All Forum Posts by: Sean Smith

@Kwanza P. I have deep experience with co-living and can offer up a few property mgmt options for you - will send you a dm

@Greg Lovern you'll want to see consistent income, not just cash or investments in the bank. If your applicant can show consistent draws from their investment accounts and can produce an approved SSA benefit statement with verifiable monthly income, then you should be in the clear. Of course, make sure this meets your gross income % of rent minimum and verify verify verify. Its quite easy to fudge documents these days so be diligent.

 Congrats! Keep me in mind - cheers

@Linda Garcia if you couldn't get your per door price a partnership might be an effective way to offload the land. Depending where the land is I might have someone who'd be interested in partnering up. Any more details?

Hi @Joshua Bennett you're on the right track. Condo-ization or condo-izing is incredibly popular in my neck of the woods (King, Snohomish, Pierce counties). I recently read through a case study on a successful ADU build & exit down in Tacoma from an investor/contractor which could be valuable for you. And I have a few contacts that help with the financing and structuring of something like this. It will very much depend on where your 18 lots are located. Will send you a DM with some resources

@Ethan Fiore depends what you mean by "set up".

If you're looking for the most up to date lease language approved by attorneys in the state of WA, I'd suggest looking at RHAWA forms. 

If you're looking for how to structure it with multiple tenants in one property there are a few schools of thought. The most common setup I see is structuring these as roommate agreements.

I'm sure someone here in the forums has strong feelings about annual leases vs. MTM, roommate vs. sublease agreements, RHAWA forms or custom forms, etc.

Again, depends what you're looking to do.

@Mailyn Lee it depends on your goals. 

Do you want the ability to sell and/or manage property in one specific state? If yes, then get it. If no, then don't.

Do you need a license for what you're doing? If you're focused on investing only, a license is not necessary at all.

Are you willing to commit to renewing your license, paying the fees, and taking continuing education courses every 1-4yrs ?

For most investors a license doesn't matter much. But for someone like me, who holds licenses and does business in multiple states, it's essential.

@Lily Tang you and I had a conversation about this off-line but I figured the forums could benefit from our discussion.

Terminating tenancy in the city is challenging and requires Just Cause. There are sixteen different Just Cause reasons to terminate a tenancy.

The two that can be used to set the property up for your purposes:

1. the current owners are selling the property. With 90 day notice the units are able to be vacated.

This is the ideal situation given that the burden of the tenancy termination is on the owner and not you. This removes headache, liability, and risk from your deal. Unfortunately this does make your offer less competitive. To remain competitive, I would likely structure an offer with an attractive price and a contingency of closing to have the units vacated. You could get creative and structure the deal to close escrow before the 90 day vacate period ends, giving the owner peace of mind that the asset is sold, but escrow hold back a substantial chunk of the net proceeds after closing until it is confirmed the tenants have vacated.

2. You the new owner are moving in. 

You yourself can serve notice to the tenants after closing because you are moving in. Challenge here (besides the obvious risk of the tenants not moving out when you serve them notice) is that this only applies to one of the units. Not both. Again, challenging.

My two cents: either structure this offer as I detailed in #1 or some version of it… or take a more creative approach and target vacant multi families. 

A pro-tip: have your agent/broker set up a search to surface only SFHs that currently have an ADU/DADU. This is essentially just a duplex with a much lower likelihood of running into the tenant occupied challenges.

Good luck!!

@Alex Frey welcome to the community! And can I say, what a great problem you find yourself needing to solve :) 

I'm a local PNW investor-agent with experience in the STR strategy. Over the years I have helped clients navigate the 1031-exchange process more times than I can count.

1) Yes, you can exchange into as many properties as you want. The 45 day ID period and the 180 closing period still apply however so it can become more challenging with multiple properties to buy in a set timeline.

1.5) For tax reporting purposes it is generally advised to close on the new properties in the same name/entity your previous properties were held in - keeps records clean. The amount of time you'd need to hold it as a rental prior to moving into the property I've seen vary CPA to CPA. Some of my clients' CPAs have told them as little as a year, while others have said 2 years minimum. Talk with your tax pro.

2) Bainbridge requires a STR permit, state and city business licenses, and lodging taxes. Overall a decent place to own a STR, though an expensive part of the Sound to buy in. Whidbey and Island County have been fine but some challenges with STRs are on hte horizon. Earlier this year there was a proposal to ban STRs in certain areas of Whidbey and Island County, or increase regulations. Currently there isn't much in place but I expect this to change soon. I have 2 close colleagues that run short term rental management companies in these areas -- there's decent demand so long as your property offers some sort of differentiation (design, amenities, location, etc.) from the baseline competition.

3) Cash flow? Go for high-bedroom-count properties with differentiation. Ones that can support large groups. Everyone and their mother is Airbnb'ing a small house, condo, or cabin. Few properties support large groups and unique experiences. Appreciation potential? This can be achieved by doing your research on a by-zip-code basis with historical sales - happy to share the dataset I use with my appreciation-focused investors. Stability? Look for areas that support activities and attractions year round that aren't easily affected by weather events. Example: Snoqualmie Pass and Index have incredibly high ADRs (average daily rate) but also have major swings in seasonal revenue. Places like city-center Seattle have less variability.

4) Managing remotely is possible -- I have clients who have done it. Getting your team in place is critical. Cleaners, handymen, etc. And building your system is essential; guest checkin, checkout procedures, response times 24/7, scheduling cleaners, revenue and tax reporting, etc. Or you can pass the work off to a management company if it becomes too much.

And again, you should absolutely have these tax-related discussions with your CPA. They know your finances better than any of us ever will.

Hope this helps!

@Morris Sandvig this all comes down to your dollar's highest & best use.

Does that dollar used pay down a 6.67% interest rate outpace a dollar put into a tax-advantaged or employer-matched retirement account, a HYSA, or a different real estate investment?

How much do you value liquidity? If you convert that cash dollar into equity, it becomes challenging to access quickly if an outside investment opportunity comes up.

Whatever you do, just don't keep that cash sitting idle getting cut down by inflation every year.