All Forum Posts by: Dan Moore

So why is it that when something is in my head, everyone reading my post doesn't automatically know it? When I said I needed a PM, I should have said I need a PM for short term vacation rentals. I'm an idiot and I apologize, especially to @Nathan Gesner who gave such a well thought out response. Our property is beach front in Myrtle Beach and we'd like to begin renting it for short term vacation rentals. We are looking at AirBnB and VRBO, but traditionally down there our peers have used a rental company/PM to handle their rentals. 

So, now that I'm actually saying what I'm thinking, can anyone recommend a vacation rental property manager for Myrtle Beach? 

Again, apologies I wasn't clear. 

The wife and I will be there. 

Asking the city is like asking your doctor if you need a checkup. Or asking your mechanic if you need your tires rotated. The answer is always yes. 

There is a property near me. Beautiful old farm house on 15 acres. It went up for sale and I just met the new owners. They told me multiple people tried to buy it to turn it into a wedding venue. Then they bought it and were trying to do their own thing with it. Prior to them getting it, the Local town turned them all the wedding people down. No wedding venues allowed. With about one days work, it would qualify as a farm in NC, which means it is exempt from the cities rules. Period. NC specific laws. 

So to know what you have to do, you need to know the law. The city is not going to give you pass out of the kindness of their hearts. They always default to a permit. 

I have my LLCs in my name only. This allows them to be single member entities, which allows me to declare them as “disregarded entities” with the IRS. That means their tax returns are not required and the parent tax return absorbs all the transactions. Kinda like running a sole proprietorship. 

The parent entity can be an LLC as the parent, or my personal return, which is how I have it.

Takes a lot of trust from the spouse though. She would get all my assets when I die anyway so if she gets nervous about the marriage, it will be time to pull the trigger on that murder she’s been planning for years. 

Lots of Raleigh investors on BP. I've been here for 47 years so I've seen quite a bit in the Raleigh market over the years. It is indeed a good place to be both for investing and for general life. I do see it changing, and not for the better. But that is probably just the curmudgeon talking. I want my old Raleigh where I could get to Cary in 22 minutes instead of 45, but I want todays prices. Typical. 

 Thank you Ryan. Looks like a good lead. Will reach out to Pete. 

We have a long term property in Myrtle Beach that we are going to start renting out. The wife has been contacting property managers in the area. To date they have been, um, disappointing. Bad communication. No follow through. Always someone else in the office who "does that" and never did. This is in the interview process, so I can imagine what they are like when it is under contract. 

Anyone have anyone in MB they would recommend? 

Thanks Justin. I'm certainly no ones mentor. While we've had rental properties for years, they have always been ancillary to our normal business. Switching over to making REI our primary business is a new focus for us so in reality, I consider myself a newbie at this. I'd certainly be happy to be a peer.

I’m not sure it’s safe to say rents don’t go down in a down turn. When new homes stop selling, builders will sometimes turn to rental for cash flow. A brand new house down the street renting for even your current rental rate (assuming it does) means your older home will have to decrease to compete. The worst thing you can have in business is a desperate or stupid competitor. Track home builders in a cash crunch can be both. 

Saying that interest rates go down in a down turn is also not entirely correct. This is the lowest interest rate environment in my lifetime. Rates were higher in every previous downturn that I recall, back to the S&L crisis in the 80s. If inflation cranks up, recession or not the rates will rise to offset, most likely. If you have a fixed rate then who cares. If your model is built on refi or an ARM. You could be screwed.

I’m not saying hide under the covers, but the last 15 years are not a reliable indicator of what the next 5 will be. No offense to the many smart people on this site, but many of them have been through maybe one down cycle. They are not the same, and they are rarely what you expect.

We always model a lever plan. If the market does this, what lever will we pull (lay-off, sell of x properties, rent for cash flow at x percent off normal rates). If the market does this, minus another 10% we pull the first lever and then the second (move in with parents, rent primary home, etc, you get the idea). This minus 20%, lever plan 3. Predict the best, worst, and expected market.  Then figure out how you’d react in each scenario and run a simple Pro Forma.

It’s not being paranoid. It’s having a plan and executing if the need should arise. We did this each year in my old business which did about 100 mil annually and was VERY cyclical. If the market tanks, we update it much more frequently (in 2009 where we lost 80% of our market potential, we updated it weekly) but we looked at it each year as part of our business planning. It is a lovely thing to see an inch of dust on it, that means that the market is doing well this year.

Nowadays (in this business) the process is much more compact and less detailed but we still look at it. 

Not to dodge the question, but I’d ask the people quoting you the insurance. Sometimes the best way to learn is to admit ignorance and just ask while you have them on the phone. Insurance people understand that their jargon is confusing and they explain it 100 times per day. They won’t bite. 

And if I understand your question correctly, it’s basically this. 

To rebuild your property after a total loss costs more than to simply replace its current insured value. So replacement insurance costs more than “regular” or select insurance. 

If you only care about paying the note off with a total loss, then get the cheaper insurance. If you want a building built back in place shiny and new after a total loss then get replacement insurance.