All Forum Posts by: Brian Kantor

Hi, everyone. Most of my experience lies in the longterm rental property world, but we just picked up a short-term rental in Vermont and are going through the process of getting it ready to go.

The property cost about $415k, and my insurance quote for homeowners + liability was about $4k, which seemed high to me.

Obviously insurance quotes vary greatly by policy, but wanted to get a sense as to what others were paying and what provider they used.

I am used to long-term rental policies, which seem to be less expensive.

Thanks in advance!

Hey, @Tanner Foy. Going to disagree with much of the sentiment here except for @Kate Barry and @Bruce Lynn through Point #3.

You definitely want a team up front, especially if you're investing out of state.

Order definitely matters, though, to Kate's point, but with that said the only one that wont take your call until you have property under contract, is the contractor. You want the rest in place first so that they can offer referrals and provide checks and balances. The key is being specific and focused. No one wants a "project"; they want you to be a "prospect".

1. Get yourself pre-approved for a mortgage. 
2. Research neighborhoods in your DMA that are good for investors. These don't need to be the exact ones you go after, but this gives you a starting point for conversation. This way you've done your homework and can talk from a point of knowledge. Look at 25+ Zillow listings in these hoods.
3. Call 20 to 30 agents. Let them know you've been pre-approved for a mortgage up to $X and you're hanging on to $Y for renovation reserves. Say that you're considering Neighborhoods A and B because you've read that they have a strong ROI but arent too dangerous. Does he or she agree? What other neighborhoods do they like? What property managers do they recommend? What contractors and inspectors do they recommend? Let them know that you're looking to build a long-term relationship and that you want a partner. Offer them a $2500 bonus when your tenant moves in (after purchase and renovations are done).
4. Call 20 to 30 PMs including those recommended by the above agents. Here are the neighborhoods you're looking at (updated with the most common ones you've heard from those 20+ agents. Do they manage properties in those 'hoods? Do they like them? What sorts of rents are they seeing in those hoods? Are there other hoods they like?
5. Call back your favorite agent(s) and ask them about the hoods mentioned by your PMs.
6. Look at 100 properties and make an offer on 1 of the top 10 contingent on inspection. If it falls through, move to #2, 3, etc
7. Go under contract
8. Call inspectors and say you need them to check out this property
9. Call contractors recommended by your agent and PM; pay them $250 to walk the property and provide you with an estimate based on the inspection report and what you just saw
10. Close
11. Renovate
12. etc

Net net, do your homework first and prove it to your potential team so they can tell you're serious and not a headache.

Good luck, sir!

Hi, @Joseph Schweizer Congrats on your purchase and for taking this step. Turnkey often gets a bad rap here because a lot of investors feel that 1) it's a cop-out to turnkey instead of doing everything yourself and 2) because people feel (potentially justifiably) that leveraging turnkey cuts down your margins because the turnkey company is taking their cut.

I think #1 is BS. We're all here to generate more income, and we should all do what makes us feel the most confident be it turnkey or "traditional" soup-to-nuts.

Regarding #2, of course the turnkey company takes a cut, but to me that matters not if they are getting you a better deal than you could find on your own.

So my request to you... can you keep us posted over the coming months how everything turns out? Would love to see how performance pans out over the longer term.

Also, my personal gut tells me with turnkey that the properties are not BRRRR'able as you're essentially getting them post-renovation for their actual appraised value and not below. Curious if you or @Zach Lemaster has any perspective to share on the ability to find a property from which you can retrieve a sizable-enough amount of equity to repeat the process.

Super helpful, @Grant R. Thank you. If I was to limit to just me and 1 other partner (providing capital), how would you suggest avoiding deadlock? The thought of having 3 total partners was to mitigate that issue. Thanks again!

Super-helpful @Kathleen James, and by the way, we are working with the agent you recommended. Thank you! @Adam Lippa, the property is in Weston.

@Grant R., this is great! Thank you.

So, to be clear, with the long-term strategy, you think it's fair for the capital partners to earn 33.33% of equity and cash-flow despite plunking down 47% of the capital? Does that 13.67% "loss" in equity and cash-flow make it a poor deal for them?

Example property:

• $70k cost + $25k rehab + $5k closing costs = $100k purchase price ($110k appraised value)
• Rents for $1000/month less expenses = $500 monthly NOI

This means that their $47k investment gets them:

• 1/3 of $110k = $36.6k in equity
• $2k in annual cash-flow (4.25% cap rate)

Does that seem fair? The equity loss alone seems like a gip.  I want to do right by them. Is there something more I can do to make this a little sweeter for them, but still worthwhile for me doing all of the work?

I'd like to note, that I do not self-manage, and do outsource to a property manager for 10% of the gross rent (which comes out of our profits).

Thanks again!

Hi, guys. My wife and I are considering the purchase of a vacation property duplex in Vermont with a massive detached garage that we'd like to finish and turn into a standalone unit for short-term rentals.

The property is currently zoned as a two-family residential. While I know this means that we can't turn the garage into a legal 3rd unit for a long-term tenant, but are the laws different with regards to a shirt term rental? Would we be able to rent the garage unit out on Airbnb without having to get the property rezoned?

On the flip-side, has anyone had any experience in getting a property re-zoned in rural Vermont and can share any insight how easy or tough that might be, how much it might cost, and how long it might take?

Many thanks!

Great tips here, everyone! After this feedback and some insights I've pulled in elsewhere, here is my revised plan.

Thoughts?

• Number of Partners:  3. Each with one vote (to avoid deadlock)
• Partner roles:  I do all of the work and both other partners are totally passive
• Upfront capital:  
  • 5% from me, 95% split between the other two partners (47.5% each)
  • Treated as a loan at 0% interest with no fixed payment schedule
  • Capital goes to:
    • Purchase price
    • Renovations + buffer
    • Closing costs
    • 1 year of CapEx reserves
• Ownership: Each partner owns 1/3 of the LLC and property
• Loan payback:  50% of monthly net operating income goes to pay off the loan pro-rata based on invested capital %, 50% goes to cashflow
• Cashflow: Even 1/3s (after expenses and CapEx reserves)
• Upon sale or refinance:  Loan paid off first based on % invested capital. Balance split in even 1/3s

My other option is same as above, but 2x partners and I have 100% voting rights, but I don't necessarily think that's fair. Thoughts?

Reviving this old thread. 

My wife and I live in Brooklyn, NY and are buy-and-hold BRRRR investors in Detroit, MI. She's been skiing Bromley (Peru, VT) since the 90s and we still come up here every winter. After years of renting, we're looking to buy a place with 1 or more ADUs to rent out on AirBNB to help pay for the mortgage (looking at Weston, Manchester, Peru, Londonderry).

Can anyone recommend a good buyer's agent?

@Tyler Tacy, as I'm sure you've just realized, you have just stumbled on one of the most polarizing situations in REI. Allow me to offer two "solutions" that should quiet both the angel and devil on your shoulders.

1. If these sweet little old ladies are really barely able to make ends meet and afford market-rate for rents, they may qualify for government assistance in paying their rent. It could be worth calling your state's Section 8 office (or whatever your state calls it) and get as much info as you can about who qualifies for assistance and what the process is for applying. Once you have that info, if your tenants qualify, you could then help them go through the application process. Once they're approved, you get higher rents, and they potentially end up paying LESS than they were before. Everybody wins.
2. If the above doesnt work for one reason or another, let them know that market rent for their apartments is $900, and that you do NOT plan on raising their rent from $550 to $900 overnight. But you do need to ensure that you are covering your bases and paying your bills. You could suggest a modest ~5% (or $50 increase or whatever else you are comfortable with) once a year when their lease renews. This way, slowly over time, you can nudge their rents up closer to market rate without doing it all at once or throwing them out. You can help to justify these incremental annual raises via capital improvements that will make the place nicer for them and more profitable for you in the future. Consider redoing the floors, bathrooms, kitchen, etc while they are there to show them that you are not simply taking that extra rent and padding your bank account. Ultimately these improvements will pay for themselves over time.

Just my two cents. Good luck with whatever you decide.