All Forum Posts by: Bonnie Low

I work with a lot of MTR investors and what I am seeing frequently with multifamily acquisitions, particularly with new investors, is that they often test the property just like you're mentioning, as a way to dip their toes in the water and see what works in their area and for their personal style. Typically, if they can make it work as an STR they go that route because it almost always generates the most revenue. Interestingly, though, people who have experience with STRs seem more likely to pivot to the MTR strategy once they realize how much easier it is and how well the renters treat their units. This is especially true with single family homes. There's no one size fits all of course, but generally the STR/MTR/LTR mix in a multi-family unit can be challenging because the way renters utilize these properties is so different. You STRs tend to be a little higher end and guests have higher expectations. MTR attracts a lot of traveling medical professionals and WFH individuals who need a quiet space during the day, which may not be compatible with families living in the attached LTR. So it really just comes down to figuring out what solution works for a given market, but it's yet another great thing about real estate: having options!

It seems like there's some confusion between the asset protection one would want to achieve by ensuring that personal and business funds are never commingled vs. the BMP of separating deposits to ensure they are available to the tenant when due. With the former question, if you are trying to achieve asset protection it's imperative that you don't commingle personal and business funds. Talk to an attorney about this because there is so much more to asset protection than just that. However, I think your question was more about the latter: making sure the security deposit is never touched until it's due back to the renter. I've been religious about this because I know how easy it is to lose track of what you're spending when it's all going into and out of a single pot. I use Baselane for my banking and bookkeeping platform and I really love how easy it is to set up accounts and sub-accounts for just such purposes. For example, I have an account set up for each of my rental properties. This is my main account for each one. But I also have sub-accounts set up for the security deposit and to set aside funds for CapEx. All of my day-to-day expenses and the bulk of the revenue flow through the main account. The security deposit goes into its own account and stays there, untouched. And a percentage of the revenue gets auto-directed to the CapEx subaccount. It's very easy to keep it all straight.

These are all services that investors and homeowners will and do pay for so you're on the right track. Denver and its surrounds have particularly active markets and a lot of active individuals offering ancillary services so I'd suggest you research those available services you're looking at offering to help you get an idea for what is well covered, what is lacking and what your competitor's pricing looks like. Good luck to you!

 I couldn't agree more. It can be a great option as families combine and parents or grandparents need less space, need to be closer to family but still want their own unit. It makes multi-generational living much more affordable.

There are easy to use systems that will help you do this, @Angelo Llamas. I wish I would have started using Baselane a long time ago. It's a banking and bookkeeping platform built specifically for real estate investors. Like Jake Baker suggested, keep good records and have a dedicated bank account for your property, properly separating personal and business expenses. Baselane has the added advantage of synching with your Schedule E you'll use at tax time to file your taxes. You'll be tagging transactions throughout the year with categories that fit the Schedule E so when tax time comes (if you stay on top of it) every deposit and expenditure will already be categorized and it's quick to create the Schedule E and/or run P&L reports any time you need to. There are so many features that make Baselane a great option for real estate investors. The sooner you use a system like this, the easier it will be to keep track of it all when you have multiple properties. 

It doesn't have to be condos or apartments necessarily. Smaller homes are not for everyone, but they almost always work for two very important parts of the homebuyer demographic: retirees and first time homebuyers. A lot of jurisdictions dislike density, particularly if parking is an issue and mass transit is not readily accessible. Both of these are legitimate concerns. I like what I'll call the "west coast model" since it's mostly happening out here (though I'd love to be wrong about this!) which is allowing homeowners to build an Accessory Dwelling Unit (ADU) on their property. That unit can either be the one the homeowner chooses to live in or it can be one they rent out for revenue or to offset a portion of their housing expenses. I see SO many properties in the upper midwest that have ample yards or even existing structures like carriage houses and detached garages yet prohibit ADUs. Allowing someone to do this on their property can significantly increase housing density and affordable units without increasing the jurisdiction's footprint. Some areas of the west coast are allowing multiple units to be built out on a single parcel and in these higher COL areas, it's a boon for the homeowners, renters, builders and even for the local governments that are collecting the building fees. I'd like to see more of this happening everywhere. My sons are of homebuying age but the barriers to entry are so much higher than they ever were before. Having the ability to offset their mortgage with an ADU would be a game changer.

Hi, Jorge - My MTRs are in California, too, and we have exceptionally high bills in the summer time especially for AC usage. You're definitely in a unique situation, but there are some SOPs that apply here. #1, know your guest avatar. If you're certain the type of renter you're going to get are traveling medical professionals, you know they're on short term contracts (typically 13 weeks). That alone makes it difficult to get the tenant to put utilities in their name. If you're dealing with relocations, you shouldn't have any problem getting the tenant to put the utilities in their name as these are typically longer contracts. If the former is your guest avatar, you really need to look at what others are doing in your area because if they include utilities with no cap and you don't, it will make your property much less desirable. However, if you seem similar listings in your area and they're requiring tenants put utilities in their name, then you should feel more comfortable doing so. You can also split the difference by looking at the historic energy usage for the property and setting that as a utility 'cap.' That amount is baked into the rent you charge. Anything above that is billed to the customer separately by you. Sometimes it can be difficult to collect and some landlords will keep any unpaid utilities out of the security deposit, though CA is one of the trickier states to do this in. I find that putting a utility cap in the lease agreement they sign and calling their attention to it really helps make them more aware that they'll have to pay for excess usage so, fortunately, I haven't had to actually bill anyone yet, but the language is there if I needed to. 

There are a lot of books on note investing, which is essentially what you're talking about. Here's one from Bigger Pockets publishing https://www.amazon.com/Real-Estate-Note-Investing-Passively/...

 The markets I'm focused on for my next MTR are my local market here in NC as well as Colorado Springs. For flipping, I'm concentrating on SC and IN. For my MTRs, I ONLY use Furnished Finder and, more recently, MiniStays. Like many MTR hosts, I feel like it's a big risk to list my properties on Airbnb for longer stays. Their guest-forward policies are too risky for me. I want to be in control of what happens with my property and my cancellation policy so I won't use Airbnb or VRBO for midterms. Fortunately, I stay completely occupied through FF so I've not had a need to branch out further. If I did need to, Zillow would be my next go-to as I'm seeing more and more people use it.

If you're left with $107k across all 3 units after ALL expenses are deducted (some people don't include PITI when they discuss NOI) then I'd say it's darn good. But if your PITI is $105k, then not so much. I'd happily accept the former, though the 16% YOY property tax increase would be a non-starter for me.