All Forum Posts by: Susan Gillespie

@Cory Land  You have a cash flowing asset that's likely to appreciate. You're looking to get out of it?

In the next year or two, you have the opportunity to gain some appreciation, build rent history and landlord experience, and save for another purchase. If you cash flow about $300/mo for 24 months, that's $7200. 

Is your renter on an annual lease? If they renew, you'd have no vacancy.

I'm not sure why an investor would pay $250k for $1750 rent. You'll get a higher sales price from an owner occupant. Transaction fees to sell and buy another place will eat into your return.

You're doing well to own a home and also an income property. Don't forget there's a fair amount of risk with a $100k duplex. Where would it be and who would rent it? That's a different demographic than the young professional renter you have now.

@Lars Anderson  you can check area rates and occupancy at homeaway.com or vrbo.com. Look up similar properties to get a better idea of going rates and how full the calendars are. This isn't perfect, as owners can also block off time for personal use, but it's a good reference.

Regarding cash flow and net income, you'll have to run your own numbers based on whether you finance, if you buy rent-ready or need rehab, the property's specific expenses and expected occupancy. You'll pay more for a full-service property manager, but you may also have a higher occupancy. If you market on your own, factor in your time, as you may have hundreds of booking inquiries to respond to. 

Find a good realtor and they can look up taxes, HOA fees, and estimates of other expenses. The variables can get complex, but there's a lot of opportunity in the vacation and short-term rental market.

@Arnie Guida  definitely check homeaway.com. You can browse cities and search by dates or use the "I don't have a specific date" feature to see types of places available. There's a pretty amazing selection, and you can find some great values. Many owners will post monthly rates, along with nightly or weekly.

If you see a few places you like, you can email the owner or manager directly from their page. One of the complaints with homeaway is around inconsistent service from owners, and the fact that some owners don't reply quickly to questions or inquiries. You don't want to deal with people like that. Also read reviews from past guests.

Many owners are very responsive and would probably prefer to rent for longer time frames, because it cuts down on turnover costs. I booked a Mexico vacation last January through homeaway, and it was a great experience, very easy overall. I wouldn't use craigslist or any site where you can't verify ownership.

As others have mentioned, vrbo.com is another site you can look at, also owned by homeaway. Many of the properties are the same, but the search format is slightly different.

I hope you find something good. It's too cold already and it's not even December... ugh..

@Chris Christianson  the "what gives" is crime, schools and reputation.

The West Side of St. Paul and West St. Paul are two different things. I think you're referring to the West Side. As mentioned, there are some beautiful old properties on the West Side bluff, the location is very convenient to St. Paul, and there are nice parks and views. It's also close to Robert St. for shopping, groceries, Target, etc.

If you like the house and can make the numbers work, the area might make sense for rentals. I would check into school ratings and crime stats, factors that significantly impact market value and demand. The West Side has a reputation for being a tougher area, although I know people who live there and like it.

You can fix a house, but what about the neighborhood? I would look very closely at the surrounding blocks and talk to a few neighbors in the area you're looking at.

@Jeremy Kleier   short-term rentals can be a viable strategy, depending on your goals, location, and numbers. 

Short-term rentals command higher rent, but you also have higher expenses due to marketing, cleaning, furnishing and other business expenses. Variable occupancy makes income less predictable. 

Also think about:

-target market. will you rent to tourists, travelling professionals, college students, etc.? who would stay there and why? advertise, furnish and price accordingly. good points from @Micki M.  

-run your numbers both ways, as long term and short term rental. if it's not working as a short-term rental, it's nice to have the option to transition.

-consider 30-day furnished rentals versus nightly. I know someone in Austin, TX, who's done very well with this model. He gets higher rent than annual, has had low vacancy, and much less turnover and wear and tear. 

-definitely research online listing sites, as others have said. A cottage could have tremendous appeal and help you differentiate from others in your area.

-check into local regulations. do you need a special permit or tax filings? are there any restrictions?

Supply and demand for short-term rentals have grown exponentially, thanks to companies like airbnb and homeaway. There's huge potential in this space, in my humble opinion.

@Marc Inderhees  I've been researching the area also. Let me know if you want to compare notes. Interesting points in this study:

http://www.i4poincianaconnector.com/about-the-study.shtm

@Jack Tucker  there's a sample agreement at Homeaway Community you could use as a starting point. You'll also find checklists, templates and other resources specific to vacation rentals.

For local VR property management, I've been quoted anywhere from 20-40%. The higher end is typically for onsite or staffed offices within resort communities.

For online VR marketing and booking services, I've found rates of about 10%, plus 2.5% fee for credit card processing. These companies handle all marketing, booking and online/phone inquiries. They can connect you with local vendors, but don't do the maintenance/service calls themselves.

It really depends on how much work you want to do yourself. Since you're local, you could outsource the marketing/booking piece and handle onsite issues, or try to find a local PM and negotiate a fee for being on call. Check with larger PMs in your area who offer emergency/maintenance only service. There's one in my area who does this, and I don't remember the specific rate, but I thought it was reasonable overall.

@Jared McKie buying a duplex can be a wise first purchase. I wish I had done that for my first home. I have a contact who's very knowledgeable about Minneapolis area duplexes if you want to talk with an expert. Important points to remember are to understand market dynamics, look closely at expenses and don't overestimate rent. 

I agree it's hard to find value with current rentals, and anything that's widely advertised basically won't cash flow. I'm going to put in more effort looking this year between Thanksgiving and New Year, when it's quiet.

I don't think the market is inflated, but deals of the past are gone. 

http://www.zillow.com/minneapolis-mn/home-values/

@Joshua Morris long-term buy and hold real estate investing can definitely be worth it. You're already asking the right questions and obviously thorough in your research and analysis.

Like others, I checked your numbers and get negative cash flow. That's one of the big risks with investing, as a bad deal can slowly (or quickly) bleed you dry.

I would talk with several property managers in the area to get their insights into rental rates, demand and overall conditions. Many also know owners looking to sell. I would also talk with several people who are buy and hold investors themselves to get opinions on where they see opportunities to buy. Many properties you find online simply won't cash flow due to high costs and expenses, especially when financed.

My investing partner is a Navy vet, and while we aren't in Texas, feel free to let us know if we can help answer any questions. The most valuable advice we got when starting out was from two helpful people who already owned rentals in our area. Good luck. 

@Kate Stallmann  make sure to double check the condo association's rules and regs on short-term rentals. Many condos have restrictions, such as 30-day minimum rentals or other requirements.

Regarding the duplex, it sounds like you have leverage to make a lower offer because of the sellers' motivation. The purchase price and your finance terms are major variables that you need to consider, along with other expenses, including utilities, maintenance, insurance and property management. 

Also think about how much time you plan to spend on the management yourself, especially if you have a condo and duplex to rent. It can take more effort than people realize to get properties rent-ready, contract terms in place, showings/screenings, etc. Not that you can't do it, but be prepared to spend a significant amount of time up front if it's all new to you.