All Forum Posts by: Bob Metry

@Luke J Nelsen looks like a sweet cabin. are you basing your underwriting using 2020-2022 revenue estimates? do you have any concern that revenues could be declining due to increasing local competition and renters preference/ability to travel elsewhere post-pandemic?

@Robin Simon thanks for sharing. were there any specific examples of what might be "hidden gem" markets?

@Henry Clark thanks for sharing this. Question, how much more valuable do you think the property would be if you got it to a stabilized occupancy level? How long would it take to get there and what is your decision process for not waiting until then to sell?

 Absolutely. I also agree with @John D. thoughts above. So I would focus on how you can make your property stand out.

@Ross Gallo I think market competition may play a bigger factor than a recession. From what I am reading, there is large influx of STRs in Joshua Tree area. I would be most concerned that I could offer competitive pricing especially with other STR owners that purchased years prior and have a much lower basis.

@Irvin Nguyen
June 2016 to March 2019 is 2.5 years. So you should qualify for the tax free exemption of $250k if single and $500k if married.

@Kim Hopkins this is a situation many of us have or may become exposed to in some degree so I appreciate you sharing your experience. You may not still be seeking advice but this is what I am gathering from your situation:

Your property is leased well under market value and now is worth a lot more than you paid for it.

Your tenant is taking advantage of his situation by subleasing and likely now subsiding most and possibly all or more of his rent. His sub letters are also possibly paying below market rent. None of the tenants are likely motivated to lease elsewhere as the rates will likely be significantly higher and it sounds like their businesses are difficult to relocate.

Your tenant says he wants to buy place and while that may be the case, at this point, he does not have an incentive to quickly move forward at least from anything coming from your side. Your $100k offer didn't move the needle so that is a good indication that he is not motivated to move.

To me it seems to be in your best interest to get the current tenant out even if your current deal doesn’t go through. If you sell to your current buyer you make your big profit and if you don’t you either sell to someone else or rent to someone else in your currently hot market - all options seem to be significantly more profitable than your current lease. So, I really don’t see any major downsize to loosing this tenant.

To accomplish this you need leverage. Even if it is just perceived leverage. 

If it were me, I would likely try to play the good cop with the tenant and let them know that my “partner” is not ok with the subleasing situation and is now moving forward with legal recourse. This will help you "save face" if you go back to negotiate with him. 

I would actually hire a proper attorney that does commercial evictions in that county and start the process. Even if it is just having them start by sending a letter to the tenant notifying them that they are in breach of the agreement and you will be moving forward with legal recourse (eviction) accordingly. I know you say the tenant will just cure the default but I would not assume that. Again, the sub letters will likely have little to no motivation to move on and even if they do, the current tenant may not be able to afford the lease on his own on at this point.

You need leverage even if it is just perceived leverage and putting him on notice of the eviction will help you with that. Once you gain your leverage you can better strategize on how you can meet your goals by either evicting the tenant and/or helping them if necessary to move on to their next location.

Good luck and keep us posted.

I don't think it is accurate to say mortgage interest rates used to 10%, 15% or whatever much higher rate than they are today and that people still purchased homes. Sales prices were and eventually will be adjusted to the relative value/affordability to the buyer in coordination with interest rates. 

@Kim Hopkins I would talk to a great real estate attorney with a landlord/tenant focus asap. Did you have an attorney draft your current agreement? What does it say about defaults, subleasing, etc? Depending on how the lease was drafted, you may have cause for eviction since the tenant has been subleasing without your permission or maybe something else you haven't even thought of.  Regardless, I would recommend getting a specialized attorney to guide you.  

@Jay Hinrichs copying you here as would love your sage insight on this topic if you wouldn't mind.