All Forum Posts by: Raghavendra Pillappa

Hey @Raghavendra Pillappa, late to the party here but everyone said it best.

I wouldn't move forward on this until you find out all the details on if the septic can be expanded and if things were done correctly to add the bedrooms. Need to be permitted and I am going to say it probably wasn't.

If the septic is only for a 2/1, then the county/city wouldn't approved the expansion as the current septic doesn't work for it.

Most likely this would be a pass.

I would report them to the county and have the county force them to fix it if you wanted to gut them.  However, the other option is to write a letter and have your agent present it to them with a counteroffer.  They must disclose this to any future buyers because they know this.  I had a similar issue on my last deal and got another $25K off.  If they still do nothing, you walk away.  Then, in a week, have a friend of yours contact the listing agent and get it under contract.  If they don't disclose it to the new buyer, then have them close.  Then the agent and seller are liable for any damages you have.  Fix the problem and make them pay for it.   The agent has insurance, but clearly, they should not be an agent if they don't disclose this.  But there are a lot of unethical agents out there.    

I have 12 STRs and am launching 20 more this year. I am building them especially for STRs, but they will have a cash flow as regular rentals. I call them Micro hotels/co-op living—12-bedroom duplexes with 12 baths and two standard common living room kitchen spaces. Bedrooms are 350 sqft. In general, most people value STRs for sale based on the income of the STR. You should base your purchase on what you make as a long-term tenant. If those numbers don't work, then don't buy it. STR is just a bonus. This model works just about everywhere besides places that have occupancy limits.

Unless this is a place you want to go hang out, it is for fun, not an investment. You can lose money on those deals. 

I'm a short term rental specialist in the Shenandoah Valley. If it's a 2 bedroom on paper and a 5 bedroom in reality, then this is a significant problem and is probable a big reason why you say it's been sitting on the market. There's a chance that a septic upgrade will work, but also a chance that it's simply not possible. I recently bought a 3 bedroom in Elkton VA (Rockingham County) and expanded the septic to allow for a 5 bedroom. All-in cost of that is around $21k, and we had to get creative to make it work given the drain field site. You could try to "fly under the radar" and use the existing septic but 5 vs 2 bedrooms is a massive difference so I have to think you'll be dealing with septic problems. Additionally, I don't know exactly which county you're considering buying in, but some around here don't require permits… yet… but I think that's coming. Also, all it takes is one neighbor who doesn't like you to look up your 5 bedroom Airbnb listing and your 2 bedroom house in county records to report you to the health dept, and then so much for flying under the radar. If you get serious about buying the house, feel free to shoot me a DM and let me know the county… I can connect you with an OSE who could probably take a look at the records and tell you what is possible regarding septic expansion.

Make the offer that suits your assessments. If they aren't playing ball, walk away.

You will need to make sure the home is code compliant. If not, you assume the risk and all potential consequences attached. Evidently, they did not pull permits.

My first question is: Do you need to register your short-term rental in that town or city? If so, do they conduct inspections? How often, and what does that process look like?

Even if inspections aren’t required now, that could change in the future. If the city decides to enforce inspections later and your property isn’t compliant, you may need to make costly updates to bring it up to code.

It ultimately comes down to your risk tolerance. If I believe I can generate enough profit this year and navigate any potential inspections next year, I’d be comfortable moving forward—using the income earned to cover any necessary upgrades.

An alternative exit strategy is to document the financial performance and sell the property as-is, highlighting its strong short-term rental income.

Think through your next five moves, from best to worst-case scenarios, and make a decision that aligns with your goals.

 Yes check with the county to make sure permits were pulled for the addition.

Make sure this is permitted to be a STR with the bedroom count you expect.

Something may be unpermitted if they still have a 2 bedroom septic tank.

I would run from this. The land that this property was built on was approved based upon the capability of the land to support the septic needs of a specified-sized property. If the health department felt that there was an adequate field to support septic for a larger dwelling, they would have said so from the very beginning.  The health department doesn't limit the size of the approval in order to be difficult; they do so to ensure safety and sanitation of the occupants of the house and its neighbors.

I see this all of the time in the Smokies.

Hi Raghavendra! The mismatch in bed/bath count and the existing septic system capacity are important factors to consider. An undersized septic system may lead to compliance issues, maintenance problems, and costly upgrades. If the sellers aren’t willing to update records or make necessary improvements, it’s essential to weigh the potential risks and long-term impact. Negotiating a lower price to account for these issues could be an option, but if they’re not flexible, it may be best to explore other opportunities.

Happy to connect if you’d like to discuss further!

What if the county/city will not approve a bigger septic tank? I'd find this out.

This would be a deal breaker if the city doesn't at leave put in writing that you can legally put in a bigger Septic tank to accommodate the bedrooms that have been added.

Also was the increase in house size done legally since they weren't required to upsize the septic tank? Maybe they didn't have proper permits? 

Lots of questions I would want the answers to.