All Forum Posts by: Paul Shannon

@Neil Masincupp It doesn't necessarily have to be an all or nothing proposition.  Finance 101 would suggest that leveraging your money and keeping the debt would lead to more wealth over the long-term.  As you know, stocks and real estate have outperformed 4-5% overtime.  However, investing is more than just numbers.  Risk tolerance is involved and that varies for everyone.  Having no debt, increases cash flow and your obligations, which helps some people sleep better.  

I look at paying down real estate debt similar to the utility owning bonds used to provide.  Today, bonds don't pay sh*t for income, so I don't own any.  However, I have some mortgages with 4-5% interest rates.  Whenever I pay down principal, I guarantee myself that 4-5% return.  The stock market is bubbly in my opinion, so extra cash is going towards paying down debt at the moment.  If the market corrects in the fall by 15%, I'll be plowing that money into the stock market to buy the dip.  Just spreading bets.  Roughly 75% of cash flow to buying assets and 25% paying down debt is what allocation works for my risk tolerance. 

John, 

With hiring individual cleaners, how do you manage back-up contingencies if that cleaner calls in sick on a same day turnover?  I'm concerned about a single point of failure.  Guests showing up to start their vacation to a trashed house is game over.  Sounds like you have a solid system. 

Is it always beneficial to hire a cleaning company versus a solo cleaner?  I'm worried about a single point of failure.  What happens if your cleaner doesn't show up on a same day turnover?  Whoops.  

Aspiring STR owner here.

Mark, one of my concerns with STRs being self-managed from a distance is having a single point of failure in my process.  I can handle bookings and guest communications, but cleaning and maintenance are a concern.  It sounds like you've been successful with hiring cleaners and maintenance folks.  What if your cleaner calls in sick or isn't reachable on a turnover day?  Do you hire a cleaning company with a large staff to get around that?  Same issue with a handyman.  I'm preparing for making the self-manage versus hire it out decision.   

If you haven't had experience investing in real estate, staying close to home is ideal.  If the numbers don't pencil out, forcing you to go out of market, there are a lot of options for other areas.  More important to the market, is finding a solid team within that market.  Makes all the difference.  I'd find the market with the best team (contractors, property manager, realtor, etc. you can trust or believe you can trust) and secondly the market that you personally can get to easiest.....driving distance or direct on a plane.  

I had a very similar debate over this about a month ago. I think the HELOC or a business line of credit is the way to go. It keeps your risk lower on the properties you already own. You only will pay interest if you use it and the costs to open the line are low. I love to have the option to access cheap money whenever I want it to jump on opportunities.

It is difficult to find them right now though.  May have to source through local banks or credit unions.  I believe all the big banks have shut off new applications. 

Yes, I can see what you mean. By new investor, do you mean new to STR investing, or investing in real estate in general? Do you think property management, although expensive, can help mitigate the risk of getting a poor review if your STR is out of state?

Sweat equity is what builds wealth the quickest in real estate, b/c you are able to create equity through rehab out of thin air when the BRRRR strategy is executed correctly. With a turnkey property, that sweat equity was earned by the turnkey operator at the closing when they sold it to you. Then they make property management fees from you ongoing. If you want a passive investment that earns an average return, there's nothing wrong with turnkey. Just be careful that you are really buying a turnkey property and not one with lipstick put on it. The turnkey seller makes a better return than the turnkey buyer.

If you want more you have to put in your own sweat equity by managing the rehab and running a business. 

@Jonathan Greene

@Ann Shanley

It's interesting.  I'm looking at it a bit differently.  I just went down to Destin, FL a few weeks ago.  We didn't go out much, but had a house with a pool.  We were able to avoid the crowds and stay safe and have a great vacation.  Could you do that at a hotel?  Not so much.  

Over the last few years, I've staying in VRBOs exclusively for vacations.  I saw the trend heading that way before COVID, but I believe travel will be changed moving forward.  Airbnbs in cities that rely on event traffic are hurting, but vacation rentals I think could benefit huge.  

I know a STR owner in Vermont. Usually they get seasonal traffic in the winter for ski season and summer is very light. He's booked every week through Labor Day this year.

I'm betting on STRs in vacation spots with favorable legislation and a tract record of STRs long-term.  

Its risk management, which is a personal finance topic.  Personal finance is "personal".  Its different for everyone and there really is no right or wrong, b/c emotion and risk tolerance is involved.  If you are using rental real estate for income in retirement, you want low maintenance and low risk.  A paid off property fits the bill.  It provides much higher cash flow and you need way fewer doors to achieve the same level of cash flow you'd need with quite a few more properties using leverage.  Simplicity and income.  If you are trying to scale quickly, however, you need leverage.