All Forum Posts by: Michael Hyun

@Jane Ng I'm curious what you see in that market - would you be willing to share? I've done Airbnb's in San Francisco, San Jose, and Joshua Tree, but I'm interested to hear why you'd want to do a STR there?

Hello everyone, I'm currently looking for a CPA to work with for the long term. I'm looking for a CPA that offers tax planning and will work with me to not just help me with my tax return, but also help me put together a plan for the long investing career ahead of me. Please give me any recommendations and please share some contacts! Thanks all!

I wouldnt suggest renting a condo/townhouse with an HOA unless that HOA explicitly allows the STR.

I think a 20k to 40k profit is generous for cheaper properties. If you want bigger profits, maximize the number of beds in your STR.

Let me prefix with this:
Basically the reason why STRs have exploded in 2020 was primarily due to the pandemic making most people work from home, and there was (and still is) a desire to travel a lot since everyone was always indoors. With that said, the capital gains in my post are mostly luck, not calculated. I ran the numbers assuming zero appreciation (Joshua Tree is not known for appreciation, historically)

With that in mind:

I bought a second home 20% down in Joshua Tree, CA for a 2/1 800sqft 225k home near the National park entrance. I didn't know 10% vacation home loans were a thing then, but I was okay with the 2.75% rate on the second home loan. I closed on Oct 2020, and then did a full paint job, new floors, painted kitchen cabinets and replaced countertops, etc. A very cosmetic renovation. All in was 45k down, 35k for renovations and furniture - including a stock tank pool. I grossed about 50k and netted about 20k in exactly one year.

Sold the JT home in Nov 2021 for 504k. 1031'ed just about 300k into a long-term rental home in the Bay Area. I closed for 960k, it appraised for 990k, and I'm pretty sure I could sell it for 1.1mil currently.

So something that I learned from all of this is - the real wealth builder is: gaining equity. I know I lucked out with my timing, but real wealth is built with appreciation. I cash flowed 20k my first year doing STR, and I was able to bonus depreciate pretty much all of my furniture and some of my renovation costs, so it canceled out pretty much all of my first year's profits. But going forward, I'd have to pay taxes on that cashflow. However, the equity that was added to my JT home can be used without paying taxes on it (yet). I can 1031 the full amount (300k) and use it until I die without paying taxes on it. Essentially, there are so many ways to avoid paying taxes on equity gains, whereas not as many for cash flow I realized.

No, the tenant has California tenant rights at that point since you are renting more than 30 days at a time. She is technically a long term renter. Thats why I only rent under 30 days at a time. 

@Jon Rosburg you think the property will be worth less in 5 years, why’s that?

@Arya S. That is definitely a viable option, I might have to look into that also. I don’t know much about commercial but perhaps I can 1031 my house into one of those.

I personally would not do Evolve - I've heard bad things. You could do a much better job - the key is in the set-up. Make the place "question-free" - meaning when you set up the property, make sure you have a guest book that answers 90% of questions they might ask you. Put labels on everything to show them how to use things. Make it obvious how to do things around the home. 

Lastly, you'll need someone you can trust to be within a few minutes or an hour. Save teh management fee, unless you have 5+ properties and are trying to scale

An inground pool for 17k?? How is that even possible? What does this inground pool look like? 

Most inground pools I've heard of cost 100k+ to build. I'm amazed that you could do it for 17k. 

The pool will be the selling feature of the home, I wouldnt put some shabby pool there. People are booking homes specifically for the pool. 

Still, even 70k for a pool seems insane. You could take 70k and buy a 400k property that grosses 60k a year on Airbnb... Just some perspective. 

I considered them, but conventional financing is the way to go - it should be your first option. You can't beat the rates. If you want to scale without the restriction of DTI, then maybe you should consider Host Financial.

Rather than call, I'd just read through the city/state/county ordinances. It's the most accurate way although it might be a bit boring.