All Forum Posts by: Miguel Del Mazo

 1. We absolutely background, credit and eviction check every prospective resident that does not book through an Airbnb-type platform ("OTA"). We use Avail.co to manage our rentals' leases, rent collection and checks. We let prospective renters know what our criteria are prior to them paying $55 to be checked. That way, they don't waste their money if they know they will fail. We have a modest security deposit collected up front along with 1st month's rent and the cleaning fee. As soon as we can, we'll prorate rent to the end of the month with the residents permission, so that now they are synced up with all of the other payments depositing near the 1st of a month. 

2. The dynamic pricing for the OTAs has been hit or miss for us. I would suggest setting "instabook" to "off", allowing one of the more flexible cancelation options, and having a minimum stay in line with your local ordinances. Offer a significant discount for 1 week and 30 day stays (after setting your daily rate to accommodate the price drop with discount). To increase views, go into your listing periodically and lower the daily rate for the week or two after you have an expected vacancy, but increase the nightly rate after those two weeks so that you are still getting your target monthly rent. This encourages guests that will best fill your units back to back without sacrificing your over all monthly rent. 

3. Definitely learn about and post to furnishedfinder.com. It's not a booking site. It's a matchmaking site where you will have to reach out to prospective residents, background check them and create leases. ALE solutions, united corporate housing and alacrity are large companies in the insurance relocation space, and it is useful to go to their site and let them know you exist. Each site works a little differently. 

Best wishes

Clearly you are very successful at what you do. As a GA native and investor, I love Savannah, but I haven't invested there yet, partially because y'all are so dominant in the market :) 

I would caution, however, that there is "no way to do background checks". If we meet a resident through an OTA, we enjoy certain protections with that platform, but if, at any time, the resident wishes to extend, but not through the platform, we require the same background check, credit check, and eviction check as for anyone else not booking through an OTA. 

This is partially because we lose the OTA protections and partially to make sure we follow the same procedures for all residents (fair housing laws are important to follow). 

As for evictions, here is a tip from the one "cash for keys" move out we've had: don't be afraid of a little vacancy; a prospective resident with every red flag flying proudly in the wind is not a good match, even if you're new to the MTR game (as I was :) ) 

 I believe it is completely reasonable to have a clause in your lease that places a cap on utilities with any overage (proven by a bill) being the responsibility of the resident.

Our clause states that any electrical bill (we don't have gas, and water has never been a problem) that is over double the same month's bill from last year will have the overage assigned as a fee.

It is important to keep your bookkeeping straight if you do assess a fee. Generally, applying any monies received to fees first leaves the deficit as "rent". If it became necessary to evict a resident for another reason, unpaid rent is usually a pretty clear lease violation. Unpaid fees are not. Be aware if their payment is clearly labeled "for rent only" or similar, and in that case, only apply it to rent. 

I really advise doing everything you can to be on the same side as your residents and to be aligned with them, but some of them may not hold up their end of the bargain.

Hey Tod, 

I took a very brief look at your first listing, airbnb.com/h/newport1bedroom, and the thing that jumps out at me as far as improving it is: address the 1-star review head on without attacking the reviewer. Your response may turn off a number of guests who were thinking of booking.

We've all had guests whose unrealistic expectations were not met and could never have been met. If the guest feels slighted, there is no fact checking service provided by AirBnB to confirm their claims, so it is up to you to let future guests know the level of professionalism you provide.

If you are able, I would recommend editing your response to the 1-star review. This may be a viable response: "I appreciate your feedback, and I am sorry that your expectations were not met. As a super-host going back over 14 years, I know how important it is to have a great experience. Our Newport condo has consistently been rated highly, and we have been using the same cleaning crew since XXXX because they have consistently done a great job. When you posted your review, we assessed the unit to see if there was evidence of mold, urine or any other health hazard. We, fortunately, did not find any evidence of these. I am sorry that the storm that passed through just prior to your stay required emergency roof repairs.  When we spoke, I alerted you to the need to make the quick repairs, and you agreed to allow access to the space to get things back to top shape. I understand how important privacy is to our guests.  Again, I am sorry that your expecations were not met as I will always try to be honest, straightforward and respectful to all of our guests".

It is a shame that one reviewer can hold so much sway, but sometimes the host's response (if done well) to a negative review can actually draw me to a property, rather than dissuade me from booking.

Furnished Finder is definitely worth the costs despite the company continuing to raise their yearly price. It was $99 a year, but now it is up to $179.  Still, it is worth it.

Think of FF as a lead generator and not a booking platform. You post, and potential residents will reach out...or maybe they don't. If your listing checks some of their boxes, but not all of them, FF will let you know about an "unmatched housing request" or possibly a "general hosuing request".  It will be on you to reach out to these folks to see if you would be a good match for what they need.

It is *not* a site where people can just put in their travel dates and find, book and pay for a place to stay without interacting with a human.

This.

Also, if you were the tier 1 worker bee at a relocation company who wants to get a family housed, happy and as quickly as possible, would you accept the word of a guy who sells a course to new-to-MTR investors that "here is Eli; please send him all of your business. He's great".

I recently went to a conference (that fortunately was free) where a really famous name in the flip space talked for an hour about how important relationships and authenticity are in the real estate business. He then talked about the best ways to fake these. I mean, he probably wouldn't describe it that way, but that's what he was doing.

It takes time to grow organically, and it is frustrating and painful at times. Still, it prepares you well. Some things have shortcuts, but developing relationships isn't one of them.

I am sorry you got burned by a bad resident.  While it is a thing that definitely happens, it absolutely sucks when it happens to you. We've only had one resident fail to pay rent, and it was someone who had all the usual red flags, but she also had a sick kid.  Turns out that a 520 credit score and a sad story (that turned out to not be true) is really just a 520 credit score. Still, my soft heart left my head feeling pretty rough, like a "failure".

I don't think with your experience and 17(!) units you're in that boat, but for anyone out there, keep your head up. (still took me a few months to shake the bad feelings, though).

As to the original question, "yes". Credit cards offer a lot of protections for the user, but that doesn't mean they are allowed to commit fraud with them. Call the credit card company, and let them know the situation. I suspect, as more and more leasing-related disputes are occurring involving credit cards, the companies have already figured out their method of handling these claims. I would hope that they are not so one-sided as to only value their clients wishes, but who knows? For a few thousand dollars in rent, it is worth the call.

If you don't get satisfaction there, credit card companies are regulated via The Consumer Financial Protection Bureau (CFPB). There may be a way to appeal to them, especially since you were wise enough to have a lease in place. Letting someone out of the lease is not the same as nullifying that the lease ever occurred; it is just an agreement that you won't go after any additional months of future rents that would otherwise be owed. They still owe the back rent as evidenced by the fact that your resident gave you a credit card authorization.

If CFPB doesn't have a solution, then you have to decide if going to small claims court is worth it. You will probably win when she doesn't show up, and while you will have a hard time getting the proceeds of the judgement, you can mess up a credit score pretty well with an unclaimed judgement. That might even be enough to make it hard to be hired by a traveling nurse agency.

BTW, I am not a lawyer that can give legal advice. I am just a guy who tends to give illegal advice, I guess.

And finally, folks need to be aware that while many travelers pick the nomadic lifestyle for some of the awesome reasons: travel, excitement, variety, some pick it to try and increase their income to a level where they can earn their way out of terrible financial situations or decision making. The 2nd group can often be spotted via the credit report, and they are a lot less fun to host (late payments, asking for concessions, demanding, etc.)

 It's not a perfect solution, but for us, we don't change the availability of a unit until we have a signed contract. In our communication with prospective residents, we make this clear. So if the potential resident wants to drag their feet, but another party books on AirBnB, then that's just unfortunate for the FF lead. 

We also use avail.co's background, credit and eviction checks which can be set to make the potential resident pay instead of us. We've found that expecting the resident to pay for these is customary, expected and actually increases the likelihood that a resident completes their lease. I guess it triggers the "sunken cost fallacy" part of their brain. Dunno. :) 

I think a lot of the replies have made a lot of assumptions about the OP's situation. I'd like to clarify my assumptions (numbered below), and I would be interested in (constructive) feedback, especially from, the OP.

1. He has stated that he is a new investor, but he already has paid off his first investment fully, so he is clearly doing something right. Whether or not he is solely using the rental income to pay off the property or not, he has the ability to pay down a mortgage efficiently. 

2. He owns an asset that is worth (low-end) $300k that generates 2300/month (after all costs). He would like to sell it and buy 3 more properties of similar value with 20% down loans. So if he sells, after fees and such, he'll have $270k or so.  20% down on three $300k house = (.20 x 300,00 x 3) = $180K.  After buying these new rentals, he will still have about $90k in cash to spend on upgrades and furnishings. That's a lot more than it takes to furnish 3 homes.

3. Financing $240k at 7% will be about $1600 a month in principal and interest. The OP made this math easier for me, since he let us know that he is clearing $2300 a month after all his fees, so that means the only cost he isn't including in that $2300 would be his principal and interest.  Subtracting the $1600 leaves $700 of profit with each new house. With three of these houses, he will make $2100 a month, which is comparable to the $2300 he is currently getting. 

4. He believes that area where he will be buying the new homes is going to appreciate and attract more MTRenters, but now, the big difference is that he would now have 3 properties that can go up (or potentially down) in value, go up (or down) in rent, and three times as many vacancies to fill.

My back of the napkin assessment is that for only a drop in $200 a month in cash flow, he would control a lot more assets with growth potential and as rents rise over the coming years, the combined rents will increase to a total more than the single rent.

HOWEVER. Selling an existing, well-performing asset has some risks. Why not use the existing HELOC (mentioned in his 2nd post) to use as the 20% down on property #2? 20% of $300k is $60k; financed at 7.5%, that's $420 a month for the HELOC. The profit of the original house would drop by $420 to $1880, but a new property would come under his ownership making $2300 - $1600 = $700. The numbers can be adjusted for taking more from the HELOC to do repairs and add furnishings, but I think it's fair to say that $1880 + $700 - (cost to borrow for repairs and furnishings) will be at or greater than the original $2300 in profit form the single house.

5. Since the OP has paid off the HELOC quickly before, he can do this again. If he uses the HELOC responsibly, he'll be able to serially buy performing hard assets and eventually get to the point where the monthly cash flow will provide future down payments.

6. This is a "me" assumption: I assuming that I made a mistake somewhere in my analysis, so please feel free to show me. :) I learn a lot more from my mistakes than what I (very occasionally) get right on the first pass.

If there is a way to apply the discount code without calling, then I don't see it. 

We have 6 listings with them. I would love to benefit from the savings of grouping the listings as a primary with add-ons, but the last time I tried that, there were multiple issues on their end. It was worth it to just separate out every listing on its own, but if the price keeps going up, we will have to reassess.