All Forum Posts by: Brent Langlinais

Sounds like the perfect "Subject To" deal. Probably need a Canadian real estate lawyer with experience in Sub To contracts and approval of HOA?

Colleen F., Good questions!

I think San Fransisco is one market that will maintain solid Travel Nurse demand and higher pay, as it always has, partly to do with the fact that staff nurses in the Bay Area are compensated much higher than the rest of the US, so hospitals can offer higher travel nurse bill rates and not break budgets. I confirmed this with several travel nurse recruiters who have exclusive accounts with San Fransisco hospitals, and report higher than average winter rates and plentiful contracts in the Bay Area. I underwrote the deal with MTR comps for shared houses and apartments in the area and the competition is super weak with terrible marketing, and most offerings are in houses with a family or grandmother, cluttered shared space, lacking amenities, beat up furniture, terrible photos, don’t offer refunds if the nurse’s contract is unexpectedly canceled, won’t allow mail deliver at the property, among other things that we would consider “not traveler friendly” The property I’m arbitraging is ideally located, brand new rehab inside and out, high end finishes, hardwood floor throughout, elegant furniture (mine), in suite W/D and dishwasher, parking, 3 minute was to subway, etc. But more important than amenities or number of bathrooms, travel nurses want to feel at home and comfortable and welcomed, instead of dealing with a nosy micromanaging landlord, unnecessary demands, suspicions or accusatory attitude, etc.

No doubt I’d be prefer a 2bd/ 2ba, but I think the monthly rent will attract plenty of nurses willing to share a bathroom, and I don’t need to rent all 3 rooms for the deal to work out for me financially.

Perhaps the most important part of my underwriting is the fact that I have competitive advantages in Travel Nurse Mid-term rental space, and even with decreased compensation for travel nurse contracts, and a single bathroom, I feel confident I can fill the purposed rental unit in this specific market.

By this I mean that I personally know and stay in touch with literally hundreds of current and former travelers, and dozens of recruiters representing 30+ different staffing agencies. As such, I get hundreds of contract offers each week and follow trends to a degree I have not seen from any other travelers I know. I offer value to those in my network as I share with them especially lucrative contracts and serve as a resource for other travelers and recruiters who what an honest take on the compensation and terms of contracts they may be considering or what to know what their competition is offering. I've also been a guest on the travel nurse podcasts and participate as a top contributor in numerous travel nurse online forums, network at travel nurse convention, and the list goes on in terms of ways I offer value to folks in my industry who are likely to help me a competitively priced MTR where demand is high. All this to say that I can probably fill the units with people in my network who will gladly trade a shared bathroom for peace of mind renting from someone they trust not to harass or micro manage them, invade their personal space, not allow them to get mail, or generally make them feel unwelcome, l which is the main complaint nurses seem to have about the MTR operators. 

In fact, I may be able to fill the rooms without even advertising the rooms on Furnished Finders, as is the case with one of my colleagues who keeps his 3/1 and 2/1 in Palo Alto occupied year round just with referrals from my favorite recruiter, who I may or may not be dating. :~)

Im a veteran travel nurse of 9 years and dozens of contracts, and home ownership has long been a challenge for travel nurses, because stipends are not included in our tax returns, so stipends have not been considered income according to the mortgage lending industry. Pre-pandemic we typically made $20/hr plus full GSA per diem stipend, or similar.  So only a third of our income was taxable, and at $20/hr income for 36hrs a week with occasional breaks in employment our reported annual income was like $35,000 a year. which gives us very little borrowing power.  The pandemic changed this completely with travel nurses making $100/hr or more for 48-72hrs a week, plus max GSA per diem, so that 80-85% of our actual income was taxed and reflected on our tax returns. 

Many of of us made $200,000 - $400,000 a year for a couple of years, and with 3% interest rates a lot of travel nurses were able to purchase homes for the first time, maybe 2-3.  But the crisis contracts are over now. There are still some decent contracts out but not many. By good I mean $50-60/hr taxed pay rate for 48 hrs so maybe $120K/yr on tax return.  The majority of contract is seeing are back to $20-30hr taxed :~(  Unfortunately interests rates have climbed to 7.5% and rising which further limits our powering power, leaving a lot of travel nurses (and anyone wanting to purchase real estate) feeling like the ship has sailed and we missed the boat. 

To address your specific questions, most lenders I have spoken to require two years of experience as a travel nurse (or even two years of tax returns so maybe almost 3 years of traveling) and treat the nurse as a 1099 independent contractor.  Twice I've been told they average our income for the last two years tax filings, and extrapolate the last two months pay to determine an annual salary, and use whichever figure is less to assign our annual income for lending purposes.  and Per Diem stipend would not be considered.

I've also been told that FHA (or any primary home loan) would be challenging because your intention is supposed to be to occupy the home and a full time traveler obviously isn't going to live in the home much of the year. I think some lenders are willing to bend the rule and others aren't. I would think its easer to qualify for the loan if the home is at the same location as your home of record where you are already duplicating expenses, rather than in a new state where you want to move but don't have roots.

Also, some staffing agencies have been willing to compensate you without per diem stipends, so that all of your income is taxed, and help you qualify for a larger mortgage.  Most will not do this, however, because they save money by paying per diem since pay payroll taxes, unemployment insurance, etc is charged as a percentage of taxable wages. They also have to be careful if others are paid per diem and you aren't, as their legal department doesn't want the IRS to accuse the agency of "wage reclassification" which is tax fraud.   

I think there has never been a more difficult time for a travel nurse to buy a home, or for anyone to buy a home.  But it's still possible.  Creative financing is probably your best bet and I'd read anything you can about it and there are some great BP podcasts on the subject.  I'd also use the search feature on the facebook travel nurse groups, this subject is discussed frequently. Lastly, I would contact The One Brokerage. They offer a ton of different loan types with flexible conditions aimed at real estate investors.  You can use a lone broker anywhere, they do not have to be in your home state or city, and will have many more options than local banks or credit unions. 

All the travel nurses past and present have faced these same challenges to some degree.  Don't give up and keep us posted on your progress. :~)

@Bian Dahab, no doubt.  I would also not rent to a tenant who is difficult off the bat, and I've met more than one difficult nurse. ;~) Their income would be more than enough to qualify for housing costs, but that's not to say I'd want to deal with them personally. We understand that property owners should, and do, charge as much as the market allows for rentals, and the travel nurse industry is more volatile than most so renting to a digital nomad, instead might have advantages.  

With regards to GSA per diem, there is some addition nuance worth mentioning.  Nurses are hired by a staffing agency, who collect an hourly bill rate from the hospitals, which is often double the hourly wage eventually paid to the nurse.  Both per diem pay and hourly wages come directly from the bill rate, so per diem pay is essentially just compensation that is not taxed.  The more of the nurse's compensation that can be classified per diem, the less we pay in taxes, so the more attractive the contract is.  The tax free savings also benefits the staffing agency who saves in payroll taxes, unemployment insurance, etc.  If too much is paid per diem, and the hourly pay wage is exceptionally low, IRS will consider it "wage reclassification" and audit the agency and staff for fraud.  The widely used minimum hourly pay rate is $20/hr ($720/week) for travel nurses and the remainder of the available compensation can me paid per diem up to the GSA allowance for a given area.  When bill rates are high, a nurse might make $50-90/hr taxed + max per diem for an area, but when bill rates are lean we might only make $20/hr taxes and a fraction of the GSA approved per diem.   However, there isn't a nurse in America who would take on the risks or expense of travel nursing for $20/hr when they make $50/hr at their local hospital.  Instead we see this per diem as regular compensation with the added benefit of tax savings. 

For example, a typical contact currently pays is $2000/week ($720 taxed and $1280 per diem).  If the nurse doesn't qualify for the per diem because they don't duplicate expenses at home, or they are local to the hospital, their pay might me $1900 taxed, which is less than the $2000 because the staffing agency keeps the same profit margin and has added payroll tax burden, unemployment insurance, etc. 

None of this should be of any concern to a property owner renting to a tenant.  Same as an auto mechanic should not care how much taxes a real estate investor pays when negotiating the cost of an auto repair. However, when you look at a travel nurse's annual tax returns, per diem pay is not included, only the taxed hourly wages, so when applying for credit, or to anyone requesting tax returns, it would appear the nurse made 1/3 what they were actually paid, which is hell for a travel nurse trying to invest in real estate.

I share this because very few MTR operators understand this and many see per diem compensation as free money the nurse has available to pay rent, and its often a point of contention between property owners and nurses, which is another reason nurses don't want to share the details of our compensation. 

Thank you Mason. 

I think the property owner is open to other options as long as his investment is protected. Do you have a recommendation as to how we structure the lease so that he in protected in the event of a tenant refusing to leave, eviction problems, and liability?  It would seem that the risk of eviction would fall on me because I would still pay the full rent to the property owner while not collecting rent from the tenant.  And the property owner's insurance would cover their liability regardless of who the tenants are.  

Thanks!

HI gang, thanks in advance for your insights. 

I'm a veteran ER travel nurse of 9 years having worked dozens of contracts throughout the country.  But the industry has progressively tightened it's belt over the past 12-18 month with fewer and fewer travel nurse contract offerings, and pay packages continuing to  plummet.  We are now seeing average pay packages at, or below, pre-pandemic levels.  With increased housing costs and reduced income, travel nursing no longer makes sense for me financially, so I have switched from travel nursing to a full-time staff nurse position in San Fransisco where nurses are paid more that what is currently available as a travel nurse.  I'm happy to share my insights if investors are curious how this might effect supply and demand for MTR rentals, but for the time being I have some questions about MTR rental arbitrage.

I am looking at renting a 1bed/1ba apt in Daly City, CA. The property owner is also renting a 3bd, 1ba apartment on site and we are discussing the possibility of me leasing the entire property, and then subletting the 3bd apartment to travel nurses via MTR leases. The property is well suited for the purpose, no HOA, with potential cash flow that will provide me free housing in the 1bed 1 bath, maybe more... making for a great house hack. I have experience house hacking during college where I furnished a house and rented rooms to cover all my costs and free rent for me. I have also run a lucrative air b&b on my sailboat in Seattle way back when the Port or Seattle allowed it, and designed and set up an AirB&B via ADU at my mom's place which now nets her $15K annually. So I don't think managing this purposed rental arbitrage is beyond my capacity, but property owner and I have some details to work through.

Our dilemma is how do we vet potential renters, who conducts the background checks, who holds the deposits, etc. Of course I would furnish the property, advertise the property, show the property, provide weekly cleaning service, collect rent from tenants, and pay full rent to the landlord regardless of occupancy.  I also purpose that I pay the full deposit ($5000) to the property owner, and I pay for minor repairs myself, collect deposits from tenants, and I would be responsible for responsible for vetting the tenants by standard rental application, verifying employment, credit checks, references, and background checks.   However, the property owner is requesting that he hold deposits, applicants submit applications to him, and he takes on the responsibility for vetting tenants.    In my mind, this presents a conflict of interest if property owner is paid full rent by me, he has no risk associated with vacancy, no incentive to conduct timely rental applicant screenings, and no incentive to approve tenants.  And if he holds deposits, I have no means of recourse for potential damage to furnishings, or minor repairs which I would rather handle immediately as an onsite property manager.  Property owner and I are researching local sublet laws as they apply to MTRs and rental arbitrage, but I'm seeking any insight BP community has regarding how best to arrange the lease and potential subleases to best protect the property owner and myself.  

Thank  you all in advance for your thoughts and insights.  

~Sincerely

Great points all.  I'm a travel nurse of 9 years and most of my veteran travel nurse friends do not share their income with MTR landlords (same as we don't share with hotels or air b&b hosts) because we are too often taken advantage of. In fact, we have seen a massive increase in our housing costs as our industry has gotten a lot of negative press about how much money we make. I've even heard the sentiment on BP podcasts that travel nurses make a killing, encouraging investors to switch to MTRs to take advantage of our housing stipends.   Indeed, there was a boom during the pandemic with news headlines of nurses making $10,000 a week, not mentioning that we worked 90 hours a week at $90/hr for this income, and paid 40% or more to taxes.  My tattoo artist makes more than $90/hr, so does my electrician, plumber, diesel mechanic, etc. lol 

Part of this $10,000 was a per diem tax free stipend which is based on GSA per diem allowance and varies by zip code and season.  To receive the stipend we are required to duplicate our houses expenses so we are paying rent or mortgage in our home town AND at our duty station. Also, in an attempt to cut costs, some hospital systems cancel our contracts without warning, due to low cense, or hiring new travel nurses who sign contracts paying less than the current traveler is making.  Some predatory travel nurse agencies routinely cut pay as soon as the travel nurse begins their assignment with a take it or leave it approach knowing the nurse waited weeks without work for the contract to start, gave up other opportunities, and accrued thousands in out of pocket expenses for flights, rental car, signed a MTR lease, and maybe even relocated their family.  Many new travel nurses initially fail to realize the "contracts" are not binding in the legal sense, but At-Will job offers.  When the contract is canceled, many real estate investors refuse to let these nurses out of the rental leases and nurses pay for 3 months of MTR rent that they were unable to use while the landlord immediately rents their property to the next travel nurse, and gets double rent for a period.  I could go on and on about how nurses have been burned during the pandemic, sometimes by hospitals, sometimes the staffing agencies, and sometimes their landlords but this is likely why they are hesitant to share their income, i.e. fear of being taken advantage of.   

Quick tip: the travel nurse market has shifted drastically in the last 12 months, falling to pre-pandemic pay levels and often below.  During the pandemic peak, there were as many as 60,000 current listings for travel nurse contracts with pay packages between $4000-$11,000/week ($16K-$44K/month) depending on location, hours worked, specialty, and experience.  We are now down to 6000 current listings with pay between $1500-4000/week ($6K-16K/month).   

I don't think landlords have to worry about our earnings/income.  But I might be concerned with the increasing supply of MTRs and decreasing demand for MTRs with fewer travel nursing contracts, and fewer nurses willing to travel for the reduced pay.