All Forum Posts by: Wes M.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $182,000
Cash invested: $28,000

MLS deal that was listed below market value.

What made you interested in investing in this type of deal?

Location. Property in an upcoming area of downtown Wilmington. Single-family one-bed property on a 4,500 square foot lot that could allow for future expansion. Availability of a large yard in downtown Wilmington was also of interest.

How did you find this deal and how did you negotiate it?

MLS listing that had a ton of interest. There were over 13 offers. List price was $155,000 -- we offered $185,000 with $4,000 due diligence.

How did you finance this deal?

Conventional loan through SECU. Five-year ARM at 5.5%.

How did you add value to the deal?

Nothing so far.

What was the outcome?

Tenant secured within 4 hours of listing for rent. Initial rent goal was $1,540 per month, but increased to $1,640. I suspect we could have gotten higher rates. I believe many other investors were intending to rent the unit as a STR. We did not want the capital outlay and felt the LTR market demand offered a greater return on our time and money. Cash on cash return at 12% and cash flow of $400 after cap ex/vacancy. We intend to apply payments as though it were a 15-year loan in order to have property paid off. Ideally, this will be the college fund for our two young children. Payments on the 15-year term have the deal breaking even while still accounting for cap ex, vacancy, and maintenance.

Lessons learned? Challenges?

In North Carolina, if you submit an offer with DD fee, technically that money is obligated at the moment the offer is delivered to seller. We considered backing out of the deal after a verbal confirmation from listing broker as we received no signed contract attesting to being officially under contract within 48 hours. We considered backing out and listing broker informed us that $4,000 due diligence would still be required. 

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

State Employees Credit Union for financing. We represented ourselves in the deal. I recently received by real estate brokers license however.

@Aaron Williams

@Aaron Williams

Beach communities are also great places to invest. In North Carolina, many of our beach towns receive occupancy tax revenue from vacation rentals/STRs. If those beach municipalities were to pursue STR regulations it would negatively impact their annual budgets and potentially result in property tax increases, which is very untenable for the majority of them.

Regulations are being pursued beyond the interests of the hotel industry. In my opinion, the two more substantive factors are the impacts on housing affordability and neighborhood fabric. Elected officials listen to their constituents. And it doesn't take many problematic STRs to disrupt a neighborhood which then results in the establishment of STR regulations.

The topic is oft litigated and regulation preemptions vary across the US. Over the coming year, I anticipate there will be several bills filed across the US in state legislatures to preempt any local government regulations. In Virginia, a preemption bill was filed late last month. Can be found here. I suspect similar legislation will find its way into various state houses.

Hi all, looking for post-licensing course recommendations. I need an online course that is self-paced due to W2 employment. I have found a few courses in the $500 range. Curious if anyone has any recommended courses? Thanks in advance. 

Hey Heather. It was a combination of things - primarily wayfair and Amazon. The kitchen table came from Home Depot and the chairs wayfair. I believe the couch was FB marketplace. Acquiring furnishings is a tenuous process. There were several items that were ordered and then I put them together only to realize they would not work. So, then I would try to resell them rather than take the time to return. I thing most STR owners can attest to the chaos of ordering and putting together furniture. I would be happy to send you are shopping list if it would be helpful. Just send me a message.

@Bruce Woodruff That would be nice. We have prices a bit higher than last summer.

@Jerry W. I would anticipate we have added $100-150k in value due to renovations and appreciation. As of now, we are more focused on LTRs, but will pull the trigger on another STR if the numbers work. We have added two LTRs in the Wilmington area since the Oak Island purchase.

I wanted to provide an update on our vacation rental after a full year placing the listing into service. We purchased the property in October 2021 for $459,000 and completed a roughly $25,000 renovation. Furnishings totaled $18,000. The listing went live in January 2022. We were shooting for $54,000 gross revenue and ended up with $71,300 in total revenue for 2022. After accounting for cleaning expenses, we ended up with $61,732 net to us before PITI, cap ex, and other costs. We do not allow pets in our home, for now, so we did not capture any pet fees. Our expenses are roughly $3,200 a month, so we ended the year with a net profit of approximately $23,000. We do self-manage our unit and have been incredibly grateful for our capable cleaning team and handyman. We are fortunate to have an interest rate of 3.15%, which helps to keep our expenses low. Our property is also not located in a special flood hazard area so we do not have to pay for flood insurance.

July was our highest revenue month, with December and January experiencing the fewest bookings. We still have lots to learn, but wanted to share our experience with others. As for the market, there has been a substantial increase in the supply of listings - as has been stated by AirDNA and others. As of Q4 2022, there are a total of 1,868 available units - which is an increase of over 500 units since Q4 of 2019 (1,360 units). It is interesting to note that there were 1,945 units as of Q3 in 2022, so I assume some operators have either sold their properties or removed them temporarily for the winter months. 

Our listing can be found below. We're not sure what 2023 revenue will look like, but we hope to achieve similar numbers or perhaps even see a slight decline given the economic uncertainty and listing growth. Happy investing to all!

https://airbnb.com/h/groveoki

It can be difficult to find a lender that will put a HELOC on an investment property. If you can get a membership through State Employees Credit Union (SECU) they will allow HELOCs on investment properties.