All Forum Posts by: Susan Gillespie

@Micki M. congrats on your rental. I've looked into several short-term rental options myself, but often run into 30-day minimums.

I just got back from the HomeAway Summit last weekend in Austin. Can you share any insight into reasons for using airbnb vs homeaway or others? Is it clientele, fees or something else? I'd be interested in your feedback.

@Keith Courtney

I have a colleague looking in Orlando. Can you elaborate on the "bad investment" aspect? Does it relate to the numbers, or more to market issues? I keep reading that Orlando is still a good buyers market, with room to grow in value, but realize multiple variables make the deal.

@Blake C. I would run side by side comparisons of your purchase scenarios (cash buy vs 15 year vs 30 year) so you can see which set of numbers you're more comfortable with.

I'm also on the conservative side financially, so understand the appeal of a 15 year mortgage. However, that will decrease cash flow due to higher payments ($882 vs $613). It also decreases return, but has faster pay down and builds equity faster.

The 30-year loan has lower payments, which is a plus for cash flow and return. I see negative cash flow with a 15 year loan.

Consider that if you pay cash, you lose the ability to use that cash as down payment for additional properties or for reserves, as @William Brace said.

If I assume paying cash, monthly cash flow is higher ($670, assuming 8% vacancy rate), but internal rate of return over 30 years is less than 6%. With 2% appreciation annually, you're still under 7% IRR. With 2% appreciation and a 30 year loan, IRR is closer to 8%.

If your goal is to build cash flow by buying several properties, it will be harder to acquire more if you pay cash, unless you have a lot of cash. Fixed rate 30 year loans give you the flexibility to make extra payments if and when you want. It can work well if you can get good financing, have cash for down payments and reserves, and want to build a portfolio with up to 10 properties.

Hi @Mark Bradford I started with something similar, a vacation home that I converted to an annual rental. There are many differences, pros and cons of the two types, including the amount of time and effort required to market, rent and manage a vacation vs annual rental.

Have you looked at HomeAway? They have online info and events. There's an upcoming Summit May 31 in Austin, TX, for people who own or are considering buying vacation rentals. I'm speaking on the investor panel and look forward to meeting people with all types and levels of experience.

There's so much useful info online now versus when I started out, but nothing beats talking to others who've been down the same path. I don't know the Michigan VR market, but have you checked directly with local VR owners and property managers? They can put you in touch with good contacts and give you feedback on the market.

I know a few property managers in the area. Are you looking downtown or in suburbs? Feel free to message me if you want to discuss or connect.

Hi @Alex Maroz are you looking from a process perspective, like tracking activity, managing docs (PAs, disclosures), to-do notes, reminders, etc?

Or from a property (address, photo, notes, details), numbers and evaluation perspective?

Maybe you're planning to develop something? There are solutions/apps/tools out there for investors, but I'm not sure what you mean by solution. Can you clarify?

It's very competitive now. I've been in the same spot, and it's a challenge because you don't want to overpay, but you want to get started or keep building.

My favorite definition of luck is "when preparation meets opportunity." Good luck to you - you're on the right track.

It's about risk v reward and your own long term goals. You could potentially do better with a lower priced property in poor condition, but then you'd have to manage a rehab too.

There are two sides to every story. Hopefully Havenbrook is a reputable, ethical company. It has a vested interest in helping to create a stable community.

What's worse, abandoned and deteriorating homes, or stable communities? And who's renting, maybe people who want to live there, but can't afford to buy?

I agree about being late and didn't see other solutions presented. Not everyone can afford or wants to buy.

@Robert Fuhs

So it’s turnkey and rented now? That’s an advantage. Do you know the lease terms? Have you talked with a local property manager to get their perspective on the neighborhood and rents?

Other positives:

-Twin Cities market is appreciating

-Rental demand is strong

-Stable, desirable neighborhood

-Opportunity to add value/increase rent through extra bedroom

-1.5 baths each, better than 2/1. This is a sticking point with many renters.

-Quick startup, immediate cash flow

On the negative side, cash flow is minimal and close to break even in my view. If it’s a newer property, you could be ok, but unexpected issues quickly eat into cash flow.

What about water, trash or other utilities? Your vacancy rate is on the low side.

Using your numbers, if I model a 20 year hold (buy at $240k/sell at $250k), I get an internal rate of return under 8%. However, if I model 20 years (buy at $240k with 1% annual appreciation, sell at $293k), IRR bumps up to 9%.

This doesn’t change cash flow, but if you’re buying for the long term and add benefits of paying down the mortgage, tax write-offs and depreciation, and hopefully some appreciation, it’s something to think about.

I know some Mpls-based PMs you could talk to who are very responsive and reputable.

Good luck and I hope your deal works out.

Hi Stephanie, I know a few property managers in the area. Are you looking specifically in Mpls or suburbs? Feel free to message me if you want to discuss or connect.