All Forum Posts by: Victor Menasce

There are a number of professional property management systems out there that help with keeping everything organized. Some have lots of capability for managing large complexes (Yardi) and others are very capable systems that are great for smaller portfolios. I'm thinking of systems like propertyware, rent manager, buidium, app folio, to name just a few. They will all do a good job of tracking the operating aspects of a property.  

E-Myth series by Michael Gerber. 

David,

That’s a great question.

The obvious answer is it depends.

There’s clearly a linkage between travel and hospitality. A portion of the short term rental market is made up of medium term stays. Some estimates put the proportion at about 20%. I received this number from an employee at AirBnB directly back in November. Of course this number varies by market.

You need to look at how people arrive at the destination. How many arrive by air, how many by car and so on. For example for yourself, I don’t expect that many people are going to be driving to Alaska compared with those who fly. The Corona Virus is clearly having a massive impact on air travel. I have family members in the aviation industry and they’re monitoring flight loads on certain routes and seeing the number of open seats increasing by the hour.

It stands to reason that short term rentals will be impacted in much the same way as hotels.

We own several short term rental properties in the Rockie Mountains near some major ski resorts and a national park. A high percentage of the traffic to our properties comes from within driving distance. But if air travel is reduced and occupancy falls in hotels, we can expect prices to fall across the breadth of the market, including short term rentals. We won’t see as high a nightly rate as we might have seen in past seasons. Short term rentals cater to a different market than hotels. While there is some overlap, the reduction in air traffic will have a significant impact. In our market we routinely see plane loads of tourists from China and Japan in the summer months. During the peak season we see essentially full occupancy and nightly rates that are over $600 a night. Air traffic from Asia is down by 90% at the moment. If that continues into the peak summer months, it will be a problem.

We’ve seen that vacancy in the short term rental market doesn’t hit the market uniformly. Properties with the best reviews and the highest ratings get a disproportionate number of nightly stays. Even during low season, many of our properties have seen very high occupancy, far above the market average. By offering a superior product, competitively priced you can get more than your share of occupancy. The vacancy will tend to go to the junk in the market.

Let’s be clear, the entire world is suffering a significant economic impact right now. Even if the Corona Virus pandemic were to be cured tomorrow, there has been considerable destruction of wealth in a short time period. There may not be the disposable income for people to travel that might have been planned even two months ago.

We are at a moment when history is being made. We don’t know what the outcome will be. Be prepared for a bumpy ride in the short term rental market this holiday season.

Finally, to answer the last part of your question.

Whether AirBnB will delay its IPO remains to be seen. I have no inside information. A downturn in the hospitality industry could easily create unfavourable conditions for an IPO. When hotel stocks and airline stocks are falling, it will be hard for AirBnB to convince investors that they're different.

Not necessarily. He specializes in developing boat and RV Storage. There may be some potential synergy. 

David, 

My heart goes out to the communities where the main industry is shrinking. The fact is, real estate follows any other free market and must adhere to the laws of supply and demand. Communities connected to coal mining are shrinking because the employment is shrinking. For better or worse, coal has earned a reputation of being a dirty fuel and many jurisdictions have made the decision to eliminate coal burning for environmental reasons. Some of that reputation is well deserved, some not. There are some clean coal technologies under development and undergoing trials with the department of energy. If those trials are successful, it’s possible that we may see a resurgence of coal as a viable fuel for power generation. I doubt we will see power plants convert back from natural gas to coal any time soon, but it may enable some domestic power plants to extend their operating life. In particular, there are numerous plants in other parts of the world that may want to license clean American coal technology, or perhaps source clean American for their power plants.In my opinion, it would take something like a resurgence of coal in order for me to consider investing in an area where there is a dominant industry like coal mining.In order for me to invest, there has to be population growth, and jobs growth. If the jobs are disappearing, you’re trying to sell a product to somebody with no money. If they have no money, it’s not exactly clear why you would go out of your way to do business with someone who has no money. There might be a social benefit to doing so, or perhaps a humanitarian benefit to doing so, Those are all great things. But if your goal is an investment, then you want to evaluate the investment on investment metrics.The flow of money is straightforward. The tenants have the money. The way it works, is the tenants give you money at the start of each month. Over time, they help you pay for the property. In exchange, you take the financial risk of buying the property and borrowing the money from the future, along with personal guarantees and collateral to protect the lender’s position in the property. But if the tenants don’t have the money to start with, then the whole system breaks down.The problem with buying with the intent of selling in the distant future is that you don’t know if there will be buyers. If there are no buyers, then prices fall. It’s exactly the same situation as Detroit, albeit on a smaller scale. If there are no buyers, then prices fall. If there are no buyers, then you don’t have an investment. All you have is a prison for your money.Keep a close eye on whether clean coal gets adopted and whether it will drive a resurgence in coal mining.
 

Adam, I have an associate who specializes in these types of assets. Would you like me to connect you together?

The problem that I see with the park is that it is too small. Even if you get the park to 100% occupancy, you're only looking at income from the mobile home park of about $4,000-$6,000 a month. That doesn't even pay for the staff to operate the park, let alone pay taxes, maintenance, and so on. Even if you got the park for free, I'm not sure it's worth the effort. If you aspire to become an investor, as opposed to simply buying yourself a job, then you need to look at assets that generate enough income to hire staff. 

You will need to check your local building codes. You will definitely need a permit. In order to convert the basement into a legal secondary dwelling unit, some cities require a separate entrance to the exterior, the HVAC to be separated from the rest of the house, the bedrooms must have opening windows of sufficient size to qualify as a means of egress. Each community has its own rules on properties of this type. Not familiar with your specific town, but the building department should be able to answer your questions. Some people decide to build illegal apartments. That is, until there is some kind of problem and they discover that their insurance won't cover the water damage, or the fire damage because alterations were made that don't comply with the building codes. 

My recommendation is that you hire a consultant who knows the medical office space. These are the folks who have built dozens or perhaps hundreds of these buildings. They understand the leases. More importantly, they understand the underlying businesses. For example, there is a lot of consolidation happening in medicine. Are these tenants likely to be absorbed by a larger organization? If they were, what would that mean for their space requirements? Medicine is undergoing a changing model. I was about to build a building and then decided to pause because I didn't have the right people on my team. 

Is the situation a Foreclosure or a Power of Sale? How much would it take to make the loan current with the lender?