All Forum Posts by: Marcello Di Gerlando

Immediate thoughts. If you are contracted by Fannie Mae and you have 'insider' info I would suggest it sounds like a conflict of interest and may put you and any potential partners in legal jeopardy. 

Also, without skin in the game your risk is...well, kinda zero...If you do have zero dollars at risk than I wouldn't expect 50% or even 25% of the profits. You may in fact find someone to give you what you ask, its worth the ask. I would not.

If you can avoid conflict of interest and legal jeopardy bird dogging for a fee may be a better/cleaner route. I would love a bird dog with this kind of info in my area.

Good luck

I'm not and attorney and I don't give legal advise. But, I went through this in California some years ago. The nuances of law escape me now but I remember some of the larger moving parts. Bottom line, judge will want to see you tried to settle. And will probably split right down the middle to shoo you away if it's a close call. Judges don't like wasting time on this stuff, they see it to often. Carpets and messy children are boring. I recommend you try and settle and showing a record of your effort in this regard will work in your favor if the landlord doesn't budge. You could counter sue but 'wining' these types of cases can be a long shot even if your LL is completely in wrong. settle.

What type of STR; corporate rental, vacation rental? who do you expect your clients to be?

Almost exclusively I buy my properties with all cash offers even when it's not necessary. Discounts can be found but not what most new cash buyers expect and often cash has no bearing to the seller at all. The speed to closing is how I have found cash gives me an advantage on a property. When I mean speed Im talking hours or minutes. Not days or weeks. No inspections no contingencies. Acting with speed means you really have to know what you are doing to minimize your risk. If your business plan to your banker sounds like you are buying sight unseen, no inspections, no contingencies etc getting an unsecured LOC is your concern. Bankers will not lend to you unless you have an established relationship and a track record and even then unlikely. Its a dangerous game, the rewards may not be worth the risk. There are other strategies in the REI space that have less risk associated with it. Also, if you do get into cash buying you will quickly find out there are many more cash buyers out there than you might be imagining.

We have been using Evolve Vacation Rental since December 2019 for our one vacation rental in Colorado. 

I have never self managed an STR so I cannot compare my experience with Evolve against self management or another firm; I can only share my personal experience. In no particular order here are some immediate thoughts regarding Evolve.

1) Accounting - I tend to leave my accounting to others. However, I spot check accounts from time to time and look for anomalies and ask a lot of questions. I do the same with Evolve. However, when I communicate with them about a particular payment, line item, fee etc. I have yet to come across a customer service rep who can interpret their own reports in an intelligent manner. Evolve has not done a good job training their folks in this regard. Or they have automated their way into a mess of accounting and third party plugins and have lost control of skynet. I don't like the idea of paying an accountant to interpret Evolve's accounting which is what I expect to do this year.

2) Management? - Our original draw to use Evolve was the idea of getting us off the ground and running quickly and efficiently as well as Evolve's ability to communicate with guests prior to check in and managing post check out issues if they arose. Evolve did the write up, took pictures, posted our home on vacation rental platforms, gave owners and guests customer service and an app for calendar management. For that they earn 10%. We were going to take care of guests once they arrived manage cleaning and maintenance. Evolve had our flanks we had the middle if you will. Also, their on-boarding process was well executed and the staff were commendable. 

not so fast...

On at least two occasions guests have contacted me prior to check-in after they were advised by Evolve to reach out to me. One was looking for a complete refund 24hrs out the other was a COVID lock down related issue where guests were booked to close and in violation of local ordinance. We took care of our guests, but I promptly ripped Evolve a new one in scathing emails. Evolve was putting their monkey on my back. Both of these issues were in Evolve's wheel house and should have been MANAGED by them. 

3) Customer service pre and post COVID - Before the pandemic Evolve's customer service was really quite good. I particularly liked the easy to use 24/7 reporting feature on their app and website and I took advantage of live chat messaging as needed and when I called them responses were prompt. I was happy with their attitude, efficiency and response to issues... Post COVID... Total shite-show. Getting someone to even respond let alone managing an issue has been challenging. I submitted a report of damage 4 days ago and haven't heard a peep. I have also reported, on four separate occasions, that my listing appears on airbnb's mobile app as being in a town 30 miles away from the town we are actually located! Evolve cannot resolve the issue.

4) Evolve's vetted maintenance and cleaning network - Even though Evolve does not manage cleaning and maintenance they do have a network of cleaners, maintenance and on-ground services they recommend. My experience with Evolves network has not been great. The first lady we hired was a nonstop chatty Cathy whom we needed for a post-construction clean - she showed up with homemade chili and cornbread and was trying to figure out if she wanted to be my mother or chat me up for a-bit-of-the-you-know-what. I wanted to throw myself off the balcony after an $900 bill. (expensive chili in case you were wondering). The second guy was overwhelmed and under prepared for our place, he didn't make it a half day before quitting. The third and last Evolve vetted cleaner was a drugged out junky who was literately working in the dark - no lights and curtains closed- at nano speed with her kid in the basement and dog in the car. Poor creature was wacked out on pills or something. I felt bad so I fed the kid and let the dog out, she then quit.

Evolve needs to step up and remember that home owners are their customer not guests or anyone else. I'm on my last legs with them and hope they can turn things around. Their business model reads well but execution is questionable. COVID has a put a strain on everyone so I don't want to beat them up to badly. I'm willing to give them through the end of the year or until @Luke Carl book comes out, which ever comes first.

P.S Does Evolve even have a presence on BP? if not their nose is not to the ground.

@Luke Carl mathematically speaking your area still has an average regardless of the data set. Doesn't look like the 'average' would be meaningful from the price ranges. In your case, I would probably look for the 'mode'  which is the most frequent value in a data set.....But I'm not sure how that would be meaningful either. Just being a square.

From your description it dose not sound like a terrible situation. Is the area crime ridden? is there a pattern of break-ins' and vandalism?  Or was this a one time thing? If this was an anomaly for your area I don't know that I would go as far as the $12 a month light solution. I may put up solar powered security lights to make the tenant feel better but not much more. However, if this is common and reoccurring I would probably do a lot more. Wifi enabled cameras, lights, sirens etc. If I'm not mistaken I think you have a bunch of doors relatively close together, if so and you can justify the expense, drive by security firms are popping up everywhere and becoming more affordable.

Welcome @Jonathan Kimball to BP. I have been dabbling in REI in the Springs and surrounding area for over 10 years as well as enjoy my career in the Army. If you are looking for an agent who understands Colorado springs and understands real estate investing reach out to @Colin Smith . Colin walks the walk and will steer you well. Colorado Springs is a tough but rewarding market for REI and Colin understands it very well he is your guy.

@Luke G.

My situation is very similar to yours and I wrestled with the exact same issues last December when we opened our STR. Happy to share some of my experiences hope it can help.

We bought and remodeled a 4400 sqft vacation property in the Colorado Rockies. Sleeps 16 in 10 beds, 5 Bedroom, 4 Bath, 2 kitchens. I was able to divide the property to create two separate units with the intent to divide the listings as well as offer the whole house to larger groups.The larger of the two units was initially going to rent for between $290-$425 seasonally adjusted and the smaller one for $125-$250 ish. However, with winter coming on fast and no good solution to efficiently clear the snow to the entrance of the smaller unit we decided to rent the entire house as one large property just for the winter/spring season. 

Our decision to rent as a single large home was helped by the fact that splitting the units required multiple listing and other creative ways to juggle calender's for optimization which was more than I wanted to deal with at that time. We also briefly considered charging more for 'extra' guests but quickly changed our minds. I figured the single large house experiment was worth a shot during the winter to gauge demand with a plan to adjust fire in the summer for the two unit option.

I can tell you that we don't regret our decision for the single large option one bit. And fully intend to keep it as one large unit. Demand has been far better than we expected and getting large groups is not a problem at all. We have had to raise rates several times to find the sweet spot. My highest rate so far has been $950 a night for Christmas/new years 2020. 3 weeks of back to back bookings at my highest rates were booked 11 months out. Which tells me I left money on the table this year. We have seen similar demand for the summer/fall crowd as bookings were coming much earlier and more regularly than we expected. Some of our early summer guests got a steal as my pricing model was less than optimal. let me share some observations and thoughts, pros and cons, do's and don'ts on the larger property model for you to consider.

1: Large groups for STVR is a very real and very healthy market. 

Anyone telling you different probably doesn't have a large STVR worth staying in. Or have not played in this niche at all. Most folks simply assume there simply isn't a large enough demand. I had the same intuitions; I was wrong. Also keep in mind your competition. What competition? large groups have limited choices. 3BDE 2BATH STRs are a dime a dozen and once you split your units you will be competing with all of them. As a single large unit your closest competition is 45 mins away! You can demand a premium with the larger property. With the smaller units your competition is going to undercut you daily and you will have to be agile to keep up and try to find ways to differentiate yourself.

2: Economies of scale - One large unit will offer you economies of scales you can capitalize on. Consider one set of processes and expenses to manage instead of multiple. Also consider your economies of scale for maintenance and cleaning. Multiple unit cleanings a week or one? multiple maintenance trips a week or just one? 

Example: Set aside property appreciation math for this example but consider potential revenue and expenses to my hypothetical question. As an LTR landlord, would you prefer 1 roof with 6 doors paying $200 each or 6 roofs, each with 1 door paying $200 each? obviously 6 roofs have a lot more expenses to consider while your revenue stays the same. The same can be said for the single large STR or two smaller ones.

3: Economies of scale also work out for your guests. Large groups love the fact that they get a great deal when they split costs. It's a true win-win. Smaller STRs and hotels cannot compete with the value a larger STR can offer. I caution you and suggest you reconsider the additional rate for additional guests as @John Underwood also suggested. The economy of scale for your guests will not be as appealing and probably feels like nickle and dime'ing to the folks checking out your property online. The extra charge will have folks trying to figure out how to pull-one-over on you and they will probably feel uneasy about their ruse the whole time they are supposed to be enjoying your home. I can think of a half-dozen other reasons I would not go down the extra charge route. For me its simply not worth the extra agro.

4:Cleaning and maintenance: No doubt you will need the right team. Easier said than done. As @Mark Miles suggested a big house is a lot of work especially if you plan on doing same day check ins. We did same day check ins during the winter, pre-COVID and it was hard but manageable, the extra revenue more than justified the extra expense. Post COVID lock-down we are not doing same day check in; we have a 24hr gap for new guests. The lost revenue stings but so far its working out.

5:Trash: there is a lot of it. 18 folks + 5 days equals a well placed dumpster or a stinking nightmare. Have a good plan to handle trash on a quasi-commercial scale.

6: Alcohol + large groups = Party. Any time you have a lot of folks and alcohol combined you can bet on shenanigans. Check out the threads on BP that cover the topic of controlling parties potentially heading your way. Their are mitigation tactics including minimum age for bookings, screening for .edu addresses, noise detection devices etc. Good commercial STR specific insurance is a must have. Proper Insurance is the industry go-to I'm not sure of the others in this space. I use Proper and they have me covered for Alcohol related liability.

7: Washing machine, dryer and dish washer: Drying towels and linens will cause a bottle neck in the cleaning process. As large as your property is two dryers is highly recommended if not critical. One will not be enough especially on one day turn arounds. One large washing machine should suffice but a second cant hurt. Dish washer, consider two because your standard dishwashers are barely capable of handling a family of four let alone 3 meals a day for 18 guests.

8: I recommend you have fun activities for your guests to do in the house. With a large property you will have multi generation families and even two or three different families at any one time. Ages ranging all over the spectrum. Don't forget the Baby and don't forget grandma. I keep a stocked book shelf, lots of board games and cards, floose ball table, corn whole, gold pans, fishing poles, binoculars, game console, dvds etc. No one wants to be in a giant house without the fun stuff. Stay away from dart boards unless you have a good method to prevent darts from creating excessive damage. Guests loved my traditional dart board and was a huge hit but unfortunately some guest turned into a missile range and blew up my wall. Sadly, I it took it down yesterday.

These lessons learned are my immediate thoughts on the fly while typing.I have more info to share so let me know if you have specific questions. 

Final thought, don't dismiss the large single house option. The revenue you can generate may pleasantly outperform the combination of the smaller units and your economies of scale will definitely lower your expenses and reduce workload. You already have a significant advantage on your competition and the opportunities to differentiate are much greater with a larger home. 

Good luck.

I use Evolve as a third party management firm and guests are required to buy insurance for $14.50 covers $3k in theft and damage and $1MM in liability. $500 deposit would barely cover a piece of furniture or carpet cleaning. I've made a claim to test their tolerance and process and it was a low hassle easy experience. I also have supplemental inurance for catastrophic contingencies. Keep in mind guests don't know you and forking over large sums for security deposit dollars may just make them shop around to your competion. I find insurance to be a win win. Good luck