All Forum Posts by: Billy Zhao

How about this analogy: who can predict which NFL team will win the next super bowl or even the conference champion? 

Every day, on tv and media elsewhere, countless people spend endless energy and time trying to predict the outcome. How do you plan your activities on these predictions? 

I'm sure for a lot of people, the debate over who's prediction is accurate is a lot of fun. And some people profit from people's attention by stoking fear. 

But you will be a fool if you set up your plan based on one prediction or another, cause you will lose if you sided with the wrong prediction (and we know that most predictions are wrong).

Then what? 

I think for those like Warran Buffett, their plan is more or less constant regardless of what the bigger market outcome is. I'd rather spending more energy on refining that strategy than constantly getting startled by some new predictions coming online. 

@Russell Brazil it's not that whether the crash will happen and when. It will and no one knows when. It could be tomorrow or next week or next year. It's also likely that after the crash things will recover. Again, no one knows when and how fast. The point I'm trying to make is that prediction itself is pointless. It's how you handle different situations that matter.

 What do you mean by "x3 property tax on rental properties"? Are you saying the property is worth say $100k, and the county tax appraiser says it's $300k? 

It seems these days people are running around like headless chickens in a panic mood. The housing market is crashing, and the economy is collapsing, the world is gonna end!

Then there are those on all kinds of platforms including BP saying "I told you so". 

My take on this: calm down folks. Stop scaring yourself to death. Also, let's get out of this business of making predictions about the economy or any social matter. We simply don't know where things are going to go until it happens. Predicting it is a fool's errand. It is counter-productive, unhelpful, and generally foolish. 

Here is why.

1- Unlike physical science, social science like economics is more of an art than science. It's not that you can't use data and theories to make sound analytic inferences. The problem is that there are too many factors and variables that you can't possibly account for. So the vast majority of the predictions in the past are proven unreliable. 

2- Humans, well educated or not, are prone to confirmation biases which further skew their cognitive objectiveness. In other words, we believe the things we want to hear (often scary things) and ignore all the signs that contradict them. Even if we think we are good at critical thinking skills, it's hard to swim in a current when majority of the people are moving in one direction (that may well be the wrong direction).

Here are a couple of recent popular prediction failures. See if you predicted correctly:

1- The stock market and housing market recovered after the 2007-2008 recession in just 5 years and appreciated much quicker after that.

2- The short-term rental market and other sectors recovered from the 2020 Covid shutdown recession quickly and went into a boom mode

3- Instead doing a surgical-strike operation in Ukraine , the Russians got them into a Vietnam-style quagmire. (OK, I can make one prediction that I feel comfortable making: the US and some other superpower out there will invade another country like Afghanistan or Iraq and then be stuck there again, and again.). 

Anyone guessed correctly before these events happened? Most didn't. I certainly didn't. But it doesn't matter. 

I think it's more productive to discuss how to make money in various market environments. Even in the 1980s, when the mortgage rate briefly topped 19%, there are still people making money, lots of it.

Your thoughts?
 

Take a look at this graph. Yes, the rate is >6% now and the 2-3% days are over. But we are still at a historical low right now. Even before the "Great Recession" of 2007-2009, the rate is still above 5.5-6.5%. How did people make money in all those years when mortgage rates are much higher than it is now? Your thoughts?

@Drew Sygit 

Thank you for the advice and link to the article. I am reading that right now. I am with you, screening PMs is just as important. As newbie, I don't know what to look for so most likely I will make rookie mistakes. My gut feeling is that I probably will try to find a co-host first but unlike PMs that are advertised all over the web, I am not sure how to identify a list of cohosts to interview from. 

The amount of work involved in managing STR seems to be pretty significant. This is particularly true when you don't live in the town where the property is located. In addition, there is a lot of paperwork, tax related things I will need to handle as well. I'd love the idea of a co-host, or boots on the ground so-to-speak. If I found a co-host, what is a proper pay structure (10% 15% 20%)?

Thanks for all the great advice! I am surprised that most people not using a PM (as this is almost the opposite for long-term rentals - and STR is much more involved than LTR).

I'd love the idea of "co-host" but how can I find one? Thanks!

I am about to sign a full-service PM to handle my short-term vacation rental house. I interviewed several PMs from mom & pop types (managing just a few properties but charging less) to big behemoth national PM companies. I am still not sure what to do or who to hire. Here are my questions:

1- Should I engage the PM as a "white glove" partner, meaning that I am co-managing the place with the PM? I want to learn the ins and outs of the short-term rental but I think I may not have the energy or time to do it. The alternative is to hire the PM and let him/her take care of the property completely. The drawback to that is that I don't get to learn anything. What should I do here?

2- It seems 20-25% is the standard rate. What do I need to know before I sign the agreement? 

3- Most PMs will manage the money themselves and send you a check after all the fees. Is that normal?

4- Anything else I should consider before hiring a PM?

I apologize if these questions were answered elsewhere. If you see those discussions, please share the link, I will read through them carefully. Thank you!

 I like your idea. This might be the cheapest route to go.