All Forum Posts by: David M Trapani

If you select a growing area and have reliable boots on the ground (cleaning and maintenance) you can successfully self-manage & operate on the STR platforms. This can be done from your laptop or cellphone app. Saves the sometimes 20%-25% management fees. On the other hand, if times at a premium (i.e. heavy work schedule), it may be best to hire local property management.

Many cities with STR regs will not issue STR permits to LLC's or corporations. Likely, they want to know who they're dealing with and an individual who's accountable for problems/complaints. Also, most jurisdictions do not allow transfer of a permit on sale or between (buying or selling shareholders, members or partners) owners. They don't want LLC memberships or corporate stock being sold or shuffled, such that the permit may transfer or potentially last in perpetuity. Not familiar with NY law. However, my sense is forming an LLC in this instance will not fly.

In my experience, collecting a judgment against a tenant in CA is nary impossible. Knock on wood, only had two evictions in 40 years. Not fun. CA rent control, laws favoring tenants over landlords, rent moratoriums etc. are reasons I traded (1031) out of CA LTR's. No more of those please. Airbnb and out of state (red state) properties and NNN QSR's now.

PS - Purchase an umbrella policy to cover all your properties. $3M - $5M relatively inexpensive, gives peace of mind.

In just over 7 years in STR business made my share of mistakes, especially on the first one.

Easier to suggest what to do (lessons learned from mistakes & successes).

1. Buy in right location which is high demand resort or destination location.

2. Make sure it pencils as either STR or LTR. Or you wouldn't mind living there yourself if needed or wanted.

3. Be sure STR's are allowed by City / County and HOA if a condo - get your permit, if ones required. Going without will get caught and cost you.

4. Reliable Cleaners, maintenance and boots on ground are mission critical.

5. Add amenities and creature comforts such as coffee maker, Amazon Firestick, hangers in closet, waste baskets, blow dryer, ironing board & iron etc.

6. Communicate timely and in a friendly manner with guests and prospective guests.

7. Monitor local politics and the news for any changes in law.

8. Don’t be emotionally attached and be prepared to 1031 to friendlier climes or states if rules of the game change.

I personally prefer to do higher quality furniture decor and often make hard improvements such as quartz countertops, all new lighting, paint, appliances, etc.

Tends to draw higher quality guests, higher rates. You enjoy it when visit. Plus adds value on re-sale. I also double-pay the mortgage to save interest, beat down principal and build equity. A successful STR makes plenty of cash flow for this. Often will cash-out Refi to build reserves and generate funds for other r/e investments. Keep LTV at 50% or less.

Agree that staying at your STR from time to time helps with spotting / addressing ongoing maintenance needs. Have cleaners report items that need replenished such as TP, paper towels, coffee, soaps etc. Have high volume washer and dryer so cleaners can turn bedding towels and linens promptly.

Hope this helps. Many successes to everyone!

David

Moved all LTR’s out of CA for similar reasons.

Government has no place regulating private property unless it is causing a legitimate and proven nuisance. Nuisance would include things limited to noise, traffic, trash and crime. Again, there must be hard evidence. Not news stories by media with a political bent, false wolf-crying nimbies or other fraud by people exaggerating a problem that doesn't really exist. Government has no business telling private property owners who may stay, for how long or for how much. That's why it's private property. Property owners work extremely hard to save the down payments, locate, analyze, acquire & operate their investment properties. They already pay the government property tax, income tax, capital gains tax, business license tax, sales tax, etc. ad naseum. Government should not regulate property unless it causes a legitimate nuisance. Government is not a nanny fascist controller of any "housing supply". Governments have laws telling them to build affordable housing. If government fails to do so (which they often fail to do) it is inappropriate illegal and unconstitutional to blame investment property owners & to seek to tax and regulate those private property owners to protect the "housing supply". Not the job of government. If we want to live like Communist China, North Korea, Russia or other similar countries (Just look at Venezuela and Cuba and see what happens) then the government can seize private property and socialism / communism will take root. Government should never interfere with private property ownership absent true nuisance situations. 

Also agree with Max. Stick to the fundamentals. Run your cap rate and COC analysis. Buy the right properties in the right location. Fix them up. Bump rents over time. Use RUBS. Double pay the mortgage. Beat down principal, save interest, build equity. Cash out refi for 75%. Use the case to buy more smartly located income property & shore up reserves. Keep LTV down to no more than 50%-60%. Keep double paying the mortgage, fixing up, raising rents & lowering expenses.

4 reasons come to mind (there may be others):

1) changing market conditions (equity has gained, rents soften or are reduced by govt or market factors); 

2) expansion of govt regulation of LTR’s (i.e. statewide rent control);

3) expansion of govt regulation of STR's (govt makes it more difficult or less profitable to operate); and

4) differing goals of partners in a partnership.

In any of these instances, prefer not to “sell”, but rather 1031 tax-free exchange to friendlier climes & better growth and cash-flowing opportunities.

As others have stated, the landlord business is not for everyone. Best to do your research, vet tenants & keep eyes and ears open to changes in regulations, etc. Not to be emotionally attached to properties or markets. Always be ready to pivot. For example, and due to draconian anti-landlord laws (rent control) in CA have exited all LTR's in CA. Have a few STR's in high demand vacation markets left there. Thinning those out as well as due the threat of more lockdowns There roll out. Recall gov't closed STR's for 3 months in CA March 2020. 1031 out of CA to other more friendly STR locales. Expand further into low-management NNN QSR's. Other options - cash out refi to fund additional deals outside CA, shore up reserves, stockpile cash on hand & acquire more silver Eagle coins. Just my "two cents".