All Forum Posts by: Doug Diamond

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $870,000
Cash invested: $200,000

6 Bedroom Property used a Short Term Rental in Gatlinburg, TN

How did you finance this deal?

I used a DSCR loan.

How did you add value to the deal?

This was a turnkey property, but I did update the furnishings and decor.

What was the outcome?

Made $100k in 5 months last year, and has appreciated at least $300k.

I am familiar with the rule around the capital gains exclusion for your main home, in that you must live in the home for 2 of the last 5 years, but those years don't have to be consecutive nor do you need to currently live there.  Here is the question:

If you lived in a home for 2 years, then rented it out, then moved in to another home for 2 years, can you then sell both and exclude both in the same year? They both meet the 2 out of the last 5 rule.  Or even in consecutive years (sell one in one year, and the other in the next)?  It sounds like you can only take the exemption once every 2 years, but seems like you should be able to sell both at the same time. 

These have all been great suggestions!  I will add a couple of my own:

1) Do the paid version of AirDna wherever you are thinking of buying.  BUT, don't always trust the data.  For instance, in the paid version, you can see how much revenue a particular place has earned.  However, sometimes it's not right.  Look at how many reviews the place has.  If AirDna says a home has made $70k in revenue, but there are only 3 reviews, it's probably not right.

2) Automate as much as you can.  Get a digital lock that will automatically create each guest a code, automatically sends the guest an email with the code, and makes the code active only at the exact check in day and hour. I use Lockstate, and it works great, but there are others.  Just this weekend, I had a guest try to check in the night before their reservation, and there were other guests there!  Luckily, their code didn't work because it was too early, so they didn't get in.

3) To operate one property, you don't need a channel manager.  List it on Airbnb and VRBO.  That's all you should need.  I get 98% of my bookings on Airbnb, and I run 95% occupancy. Channel Managers can be very complex with a huge learning curve.  Add one later if you want.

4) While you don't necessarily need a channel manger, automating the guest messages is a HUGE reduction in workload.  I use SmartBnB, and I love it!  It sends several messages to the guests, from right after booking, the day before check in, the day after check in, the day before check out, and a day after check out.  It also will automatically send a good review a couple of days after check out, unless you tell it differently.  Huge time saver! It also automatically sends my cleaning team a request to clean on the check out date.  

5)  As the others have said, have a good cleaning team and handyman.

Best of luck! 

No, I never have heard if anyone has done this. The one thing that might need to be looked at, is if you do this, a manager from the LLC is going to have to sign the lease, and if that person is you, it might not look good.

This is what my CPA told me when I asked her if I should do a cost seg on my properties:

"I would not recommend it. It is expensive, and in most cases the loss it can produce via depreciation will be limited or disallowed all together under the passive loss rules (which you are subject to).

It is a very specific type of rental that will benefit a cost segregation study, and for most, there is very little to no cost savings in taxes, just a sizable ($3,00 to $5,000) cost for the study."

I'm not a CPA, and I want to be able to trust what she is saying, but I'm also hearing people say that if this is what your CPA says, get a new one!

@Basit Siddiqi

I am not a real estate professional, and my AGI is below $150k, but not by much. Extra deductions could drive me above that level. 

My CPA says not to do the cost segregation, as the cost of $3-5k would not be worth it, which may well be true. Also, I am about to either sell one or convert it to my primary residence, which probably changes the conversation on that property. 

As a side note, my properties are all short term rentals, and my accountant says not to do the cost segregation due to the passive nature of the investment.  

So I keep hearing on different podcasts about the benefits of cost segregation and bonus depreciation for real estate investors. I just listened to a podcast that had an owner of a Cost Segregation company, and he said any property worth over $200k should at least be looked at to see if it's beneficial. Are any of you doing this with your SFH's? If so, was it beneficial, and is there a minimum home value that makes it worth while?

I own a couple of SFH that I use as short term rentals. I'd like to continue to expand, but when financing a short term rental, banks usually want 2 years of tax returns. My problem is that my last 2 years of tax returns do not show much (if any) income from these properties due to write offs. If I had a long term lease in hand for these properties, financing would be much easier.

So here is the question;

If my properties are owned by my anonymous series LLC, can those LLC's then lease the properties from me personally, thus giving me the long term leases that the banks are looking for, allowing me to then go out and acquire more properties? I do have a call next week with an attorney that I will ask this question of, but I wanted to hear if anyone else is doing this.