All Forum Posts by: Dan Gandee

I CAN'T THANK YOU ENOUGH FOR CONTINUING THIS CONVERSATION WITH THE REGULATION INFO. I even learned a few points I was unaware of at this time. 

Owning a short-term rental property in a beach area on the Oregon Coast can be a lucrative investment opportunity, but it also comes with its own set of pros and cons. Let's start here!

Pros:

1. High Demand: Beach areas are popular vacation destinations and attract a lot of tourists, making short-term rentals in these areas in high demand. This high demand can lead to higher occupancy rates and higher rental income.
2. Seasonal Rental Opportunities: Beach areas often experience peak seasons for vacationers, which can allow for higher rental rates during these times.
3. Personal Use: If you enjoy vacationing at the beach, owning a short-term rental property in a beach area can provide a convenient vacation spot for you and your family while also generating rental income when you are not using the property.
4. Property Appreciation: Beach areas are often desirable locations for real estate, and owning a short-term rental property in these areas can provide a potential for property appreciation and a profitable exit strategy.

Cons:

1. High Competition: With high demand comes high competition. Other property owners may be vying for the same renters, which could lead to lower occupancy rates and less rental income.
2. Seasonal Fluctuations: The rental income for a short-term rental property in a beach area may fluctuate seasonally, with lower demand during off-peak seasons.
3. Maintenance Costs: Owning a short-term rental property requires regular upkeep and maintenance to keep it in top condition. This can be costly, particularly if the property is located in a corrosive, beachfront environment.
4. Regulations: Some beach areas may have regulations that limit or prohibit short-term rentals. Property owners must be aware of these regulations and comply with them to avoid legal issues.

In conclusion, owning a short-term rental property in a beach area on the Oregon Coast can be a lucrative investment opportunity, but it is important to weigh the pros and cons before making a decision. Property owners should consider the competition, seasonal fluctuations, maintenance costs, and regulations when making their decision. My real estate team has been working with STR owners for years, and we always advise anyone looking to invest in this asset class to run a SWOT analysis of the specific market they are potentially entering. If you have no personal use goals, then it must simply CASH FLOW every month to be a good investment.

Next, here are my TOP 10 STR Cities on Oregon Coast (ranked by best to worst in my opinion of cashflow, amenities, beauty, and weather):

1. Brookings, OR  

2. Cannon Beach, OR  

3. Seaside, OR 

4. Lincoln City, OR

5. Florence, OR (Yachats & Heceta) 

6. Newport, OR 

7. Bandon, OR

8. Gold Beach, OR 

9. Port Orford, OR 

10. Pacific City, OR 

It's not always the most beautiful place that cashflow the most, but instead the easiest for access for weekend getaways. Hence the reason we have several cities within driving distance of Salem, Corvallis, Eugene, and most importantly Portland. In terms of beauty, I feel Brookings, Gold Beach, Seaside, and Bandon take that crown. In terms of amenities and things to do - Florence takes the crown here with the dunes, restaurants, fishing, hiking, etc. For romantic locations with a little more privacy, Port Orford, Gold Beach, Cannon Beach can be great areas to visit. 

Most of the cities on this list have restrictions for STR's so DO YOUR OWN DUE DILIGENCE before BUYING!

Any questions - hit me up! 

Hello there BP Family! Let me preface this forum post by saying that no one is an actual dummy when first starting out, but to grab your attention I had to use something good :) 

Cap rates, gross rent multipliers, cash on cash return, internal rate of return, ROI, 1% rule, and the list goes on in terms of underwriting calculations you must know as an investor. But I wanted to quickly break down cap rate because I train, recruit, and mentor a lot of first time investors/agents. This seems to be one of the hardest concepts to grasp due to the rules that create confusion with moving variables around such as rent income, expenses, vacancy, repairs, and capital expenditures.

----

Cap rate, short for capitalization rate, is a common metric used in commercial real estate to evaluate the financial performance and value of an income-producing property. It is expressed as a percentage and is calculated by dividing the property's net operating income (NOI) by its current market value or purchase price.

The formula for calculating cap rate is as follows:

Cap Rate = Net Operating Income (NOI) / Property Value

Here's a breakdown of the components:

1. Net Operating Income (NOI): NOI is the annual income generated by a property after subtracting operating expenses but before deducting debt service (mortgage) and income taxes. Operating expenses typically include property taxes, insurance, property management fees, maintenance and repairs, utilities, and other costs necessary to operate the property.
2. Property Value: Property value refers to the current market value of the commercial property. It can be estimated through various methods, such as sales comparables, income capitalization approach, or the cost approach.

Cap rate is used as a measure of the property's yield or return on investment (ROI) and helps investors assess the risk and potential return of a commercial property. A higher cap rate generally indicates a higher risk property or a property with lower potential returns, while a lower cap rate indicates a lower risk property or a property with higher potential returns.

Investors often use cap rate as a benchmark to compare the relative value of different commercial properties. For example, if an investor is considering two properties with similar NOI but one has a higher cap rate than the other, it may indicate that the property with the higher cap rate is relatively cheaper or offers a higher potential return on investment.

It's important to note that cap rate is just one factor to consider when evaluating a commercial property, and it should be used in conjunction with other financial and qualitative factors to make informed investment decisions. Additionally, cap rates can vary depending on the type of property, location, market conditions, and other factors, so it's crucial to thoroughly analyze each property on its own merits before making investment decisions.

That being said, cap rates can be very confusing to most starting out. As a real estate broker and investor, I've always had my clients run through multiple underwriting spreadsheet test cases so they understand benchmarks, valuation, and how expenses and value add can create changes in valuation, i.e. cap rate. 

-Dan Gandee

Totally! Just let me know if you want to connect sometime and be happy to share any insights. We've spent years compiling a list. 

 I could broker parks if I wanted to, but my investment company is actively owning and operating a few. Do you have a buyer looking in Oregon?

Quote from @John Boutros:

Quote from @Dan Gandee:

After purchasing multiple parks and managing them over the past few years here's my synopsis of the pros and cons of owning a park. What has been your experience? 

Pros:

1. Steady Income: One of the biggest advantages of owning a mobile home park is the potential for a steady stream of income. As the owner of the park, you lease the land to tenants who own their mobile homes. This allows you to collect monthly rent from each mobile home owner, creating a reliable source of income. We've noticed great net operating income from our parks and continue to force appreciation through annual rent increases. 
2. Lower Operating Costs: Compared to other types of real estate investments, mobile home parks generally have lower operating costs. Unlike owning rental properties, you are not responsible for the maintenance and repairs of the individual mobile homes. Instead, you are only responsible for the common areas and infrastructure of the park, such as roads, utilities, and amenities. This can result in lower ongoing expenses, making it an attractive investment option for some. This can be somewhat of a incorrect data point as our parks expense ratios are in the 25%-35% range. 
3. Demand for Affordable Housing: With the rising cost of traditional housing options, there is a growing demand for affordable housing. Mobile homes provide an affordable housing solution for many people, especially those on a tight budget or looking for a more flexible living arrangement. Owning a mobile home park allows you to cater to this demand and provide an affordable housing option for tenants, which can result in a stable tenant base and consistent occupancy rates. We have seen this demand through mobile home listings on the brokerage side and it still continues to be strong. We've never had an "expired" MFH listing and this shows us that affordable housing is at it's highest demand ever. 
4. Potential for Appreciation: Like any other real estate investment, mobile home parks have the potential for appreciation in value over time. As demand for affordable housing increases and land becomes scarce, the value of mobile home parks can increase, resulting in potential capital gains for the owner. This has been the biggest gain for our portfolio by repositioning the asset by forcing net operating income and through improvements. 

Cons:

1. Management Challenges: Managing a mobile home park can come with its own set of challenges. Dealing with tenant issues, enforcing park rules and regulations, and overseeing maintenance and repairs can be time-consuming and require effective management skills. If you're not prepared to handle these challenges or hire a property manager, owning a mobile home park may not be the right investment for you. This definitely has been a challenge for us since tenant disputes can get out of hand and suck the moral of the specific area of the park down. We deployed professional property management to combat this. 
2. Dependence on Tenants: The success of a mobile home park is heavily dependent on the tenants who lease the land. If you have high turnover rates or struggle to attract and retain quality tenants, it can impact your rental income and profitability. Additionally, mobile home park tenants may have limited financial resources, which could affect their ability to pay rent on time, leading to potential collection challenges. We fortunately have not run into these issues by screening tenants well and keeping rents affordable. 
3. Regulatory Requirements: Mobile home parks are subject to various regulations and laws, including zoning and land use regulations, health and safety codes, and tenant protection laws. Compliance with these regulations can be complex and require ongoing effort and expense. Failure to comply with regulatory requirements can result in fines, penalties, and even legal disputes, which can impact your investment returns. We keep detailed checklists of all the items that are annually required to keep our parks running which includes water testing, park registration, septic maintenance, and licensing. 
4. Limited Financing Options: Financing a mobile home park can be more challenging compared to other types of real estate investments. Traditional lenders may have stricter lending criteria for mobile home parks, and obtaining financing may require a higher down payment or come with higher interest rates. This can make it more difficult to acquire and finance a mobile home park, especially for first-time investors. We avoided this problem by deploying owner financing and locking in great terms. 

Love keeping in touch with other owner/operators so please reach out! 

-Dan Gandee

 Good post! I'd agree with your points here from personal experience with multiple parks. We are in acquisition phase of growing our portfolio of parks with my partners.

Shoot me a PM if you'd like to connect! Enjoy connecting with other owners/operators.

 Definitely let's connect! Happy to share my experiences. 

After purchasing multiple parks and managing them over the past few years here's my synopsis of the pros and cons of owning a park. What has been your experience? 

Pros:

1. Steady Income: One of the biggest advantages of owning a mobile home park is the potential for a steady stream of income. As the owner of the park, you lease the land to tenants who own their mobile homes. This allows you to collect monthly rent from each mobile home owner, creating a reliable source of income. We've noticed great net operating income from our parks and continue to force appreciation through annual rent increases. 
2. Lower Operating Costs: Compared to other types of real estate investments, mobile home parks generally have lower operating costs. Unlike owning rental properties, you are not responsible for the maintenance and repairs of the individual mobile homes. Instead, you are only responsible for the common areas and infrastructure of the park, such as roads, utilities, and amenities. This can result in lower ongoing expenses, making it an attractive investment option for some. This can be somewhat of a incorrect data point as our parks expense ratios are in the 25%-35% range. 
3. Demand for Affordable Housing: With the rising cost of traditional housing options, there is a growing demand for affordable housing. Mobile homes provide an affordable housing solution for many people, especially those on a tight budget or looking for a more flexible living arrangement. Owning a mobile home park allows you to cater to this demand and provide an affordable housing option for tenants, which can result in a stable tenant base and consistent occupancy rates. We have seen this demand through mobile home listings on the brokerage side and it still continues to be strong. We've never had an "expired" MFH listing and this shows us that affordable housing is at it's highest demand ever. 
4. Potential for Appreciation: Like any other real estate investment, mobile home parks have the potential for appreciation in value over time. As demand for affordable housing increases and land becomes scarce, the value of mobile home parks can increase, resulting in potential capital gains for the owner. This has been the biggest gain for our portfolio by repositioning the asset by forcing net operating income and through improvements. 

Cons:

1. Management Challenges: Managing a mobile home park can come with its own set of challenges. Dealing with tenant issues, enforcing park rules and regulations, and overseeing maintenance and repairs can be time-consuming and require effective management skills. If you're not prepared to handle these challenges or hire a property manager, owning a mobile home park may not be the right investment for you. This definitely has been a challenge for us since tenant disputes can get out of hand and suck the moral of the specific area of the park down. We deployed professional property management to combat this. 
2. Dependence on Tenants: The success of a mobile home park is heavily dependent on the tenants who lease the land. If you have high turnover rates or struggle to attract and retain quality tenants, it can impact your rental income and profitability. Additionally, mobile home park tenants may have limited financial resources, which could affect their ability to pay rent on time, leading to potential collection challenges. We fortunately have not run into these issues by screening tenants well and keeping rents affordable. 
3. Regulatory Requirements: Mobile home parks are subject to various regulations and laws, including zoning and land use regulations, health and safety codes, and tenant protection laws. Compliance with these regulations can be complex and require ongoing effort and expense. Failure to comply with regulatory requirements can result in fines, penalties, and even legal disputes, which can impact your investment returns. We keep detailed checklists of all the items that are annually required to keep our parks running which includes water testing, park registration, septic maintenance, and licensing. 
4. Limited Financing Options: Financing a mobile home park can be more challenging compared to other types of real estate investments. Traditional lenders may have stricter lending criteria for mobile home parks, and obtaining financing may require a higher down payment or come with higher interest rates. This can make it more difficult to acquire and finance a mobile home park, especially for first-time investors. We avoided this problem by deploying owner financing and locking in great terms. 

Love keeping in touch with other owner/operators so please reach out! 

-Dan Gandee

I leverage to rinse & repeat. If the bank is going to provide the means to acquire, reposition or refinance for more cashflow, then why are you parking equity in an asset that isn't going to provide you a multiplier effect on income. If you are scared of being upside down, then leave 20% in every property you have as long as you cash flow more than $300 per door per month. That's my rule. 

Hello Jacob, 

First and foremost - Thank you for your service!

This is what I suggest doing as this may be able to free up some inventory that matches what you are looking for and make the payments feasible. 

1. I would try to identify duplexes throughout your area that are not owned by LLC's and trusts. Next create a mailing list and mail these mom and pop landlords and let them know your situation. I.E. Veteran family with small kid looking to find a duplex in this price point and I have this much down payment to work with. Please let me know if you'd be open to selling. See if you can create an owner carry situation from someone that is looking to cash out or liquidate a few properties. Next take that list and skip trace it. Call them and follow up on your letter.

2. I would then try to locate single family properties that have FHA or VA assumable loans. Before everyone yells at me and says that's not possible, it most certainly is. It just takes a little technology, a friendly title company, and the RMLS to locate these properties and create a mailing list. Next take that list and skip trace it. Call them and follow up on your letter.

3. I would then try to find properties in the right areas that could be converted to two units (as poster above mentioned) or an ADU could be built to maximize mortgage offset. My first investment was an ADU over a garage + a manufactured home on the same property.

The biggest components to creating a solution to your problem at hand is...

-Unlocking the right inventory & at the right price 

-Finding sellers willing to work with your target monthly payment using owner carry terms 

-Finding the right loans currently in place to assume 

-Building mailing lists and call sequences centered around the right script, follow up, and consistency to increase your probability 

I'm happy to jump on a call and discuss further to help you get started. 

Anyone investing in car washes in 2023 that need to be repositioned or BRRR? I'm looking to deploy some capital this summer and would love to connect with an owner or operator of several car washes to gain some insights. Thanks in advance!