All Forum Posts by: Account Closed

Account Closed has started 141 posts and replied 4068 times.

Originally posted by @Jay Fradd:

Originally posted by @Luke Carl:

Originally posted by @Jay Fradd:

Originally posted by @Luke Carl:

Originally posted by @Jay Fradd:

Originally posted by @Luke Carl:

Can't do cap rate on a a single family home. Think you mean COC.

I think you have a fundamental misunderstanding of Cap Rate? Cap rate can be calculated on a single family rental home just the same as any other rental producing property. Cap Rate excludes out any consideration of financing or the costs of obtaining financing (among other things). I'm not disagreeing with you if you are implying that COC return is a better way of evaluating a short term rental, but to simply say you can't do cap rate on a single family rental home is false.

You can calculate it all day long but to me it doesn’t mean as much because the income and the property value on a 1-4 family aren’t related.

So you're saying that in Gatlinburg. Lets say 2 different two bedroom cabins each at 1,500 square feet. One of which is producing $70,000 in gross rental income and the other producing $40,000 in gross rental income. The value of the one producing $70,000 wouldn't almost be higher? You're saying they aren't related the gross rental income and the property value? That makes no sense. I understand, for the most part, in appraisals rental income isn't considered as the primary factor on 1-4 family as a sales comparison approach is considered.

But all of this is actually irrelevant to what you're saying. A CAP RATE is basically the annual return if someone paid 100% cash for the property. It's a different way of analyzing an investment because most people have different loan conditions (percent down, interest rates, closings costs, etc). The cash on cash return method is absolutely a better way of analyzing YOUR specific return (if leveraged). But people can artificially make deals look great by putting little to no money invested in a property and show a really high COC return due to being highly leveraged. But looking at it from a cap rate perspective, they really didn't have anything that special.

I still can't get my head around your comment (about short term single family rentals) that income and property value aren't related.

The short terms that I personally own are grossing $113,000 this month and I do not calculate cape rate on them because they are 1-4 family and comps determine value.

I do calculate cap rate on my apartment buildings.

Good for you. That sounds like a good month no doubt. However, I'd still say the rental income plays a part in the value. To say it doesn't is foolish. Take Shields Mountain (which does not allow short term rentals) and the values there right next to another place on Upper Middle Creek Road like Summit View for example and the values are tremendously different BECAUSE of the rental income generated and capability.

And going to what the actual initial post posed: "Is it still possible to get 10% CAP rate for managed STR?" That is a BETTER posed question using a CAP Rate as the metric determined rather than COC return %. Because people are going to have different financing types and of course down payment percentages that largely impact a COC return, but play no part on CAP Rate. So the original post question, in my opinion, asked it right by using Cap Rate. He may intend to put 50% down while others only intend to do 10% to 20% down. So the answers would be skewed.

But to answer the original question from the post. It is very difficult to get a 10% cap rate on short term rentals now while still using a management company. Unless the management company charged 10% or 15%. Then it still may be plausible market dependent.

Just curious. How much does the normal property manager charge for the normal Sort Term rental in Gatlinburg?

Also, what would be the normal length of stay of people using STR in Gatlinburg? 2 nights? 6 nights? Other?

0 Votes

Originally posted by @Harvey LaCount:

My 7 day trial for PropStream ends today. Didn’t really get a chance to actually test it out (ie I have no idea how to really use it effectively lol). Just wanted to know if it is a good resource and is it worth the $99/month for someone that is just starting out and trying to look for buy and hold properties? If you feel it is worth the investment, what are some tips to maximize this app?

In order for it or any other site to be useful, you have to plan on sending at least 500 to 1,000 mailers a month (plan on $1 per mailer, printing, labels, stamps) and you have to consistently do it every month as a minimum.

Or, you can be more effective and just knock on doors in a neighborhood.

1 Vote

Originally posted by @Paul Sandhu:

@Luke Carl is right. Clean it up and move on. If I dwelled on things like this I wouldn't be up to 23 STRs.

Yeah, but with your crowd you'd applaud them and join the party. ;-)

2 Votes

Originally posted by @Eamonn McElroy:

Do you use the property as a residence?

If one uses a STR for 60 days out of the year, does that make it a residence? What is the implication of using it for a residence?

0 Votes

Originally posted by @Daniel Hurtado:

I ask this as a newbie looking to start wholesaling this month

I suspect the answer is in the number of bodies of people who have tried before you that you have to step over to actually do a deal. I suggest you contact the people on BP saying they were going to start doing wholesaling and ask them if they ever got a deal completed. It should be an eye opener.

2 Votes

Originally posted by @Chi Wen:

So we all know housing will dip/drop at some point. What happens to your equity in situations when you put down 5% vs when you put 20% down?

- Buy a 500k house and put 5% down (25k) and the next day housing prices crash and your house is now worth 400k.
- Buy a 500k house and put 20% down (100k) and the next day housing prices crash and your house is now worth 400k.

in the first case you are "underwater", correct? What does that mean exactly and what kind of real life implication does each case have assuming you keep paying your mortgage and have the same rental cashflow coming in?

If you keep the property it has no effect.

If you try to sell the property you lose your equity. When you are underwater it means you can't sell it for as much as you owe on it and you have to bring money to closing to cover the deficit. Keep in mind it costs you about 8% to sell. So, if you sell at $300,000 it will cost you about $24,000 between real state agent fees, title, concessions, escrow, etc.

For instance, your house used to be worth $350,000 but now it's worth $300,000.

if your loan is at $280,000 and you sell at $300,000 minus $24,000 in selling costs you net $276,000 - your loan payoff is $280,000 so you have to bring in an additional $4000 to close.

1 Vote

Originally posted by @Andrew Haney:

@Mike Hern

1. 1 is Occupied and the other begins a minor remodel and furnishing next week.

2. 1 is just N of the pv mall and 1 is in old town

Okay. They like them to be ready to occupy for best results but I'll give him your post and he will contact you.

0 Votes

Originally posted by @Jabbar Adesada:

@Bill Exeter

Thank you for informing me of that! I have no intention ever to commit fraud, my honor and integrity are way more important to me than a couple thousands dollars in cash flow... I will refer to the loan documents then and be sure to move forward with honesty! Thank you

When you read the documents (which I actually do read them) you will notice that the lender MAY call the note due. It does not say the lender WILL call the note due. There is a very big difference. It's rare under the present circumstances for a lender to call the note due and you have the right to transfer ownership anyway. You just have to be aware that the lender CAN call the note due. If you have sufficient funds or access to money, even if they call the note due, you simply pay off the note and everything is fine.

0 Votes

Originally posted by @Russell Brazil:

Originally posted by @Account Closed:

Originally posted by @Tom Gimer:

Originally posted by @Account Closed:

Originally posted by @Jim Stanley:

Not sure if this is the right place to post, but I figured this is where the people with the right knowledge would be:

I'm a beginning investor near Denver, with 1 SFH rental, looking to learn and grow. I met a guy at a foreclosure auction who invests in a lot of things: foreclosures, buying notes, flipping houses, wholesaling, some other stuff. He has offered to teach me and let me in on some deals.

The current offer is this:
We will knock on doors of candidate properties together until I learn what to say, then I'll do it solo. If I find one that he ends up buying, he will pay me a small finder's fee. He has a money man that he borrows from, but he does still need a down payment. I will invest $50k of my money (from my self directed IRA) as part of the down payment. His money man gets 1st lien on the property and I get 2nd lien. Once the flip is sold, I get my $50k back plus 10% APR. If the deal works really well for him, I get a bonus of unspecified amount. I help out on the whole process wherever I can to learn the business.

I have no particular reason to distrust this person, but I want to do diligence and understand my risks. Please tell me if I am wrong about anything and if I am missing anything (I'm sure I am!!)

-worst case- he just plain steals the money without giving me the lien, gives me a fake lien, etc Pretty unlikely but plausible.
-really bad case- the house burns down and the property is worthless. Would his insurance cover me on this?
-really bad case- we buy a property that is worthless (built over a toxic dump, etc). I should be able to mitigate this myself by doing diligence on the property before investing, and assumedly, so would he.
-most likely case- the flip just does not go well and the profit is negative (or he claims negative profit even if it is really positive). Please correct me if I'm wrong here, but I THINK my 2nd lien protects me here. He pretty much has to sell the house to pay back his money man (or the money man forecloses and sells it), and I get paid then, correct? I THINK the worst that would happen in this case is that I would not get my 10% interest and my $50k principle could be tied up a long time. I suppose he or the money man could simply keep the property and not pay me- would I have any recourse then?

- What else?

THANK YOU VERY MUCH

Take your money to Vegas and put the whole wad on Red 7. You have better chances of that being a good idea.

No. This is not a good idea at all.

Not Red 7... just Red. Almost the best odds in the casino.

And yes, much better than a junior lien.

I've been meaning to get your opinion, I see you're in D.C.

Would you think a short term rental in Cumberland MD would be a good idea? Theory being tourists wanting to visit D.C. could stay in Cumberland and still have easy access to D.C. without the expense of the city. And the reverse that folks who need a few days of R&R away from D.C. & Baltimore could get out of the MetroPlex.

Or would the other side of the border into Lake Anna VA be a better location?

Does MD or VA treat landlords better and which has the heavier tax burden for investors?

Cumberland is as far from DC as Philadelphia is to DC.

Okay, now that we both know we are brilliant at geography, where would you look for an STR ?

0 Votes

Originally posted by @Russell Brazil:

Originally posted by @Account Closed:

Originally posted by @Tom Gimer:

Originally posted by @Account Closed:

Originally posted by @Jim Stanley:

Not sure if this is the right place to post, but I figured this is where the people with the right knowledge would be:

I have no particular reason to distrust this person, but I want to do diligence and understand my risks. Please tell me if I am wrong about anything and if I am missing anything (I'm sure I am!!)

- What else?

THANK YOU VERY MUCH

Take your money to Vegas and put the whole wad on Red 7. You have better chances of that being a good idea.

No. This is not a good idea at all.

Not Red 7... just Red. Almost the best odds in the casino.

And yes, much better than a junior lien.

I've been meaning to get your opinion, I see you're in D.C.

Or would the other side of the border into Lake Anna VA be a better location?

Does MD or VA treat landlords better and which has the heavier tax burden for investors?

Cumberland is as far from DC as Philadelphia is to DC.

Thanks for the geography lesson.

Here's one for you: Fargo North Dakota is as far from Casper Wyoming as Talladega Alabama is from Collinsville Oklahoma

0 Votes

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All Forum Posts by: Account Closed

Account Closed has started 141 posts and replied 4068 times.

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Post: Does holding a 2nd place lien make me safe on a flip deal?

Post: Does holding a 2nd place lien make me safe on a flip deal?