All Forum Posts by: Ke Nan Wang

Price point matters. If it's a $500 rental that means their income is $750 a month with only $250 excess after paying rent vs if it's a $10000 rental after paying rent they still have $4700 remained. 

In general, 3x rent is a good starting point. In our listing ads, we stated that if the tenant meets all of our qualification criteria, they will be approved instantly. But none of our criteria is a deal breaker on its own and they can always negotiate with putting down more on security deposit. 

Part of 3x rent is that we assume people have car payments. So for someone with no car payments, that can be adjusted. I have a $1100 a month luxury one bedroom and I rented to an elderly who has great credit score and no late payments but he's only on a fixed social security income. However, he has absolutely no debt and his lifestyle doesn't spend a lot of money. So even his income to rent ratio is much lower than 3x rent, I was still be able to rent to him and he turned out to be a great tenant who always pay rent on time and take care of things around the property. 

So review the application as a whole and try to negotiate more security deposit if you think this person is good and just need a little extra to offset the additional risk. 

If you are someone who's really hands on and want to do lots of tweaks yourself to optimize comfort and save energy, then smart thermostat might be an upgrade to your vacation rental property. But personally, I think smart thermostat is really meant for home owners, not investment properties. 

We started using smart thermostats when we started our STR businesses 3 years ago but gradually shifted them to simpler thermostats that has a little aesthetic design to it.

We just don't have the time and patience to figure out the nuances of smart thermostat. If you just install it and forget about it, you will have issues. There are times the smart thermostat is creating issue for the HVAC system and render it stops working (service call), guests not knowing how to operate them and then they will message you (after hour message), weird heating/cooling schedule (We had guest texted us in the morning saying last night the HVAC switched to heat and they were sweating in the morning), etc. All of these small issues, although easy to address by themselves, they do add up and just eat up the attention of the property manager. Therefore within a year, we switched all of our thermostat back to a simpler one. The only function that people want is that when they feel hot, they need a button to dial the AC down and the house start cooling vice versa. Any other functions or features just complicate the issue and introduce potential problems for host to solve. 

So in the end, aesthetics is the key. So we find a reliable brand, find the most pretty one with the simplest function, that's what we use. 

Thanks for the reply. Makes a lot of sense.

Off topic, for some reason I'm reading your original post and your response like I'm reading from chatgpt not gonna lie. I don't know how other people feel about their interaction with A.I. If this is 100% your writing, please forgive me. But if this is Chat GPT's response, I would suggest your future response come with a little more authenticity. Even it means some sporadic grammatic error and less polished. 

I main real estate but still keep a personal stock portfolio. 

To me, real estate also means a meaningful job. I get to wake up one day with a purpose that I can drive around preferably in the sunlight, walk around, go admire some beautiful craftsmanship, touch and get a connection with people (investors, buyers, tenants, subcontractors, vendors), also the satisfaction from turning a turd into a gem. 

You cannot underestimate the psychological benefit of having a job that provides all of these intangible benefits that are very good for one's mind. Sure there are some stress that come with it, but the more I do it, the better I become good at it, and the stress become less and less. It's like playing a game in real life. 

I think the real estate game is way more beneficial to one's mental and physical wellbeing than playing the stock market where you only sitting inside a house and looking at numbers.

So yes, everything you said plus what I said, that's why even I know the stock market can potential yield similar or even better return, I keep real estate my main and stock market as a fun hobby.

That's roughly a $51k loan amount, which is pretty small so I'm wondering what the rent price point is. 

In the end, the true answers to your question is do you want to retire early and go do something else or do you want to keep scaling your business. 

Without knowing much about you, speaking only in general terms, if you want #1 as your end goal, you should aim to pay off your loan as fast as you can and then go fishing, hunting or traveling the world. You can live pretty much carefree, but you aren't gonna be famous with a book deal, or a yacht. But if you want to slow ball the business and become a real estate tycoon, you usually want to stretch out your loan as long as possible and have as much cashflow as possible.  

Here is a question for you, after you placed a tenant, during your 3/4 inspection, you found out the property is in a less maintained condition that you'd hope for (I'm putting it nicely), what would you do? 

You know lifestyle is a habit, the condition is not necessarily violating the lease, but also it's not well maintained. You know as long as the tenants pay rent on time, you won't have much ground to force them out. You know you can tell them to tighten the place up a little but they most likely not gonna listen. You know if you are gonna raise the rent at renewal they will move out. But if you keep the rent the same, they will stay for maybe a indefinite period of time. Are you gonna keep them or make it a less desirable situation for the tenant at lease renewal and let them move out themselves? 

We've had a rental property that was lived like this for 8 years. There were rat/pest infestation we discovered after moved out and we essentially spent $50k to completely redo the property plus wildlife mitigation and treatment. So you can see part of that $50k pretty much wiped out all the rent we collected in the past years. However, the monthly income allowed us to float the property in a nice location and after almost 2 decades of owning the property, it has double in its value. So the $50k capex brought the property from 70% to its full potential. 

I have investor friends who has to do these 2-3 years almost for every tenant move out. To them, they think yes, the 2-3 years rent collecting period, they were happy with no headache. But as soon as the tenants moved out, they are gonna spend 20k to make the place ready again, that's like the total rent in the last couple years. They think it's not worth it. 

The textbook answer would be, they should do inspections. Then the tricky part is, what are you gonna do about it after the inspection? You rather keep your steady revenue and not disturb the hornet's nest? Or are you gonna drop the hammer? 

What would you say? 

I would assess the overall risk package and decide based on whether the two following outcomes are likely and and negotiate an up charge (maybe a couple hundred dollars more on rent per month plus additional security deposit) 

Do I feel like at the end of the day I can:

1. collect rent on time from them

2. maintain the property in a good condition. 

But if I feel like the possible risk of having the extra headache cannot be offset by the extra couple hundred dollars a month, I'll decline the applicant. 

The answer is capitalism. If you simply let human nature run the course without government regulation, this is the result. And when was the last time the NAR did anything for us other than collecting dues, and letting us use the word REALTOR that nobody gives a crap about? The only time that they could've done something for the Realtors and they just took the easy way out and settled. I actually don't care about the result but rather it really show NAR's true color. And the NAR keeps lobby the politicians to continue keep the regulations low so they can keep collecting dues from new Realtors.

Disclaimer: Nothing I said is backed up by data or evidences except it's a conjecture based on my anecdotal experience and observations. 

The STR space is getting harder and harder to be attractively profitable. More competition and the guests' standards and expectations for these properties continue to raise. Gone the good old days of people coming to the host's property as a "guest". Although not everyone, but a growing portion of guests come with an expectation of 5 star hotel level services. Simply getting that vibe from the way guests speak to the hosts. And we aren't even talking about expensive places, just an average place.

So if you are interested in getting into STR for that potential larger upside, be prepared to actively put in lots of work, or have someone else do those work, do it well, and take a meaningful share of your income, thus reducing your ROI and potentially kill a deal.

I'm doing my own STR self-managing style and I do analysis for my investor clients all the time. In your mid to low budget space, STR is pretty much break even as your LTR. The perks you get from a STR is really just a better maintained furnished property and the flexibility to be used by the property owner. Usually the exceptions we see are in the high touristy attraction, high niche area where it requires much higher initial capital investment. That sector still exist but requires deeper pocket.

Every local municipality has different development regulations and it's regulated by your local planning and zoning department. Sometimes it's the county, sometimes it's the city, sometimes you have overlaps. If you are a nobody, people who works in each perspective office only care about your project is meeting their requirements or not. So I doubt there's a development checklist online. And development is a huge liability, no one is gonna take on that liability but the developer themselves. 

Typically you can pay some local expert to do a feasibility study for you in the price range of $3k or more. For SFR it's most cost efficient for the developer to go talk to the planning and zoning department and go from there.

I regard myself as an expert in development for St. Johns County, and we have the City of St. Augustine and St. Augustine Beach in our area as well. Simply amongst these municipalities, the planning and zoning requirements are night and day. When I moved to Duval County (Jacksonville), it's another complete new set of rules. 

But in big broad strokes, here are the things I need to resolve for my area:

1. Planning and Zoning. Is the property zoned for what you want to build. Is it allowed by right or allowed by special use? Allowed by right means you have the full right to develop for that use without further permission as long as you meet other requirements such as setbacks and maximum lot coverage, which is the next things you check. Can you put the house on the site and meet all the setbacks and maximum lot coverage requirements. Keep in mind new requirements could be more restrictive and if you are building in an old neighborhood, there are maybe less restrictive requirements grandfather in. This is all knowledge and experience you either pay other people for or figure it out yourself. 

2. Utilities. Do you have all the utilities available to you? If not, what's the cost to bring them in? sometimes it become cost prohibitive if utilities are not readily available. 

3. Pave road access. Easy yes or no. Most time in our area if there is no pave road access is 99% a deal breaker. 

4. Environmental: Wetland, flood zone, elevation, geotechnical, coastal construction control line, turtle and eagle's nest etc. are the things to do research on in our area. 

If everything checks the box then it's a pretty easy go. Our county has a confirmation letter allow the applicant to pay $116 for the county to issue a letter to confirm that you can do the thing you would like to do before you start. 

If somethings don't check out, then there are array of things you can do to mitigate those things. Often times they all become cost prohibitive unless you have either an amazing land deal, or you do a larger community development with lots of units where that cost is spread throughout the project.