All Forum Posts by: Brian Kantor

@Sean Bramble, to estimate revenue when I underwrote my existing duplex, I went on Airbnb in my area and did a deep dive on listings to find comparable properties and what they were charging. You have to play around with the dates to get a sense of discounts for longer stays and also seasonally changing rates. I then looked at the reviews for the properties that had a ton of them. I was less interested in what the reviews said, but more concerned with WHEN they were posted. This helped to show what months of the year I could expect renters (in addition to the obvious ski season).

I also ran a report on AirDNA which allows you one analysis for free without signing up to get another perspective on occupancy. They estimated that I could expect occupancy 50% of the year..

Finally, I connected with a friend who has an Airbnb in the area about what occupancy she was seeing, and she told me that she was seeing closer to full occupancy (90%+).

Combining all of that together, I figured that I'd see 50% occupancy on average at the low end for a traditional Airbnb that had at least 1 BR, kitchen and living room, but with upside as high as 90%.

For this motel, we would do a combo of rooms and suites. We are estimating the suites that would have a full kitchen and living area as equivalent to a standard Airbnb at 50% average occupancy and the standard rooms at closer to 30% occupancy. I further supported these assumptions by figuring that at worst, the standard rooms would see 2x nights per week (Friday + Saturday) with once a month getting a 3-night stay. 2 nights/week x 4 weeks per month. = 8 nights + 1 = 9 nights / 30 days = 30% occupancy. 

Based on my knowledge of the area, I got a little more granular on the above, digging into the seasonality of travel there (with Christmas Week through end of March being super-packed and longer stays, April being totally dead and the rest of the year being somewhere between). I also know that aesthetically, the comps are mostly in terrible shape with dated properties still doing a decent business. There are 3x modern comps in the area that are charging on average 2.5x the dated rooms and as high as 5x. Long story short, the above numbers checked out and actually seem to be conservative.

Really appreciate all of the positive vibes from the community!

@Michael Baum, the bar/food area seats 25 legally inside and then has outdoor space as well. I looked into the licensing permits, and they don't appear to be onerous. Short term, we may rent the space out to a local restaurant who wants an outpost location, so we can monetize the space without the effort. Again, we're better than breakeven without this space, so even a little rental income here is nice. That said, we ultimately want to take the space over and do our own thing. We have a good sense of what could work there and there are not enough restaurants/bars to service the community and travelers, so good upside.

It is zoned properly from what we know so far (been an inn for 60 years), but would definitely want to confirm that before the purchase.

Parking currently is decent. The parking lot is gravel (as are most in the area) and maybe holds 12 cars, but the property lot is 7 acres, so room to expand it if needed.

We'll see. There is another interested party, but no offers in. Our contractor is friendly with the owners and we are going back a second time with him the weekend after next.

In the meantime, working on a formal business plan as that's a requirement of the commercial lender.

Will keep everyone posted.

Hi, y'all. We're in the process of finding our next STR property in Vermont, and we stumbled on a motel/Inn for sale that's walking distance from our existing duplex STR in the area.

We feel this property has a ton of potential, and my underwriting has so far come back really strong. With that said, I'm curious as to whether or not I am missing something that I don't know to be looking for.

A few notes:

1. The property has 10 rooms (w/ 5 exterior entry like a motel and 5x interior entry like an inn). Plus a 2BR/1.5BA owners suite and a 25-seat bar/restaurant space. Our plan would be to keep 4 units as single rooms, but split them up into 2x with 1 Queen and a small kitchen (aka studios) and 2x with 2 full beds and no kitchen (aka rooms). We'd pair each "studio" with an interior door connecting it to a "room" to have the ability to rent them together as suites. We'd turn the owner's suite from a 2BR/1.5BA into a 3BR/1.5BA and then pair up the remaining 6x rooms into 3 suites.

2. We plan (at least to start) to run this as a bunch of Airbnb units with remote key-code access and self-check in and 3rd party cleaning and maintenance as we use with our existing Airbnb.

3. There is a 15% VT lodging/sales tax, but I am calculating that this fee will be added to my room-rate after the fact, so it's neither income or an expense; it's a wash

4. My underwriting shows this doing better than breakeven without any revenue from the bar area, which apparently used to generate more revenue for the past owners than the rooms.

So, with that out of the way, any tips, advice or pitfalls to lookout for when underwriting a property like this?

Thanks in advance!

-Brian

I love this question! And I don't have a definite answer, but if this was my property, I'd try to get the tenant to sign a liability waiver drafted by a professional real estate attorney. Also, before you take ownership, make sure you get a strong liability insurance policy in place. That said, if the property is genuinely uninhabitable/dangerous and you're planning to spend a ton to gut-renovate the place anyway, your best bet might be paying for 60 days to put the tenant up in a safe short term rental of equal or better state than this current property. They shouldn't be upset with leaving a dangerous place to stay in something nicer for 60 days while they look for a permanent solution. You could also help them find another long-term lease at a relatively equivalent rent...

Not only "can you", but this is one of the best ways to leverage the untapped equity in your primary residence to drive yourself meaningful returns elsewhere. I assume you are referring to your primary residence (or a vacation home), though, as typically (but not always), you cannot take out a HELOC on an investment property.

Good read, @Bruce D. Kowal. Thanks for sharing!

@Lane Kawaoka Are you suggesting that if they sell their property for $500k and realize $200k in gains, but then take all $500k and invest that in a syndication, then in Year 1 that $500k shows as a loss, so that their net loss on the year is $500k - $200k = $300k loss on Year 1 tax returns?

@Dave Foster and @Ronald Rohde, my parents are the only members of the LLC that owns the property. They each own 50%, so any move would be the two of them together.

@Jon Taylor, you are the second person who mentioned this. I did some digging already, and this seems like a more compelling solution than a syndicate for a few reasons:

1) This way they don't have to keep rolling over into a new syndicate every 5 to 7 years (or get the tax burden at that point)

2) The tax efficiency seems to be strong for them as they pass ownership to their heirs after they pass away

Thanks so much for the tips @Colton Hahn and @Charles Carillo!

Hi there. My parents are selling a commercial property they own in full that's held in an LLC (of which they are partner members. Can they 1031 exchange the proceeds from that sale into a syndication deal as a limited partner? If so, what would be the stipulations or things to consider?

Thanks!