All Forum Posts by: Caleb Drake

@Stephanie Reinagel

I can speak for the NWFL panhandle. My occupancy rates are through the roof and a lot of the bookings are for longer stays. Not like monthly, but weekly versus a three day stay. We are on track to do about $5-7k more in bookings this year. That equates from higher rates and probably 10% more stays. We maintain about 85% occupancy annually.

@Katharine Gonzalez I own a STR in Navarre and I also am a REALTOR in the area.

If you have any specific questions about the area, feel free to reach out! I can speak smartly about Destin, Navarre, Pensacola and the areas in between.

Harjeet, I've always worked with brokers and none of them will touch it for under $100k. They are all guys I have history with, but can't do anything to help me because their hands are tied. I guess I need to go directly to the bank. I've decided to start investing in the midwest since my local market (NWFL) is so overpriced and nothing will cashflow!  

Rommel, I am in the same boat. I have a property lined up for $45k that will rent for $750/mo. I can't find anyone out there who will touch it only because of the small loan amount.

I use Jordan Reyes at Goosehead Insurance. He's a broker but has brought me policies that are cheaper and better than I ever considered with State Farm and USAA. I use him for all three of my properties and recommend him to all of my clients and friends.

Shoot me a PM and I'll give you his info if you're interested. My STR policy on one of my rentals is about $1500/yr and an umbrella policy up to $1M with him was less than $350/yr.

@John Underwood, I think I am. The problem is, I'm not actually on the beach so it's hard to compete at a higher rate. When I was only renting for a few months of the year, it was very lucrative. Now that I have the opportunity to rent my home out on the LTR market, it doesn't make as much sense to rent short term.

My occupancy rates are around 85% throughout the year, but I'm only renting at an average of $100-125/nt.

On a side note: I'd love to get into a rental in the mountains. Do you invest in that market?

Putting this out there for myself and for the masters of the minds to give me feedback. I cannot decide which direction to go. Originally, I was thinking "sell! sell! sell! I hate my neighbors and this HOA and I can use the equity to buy another rental and have some buying power for a possible flip." Now that I am running the numbers, I'm not so sure. I WOULD LOVE TO HEAR YOUR ADVICE AND OPINIONS.

Property details:

• 3/2 SFH with HOA, community pool, private pier in NWFL.
• $216k, 3.1%, $1200/mo (Conventional Loan [refinanced from VA], no money down, 30 year Fixed Rate)
• BRAND NEW Roof ($19.5k insurance claim, cost me $1k), Newly fenced in back yard, Original AC Unit (Circa 2000)

STR (Rented 10 months of the year while I was deployed)

• $27.5k Gross (~80% occupancy rates)
• $20.5k Net (Estimated, I don't have my tax returns handy)
• Monthly CAPEX (including supplies): ~$500/mo
• Speculative Potential: $32.5k Gross Annually (~$24.5k net)
  • Based on the performance of my other STR, I could net an extra $4k on this home if I marketed better and adjusted my prices. I left some money on the table being new and displaced.
  • Thinking out loud: Home is approximately 4 miles from the beach. I have 2.5 years of rental history but this home has never been strictly on the market as I come and go when I'm not deployed/mobilized. I have a good network set up for STR via AirBnB that I use for my other home also, but, honestly, I don't know if I want to deal with the hassle for an extra (speculative potential) $4.5k that is not guaranteed in this COVID environment. Another draw back is (currently) the banks will not use any of my STR income when considering my D/I ratio for future lending. My forever home we are building is a VA no-money down and I had to get an approval from management because of my D/I ratio since $30k of business income wasn't accounted for. With a LTR, the contract and two months of current payments is enough.

LTR 

• Rent: $2000/mo (based on CMA from the MLS)
• CAPEX: $300/mo
• Cashflow: $500/mo
  • Thinking out loud: I have the luxury of military families in this area and the vacancy rates would stay fairly low. The recommended rent from the CMA is $2000/mo. The high end in my neighborhood is $2400/mo. I am thinking "do I rent it out for 2-2.5 years and then sell it to avoid Capital Gains Tax or do I keep it longer and just 1031?"
• SELL

• $216k loan balance
• Appraisal before new roof/upgrades: $285k
• Broker CMA: ~$299k (under current market conditions, wouldn't be able to list for a couple of months)
• Equity: $65k  ($299k - $216k - $18k) 
  • Thinking out loud: I hate my neighborhood and I'd love to be gone. They caused me a lot of problems when they found out I was STR even though it was not against the CCnRs. We are talking lawyer level problems all while I was deployed... But, the neighborhood is very sought after and houses are going within a day or two in this 'hood. I am working on my realtors license and should have it before I can list. If not, my realtor/investment partner is willing to assist me in a FSBO. If I do not do that, I'm looking at ~$18k in realtor fees/closing costs if we didn't negotiate any of the buyer/seller expenses. This includes a home warranty for the AC unit.

My Conclusion:

The more I think about it, the more I want to keep it for the time being and rent it. My end goal is to expand my real estate portfolio, but I would be leaving a lot of money on the table in transaction fees if I sell and buy another property now. I have enough cash reserves (and cashflow) to buy another property (with my business partner) in the next year. We are splitting the down payments and expenses and using an LLC for income and tax management. The cash-in-hand would be great, but the cashflow on this property is better than I will get on a new property in my current market.

Investment Info:

Single-family residence buy & hold investment in Navarre.

Purchase price: $168,000
Cash invested: $37,500

Single Family Residence 3/2 four miles from the beach that was purchased for a short-term rental property.

What made you interested in investing in this type of deal?

I rent my personal home out on the Air BnB platform while I'm deployed six months of the year. This model has worked great and afforded me the opportunity to buy a second, income-generating property. The model works great for this area because of the proximity to the beach. I also knew that the home would easily rent as a long-term rental because of the proximity to the local military base. Being in the military I also know how this system works and the quality tenants it produces.

How did you find this deal and how did you negotiate it?

I found this deal on the MLS and I negotiated very poorly. I gave a best and final full asking price with a pre-approval letter, and contingencies on financing under 5%, and inspection.

The seller countered with a limit of $2500 in repairs after inspection which we agreed to. I wish I would not have agreed to this because it cost me $2k when the hot water heater went out on THANKSGIVING three months later.

How did you finance this deal?

Conventional Loan with 20% down purchased with my business partner/best friend from college.

How did you add value to the deal?

The home was a rental prior to our purchase and already had new carpet, fresh paint, a brand new roof and new appliances. We added value mostly by adding curb appeal which was needed for our short-term rental business model. We redid the deck in the backyard, cleaned and stained the fence, redid the landscaping and furnished/decorated the home for the tenants.

What was the outcome?

The outcome so far has been great. We are 90% booked in season and around 65-70% booked out of season. When purchasing, I ran the numbers at 65% annual bookings which puts us at ~237 days rented. We are already blowing that projection out of the water and should have enough cash flow in the next year to put a down-payment on another rental.

Lessons learned? Challenges?

Even though the market is really hot here, I should have lowered my offer. The house had fallen out of contract once and the owners were living out of state. We were anxious to buy a place before I deployed and have it set up and running as a rental before I left. That desire left a lot of money on the table.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I have an agent and friend who also doubles as my mentor. I have a lending team I work with and I have a preferred inspector.