All Forum Posts by: Brian T. Grooms

Does anyone know of lenders that specialize in Short Term Rental financing? I know there cannot be many out there. Obviously you could use conventional and convert a property to an STR. But there are mortgage due on sale clauses to deal with if you own or want to own in an LLC.

I am thinking that there must be commercial lenders that would loan or refinance on STRs, anyone have experience with this?

Ive been looking into this also. I have my sales license and license already hung but am still in the first year of having my RE license.

My broker is great and one of the owners has encouraged me to start a property management company with the brokerage to specialize in STRs. This was not my original plan, as I have planned to acquire and operate my own STRs.

I still fail to fully understand what a broker does and is responsible for (other than state laws requiring property management be run through a brokerage in AZ)! But I do know, there are issues with trust accounting and handling trust accounts that are usually set up in most property management arrangements with property owners. Brokers have liability and are subject to audits (I hear they are very common) of the trust accounts and activity. If you screw something up your broker can be sued and is likely to be. The brokerage definitely opens up opportunities to bring you more clients and opens the door for buying/selling commissions, but if my main goal is build my portfolio of properties I own and/or operate I am still not sure it is the best way. I am convinced there are other creative ways to operate properties that do not require a broker be involved.

I too would appreciate some comments from those experienced with property management companies and RE brokerages.

I have been considering "property management" business models to operate more vacation rentals. I have thought for a while one way is offer to lease residential properties sort of like a commercial lease. IE longer terms, slightly higher than residential market rents, having the right to improve and furnish the property, paying the taxes, etc.  if it makes sense of course.lllThe kicker would be getting an option to buy also.

What management companies have you found that are doing this?

I have my Sedona, AZ vacation rental now in an LLC. Quit claiming to your new LLC is easy. It just takes a simple recording with the county. You can get forms from the county to use to convey the property. You just need to get the conveyance notarized and then file with the county.

The thing you need to be careful about is the due on sale clause likely to be found in your deed of trust/mortgage documents. Technically the note holder can call the note due immediately when ownership is changed. There are several threads on BP about setting up a Land Trust that holds the property and then making your LLC be the beneficiary of the trust. Supposedly this type of set up still provides for liability protection through your LLC but does not trigger the due on sale clause on your mortgage because of laws that prevent this from happening when you move assets into a trust for estate planning.

So far I have regretted moving my property into the LLC. I have long term plans for this niche and the LLC should be beneficial in the long run so I plan to keep it. But it is has been more costly, time consuming, and I have made it dramatically more challenging to refinance the property. Mine is free and clear and I want to do a cash out refi to go after another investment but it is impossible to find conventional financing for an LLC property. I am beginning to explore the land trust with LLC as beneficiary possibility, otherwise a commercial/portfolio loan will be necessary with less favorable terms and rates compared to conventional residential financing.

If I could do it over again and planned to only have one or two properties I would simply invest in a good umbrella insurance policy and call it a day. It would save me a lot of money and time wasted long story short. By the way my insurance premiums are the same with the LLC....

I am up north in Sedona and have an STR here. Own owner association in particular moved quickly to amend its CCRs to ban rentals less than 30 days. There will be a lot legal fights related to SB1350 from both sides yet to come in AZ........

I have been exploring this also. I have one property being used as a VR currently, but have plans to manage more and want to be set up early on to take on more properties.

I am currently using AirBnb, FlipKey, Vacationrentals.com (HomeAway family), and completing my stand along website is a work in progress now.

To me, being fairly new to vacation rentals (but rapidly learning), it seems like there a  lot of changes underway in our space and many software providers haven't really caught up with the changes (instant booking for example). I played around with the software from 365villas and ultimately realized it was just complicating things instead of making them easier at least for now.

I want software primarily to help with calendar syncing, rate syncing, rate optimization, inbox syncing, providing a good website template that can be white labeled, bookkeeping, and generating  property reports. I am also interested in the idea of a service that handles guests communications and optimizes listing content. I have now found good cleaning crews and have automated locks and back up lock boxes at my property to automate key exchanges and cleaning turn overs.

So far I have been allowing guests to instant book and have found sending contracts back and forth to be signed by both parties is cumbersome, slow, a waste of time, and just feels dated. Most of the software providers I found are set up mostly to serve the industry before the rise of AirBnb and instant booking.

All of my instant bookings were not fitting neatly into the 365villas system. It is good for enquiries but not instant booking. The rates were not synced on 365villas or the various channels I use, and as I regularly alter my prices as part of my price optimization strategy the reports being generated by the software were just flat out wrong and a pain to change. You can use  a "channel manager" in addition to the software to supposedly sync rates, calendars, etc. but the software does not automatically do this and you have to pay very high fees to the channel manager in addition to what you are already paying for the software.

The next one I am going to experiment with is myVR.com and my goal is to become listing site independent so that there are less channels to manage, margins higher, and have an operation that does not depend on 3rd party listing sites.

365villas is worth a look for some people as it has a lot more to offer than many other software providers I looked at originally but ultimately was not for me. MyVR.com looks promising but I'm not sure I wont just have the same problems that I had with 365villas...

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on residential properties

In AZ, Notice of Trustee sales have to be published in local newspapers.

The site http://www.publicnoticeads.com/AZ/ is a handy way to find all public notices from the papers in one place. I haven't tried this for another state but it probably works for other states also.

Once you know what is scheduled to go to trustees sale, you can then look from this public information to see who the Trustee is handling the sale. From there, some Trustees will have the sales they are handling listed on their websites and they update the status of each property frequently. This isnt the case for all the trustees though. So you may also need to call the Trustees to get more info. There are a couple trustees that handle the bulk of the sales, but there are smaller ones also that can have deals that require you to do even more leg work by calling them.

It is tedious because there is a lot of homework to do on trustee sale properties, and there are different trustees with different places holding the sales/auctions (they are not always sold at the courthouse either, just most of them are it depends on the Trustee. In AZ anyways). Then of course the vast majority of properties scheduled to go to Trustee sale do not end up selling anyways as the owner finds a solution to there problem, negotiates an extension with the Trustee, sells the property successfully before the auction date, etc.

There are some site you can get a paid subscription to that compile these pre-foreclosure properties, I haven't tried them much, because many of them seem to have out of date info. But I have heard from some that have had success with them.

Some title companies should be able to help with this also and they can send out emails every so often of Properties that have Notice of Trustee Sales recorded with the county (as is required in the foreclosure process here). 

I provided slightly incorrect information although the concept is the same. Here is what typically makes condo warrantable or unwarrantable:

• No single entity owns more than 10% of the units in a project, including the developer
• At least 51% of the units are owner-occupied
• Fewer than 15% of the units are in arrears with their association dues
• There is no litigation in which the homeowners association (HOA) is named
• Commercial space accounts is 25 percent or less of the total building square footage