All Forum Posts by: Andy Thoms

I would consider 20% down on a $1m multi-family unit, in a good secondary, tertiary market. Class B, rent ready, leased up, if you can find it. Look for cap rate north of 10%. Then hire a solid property manager and collect passive income. Save 50k for reserves. Hold the remaining 50k and short the stock market. TVIX

Hi Kevin, 

I am a full time Airbnb operator and own one accessory dwelling unit that performs extremely well. Based on what I am reading so far, it sounds like it is going to be a smart investment. Here are a few things I would consider if it were me. 

Plan A - Short Term Rental

1. Must meet regulatory compliance. What licensing is required, taxes, fees etc.. 

2. Determine TOTAL acquisition including build out, furniture, towels, linens, everything.

3. Estimate total expenses; gas, electric, cable, wifi, water, etc..

4. Use Airdna and Airbnb to find comparables. Get a ballpark idea for 1) estimated occupancy 2) nightly rates.  

5. Try to maximize sleeping capacity, if one bed (recommend Queen or King) for example, I would put in a sleeper sofa to increase occupancy to 4. 

6. Run the numbers. Calculate the cash on cash return. 

7. Even if they changed to 30 day rule, there may be plenty of demand for 30-180 day corporate tenants, traveling nurses etc.. 

Plan B - Rent it as a Long Term Rental

1. Run the numbers to see if they make sense. If long term makes sense, than I would go for it. 

Equity: The addition will enhance the value of your home. If it costs 75k for the addition, will it add 50k, 75k, or 100k to the value of your home? 

Smaller Units: Studio and 1 bedroom units typcially generate higher returns for me than larger units and they are typcially easier to manage. Easier to turn, lower cleaning costs, higher return per square foot. 

Good luck with your venture. If you need a spreadsheet calculator to help you estimate returns, PM me. Thanks! 

Hi Mike, there are pro's and con's of working direct with listing agent.  Here is my perspective as a broker, active buyer, and active Airbnb investor. 

Pro's:

- you know what you want, what to ask, where you want to buy,  and the average buyer agents who are not pro Airbnb specialists just do not know how or what to ask as good as you do, they can sometimes get in the way, I get it

- you could potentially negotiate a reduction in sales price based upon the amount of the buyer agent commission, 

- the listing agent could work harder to put the transacation together because they are hogging the entire commission, 

- seller agents know the motivations of the sellers and you may be more successful uncovering motivation, or seller structuring it to work for both sides more effectively than buyer agent

- the closest distance between two points is a straight line, we usually get better results dealing direct as experienced buyers, unless you have a superstar buyer agent

Con's: 

- the listing agent commitment and fiduciary responsibility started with the seller, will they now all of sudden become truly nuetral as transaction broker?

- the listing agent has an even bigger commission in the deal if there is no buyer agent, so they may work extra hard to upsell the deal to you to make the deal work 

- a takeaway may backfire, for example, 6% commission and you ask the seller to now work for 3% and credit the sales price, will they truly represent your best interests? 

I play it by ear with each deal. If the buyer agent brings me the deal, I honor it, and then I have a direct conversation with the listing agent to get my pre-diligence questions answered. If I self-source a deal, I contact the listing agent directly to learn as much as I can about the property, activity on the listing, any pending offers expected, DOM, expenses, and seller motivations if possible. If I feel I have a solid listing agent that can work in my favor, then I will typically work direct with that agent as transaction broker.

I typically do not ask for the listing agent to give up income or commission. That is a takeaway. They are typically more motivated to work harder to make my "discounted" offer work, if they are getting both sides of the commission. I price that commission credit into my offer, and then some...  I let the listing agent decide if they want to throw in their commission to make the deal work. 

Asking them to reduce their pay can be a win-lose. Asking them to work hard to get my discounted offer price is a win-win. I get my price, they get a bigger commission. If they need to reduce their commission to make it work with the seller, I let that conversation come from the seller. 

Fun stuff! 

I like your motivation for vacation rentals for a lot of reasons. We are active long and short term operators and shifting towards nearly all short term furnished rentals. Lifestyle assets produce both lifestyle and financial dividends. Vacation and Airbnb rentals create the opportunity to live, work, play anywhere, any time. And if all your assets are occupied, you can use revenue to subsidize the cost of renting a furnished vacation home in a different destination. It is a Wanderful Lifestyle!

Great info on Galveston! Thanks for sharing. I am also very interested in buying an Airbnb unit in Galveston and want to learn more. I am a full-time Airbnb investor and LOVE the short-term rental biz. I will be headed down there to explore the market and look for a unit in July. Maybe sooner, if I find one I really like I will make a special trip down there. 

Yes, that is possible. You would need to research how often that happens and make I personal judgement call. If you are not comfortable doing that, and you both qualify, you could refinance it into a commercial portfolio loan that does not have due on sale. 

Hi Jeff, you would want to create an LLC, put the asset in the LLC. Determine the price for the 50% share then define the terms, conditions, splits, equitable usage plan, renting rules, furniture plan, capital contribution terms, and exit plan in the operating agreement. You would definetely want to use an attorney experienced in real estate partnership structures or fractional ownership structures who could easily walk you through the structure. I have an attorney who could assist you with this kind of structure if you need one. But you may want to use a HI attorney.

The AirBnB short term rental fund is an interesting space right now for real estate investors. The yields on AirBnB property investments can be very favorable, 2X to 4X gross yields. Adding this asset class mix to a traditional long-term rental portfolios can help to diversify your holdings and income streams. That said, you need to have real passion for skills required to run a SFR "hospitality" business to succeed. I am actively buying-fixing-managing AirBnB units and in the early stages of creating a private offering for a short term rental fund I am seeking an alliance or partnership with someone who has capacity and experience in raising funds through accredited investors who can manage the fund raising and investor relations side of the business, while I focus on strategic acquisitions, stabilization, and management/operations. Thanks for messaging me if you are interested!

Get a quote from Universal Property.  You can google Universal Property insurance Florida for their number.  I have used them on multiple FL properties. I am not affiliated with them. 

Sounds like a great opportunity David. Here is my suggestion. 

1. Fill out a standard rental portfolio tape (spreadsheet) and verify the accuracy of the information the best you can.  

2. Reach out to all local regional and community banks that provide portfolio financing. Connect with local investor networks to find out who the best local option is for non-recourse, SFR rental portfolio, blanket loan. This will typically always be your most competitive option. Typically underwritten based exclusively upon your Debt Service Ratio and the cash flow performance of the portfolio, not your personal income.

3. Reach out to B2R Finance and First Key. They offer competitive blanket loans designed exactly for this scenario and offer non-recourse as well. The first thing they will ask for is to send a tape (spreadsheet) of your portfolio. They will provide you with the spreadsheet.  

Good luck with your acquisition!