All Forum Posts by: Julie McCoy

Thank you, @Carol Bloom!  That sounds promising, I'll look into it when things settle down from the holidays. :D

Thank you all for your input!  I have adjusted my expense estimations upward, so the numbers are less sexy but still good (more an average of $250/door/month cash flow).

@Moty Wall could you tell me a little more about your terms?  5 years...of what?  This is the part about commercial loans that confuses me - I know the terms are different but haven't found a breakdown I can make sense of.  'Splain it to me like I'm 5 please.  :D  

Why not AirBNB the house hack? Live in one unit, AirBNB the other instead of long-term lease it. "Entire place" rentals are far more desirable on AirBNB than private rooms, which is presumably what you'd be doing if you AirBNB a SFR that you live in. (I'm not a big podcast listener, so I could be mistaken, but unless you want to "move out" every time you have an AirBNBer for your SFR...)

Either way, make sure you consider the additional costs involved with AirBNB (furnishing the rental space, paying for utilities) and the time involved in communicating with guests, arranging housekeeping, and so on.  AirBNB isn't difficult to self-manage, but it's not a hands-off investment, so just be sure you're willing to put in the additional $ and effort in order to get those bigger returns.

And of course, when planning your purchase, make sure you location is desirable to a short-term renter - think about if you're targeting vacationers, or traveling business people, etc. and make sure your location/space makes sense and will be appealing to them.

I'd AirBNB a house-hack all day long if I could actually afford to buy a MFR (or even SFR) in my city. :)

Thanks, Rahul - for the sake of my numbers I've been assuming 5% on a 30-year fixed at 75% LTV, but without much knowledge in commercial loans, not sure if that's at all in line with the kind of product I'd be able to get. Sounds like I'm reasonably close?

1. I self-manage my STRs and believe I could self-manage this as well (I have deep roots in the area so lots of people to call on to be boots on the ground), but could always factor in 10% PM fee.

2. If we make it to serious discussion, I'll definitely be asking for the rent roles; Rentometer views my rent estimates as the low side of "reasonable" for the area.

3. For utilities I've factored in water/sewer, pest control, and yard care; tenants would pay power, cable, etc. I've also included 10% CapEx, 5% Maintenance, property taxes and insurance in my expense calculations.

I may be PMing you about US Bank - first I have to convince my brother to get on board ;) 

Hey all!  I may have stumbled across a deal in my hometown in Florida this holiday season and am interested in this group's thoughts.  

My background: I currently own two STRs that I manage long-distance, and am interested in diversifying into LTRs.  I have a decent amount of cash on hand but would probably partner with my brother for this deal.  We both have excellent credit.  I have no experience with commercial loans, so that's a big unknown for me currently.

The property:

A 1925 house with a back building that makes up 5 units: 2x 1/1, 2x 2/1, and 1x 3/2, listed at $525,000.  It's classified as a C property but on the edge of B and A class neighborhoods that are quickly developing, and a location that's very accessible to downtown, several hospitals, the airport, and a few blocks from a young, hip part of town.  All units are occupied.

The property needs some updating, but has a newer roof and the listing claims it's been well-maintained; photos show it to be somewhat dated in its layout but with no obvious structural issues. 

The listing hasn't disclosed current rents, though presents them as far below market.  My conservative estimates for market rent are: 1/1 = $825/mo, 2/1 = $1100/mo, 3/2 = $1500/mo.  I'm in preliminary stages of research so I drew those numbers from comps I found online and my sister-in-law's experience of recently living two blocks away.

Allowing for a 10% vacancy rate, I conclude that the overall gross monthly income is $4815.  I estimate monthly operating expenses (including insurance and taxes) to be between $1700-2000.  That gives me ~$2800-3100 net operating income prior to debt service.

Debt service is where I run into questions - I assume a 25% down payment, but since it's a 5-plex, need a commercial loan.  I know those loans are structured differently from residential mortgages, but it's been difficult to find any sort of terms for <$1m loans.  Can someone shed some light on typical terms and rates for small multifamily properties?

Obviously everything would be contingent on inspections and so forth, but if anybody sees red flags I'm missing or something I haven't thought of yet, I'd love to hear it.  Thanks so much!

Julie

I agree with @Chewie G. - I don't see the benefit of listing out your competition, but I think there's plenty of ways that could come back to bite you.  However, I think you have a really strong position - the merits of your homes sell themselves.  If I were in those traveling workers' position, I'd definitely rather stay at one of your houses than in a motel or trailer park!  

I remember you mentioning you get a lot of workers who are Spanish-speakers - you may want to consider getting the brochure translated into Spanish to give you an extra edge.  

Though, could you clarify something?  You say you're going to send the brochures to the HR department of companies - do you expect HR will pass the on to the workers, or does HR make any of the housing decisions?  I'm trying to figure out if the people actually looking at your brochures will be the workers, or the HR people, because you'll want to tailor your message accordingly.  (based on what you've said so far, it sounds like the workers are your primary readers, and who your message is already geared towards, but just double-checking)

Talk to a tax advisor before taking any action - especially since the new tax law will likely have some direct impact (e.g. the new deduction that applies to some pass-through entities). To LLC or not to LLC is a widely debated topic on BP, and both sides of the equation have merit - but now that the new tax bill is here, I suspect the merits of those arguments will change. I think you're on the right track in talking to an attorney (whose advice you definitely want re: protection strategies), but a tax advisor will be able to speak most directly to the best economic strategy for your situation.

Nashville is not currently issuing permits to short-term rentals due to an overload on the market. While it's a fantastic city, you don't want to invest there for STR right now.

If you plan to live in one of the units, your first approach should probably be what location is best for YOU? Start there and make a list of cities you want to live in (at least long enough to satisfy the FHA requirements), then research the STR rules & regs for each, then the overall market, then pin down the best neighborhood.

@Paul Sandhu has some excellent advice, and his niche that caters to blue-collar short-term workers is not nearly as crowded as the more traditional STR space. Though I would caution against Las Vegas, as LV also has very strict STR rules (and a lot of competition).

I've considered a similar model for myself, but since I live in Los Angeles (and my W-2 job needs me to stay there, for the most part), it's not particularly viable.  Best of luck to you!

What a beautiful home, @Karen Margrave!  I think your market is quite a bit different than mine, so I'm not sure that my experience is directly relevant.  But to answer your questions, my prices range from $150-295/night with a 2- to 3-night minimum, depending on the time of year (I have a 2/2 + loft riverfront house that sleeps six).  

I was about to point you towards the STR as Wedding Venue thread, but I see you've already seen it!  All the advice I'd give you is there - though I do see you have a bit of a zoning concern.  I'd still recommend doing some market research with event professionals in the area, to gauge interest (and profitability!) - even if you can't strictly market it as an event space, that would also be a way for you to "get the word out" without advertising as an event space or other activities that would alert the zoning commission.  

And definitely poke around on AirBNB and VRBO for comparable properties, take a look at their calendars and rates, maybe reach out to a host or two to see if they'd be willing to discuss it with you.  

Agreed with all of the above re: liability.  Best thing is to find a local company that rents the tubes, so you can refer your guests to them.  If you really want to do it yourself, TALK TO YOUR INSURANCE COMPANY FIRST.  (but I think it'll also be a hassle b/c people will damage them, complain if some of the air has gone out, etc)

And if your insurance company hasn't already required you to post a "swim at your own risk" sign by the river, you should do it anyway to CYA.  I've got one by the river behind my house - it's not attractive, but I did get a brown one so it looks like a park sign.