Subject To Airbnb In Baton Rouge

[Travis Steinemann]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $185,000
Cash invested: $40,000

This one was an accident. We were targeting Pre-foreclosures to buy subto and sell on a wrap but we were not able to sell it for what we needed. After trying for three months with Facebook Ads, Flyers in the Hispanic areas of town, and posting on every Facebook group possible we ran the numbers as an Airbnb and discovered that it would work really well.

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

Necissity. Our first plan didn't work and we would have had to take a loss if we sold it. The loan was at 4% so the cash flow was solid, the only issue is we have more money stuck in it than we would like.

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

We stopped a foreclosure. We were doing a text campaign to pre-foreclosures from the Clerk of Court website. The seller was the most lazy person I have ever met. I literally had to go knock on his door to get him to sign things because he was too lazy to open his email to do the docusign. I do not recommend buying from this type of seller.

How did you finance this deal?

Subject to the existing mortgage of 170k @4% originated on 1/1/2022 plus catching up 20k of arrears/escrow/legal fees and then eventually Airbnb Furniture and holding costs of another 15k from private money.

How did you add value to the deal?

Furnished and painted it. Saved the seller from foreclosure and gave him 2k to walk.

What was the outcome?

Not a great deal, but it makes money every month instead of losing money. We have very little equity so we made lemonade out of lemons. We pay down $262/month and make another $2-300/month in cash flow. We brought in $31.37k in revenue with 89 bookings and 83% occupancy $136.98 Average daily rate from 9/1/23 to 6/1/2024. Our note was $13.14k over that time.

Lessons learned? Challenges?

We learned that it is very difficult to get 20k+ down payment for a wrap. We also learned that having a seller who is not very cooperative is horrible for a subto deal. We should have switched strategies sooner to Airbnb. Additionally, getting the insurance sorted was very difficult since he had a lender placed policy. They wouldn't accept our policy so we created an LLC in the name of the seller, which allowed us to change the insurance and still be protected as the named insured.

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

We used Constant Close as our TC and they had to self perform the closing since it was an FHA loan.