All Forum Posts by: Mitch Davidson

@Bryan H.. If it was me, I wouldn't build. Perhaps I'd bring in a modular, but I wouldn't build. In our more local market, a custom build, including land development, will take well over a year. Down near Waynesville, Sylva, Maggie, or Bryson City, it'll take 3 years according to the guy that built my place. That's a ton of lost time. Instead, this Spring you'll likely see some properties that check most of the boxes, that can be made stand-out, etc. In many of the smaller/sub markets in the region you can make top 10 or top 5, having a place that's relatively similar to the top competitors, if you'll simply deliver awesome customer service and experience. I think you'd do better to buy now, start making money, and focus on kicking butt by communication, activities and features you add to the home, cleanliness, etc. Also, as you may have found previously, getting a construction to perm loan for an investment property is tough. Most lenders exited the new build business when Covid started. Some of us are just getting back into it. Most that are offering a new build product, however, are limiting it to primaries and seconds, some only to primaries. Happy to discuss more. Will message you.

@Bryan H.. What @Abigail Gibson and @Josh Myrick have said above is pretty sage. I totally agree. Our markets here will continue to be amazing for STR, especially when you consider seasonality and such, but increasingly only for those that want to work really hard at it, and keep working at it. If you haven't read Atomic Habits, perhaps take a gander at the opening story about the British Cycling team. They turned the course of history by continuously looking for 1% improvement opportunities. If you'll commit to such an approach, rather than "set it and forget it" or autopilot, you'll likely have a bright future here or in other markets.

That said, because I see how many people's STR's really do (when working on their loans), I'd increase Abby's distance to 45 minutes. You can do really well in Mars Hill, Lake Lure, Brevard, Waynesville, etc. If it was me, I'd still try to be no more than 15 minutes from a small downtown, and a great one, so that guests have a downtown really nearby, for times when they don't want to drive over to Asheville.

Please reach out if you need more feedback.

AND...if you'll be in town on 1/18 or 1/25, we'd love to see you at a BP meetup. Same if you'll be here in early February. 

Hey @Christopher Currin. I have a new cabin nearby, in Bryson City. It wasn't totally finished when I bought it 10 months ago. And some of the items the seller finished had to be redone. Then of course I had to furnish it, upgrade things for STR purposes, etc. Suffice it to say that a ton of work was needed. Everyone one I've used for services has been found by word of mouth, has met me face to face, etc. You really have to get some facetime and relationships going there, at least to get the referrals you need.

All of my trades people are generalists. They all have some specialties, and then some things they don't do. Half the people they refer are non-responsive, or worse (i.e., not motivated to say the least). And everyone wants to bill by the hour, get paid quick, etc. My electrician, for example, and amazing and cheap guy, only takes cash. Not even Venmo.

If you can suffer through the pains of making something great down there, you can have a great place. In that region, a really well-done STR seems to stand out more, compared to a market that has more infrastructure, if anything because owners struggle to find help and furnishings more often.

I'm happy to discuss more if you like. And I can refer you to a few great people down there too! I'll message you.

Hi @Brook Davenport. A friend here has a great cleaner that he'd like to get more work for. I'll message you contact info offline.

Nice, @Brandon Jones. Maggie is great place to invest!

@Nicolas Londono, for mine I just have a standard landlord policy, with a small rider for personal property included (typically included as it is). I require the tenant to furnish and maintain a renter's policy, and to name me as an additional insured (meaning, the carrier notifies me of any lapse, renewal, cancellation, etc.). 

Hey Dan. This is really excellent feedback. We often hear how awesome something like ADU's work for someone in their peculiar market, perhaps in part because they're selling coaching or books, and think it'll be magic for us too. Then we maybe find out the hard way that that awesome concept isn't so awesome for our market or even most markets. I think it would be great to post a copy of what you've said, as a standalone post in one of the forums. I have an ADU with my primary. It's stick built, and really just a small home. Not modular, and not looking like a trailer. I've had it appraised several times now. Each time, the value is about 1/3 of the build cost. Besides having very little SF to value, appraisers value ADU SF at the rate they give you for a finished basement, meaning a fraction of GLA. Thus, I'd have to separate off a parcel for my ADU to make the value improve. And even then, 500-600SF is likely not going to appraise for the cost of the build, especially when you account for foundation, utility hookups, and everything else involved. Perhaps the numbers can make a little more sense when people buy a modular cabin and bolt it down to a permanent foundation, after which it's looked at as stick built on an appraisal. Even then though, the small footprint is a struggle regarding both refi and resale.

 Great feedback, Allen. Thanks for sharing.

Like others have said, this is a business, these are good examples of the costs of doing business, and surely not worth nickling and diming about. The big picture, meaning great reviews, is what matters most, and is what pays tomorrow's bills.

Hi @Cassandra Reynolds. I live nearby, and can relate to your dilemma. I think you'd really find some benefit from attending one of our local investor meetups (all of which are free, all of which are casual and rather open forum). When you're contemplating your first investment, comradery is critical. It's often the deciding factor between taking action and forgetting about it. I'll send you info about the groups.

Regarding your decision, three major factors come to mind. The first is down payment. For a new 1-unit primary, your down payment will need to be only 5% (only 3.5% if FHA instead of Conventional; but Conventional will be cheaper overall if your credit scores are good). If the home will instead be second (can't be very nearby to your primary), the minimum increases to 10%. And if investment, the minimum increases to 15%. If your investment plan is STR, you can really go either way, meaning second or investment.

The second concern is pricing (meaning, rate and points). If the home will be a second or investment, you'll likely have a rate that is .5 higher than that of primary, and you'll have some points cost at closing (perhaps 2, meaning 2% of the loan amount), unlike a loan for a primary that won't include points unless your buy the rate down (or unless your credit scores are lower). 

Thirdly, DTI is a major factor. You may want to put just 10% down and call it a second, for example, but DTI may not work without the lender using potential rent from the subject property (obtained by an estimate from the appraiser). And to use such potential rental income the lender has to classify the home as investment, which makes the minimum down become 15%. (Some lenders require 20%, but Fannie and Freddie allow 15%; just know that putting less than 20% down on investment or second increases your points cost by .5 and of course makes monthly MI become a requirement.)

So, if you can tolerate relocating to a new primary, it might be best to go that route (meaning, make your current primary become your investment home). And if DTI will be too high for such a scenario, you can obtain an annual lease for the property you're moving out of. The lender can then use 75% of the monthly lease amount to offset most or all of what that property is occupying in your DTI.

Hope this helps. Will message you about the area meetups.