All Forum Posts by: Joey Wharton

I specialize in 1890's homes and have gutted 6. They are a pain in the *** - no doubt - but for me the juice is worth the squeeze. It's been my niche area. Most have foundation issues - a combination of bad drainage and deferred maintenance on the stone.That's where my opportunity lies. In my area the historic part of town is a big tourist destination and the historic neighborhoods are highly coveted. You can't build that kind of history and charm, so personally I buy houses I can save. Nothing is square, there are decades of who knows what crappy DIY patch job fixes I have to tear out. But I know going in I'm taking it down to the studs and rebuild it from the studs out. The lumber is hard old growth wood and hard as stone. I've replaced sewer lines on 3 houses. Rehab time for me is usually 4-5 months. But once I am done, they are solid as a rock and good for another 100 years. It's a labor of love.  

New to this group. I will be there!

@James Carlson excellent points. I spoke with the city and the state for the B & B license the property qualifies. I just have to provide at minimum coffee & donuts (ie. minimal). It does provide me the option of commercial signage and I believe that's where the property becomes classified as commercial. The B & B license is a hybrid sort of license. The lodging taxes apply. But I will get informed on the potential for commercial property taxes. 

A good friend of mine rents his home out via StayCOS. He's happy with them, but they after all is said and done, they cost him on average 40% + of revenue. He lives out of state, so it makes sense for him. 

The remote worker market interests me the most, but I have don't have enough market data to assess the demand. I'll reach out to you and see if maybe that's the way to go. 

Thanks!

Kar Sun I couldn't agree more

Thank you guys for the feedback! I already have a plan to do themed rooms, ensuite baths for all bedrooms, and since its commercial zone and is in a commercial area, weddings and parties are ok per zoning.

Gururaj - a hybrid model is what seems to make the most sense. 

Let me preface this by stating I am not a Republican. However it seems very clear to me that many Biden policies and legislation will be chopping the middle class at the knees. The 1031 exchange is primarily used by smaller, private investors (ie. middle class), removing it or severely capping it will remove an upward mobility tool. Instating taxation of unrealized capital gains at death will force hiers to liquidate assets in order to pay a massive tax bill. If you have 10 million in unrealized capital gains, would your hiers be able to pay a $4 million dollar tax bill in order to keep the assets? Raising minimum wage to $15 per hour is a direct hit to small business owners. I could go on... 

Hoping I can get different perspectives from the BP community. Just closed on a C5 zoned property in Colorado Springs on a major street less than a mile from downtown (currently going through growth explosion) and 1 mi to Old Colorado City hub (very popular tourist destination), and a 1200 sq ft commercial workshop(detached) that I can build out a second (interior floor). Excellent location and visibility for commercial (it is surrounded by commercial, or residential, or STR. Its become a hip-urban nook with 3 very popular breweries, restaurants, cafe's and a bike shop within 1-2 blocks, 1/2 mile easy access to I25 (interstate) and right on the main tourist route. The city has restricted Airbnbs, but due to C5 zoning, I can get a Bed & Breakfast license for less than $200 a year and it comes with a limited use liquor license. Retail tenant numbers not strong enough to consider.

Purchase price was $350k.

Here are the options I'm considering:

OPTION 1. Turn the "house" into a true Bed & Breakfast, and have an innkeeper I'd like to hire. "Inn" would have 5 bedrooms w/5 ensuite baths. Build out a 2bd / 2ba apartment in the workshop.

Gross revenue at 50% occupation is around 230k a year. AirDNA has this area at 80% occupancy. There could also be more revenue streams with the B & B. 

Cost to operate - I'm still working on those numbers

The big CONs are:

this is a BUSINESS, not just an STR.

Need to hire an innkeeper

I have to provide breakfast, even if it's just  continental style. 

Will require a marketing budget. Not passive income for the first 2-3 years while I build the business

Longer time for cash flow

The big PROs are:

Not susceptible to eviction moratoriums, rent loss, evictions, etc. 

The area is saturated with Airbnb's, so nightly rents have come down

More vulnerable to potential pandemic shut downs. 

Combination of Real Estate overlaid with a BUSINESS can be a very powerful tax vehicle

Business budget and business model on top of rehab budget

B & B allows us to market as an experience vs just an STR so we're not competing with the over saturated Airbnb market

OPTION 2. Airbnb House and Cottage unit, as complete units. Gross revenue project at 170k (both unit) at 50% occupancy. 

CONS

Lower revenue potential vs B & B

Still need to get the B & B license (and still need to provide "breakfast" even coffee & donuts)

STR biz model would mean much hight taxes vs B & B business (from what I understand)

HUGE Airbnb competition - area is highly desirable but oversaturated

PROS

Great revenue for an under $500k total investment

Quicker ramp up to produce revenue

Can become passive much sooner than a B & B 

OPTION 3. Keep the 3 units in the building; rent out 1/2 the workshop to a tenant who wants it NOW for $2k a month. The original units where very shabby and the area not too long ago was pretty sketchy, so either way my rehab budget is the same. I am rehabbing this property to a very high level. 

Gross revenue estimated at 75k a year

CONS

susceptible to moratoriums, rent loss, tenant damage, etc. 

need to build out separate areas and separate meters - adding about 30% to rehab budget

tenants can be a huge liability

PROs

Much more hands off than a B & B business

Immediate cash flow right at rehab completion

Tried and tested biz model, high demand area - units will rent the first day

If you've made it this far in the reading, I greatly appreciate any input, ideas, perspectives are so appreciated! 

Had to chime in...

had a house in Marina Del Rey, SoCal - too crowded

lived in Lucern, Switzerland - gorgeous would go back!

Barcelona - 

Santiago, Chile

Bologna, Italy

Hood River, Oregan

Gudalajara 

Puerto Vallarta

Bacalar and Huatulco, Mexico

Boulder and Denver, now in Colorado Springs for 9 yrs.

Working on a plan to live in CO (nov - april) months/New Zealand (may - oct)

Rent value on my primary home is 2500 long term and 6000 short term. 

Including it in the numbers as it would be paid off by the other property.

**Our goal is to live in New Zealand during our summer and high tourist / Airbnb season.

l always meet with the appraiser at the property at appraisal time. I have comps in hand and legal descriptions. Its amazing how lazy they can be. They dont care. They're getting paid anyway. Once they submit they're out unless you pay them more for an adjustment. This I have successfully done for $150 more. Its turned around asap and everyone is happy. 

If the basement doesnt have egress windows not sure what you can do about that in your market. I know it can technically be considered non living space. 

You can go back to your seller and see if he'll meet you halfway on the difference. Thats what i would do. Or see if they will pay for a second appraisal. Trust me they are more nervous about that appraisal than you are!

Strip the emotion and try to turn this into an opportunity.