All Forum Posts by: Andy Whitcomb

@Michael Baum Yes, you are correct that regular preventative maintenance is key, as well as having a good local handyman. We have a handyman who lives next door, and actually originally built our cabin years ago. He's great, but he's getting old and doesn't have the energy and attention to detail that he once had. I'm currently looking to find someone to replace him, or at least supplement him. Our cleaner is his wife, and we also have two other cleaners who live locally. 

@Paul Sandhu Maintenance and repairs are only about 40% of the issues I'm referring to. For example, even with my hot tub issue, I will be repairing that myself but I have to wait two weeks for the parts. Even though I have the skills and desire to do maintenance, that is not really the direction I want to go. Our properties are 1.5 hours from where I live, and I'm trying to create a streamline business that has the ability to scale. 

@Collin Hays Thanks for your response. I think at this point I do want to continue to self manage, but maybe bring in a 1099 employee to help us manage, as well as an on-call maintenance person who lives close to our properties. So I'm hoping to gain some tangible insight on how to deal with the assorted derailments that come with a rural STVR property. Maybe there aren't any tricks, it's just about dealing with it. If that's the case then I'll just keep going like I have been. However, I believe there are things we could do better by improving our systems. 

Eventually, if we choose to scale to several more properties, we may choose to take on an outside PM. And when we do get to that point, I'll definitely make sure to stay out of the way and let the PM do their job. As long as the PM is experienced and professional, I'll be more than happy to give them the reigns. 

Hey guys! I have owned and managed STVR's since 2015 and have developed a pretty decent nack for it. I've leveraged my background as a furniture designer to create unique and beautiful experiences for guests, and they pay top dollar to stay at my properties. I've been a superhost for years, and we have been 95-100% occupied since long before covid.

My business partner and I currently have 3 cabins, and we really want to scale up to buy more. We have incredible returns and plenty of investors wanting to jump in with us...

But..

The management of these properties is killing me. It was no problem when we had one cabin, then we had 2 and it was still manageable, but once we added the 3rd cabin it get exponentially more crazy. It seems like every day something is going wrong! For example, the other day one of the jets on the hot tub broke. Not a big deal, except then all the water drained out and our guests couldn't use the hot tub overlooking the river, which is a huge selling point. I had to refund them $300. Then, since I couldn't the part to repair it for 2 weeks, I had to message every guest who was coming in and either give them a discount, cancel their reservation, or try and reschedule to another date. These are cabins in the woods, so we have issues like power outages, neighbor's construction noises, internet outages (a big deal when people are planning to "work from home" at the cabin), guest thought they reserved two nights when it was only one, cleaner forgets to show up... all sorts of things that add up.

It seems like the littlest issue gets compounded into much larger issues that cost us lots of money. I'm sure I'm not the only one who deals with these things. So, my question is: What are professional STR managers are doing to keep operational, maintenance, and cleaning issues to a minimum and everything running smoothly? 

And, a second question... If I were to hire this out to a manager, would they actually be able to do a better job then me or would it be worse because they aren't as invested?

STR can be a great way to start investing. It's how I got in to and it changed my life from day one. I thought you asked some great questions, so I listed them below with my answers. I hope it's helpful!

Does anyone prefer Airbnb over Vrbo or vice versa?

It's market dependent, and it also depends on the type of guest your property will attract. In general I prefer Airbnb. I generally recommend trying both, at least at first.

Do you guys think the market for short term vacation properties will ever go out of style in the sense of laws being created against them (being phased out sorta)?

Again, very market dependent. Will it go out of style? No, probably not. As far as the legality of it, that is something you'll need to learn and know in detail for your market. If your municipalities haven't landed on legal parameters yet, then it's something you'll need to pay close attention to, and always have a few backup plans if the laws change and you can't operate as a STR anymore.

How much do you think a first time young person who has never bought a home would need to save for a decent property return investment?

If you're buying a home to live in and renting out the rooms, you only need enough for 3.5-5% down plus money to furnish. If you buy as an investment property (not living there) you'll need 25% down plus furnishings. Of course the cost of furnishings could vary dramatically, as I'm sure you know being an interior designer. I had a friend (also a designer) furnish her entire vacation rental for a couple thousand dollars, buying everything at thrift stores. The place had a cool, vintage vibe.

If you really want to get your feet wet right away, without risking a bunch of your own cash, then you may want to try airbnb arbitrage. Essentially you rent a home or apartment, furnish it, and sublet on airbnb. You'll need to be 100% transparent with the owner and probably either pay him higher rent or cut him in on the profits. This is how I got in to the business, starting with only a $1000 deposit and started netting a LOT of money from day one. After 2 years we had enough to put 25% down on our next property. I'm happy to discuss airbnb arbitrage further, or you can search the forums here and find many others doing it successfully, even at large scale. I personally prefer to use it as a starting point with the goal to eventually own the properties

Can I use an FHA Loan for one of these properties?

If you're living it it, yes. It''s called House Hacking and it's one of the most effective ways to get started in real estate investing. Either rent out the rooms individually, buy a duplex, triplex, or fourplex, or a house with a mother-in-law. There are many ways to do this.  Just yesterday I saw a gorgeous $1.1m lakefront home for sale in my market (extremely expensive market) that had two airbnb cottages in addition to the main home. Since the cottages combined would bring in around $7k/mo you could essentially live for free on day one. 

Do you think it’s smart to mix my portfolio with short term vacation rentals as well as more stable long term rentals?

It all depends on your goals. Personally, I do have some LTR's because I wanted to balance out the risk a bit. However, I should probably convert them to STR and I'd make a lot more money. I've been doing this for several years now and feel pretty confident I can continue with no problems, even if the demand slows down.

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I hope those answers were helpful. I'll also add:

The incredible thing about vacation rentals is creativity gets rewarded. I am a designer as well (furniture designer) and I always look at the vacation rental as an opportunity to design an incredible experience for the guest. Of course you want to make the place beautiful and comfortable, but when you start thinking "how can I make the guests experience exceptional and memorable" then you start considering every little detail. Currently my partner and I focus on cabins, and our prices are 300% higher than every other vacation rental in our area, and we're 100% booked with a waiting list (it was this way before Covid).  So, more than any other area in real estate, thoughtful design has the opportunity to unlock exponential financial reward.  

@Alex Bekeza I agree, an app would be pretty cool. Especially if it was set up so you could sign on and play with random other investors, it could be used as a way to network.  I have a sort of far-fetched idea of getting bigger pockets officially involved with this game in some way... I could see it as another way of connecting with one-another. If the game turns out good enough I may pitch it to them.

When doing a BRRRR, in order to get your original $20k back out, you'll need to make sure your numbers all line up on the front end. Make sure that your all in cost (purchase price AND rehab costs) are 70-75% of the total value of the home once it's complete. The lower your all-in cost to ARV ratio is, the more you get paid out at closing of the refi. If you go over on anything, it it's not the end of the world, it just means you may not get as much cash back at closing. And as @Adam Uxley mentioned, the money you get back is not taxable because it's a loan dispersement. 

@Lane Aakhus Good to hear! Yes I also bought Cashflow and never played it. It looks a bit to laborious to be fun. However, they also have an app that is much easier to play and quite fun. I recommend checking that out. 

@Alex Bekeza That's not a bad idea, I'll keep that in mind! I'm planning to start playing with REI friends of mine locally, so we'll see what sort of feedback I get from them.

Hey guys! This is random, but I've been designing a real estate investing board game about BRRRR, mostly for fun. I wanted to gauge interest to see if it's worth my producing.

Working title is Flip or BRRRR, and it's a game (mostly) designed as a fun game that could be a gateway into an interest in real estate investing, or for those who are new to REI and the BRRRR concept. Essentially it's fun for anyone who has an interest residential real estate investing.

The game has mostly been a fun side project that started during quarantine, but it's really come together nicely. Now I'm getting to the point where i need to decide if I want to make it a real product or just keep it as a fun game for my family.

If this sounds interesting to anyone, feel free to post in the comments! I'm happy to share more info.