All Forum Posts by: Clint Harris

One of the best parts about this community is being able to learn from so many of you, avoid pitfalls, and celebrate successes together. It amazes me how many meaningful relationships my wife and I have built through this investing community, and it’s led to tremendous growth for my wife’s real estate business, and also growth in our portfolio and property management company with all the wise advice and lessons learned that have been shared with us. I’m not great about pausing and coming up for air to post an update, but I’ve been encouraged to do that more by another investor recently, so wanted to take a minute and update where we are 3 years into our journey into buying short term rental properties at the beach. My hope is that it can either help squash some fears or help one person avoid some of the mistakes that we made.

Quick recap, my wife and I moved to Wilmington, NC a couple years ago, discovered Bigger Pockets at the same time, and after renting for a year to figure out the town, we bought a duplex at Carolina Beach, moved into the upstairs 3/2 unit, and starting trying short term vacation rentals in the downstairs 3/2 unit. We did 57k gross the first year and were hooked. We were getting paid to live at the beach but needed to scale. So, we needed more units… but beach property is expensive! Eventually we figured out Arbitrage (didn’t know there was an actual name for it at the time) and signed a Master lease on a triplex, with a Net of a little over 53k after paying rent, utilities, expenses, etc. That property led us to another duplex Arbitrage 2 doors down just from word of mouth between neighbors, and that unit brings in another 26k Net. Alright, so then we had some cash and could get out of arbitrage and keep buying. We bought an under-performing quadplex with bad long-term tenants in place, did a renovation, converted to short term, and it took off. We bought it for $485k, but 70k into it, and after our first year of operating, have a couple off market offers for $800k, so that’s fun. That property does $165k in gross rents, with a Net to owner of $68k after all debt service, and paying for property management. From there we went back and secured the arbitrage tri-plex with owner-financing and actually split the downstairs 2/2 into separate 1/1 units to add another 30k in revenue, and then in November we bought another quadplex that I’m turbo-excited about. It was an absolute dump, horrible tenants and in terrible shape, but literally built right on the beach access, 27 steps to the beach, and on the best surfing spot on the island. Very interesting and creative offer that I wont spill the beans on, but long story short, we picked it up in the neighborhood of $550k, and relocated the tenants. Luckily they were month to month, because the moratorium on evictions for non-payment was in place for Covid, and 2 of the tenants immediately stopped paying when they found out the property was being sold, and said they were dug in, not going anywhere, would see us in court… etc. After a carefully worded letter explaining that even though there was a moratorium on evictions for non-payment, there was NO moratorium on evictions for Hold Over, which is when a tenant stays past the termination date on their lease. Since they were all month to month, I provided the proper written notice, and followed all the rules, and eventually cooler heads prevailed, the tenants all moved, and I provided a free moving truck on moving day. Sometimes you catch more flies with honey than with vinegar, plus, we live on an island. It’s a small community, and I don’t need enemies. Anyway, full gut, just finally launched 3 units in early June and scratched out $18K for the month, July is booked for $28k with probably another $3-4k available to book, and then we’re putting another $10k into the property the first week of August to build a new walkway to the access, porches, outdoor shower, etc. The reason I’m excited is because we have parking to build 2 more units, and in 2 years, we’re ripping the roof off and building a couple 2/2 condos on top of the quadplex with all glass walls on the ocean side and killer views, can’t wait for that.

So that's kind of the personal portfolio growth, we also have a toddler now, which has made things WAY more complicated, but also fun. My wife Abby is crushing it at Nest Realty, the market is scalding hot and I know everyone is having success, but she's closing around $2mm a month, and I'm beyond proud. The biggest change is that with some nudging from a couple other agents that we partnered with, we were finally convinced to start a property management group. Going Coastal Property Management is a boutique-style STR management company, and the goal is to always stay small and nimble, and always look, feel, and BE local. We have 43 listings now, have a full-time managing partner, a couple assistant managers, 5 cleaning teams with 16 cleaners, an office, and for the sake of vertical integration, we've been shopping for laundromats for our linen solution. We control 12-14k lbs of linens a month right now, so I'm thinking that we can more than pay for a laundromat just paying $1 a lb for wash and fold, and then any business walking in the front door of the brick and mortar location is just additional revenue. Vertical integration has proven to be the only way that we can maintain a high standard. We have strict standards on the linens, mattresses, etc. that are used in our listings, avoid the max beds and heads strategy, and always make the beds unlike our competition that just drops a bag of linens, because the data shows that people will pay for that convenience. Our cleaners are only allowed to clean on our listings, because we need to control their entire book of business so they cant just not show up one day because they don't want to meet our high standards and have somewhere else to go where they don't have to work as hard. We pay a great wage, and have strict standards, and for the right teams and workers, it's been a great fit. I used to be quick to hire and slow to fire, and I had to learn to change that around. By using a data-driven approach to all our property selection, staging, and pricing and occupancy metrics, along with an interview process with the owners, we have developed a great system for aligning with the right owners. We have a good mix of larger and smaller properties that have different benefits and allow us to keep occupancy basically year-round so that we can keep our cleaners, handyman, and managers employed and happy. We have a certain number that we need to hit per listing in terms of profitability, and now with strong referrals and word of mouth, we are easily picking those metrics, and are turning down more listings than we can handle.

Whew, so that’s it, I guess. Like I said, I’m bad about stopping and taking time to document, so wanted to do that to have something to look back on. Abby has actually sold properties to quite a handful of ya’ll on here, so thanks for that, and also for all of the knowledge and experience that has been shared that has helped us in our journey! Let me be VERY clear… if this makes you want to try and jump into the game, our market in CB is extremely hot and competitive, but the underlying concepts of using data from a good source like AirDNA, and a data-driven approach to management, staging, operating, streamlining, and automation work pretty much anywhere. I’ve written more about that in the past, but please don’t think our market is something unique, the principles work all over, and in markets that are much less competitive than ours where you can probably get more for your money.

The goal for 2021 is a laundromat for Going Coastal, and personally, it's looking like a 1031 into either a small hotel (couple offers shot down so far), or if the right situation came along, a value-add self-storage facility just for the purposes of diversifying away from the beach. Hurricanes are a tricky business, we've had 3 in the last 3 years, and I'm actually flying back to Wilmington right now just ahead of Elsa, which I'm hoping is down to a tropical storm by now! Anyway, onward and upward. Our strategy of taking underperforming multifamily properties and converting to top performing STR units with automation and streamlining would work well in the right hotel setting in my mind, especially with it being an invisible-service structure, and not needing office space or on-sight staff, and everything through an A la carte platform. Anyway, we shall see, something could go south, and it could all fall apart tomorrow, but for now, I am lucky and blessed to be able to say that things are running very smoothly with the right personnel in place, and the machine we have built over the past couple years is steadily spitting our several revenue streams, and I'm very excited to not be forced to trade time for money. Hope you all are well and wildly successful, thank you for contributing, we all do real estate, but more than anything, we are all in the People business, so thank you for reading, contributing, and being a part of our journey.

Hey fellow investors! With one day left until Thanksgiving, and having a little time, I’ve been putting thought into all that I have to be thankful for in our up and down year in our real estate journey, and wanted to share some of the positive lessons, some of which came from negative situations. I keep up with quite a few friends in the BP community, and have been getting a lot of questions about how the year has been for us since we’re heavily invested in the Short Term Rental space, so thought it would be easier to put a summary in one place that may spark conversation that I can learn from, or that may help anyone else. I’ll try and give the short version of what happened here, and then some bullet points of what the market has been telling us, and yes, we’re still buying, even in this weird and volatile time.

We are in Carolina Beach, NC, a small island town just outside of WIlmington. We moved here 3 years ago, bought our first duplex in Sep 2018 that was a killer House Hack utilizing AirBNB and short term rentals, did 57k that first year in our downstairs unit. From there we arbitraged a triplex, then arbitraged a duplex, then partnered on a quadplex purchase with my retiring parents, and have since used the money to buy another quadplex right on the ocean access that we are closing on the 30th of this month. In addition, and after getting pressure from other out of town investors, and people looking for a new twist on an old industry, we started Going Coastal Property Management with some partners to bring a data-driven approach to short term rentals in our market, and we do design, renovations, staging, optimization, and of course property management, currently have 25 listings under management, and are on boarding 2-5 units per month. That’s kind of the natural progression of all of this, but the rocky part was back in March/April when our town completely shut down all short term rentals in our market indefinitely.

So Covid hit, our town shut down all short term rentals, and we had 28k in cancellations overnight in my personal listings that we operate. Obviously that sucks, but it is what it is. In my market, we can get hit with a hurricane any year, in fact we have been hit the last 3 years in a row, and can easily lose 1-3 months of peak season depending on the storm. Because of that, we keep a 60k “hurricane fund” that we built up the first year just for situations like that. So we were fine, and just decided to hunker down with our empty units, and wait it out. What we saw across our island was pretty much a blood bath among other hosts. There were quite a few people who had cut the margins pretty thin to get into their listings, and were in bad shape with losing those couple months (keep in mind, at the time, we had no idea how long the shut-down was going to last). So this is when things started getting crazy, all of a sudden, you had hundreds of hosts flipping and trying to put long-term tenants in their units as fast as they could. In a market that usually always has more people looking for long term rentals than there are units, suddenly, the supply was much much greater than the demand. People started dropping prices to be competitive, and units that would do 50k as a short term rental, or should be at $1600 a month as a long term rental were being rented out for $800-900 a month just to try and stop the bleeding. It was wild. Fast forward a little over 2 months, and things opened back up. Since they did, after people were locked inside for so long, the demand for short term rental units at the beach has been INSANE. We were 100% booked across all units, and even with having to charge higher cleaning fees because the Covid cleaning and linen guidelines were strict and took much longer, we were slammed full. Even now in November, we are 10-15% higher average daily rate than this time last year, with slightly higher cleaning fees, and are still booking really well. All of those people that had taken on long term tenants were scrambling for any reason they could find to evict their tenant and get back to making real money, but from everything I’ve heard, those tenants that got those good rates know how good they got it, and have been perfect tenants and aren’t giving any reason for eviction. I even heard a rumor of a cash-for-keys offer to get the long term tenants out, but don’t know how that tuned out. Anyway, our units immediately jumped to doing 6-8k gross per month per unit, so we were rapidly catching back up. Even with those lost months, by the second week of October we had completely caught back up, and are on track for a record year in terms of gross revenue on our personal listings. SO, here are some of the lessons that the market has taught us this year.

-Always keep that hurricane fund. Whatever you want to call it, be ready to have the world stop for 3-4 months and still be able to operate, or at least tread water. If you do, when/if anything happens, there is opportunity to help out other investors, and also build your business at the same time.

-Work Stations! Last year, our questions from guests were always the same. “How close is it to the beach, do you provide beach chairs, is it pet friendly”. This year the questions are completely different. “Is there a work station? How is the internet speed? Can my kid do school remotely? Can I work remotely?” I don’t think thats going to change, many companies aren’t going back to office locations, if you are location independent, there are a lot of people that would rather be working from the beach. If you’re up-fitting a new unit, put in a work station instead of a reading nook or something like that.

-Length of stay. Last year our average length of stay was 3.6 days, and this year its 6.2 days. As a result, our units with washer and dryer have been booking first, and we have started putting larger packs of the fresh ground coffee we get from our local coffee shop as welcoming gifts. Again, people are working remotely, and an STR unit is much more conducive to longer stays than a hotel. In fact, the hotels in our market opened up to 25% occupancy, and still have vacancy, and that leads to my next point.

-Shared space, or lack there of. All the hotels in our market have taken a beating, and it’s the same story over and over. People don’t want shared space. No lobbies, no elevators, no shared pool space or coffee shops, etc. People want a private unit with a separate entrance that they are assured has been cleaned to the highest standards, so thats what we provide. If you invest in multifamily like we do, its important to have that separate parking, entrances, and porches.

-Multiple cleaning teams. With the increase in Covid guidelines and the length of time it took to do each turnover, we were no longer able to offer early check-in, or late check-out, and ultimately, the cleaning team that we had been working with couldn’t handle the increased work load, and we started getting some bad reviews pop up. We ended up amicably parting ways, and hired multiple teams that have a different mix of properties, and we keep a very close eye on the post-cleaning inspections. Cleaning has never been more important than it is now.

The data is skewed! One thing that has been a blessing in disguise in that the data has been skewed. My friends on here know how big I am on data and using other people’s past performance to dictate our future success, and when the occupancy data from those 2 months of being shut down, it tanked the Gross Rental Projection data across our island. The good news for us is that because of our knowledge of the market, and also having the comps in our property management company to look it, it allowed us to pounce on some properties that other buyers seemed to be a little hesitant on because of those bad metrics. We had to put in a strong offer plus use our secret weapon to get our new quadplex that had 6 multiple offers on the first day, but my wife has also sold a couple duplexes in the recent weeks that sat just a bit because of the ugly Rentalizer report, and it was just long enough for her to educate her buyers and get them into great properties.

At the end of the day, very weird, very wild year, and a lot to be sad about, but a lot to be grateful for. Probably a terribly year to start a property management company, but to date we are at $565,460.19 in 2020 gross bookings, and that demand has definitely surged back. I guess all the friends that reached out worried about the volatility of short term rentals, I would say that it is definitely a risk, but so is everything else. In my mind, the difference between the people that either quit or just survived this season compared with those that thrived is recognizing the difference between Risk and Calculated Risk. That’s where a hurricane fund comes into play, and allowed us to keep rolling and start listening to the market. Hope all are blessed and have a safe and happy Thanksgiving!

@John K. Thanks! Appreciate the input

@John K. I can look for a Will, I’m assuming that would be in the county of the primary residence of the person? Not sure.

Second part, that was the whole issue. According to obituary and WhitePages, there is no bloodline. Obviously it was inherited by someone, because they showed up a month ago and told the neighbors they inherited it. No contact info given.

I’ve pulled county tax records on 40-50 properties before, and have an unlimited account on WhitePages to look up owner contact info, numbers, addresses, etc. I’ve done cold calls and sent a couple targeted letters. I picked up a triplex and a duplex by calling, never had success with the letters, but I’m not blasting them out like a wholesaler. Now I’ve found a property I’m very interested in, and I’ve hit a wall, was hoping for some insight.

There’s a multifamily property in my area that’s been sitting empty for several years. Built in 2004, the owner was an elderly woman that passed away in 2017. According to the neighbors, it was inherited by family, they came down several weeks ago to “do some fixing up” and it sounds like they were a little overwhelmed. Siding is falling off, paint is completely peeled, tons of deferred maintenance, and apparently a family of squirrels is living inside. So basically, it smells like money to me. Here’s where I’m stuck.

I pulled the 2020 tax records, it’s still showing as listed in the previous owner’s name, keep in mind she passed away in 2017. I pulled the obituary, all next of kin are previously deceased, no children listed. Her last known Address is Raleigh, and it sounds like that’s where the family that inherited it drove down from. I have a wholesaler friend in Raleigh that I’m hoping to get some insight from, but given what I’ve stated so far, what am I missing? How do you track down the owner of a property after it has gone through an inheritance, or if it’s owned by a trust for that matter?

@Joe Splitrock. Right, you just accelerate the depreciation, but once you depreciate the entire value, you can 1031 exchange into another property. It’s a Strategy used by a lot of physicians since 2017, you can write off tremendous amounts of high W2 and 1099 income. And it’s not passive, it’s no longer passive income once you have REPs status, that’s a real estate professional with more than 750 hours a year