone were injured during a shooting that you hosted that you could be found liable as it may be a ultra hazardous activity, and so strict liability could apply, but that is not a given either.  As someone who is NOT an expert on guns, I still have been around them my entire life, and have seen folks get shot, but only by themselves.  A lot of folks die by firearm deaths each year, but the vast majority are by suicide, follow by murders.  A tiny percentage of gun deaths are accidental.  Vehicle deaths are close to even with gun deaths, but when you consider accidental gun deaths there is little comparison.  

The risk of a serious incident with a gun is higher if you go shooting, but less likely to be fatal than taking them for a drive.  I would take someone shooting if I was comfortable they were relatively normal.  Life is not always about maximizing profit, it is about living as well.  Good food, good friends, people we love, etc.

If you choose to do it, just be careful.  I like @Paul Sandhu s advice.  One gun at a time, and one bullet at a time until you are comfortable.  I may have to look your place up.  It seems like my kind of place and you seem like good people.

God bless and good luck.

@Chuck E., for what it is worth, I would vet the potential tenant or business like any other tenant. Check with other folks who they rent from, check to make sure they pay on time, etc. In my experience people who do STR usually keep their properties up nice, but not all of them. Look to see how many 5 star reviews they have on their properties, look to see if they have outdoor cameras or sound sensors etc. to notify them of parties. They are folks wanting to make a living and get ahead just like us. As long as they are financially secure and take care of the house then why not rent to them? I definitely would if they checked out well.

@Joe S., I think it depends on your local market. You are competing with local landlords, what do they provide? I can tell you in my area not having a fridge would have a negative effect on being able to rent. I buy either 18.5 or 21.5 CU top freezer fridges for about $600 when they come on sale at sears. They are Maytags, and I try to have at least one extra in the warehouse. On the first problem I call the local repair shop who comes to our area twice per week. If I have a second major problem I replace it. In my nicer rentals I put a side by side fridge with water and ice in the door. I believe it gives me a huge leg up on the competition. I do stainless steel in my nicer houses. The $100 extra is a small price over time. Getting my rental full quickly is major. I also keep extra stoves, and water heaters in the warehouse. I try to have a washer/dryer available for each of my SFR rentals if I can find them cheap at yard sales. I occasionally put them in apartments. It is in my lease that we do not repair the washer dryer if it breaks down. I try to always be a tiny bit nicer that other units if possible.

@Trent Williams, these kind of problems are a pain.  You don't want one bad tenant driving out good tenants, but you don't know who the bad tenant is.  I just tell them that I expect every tenant to be respectful of other tenants and to obey the letter and spirit of the lease.  Usually one or the other will move out, if it gets worse you can always raise the rent of both and see if that makes one move out.  The end result is that you can threaten or admonish, but unless you really know the truth you have no way to resolve the situation satisfactorily.  Just record that you talked to each tenant and that you attempted to resolve it.  You don't want someone claiming they lost the use of "quiet enjoyment" of the property.  At the end of the day you can say if you cannot get along with the other tenants then you should leave.  One last warning.  There are some jurisdictions that have adopted laws prohibiting no cause evictions.  Make sure there is nothing like that in your local laws.

Good luck however you handle it.

@Kaushik Mahorker, It is a highly common threat to sue.  Very few folks follow through with it unless the case is egregious.  The cost to sue is usually many times the $1,000 in question.  If they really intend to sue you the $1,000 would not be enough to stop them.  I do not know a single attorney who would take a lawsuit for $1,000.  The threat is to try to keep your money.  Talk to your realtor to make sure that you are in compliance with your written offer.  This is the job they get paid for.  I have had similar threats.  I simply waited and after less than a year they returned the money.  The money is usually help by the selling broker or a closing company.  Their rules usually do not allow for them to give the money to either party unless they both agree.  However that money is an accounting nightmare for them every year.

Talk to your realtor, read the offer and acceptance, then do what you think is right.

@Jake Moran, I really liked your post.  I have seen at least 4 major real estate market changes in my state prior to this one.  This one defies all the markers and indicators or any of the other bust/boom cycles I have ever seen.  I have bought real estate since the 1970s lol.  In my opinion there are a lot of driving factors.  The biggest factor is truly the Covid pandemic.  The fear from Covid is gradually lowering, but it ushered in remote working.  Previously if you wanted a job paying several hundred thousand dollars you about had to live in a town of over a million people.  With remote working folks can now live anywhere and still make serious money.  By moving out of the large metropolitan areas they flooded the housing markets of everywhere else.  It would only take less than 1.5% of California moving to WY to have more people from California living in WY than people from WY.  Next people were truly afraid of dying, I was.  The dream of someday leaving the crime infested, 2 hour traffic to get 30 miles to work life and raising kids in small towns with little league baseball and riding through town on a bike could be lost, so the decided now is the day.  People looked at riots and businesses burning and protestors blocking freeways and deciding that making $40K less a year but having safety and 3 minutes to work was worth it.  Ok that is the mental side of it.

Next we have the lack of any decent number of housing being built since the over supply from the 2008 crash.  Lots of builders went bankrupt, many more simply went out of business and found other jobs.  The number of competent builders is quite low compared to 2008.  There has been a deficit between demand for new houses and the amount being built for several years.

The price of lumber is insane.  I was $8 per sheet of 7/16 OSB in 2019, it hit $69 per sheet last year.  It is high $20s last I looked but it is still over 300% higher.  The cost to build is pretty high.  Until used houses get near the price of new houses they will keep going up.

This is not because of banks lending to anyone and massive speculation.  This is raw supply and demand.  Houses are in short supply.  Vacation rentals have become massively popular taking even more residential houses off the market.

Will prices drop?  Anything is possible, but not with demand still massively high, and the cost of building huge.  You won't see a mass of foreclosures driving prices down, because dam near every house has gone up 20 to 50% in value.  They can simply sell and put money in their pocket.  You couldn't do that in 2008.  

Finally inflation is eating up disposable income.  The massive influx of money spent by the current and past administration is staggering.  The amount of free money handed out is staggering.  The safest thing to invest in is real estate.

Prices could drop, but I doubt it.  My belief is that even marginal houses bought now will continue to appreciate and so will rental income, but your loan payments will remain the same.  My money is on continued price increases, but most likely at a slower rate.