All Forum Posts by: Leo R.

@Jim Hudelson absolutely; STRs are as much a hospitality business as they are a real estate investment (and there are plenty of folks who are top-tier real estate investors who know little or nothing about how to run a hospitality business--and vice versa!). ...the people who succeed in the STR space understand both models.

 Already on it, @Kenny Smith  --been listening to the audiobook!

@Chad Kinsley there are countless articles, podcasts, books and resources about STRs, and most are free...a lot of those resources are on BP.  IMO, it's rarely necessary to pay (or pay a lot) for real estate education--the info is out there, usually for free. Occasionally, I'll drop a few bucks on a real estate book, but I probably wouldn't pay any significant amount of money for a RE course (especially not back when I was a beginner).  ...back when I was a beginning investor, the most important thing for me to learn were the fundamentals, and that info is out there for free, or at a very reasonable price...

Right now is a very tricky and risky time to break into STRs for a few reasons:

1. The economy has slowed significantly, and the first thing people cut from their budgets in a slowing economy is recreational travel. As a result, STRs/vacation markets tend to get hit the hardest during economic downturns--both in terms of increased vacancy, and in terms of depreciating property values.

2. There has been a lot of data coming out showing that many STR markets have become completely over-saturated with supply. ...it doesn't take a Ph.D. in economics to understand what happens when the aforementioned diminishing demand combines with an overabundance of supply.

3. Air BnB recently changed its platform to focus on top-tier, A+++, highly unique properties (think: luxury beach-front tree house), and their platform is de-emphasizing more "normal" listings (like a regular, run of the mill condo).

4. Obviously, rates are much higher and will continue to climb in the near-term, which makes many properties much less likely to pencil out if you're using any kind of financing.

All of these factors combined mean that there are some significant headwinds for STRs (particularly for beginning, inexperienced STR operators, and those who don't have elite, highly unique & luxurious listings). Unsurprisingly, there's data coming out that indicates that STR vacancies are increasing, and there's a good chance we'll see a lot of STRs failing over the next 6-12 months.

Does that mean it's impossible to succeed in STRs? Of course not...but, it's a much tougher battle now than it was 12 months ago, and there are a lot of issues that investors (esp. beginning investors) should consider closely before jumping in...

Good luck out there!

What are folks' thoughts / experiences about remotely managing a B-class (or higher) single fam or small multifam LTR in a mid-sized (or larger) city?

(I specifically say B class or higher in a mid-sized or larger city, because lower class properties, and properties in more rural areas would be exponentially more difficult to manage remotely...I may not be the brightest bulb in the chandelier, but I'm smart enough to avoid that trap...).

I've self-managed my local LTRs for years, and the task that requires my physical presence more than any is showing property to prospective tenants (I can't easily hire this out to anyone other than a PM, so I'm stuck doing it myself)... but, I have heard of owners using smart locks, security cameras, and Zoom to remotely supervise/monitor prospective tenants who walk the property without anyone else physically present...Does anyone have experience/opinions about managing viewings remotely?

As for repairs / maintenance tasks, I can (and often do) coordinate repairs / maintenance tasks from my phone, and my repair / maintenance people rarely need me to be physically present (of course, it helps that I have a decent team of repair/maintenance people in my area)...but in theory, if I can do that from down the street, I should be able to do it from across the country...

...very interested to hear folks' thoughts on this...

@Galit Garsiel short answer: yes, it's risky and yes, it would be very difficult.

Does that mean it's impossible? No.  But, very risky, and very difficult, and would require some serious expertise and skill with flipping, remote communication, an A+++ team you know and trust on the ground, with a GC who is completely on top of things, and completely trustworthy.  ...I have many years' experience in all areas of residential real estate investing, and personally, I would not attempt to oversee a rehab from a different state (let alone a different country).

You also mentioned flipping--right now is a very risky time to flip (especially for inexperienced people). This is true even for a local flip, and is exponentially more true for a remote flip.  The topic of why right now is a risky time to flip has been covered extensively in other forum threads--I'd suggest reading up.

Good luck!   

It makes me laugh when I hear gurus (or people with no RE experience) talk about STR or LTR as "passive" or "easy".

Sure, it's "passive", until the tenant calls you at 2 am to tell you the finished basement is flooded, you discover the house is basically built on top of a subterranean river, and you spend the next 6 months excavating 30 tons of water-logged clay from under the house (by hand) to create an industrial-scale sump system (true story)..."passive", lol.

Any real investor knows this is a tough game that brings some hard knocks.

@Chris Young some of these requests may be legit (obviously, if the heat or the AC goes out, that has to be fixed ASAP).

However, the very first complaint you mentioned ("Hot Water taking too long to get to bathroom faucet") speaks volumes, and suggests that these tenants are either unreasonable, or they're unknowledgeable about how a house functions. Assuming you're using a standard water heater, hot water ALWAYS takes time to get to the faucet--and the further the faucet is from the water heater, the longer it takes. I have a house where the water heater is on the other side of the house from a faucet, and that faucet can easily take 10-15+ seconds to get hot water.

So, a complaint like that indicates that a tenant either doesn't understand what they're talking about, or, they're unreasonable. I would politely explain to the tenant the basics of water heaters & hot water, and explain that it's not a defect--it's just a reality of how some houses function...if the tenant agrees that it's not an issue to be fixed, then that would be a good sign...but, if they dig their heels in on an issue like that, bad sign...

Good luck out there!

 @Heeyeon Chung  no problem.

So, since you already have some RE experience, you'd be happy living there long-term, and it's not critical for you to be able to refi at a certain time, that all makes it sound a lot more appealing...

One other consideration:

Is the layout of the house set up in a way that allows you to rehab certain parts of the house without having a major impact on your quality of life?  For instance, I did a live-in rehab on a house that had many bathrooms, so even while I was rehabbing one bathroom, I could still easily use the others...also, the house was very  large, and had two wings that were pretty well separated--it allowed me to mostly live in one wing of the house while rehabbing the other wing... also, this made it so that whenever I had subs working on the house, I had a whole separate wing that I could go to--I rarely had subs working in my living space... And, the best part: the house had a mother in law apartment with its own kitchen, so while I was rehabbing the main kitchen, I could use the mother in law kitchen!

In other words; the spaces where the work was happening were not usually the spaces where I was living--and that made the process WAY more tolerable.  On the other hand, if a house only had one bathroom (that had to be rehabbed), and/or if it was set up in a way where you were constantly living directly in your work zone, then that could make it a lot less tolerable... 

Of course, all this stuff also depends on how tolerant you are of living in or near a work zone--some people don't mind doing that, and others (probably most) really don't like it....

Good luck out there!

 @Dean Diamant   --what @Rich Carey says here is 100%; it depends on your experience level.

Cost of services significantly depends on the experience level of the person providing the services... LeBron gets paid a whole lot more $$$ than an un-proven rookie.

Good luck out there!

@Heeyeon Chung it sounds like a decent plan to me, but as always, the devil's in the details.

As you probably know, rates are rising, and will likely continue to increase in the near term...what will rates be like when you go to refi this property? (nobody knows!), but if rates are much higher when you go to refi, it could make refi'ing less desirable, or even impossible....

Another variable to consider: values may flatten or even decrease in the foreseeable future (most markets have already seen big increases in inventory, days on market, and price reductions).  If there's a market downturn, and the comps for your refi appraisal are lower than the comps are today, that could make it more difficult for your property to appraise for the value you need for the refi, and might make refi'ing impossible (or less desirable)....   but, just like the issue of rates, nobody knows what the future will bring...

Do these hypothetical outcomes mean you shouldn't buy the house? Not necessarily--the house could still be a great opportunity, even if these outcomes occur...

The question is: what's the worst case scenario for you if you're not able to do your cashout refi?  ...if the worst case scenario is that you just keep living there, and you like living there (and you can afford living there), then that sounds pretty good...  But, if you absolutely need to refi in the future, then you could run into trouble if the aforementioned scenarios occur....  

In other words, it all depends on what your plans and goals are for the future, and how important refi'ing in the future is to you...

Other issues to consider:

-how much opportunity is there to force appreciation on this property? (some properties have a TON of potential where it's very easy to force appreciation by doing things like adding bathrooms/bedrooms, etc....other properties not so much...)....finding ways to force appreciation is one of my favorite things in real estate; I could write a book on this topic!

-how tolerant are you of living in a construction zone (at least for a while)? Some people have no problem living in a house where the floor is bare plywood because they're re-tiling, and there are tools and materials lying around everywhere....other people can't stand that stuff...  with a live-in flip, you'll encounter those types of issues....

-If you plan to do much of the work yourself, it's worth being honest with yourself about whether or not you enjoy that type of work (if you enjoy rehabbing houses, great!).

Would this be your first property, or have you had others?