All Forum Posts by: Robert Gilstrap

@Ceaneh Alexis Airdna

@Ceaneh Alexis

I do STR's both in Atlanta and in the suburbs and although I'm not sure there is an "ideal" area you definitely want to pay attention to competition (i.e. 274 active STR's in Stone Mountain vs. 9,562 active in the City of Atlanta).

The south side is less desirable in my opinion but you will still make money there provided it's located well. Just be VERY aware of the neighborhood you are buying into and the local demographics. You can have a perfect property a block from a high traffic venue but it won't matter if guests need a gun to leave the unit! Happy to help if you need it. 

@Will Fraser what ISP do you use? I have comcast/xfinity at most of mine and all of mine are one login/account.

@jeff 

@Jeff Smith   Once again the naysayers strike...Pay no attention to anybody who tries to step on your dreams Jeff. Rental Arbitrage is great and works wonderfully well. I have no idea how someone could say its just a job and isn't "real investing". 

Stocks: you buy a stock and you get either dividends or you pray for an increase in value.

Rental Arbitrage:  You invest capital and you get a return on that capital but without having to own the dirt. Sounds like investing to me.

Do you build equity? No, but when you look at the tremendous leverage you can apply vs. buying I would say it's pretty compelling.

200K house buying @ 20% down = $ 40k plus closing costs.    OR...

you go rent a 200K property for $2000/mo  and $2,000 deposit = $4,000 invested.

Now I'm no math genius but it appears to me that for the same 40K+ that guy put down for his one deal I could do 10 deals for the same money (Obviously not counting the costs of furnishing which can be significant).

To me its a no brainer.  I'm no expert at Arbitrage but I've done plenty of them and learned a lot of lessons and happy to share with you what I do know.

@Lynnette E. Lynnette, you actually help make my point. All the things you describe have nothing to do with a short term rental and everything to do with human behavior. So you admit the problems were both with STR renters AND owners (which I appreciate your honesty). So you saw parking was a problem, people "borrowing" (stealing) things was a problem and people not handling trash appropriately in your view. You then mention that it was noisy and "stay up late party time for the weekenders." I would note that you correctly delineate the "residents" from the "weekenders" which you acknowledge were in fact BOTH property owners as well as STR renters. Then you mention complaints and hotlines and the police could not handle the volume.

I guess my retort is this; if laws are being broken that is why we have the police. Complaints do not equate to laws being broken although I absolutely acknowledge they could be one in the same. I say if a law is being broken then cite the person breaking it owner or guest/tenant. If no law is being broken then you should respect their right to do what they want. You may not like late party time but they might. As long as no law is being broken that is their right.

Parking might be a "problem" but again if laws are being broken regarding parking then we have police for that and they can and should cite the people breaking the law. I also note there is a huge difference in a "problem" in one persons view and a law being broken. Again, I acknowledge they could be one in the same but if laws are being broken but police are not citing people then the problem is with law enforcement. If no law is being broken then why are you worrying about it? They have just as much right to park anywhere its legal as you do.

You mention trash and that "ONLY when you returned the trash to the doorstep of the house..." so that presumes you knew where the trash originated that somehow ended up in your can. So either you witnessed it which means you should report the crime of theft of services or else you just guessed which is not so good.

Anyway my point in all of that is all these complaints happen regardless of whether its a short term renter or an owner (by your own admission). So the rental unit itself is not to blame, the person and their behavior is. Homes don't make people commit crimes or act in a certain way the same way that guns don't kill people; humans kill people.

@Alex S. It does seem true that there is a largely unfounded bias against STR's. We advocate on the local and state level here in Georgia and every time we confront a bureaucrat who spouts off all these horrible stories we ask for the data. Show me the police reports, show me the zoning and code enforcement actions, etc. and guess what? It never materializes because it largely doesn't exist. Lots of "well I heard about..." and "one of my friends told me..." stories that are just not true. It sounds logical that if you have lots of people coming in and out of a property there "must" be more problems right? Nope, it's just the opposite. Anecdotal stories are not indicative of how the industry operates and just common sense would tell you that landlords and managers would never put up with the problems because its bad for business and profits.

Long term rentals are FAR more likely to produce negative outcomes because the tenants can't just be kicked out and they have rights under law. Nobody is cooking meth in the bathtub of an Airbnb, nobody is leaving their car up on blocks at an airbnb  but they do all the time in a long term rental.

I'm not a CPA but I have a damn good one and for the vast majority of STR hosts out there short term rental income is taxed identical to any other rental income and is considered a passive income (Sch. E) not subject to self employment tax. Only if you provide "substantial services" does the IRS consider it active income and thus subject to self employment tax (Sch. C). Substantial services are actually laid out by the IRS so such things as providing transportation, daily meals prepared, daily maid service, concierge services, etc.

As to insurance; It just so happens I am also a licensed insurance broker and contrary to what most think you do not necessarily have to have a commercial policy to insure a short term rental. It depends on the insurer and what the policy covers and excludes. Short term rentals are a fairly new animal to most insurance companies (I have no idea why since they've been around forever) and I agree that most vacation rentals at the beach or mountain cabins, etc. the companies running those do have commercial policies and even I have a commercial policy but not because I have to rather because I get better coverage at a cheaper rate. That being said a "commercial" insurance policy doesn't make a property commercial. In general the activity engaged in at a property is what legally determines how it is classified. Hotels are large, usually multistory commercial structures that allow hundreds of guests to stay in separate individual living quarters under one roof. They have lobbies, restaurants, bars, gift, clothing and sundries retail shops, public meeting spaces, public event spaces, parking lots, front desks, 24/7 on site employees sometimes numbering into the hundreds, daily maid services, on site maintenance staff, signage advertising their business, they offer shuttle transportation services, concierge services, etc. 

Short term rental homes are just single family homes where people stay for a shorter duration but engage in the exact same activities that you and I do in our single family homes.  They eat, sleep, watch TV, bathe, play with their kids, surf the internet, work, etc. Same activities just for a shorter duration.

So this is why I'm saying a STR is nothing like a hotel nor is it considered a commercial business (for most hosts) as much as government bureaucrats would like to lump them altogether so they can seek to control every aspect of your existence and collect more fees and taxes.

@Collin Hays  A short term rental is not a hotel in any way shape or form. What a ridiculous and myopic statement. 

The rental of real property is not a trade, business or profession it is a right inherent to the ownership of real property. A short term rental is also not a rooming house, hotel or boarding house so you sound good to me but big picture when your attorney runs title they need to go back and find in the deed record exactly when that deed restriction was put on (you mention 1953) and by whom in the chain. Most times things like that originate with some little old lady who wants to control a properties use after they sell but deed restrictions can be removed by a court as a last resort but you have to ask yourself who is alive to enforce the deed restriction if it was put on 68 years ago by some little old lady? Now if it was put on 2 years ago by a seller then yes you have to worry.

Contrary to what @Luke Carl is suggesting it is far from a "do it yourself or lose money proposition." Rates range from 20-35% depending on market. I'm in Atlanta so 25-30% is what I see. Of course everybody likes to bash professional management as some waste of money but none of these guys is apparently worth much or else they would value their own time and factor that in. I can also assure you that an STR will take more than 30 min. per week of oversight although that would be nice.

I'm clearly biased but I can assure you a professional can do it cheaper, faster and better than you can every time. The same reason why I pay someone to cut my grass and change my brake pads. They can do it cheaper, faster and better than i can do it. They have the tools, the know how and the experience. 

All that being said I actually agree that for one unit you probably should try and manage it yourself just so you get a full understanding of the business and all that it entails. There is MUCH more to it than it first seems.