All Forum Posts by: Jeremy Horton

 Pretty optimistic on the average occupancy rate in my opinion - I think it's safe to assume you (as well as any newbie) will do worse than what the market shows initially. Now this is not always true, but it's better to underwrite on the conservative side. Now how to underwrite on the conservative side...underestimate your ADR and occupancy, overestimate your interest rate etc. Skew the numbers a bit to make it "harder" essentially. 

2019's numbers are safer to use, 2020 and especially 2021 were outliers. 2022 I believe is somewhere in the middle - but there's lots of people holding the bag, because you could've bought anything in 2020/2021 and it went up, stocks, RE, used cars etc. Now...? Not so much. Those that bought expecting 2021 rental numbers are going to be in trouble, I see it frequently. I'd rather buy at a high interest rate vs a high price all day long - I can always refi that rate, you can't do anything about the price you purchased at (and you likely got a low rate in 2020/2021, so if you ever refi...guess what, yep, your rate will go up significantly, so hopefully you've paid down the equity quite a bit otherwise you're stuck).

I would also be careful in the Smoky Mtns, there are a effing ton of cabins, very popular area. I don't believe it's saturated but everytime I go there is new construction and big players involved. Idk, I like it but I don't at the same time...just feels like a lot on uncertainty. It would be long distance for me too. 

How will you be managing?

I personally would sell - if it's not getting showings at 450k - there could be a few things: bad location, needs work or priced too high (very common these days) - the market shifted pretty quick and it's not 2020/2021 anymore - lots of people still think their house is worth 2021 prices. Lots of areas have dropped 10%+ in price so dropping 40-50k off the price is not unheard of - it's fairly common where I'm at, especially on the more expensive properties. We had a house just down the street listed for 499k, dropped to 449k and sold for 435k

On top of that a $250/month cashflow is a really low return on equity - I'd drop the price, sell it and move that 220k somewhere where it can do some good for you. Even if it did "work" as a rental the ROI will be so low, I don't think it's worth the time, hassle, or opportunity cost. How many other rentals to you have to potentially offset this one? IF you have several, you could keep it as a appreciation play, if it's the only one, I'd personally move on.

IF you did decide to make it a rental, you will likely lose money - at the very best you could break even. Unless the house is in a perfect location (which I have to assume it's not because it hasn't had any showings) I'd keep it. 

Sounds like you'll do fine if you decide to sell it anyways - likely make a nice profit and get to move on with life. You just won't be getting top dollar, which is the case with most things 

I would partially agree 

A $500/mo cashflow on a 100k property is not going to outpace even a 300k house that appreciates highly.

I don't see how it effects the speed of building your portfolio either - the cash flow doesn't matter when I'm buying great deals. Either way I can take money out because I've bought a great deal, renovated the property and it appraises for much more than what I bought it for. The appraisal value is what effects what I can take out. Even my properties that were vacant when I renovated and did a cash-out refi, lenders looked at the appraisal value and market rent. My local bank will lend my 85% of the appraisal value up front on a DSCR loan - before I even start a rehab

Equity is what is really going to make someone wealthy in the long run. I mean how many houses that cashflow $500 a month would you need? Once you subtract out repairs/maintenence/cap ex/PM etc, you're left with half of your "cashflow". 

That being said I don't buy properties that negative cashflow either - I believe you need some kind of safety net and I'm in this for the checks. Unless you have some BIG money and can withstand changing markets I think cashflow is the safe bet as well. But I still believe equity is what is going to make you rich. 

Harassment for what?

This was left really open ended

What's the revenue of the AirBnB? What is it? House? Multi Unit? Location?

First step is funding - house hack maybe since you intend to live in the property? Come up with the 500k downpayment...partner or take some type of loan

Seems like a high risk and big 1st purchase for your experience level - that's just my personal opinion

@Michael Zane

How many mailers do you send?

This is the exact route I'm going to go here in the next month.

I love the strategy, yes time consuming, but targeted at the best properties that give you a better chance of success.

I'm gonna have to send you a PM man!

This was not a very well thought out post - I too am looking for the magic potion to drink so that people just come to me with great deals that all close...give me a break man. 

SEO, DDM, facebook/craigslist, bandit signs, cold calling, sms etc all work to an extent because people still do them - this is just common sense 

This is simply a numbers game, send 1000 flyers over and over and ideally close a couple deals. 

@Paul Sandhu

I typically pay tenants a few bucks to bend over and spread them cheeks as wide as they can when they see a drone overhead

Better if they provide proof ;)

 Ok - couple of things: 

I would first pick a strategy - LTR, STR, Flip etc. You need to narrow down EXACTLY one strategy that you want to do first. No problem with inexperience, but make it easy on yourself and simplify for the first one until you understand what you're doing. You can do analysis all day but NOTHING compares to real life experience and actually buying a property. LTR is going to be the simplest, least risky and most straight forward. A flip is more advanced as far as funding and what you DON'T know (rehab costs, holding costs, contractors, contacts for the work you need done etc). STR is going to be more expensive (generally) and more risky due to the cost. You also have regulations, different lending terms (vacation home or investment ptoperty?) etc.

As far as exit strategies you really have 2: hold or sell

Do you have a spreadsheet you use to run numbers? Can you make your own? This would ensure you understand the numbers and what effects what

Rehab costs you will learn on time, whatever you come up with now...double it and add 5-10k. That will be pretty accurate until you understand the costs and do more of these

I'm sensing some "analysis paralysis" as well. You're a real estate investor. Run your numbers (have a good realtor that can double check you, if you want - I personally don't cause I find my numbers are generally more conservative and accurate and I actually care more), be confident in them and make an offer. That's really all there is to get started. 

Once you get started - see what you did well, what needs to change, educate and move forward

I made one before I first started - couple reasons, CAN limit liability if you do things correctly, CAN close under an LLC so the rentals don't go on your personal credit, CAN open credit cards under LLC, CAN deduct taxes from the LLC (but not W2) if you're what the government defines as a "high earner" (which this is really just a socialized government system and discrimination based on income), it also helps me to compartmentalize my personal assets vs my business assets to where I can grow a business separately from everything else. You MAY be able to do some of this stuff w/o an LLC (not sure) but I know you can do these things WITH one

Is it necessary - like @Nathan Gesnersaid, probably not. And look at his experience - vast experience and not issue with people not having one. But he has one also - might be a good idea to follow his lead and set one up - I don't think it will hurt you besides a little extra cost.