All Forum Posts by: Marcello Di Gerlando

@Tim Schroeder correct I paid cash. I get that most real estate investors will leverage their borrowed capital to the hilt. And may cringe at my methods. Good and great for them, many folks are successful borrowing the banks money until they die. I have a different approach and its worked so far. My overall risk is limited by my measured debt exposure. This approach gives me an advantage in other areas including being able to secure a loan anytime with almost any institution, extending and obtaining lines of credit no problem, lending to other investors at cracking rates, private investors looking to me for returns, hell just sleeping at night not having to worry that I have 5 properties in hoc with a recession breathing down my neck. I will be chilling at my paid for ski house looking for my next deal while others are being chased by the banks. ROI is important but not everything.This is not to say I don't use debt. I do but its usley for a fair amount for short periods. In and out.

Most of the criticism so far is simply based on my own proforma. Which I concur is goofy. The property is performing very well. Absolutley holding it and dismissing the idea of selling any time soon. Thanks for acknowledging the property's performance. Question: what is the correct range of gross rents for this property to make it viable as an STR?

@Mike V. tracking all you said. The numbers I have quoted are my net all fees and taxes excluded and accounted for separately. From my take I will pay the cleaning crew and my operating expenses. I wish I could self mange and add 10% instead of paying a management firm. I'm excited to pawn off the stuff I don't care to do and buy back the time to handle other things. It's a cost for sure, but the alternatives are not appealing.

@Luke Carl @Basit Siddiqi and the other BP folks suggesting I sell this property. Kindly, please share what you would expect for gross rents on this STR so I can keep it? I'm $600k all in with no mortgage. For some it seems this property is a real dog. In the first 6 days I had 33days booked netting 20K with the most active time of the yea, winter and summer, still ahead. Again, whats the magic number I should be projecting to make this a viable investment?

Thanks for all the feed back. @Julie McCoy This project has been a weekend hobby for me and probably not suitable for most professional investors. My goal with this property has always been to cover operating expenses and long turn capital improvements as well as use it as a second home and gamble on the appreciation. I bought this thing below market and have added value with a lot of improvements. As well as being my first STR it's also my first deliberate appreciation play. I concur with @Nathan Gesner that the 1% rule of thumb applies and is my goal. However, there are not many long term renters paying $6K to $12K a month in my world. I have found with pricer homes the 1% to 2% rule is a bit wonkey and does not apply well. A good old fashion accounting of expenses is far more appropriate to determine if asking rents are appropriate for the market with higher end properties. The critic of my income analysis is valid but I should say that my cost of capital is very low and holding for 2 years was not intended and not optimal to say the least. But...if the right offer comes along now I will score the capital gains benefit so no big loss and maybe even a win. (caveat to new investors, this extended hold was only affordable because I don't have a mortgage on this property and not recommended.) @Bill B.The $880k offer sounds great but this house has the potential to sell for over $1MM; I'm in no rush. I will season this property for the next year and see how it does and update this thread as things change. @Mike V. @Ken Latchers @John Underwood Evolve for me is an experiment so I don't have a feeling either way at this time; so far so good. I like the idea of a management firm taking on the marketing and handling the guests. I'm happy with taking on maintenance and managing the cleaning crew. The communication with Evolve has been superior and they accommodated me when I suggested adding 10% to their adaptive pricing algorithm. To be clear the 20K I mentioned is my net, Evolve fees and taxes are all accounted for separately. 

I will adjust my pro-forma. Please let me know what I should project for gross rents and expenses from this STR.

Two years in the making - one year late and we have our 1st STR just outside Breckinridge CO. We chose to go with Evolve vaction rentals because of the low cost, low hassle and professional recommendations. So far so good. More to follow as far as Evolve is concerned. My pro formas have been blown to bits. We were aiming for gross rents of between 50 and 60k for the first year. With a goal of getting to 75k in year 2. We definitely came out the gates blasting with 5k of bookings on day 1 and just shy of 20k in our first week. (33days booked) We haven't had any guests yet! First group arrives tomorrow. I'm not sure BP will let me get a link posted here..here its is. Check out this Vrbo rental:

https://t.vrbo.io/T1Ja0EvKq2. We bought the house in marginal condition and then expanded the existing kitchen and installed a second kitchen in the mother in law. Bathrooms rehabbed and new fireplace installed. Paint, tile and furniture. All in at 600k. We already had an offer to sell for 880k but I think I might have a cash cow. Feed back, comments, experiences tips tricks welcome.

@Ammanuel Shiferaw

Repeat! HELOC is a temporary solution. It may give you buying power in the short term. However, you need to have a solid plan to pay of the HELOC in short order. I have used HELOCs to purchase flips and buy and holds but pay the credit line off within one year.

@Andrew Postell

Thanks Andrew. I concur. I understand the HELOC is a temporary solution and has been very useful in the past for me. I tend to pay it back as fast a possible.

Not sure if they operate in your AO. You could try 1st bank or ENT credit union.

Nice work!

BLUF: I have a couple of properties with equity to juggle and I'm not sure of the approach to best set me up for my next REI.

Hi all. I'm looking for folks who would like to share their experiences with this problem set. 

My REI background: I have some experience with flips, buy and holds and issuing loans. REI is a hobby I take seriously and something I do additional to my W2 career. I don't have an imminent purchase but would expect to move on my next deal within the next year.

Priorities: 1.Protect the assets (insurance, trust, holding co etc) 2. clear the debt 3. financially prepped for my next REI

Asset 1: Primary home

.Value 550K. No mortgage

.HELOC 250K 4.25% fixed interest only

.Debt 80K drawn on the HELOC (170K remaining)

Asset 2 LLC : Second home and STR

.Value 800K. No mortgage

.Debt 100K family loan

Note: The STR will come online this month and does not have income at this time. The expected gross rents will be no less than 60K in the first year. I have no additional debts to consider.

My thoughts. First put both proprieties in an LLC for asset protection.

Then clear the combined 180K debt by putting in place a fixed 30yr mortgage on the primary as well as maintain the fixed 4.25% HELOC on the primary at the same time establish a second HELOC on the STR. Terms on the second HELOC would be variable prime plus .25%.

This will leave me with 500K LOC (two HELOCs Combined) for my next REI purchase and approx 1K in debt service on my primary home.

Feel free to punch holes in my strategy and recommend another approach. How would a cash out look on one or both of the properties? why would I cash out and pay the debt service without a purchase ready to go? Is it better to establish a holding company to protect the assets?

Respectfully,

Marcello