All Forum Posts by: Eric P.

Pricing rule #3: buy in a place that gets 80+% year-round occupancy. Sadly many parts of the US have low demand on weekdays and/or during off-season. There’s simply no way around this except to buy in high-demand year-round places (such as Tennessee, Florida, Arizona, etc). Otherwise it’s a race to the bottom - you can lower your prices as much as you want but you can’t create artificial demand that simply doesn’t exist in that market

0 Votes

From https://www.airdna.co/blog/best-places-to-buy-a-vacation-rental-home-2018:

The y-axis is profits & the x-axis is property cost. You want to maximize profits & minimize cost so the sweet spot is the upper left of the graph. If you hover over the bubbles in the upper left you’ll see that they’re almost all in Tennessee & Florida.

Which makes sense bc, no matter how great other parts of the US may seem, your ROI drops sharply if there's even a small sliver of the year that's off-season. TN & FL are the sweet spot where weather is nice year-round & properties aren't too expensive (as they are in California & Hawaii). If you don't like TN & FL, your next best options are the neighboring states.

If you wanna invest elsewhere bc you want to use your vacation home personally, that’s one thing. But for pure ROI, you can’t refute the data.

There really is no magical formula here: inexpensive properties + year-round bookings = highest profits

6 Votes

Originally posted by @David M Trapani:

Jon Crosby, thank you for sharing this STR criteria. Very accurate & helpful! Julie McCoy's criteria is also excellent.

I look for high growth areas, destination locations (that I enjoy visiting) & user-friendly STR regulations. Using my own cash flow analysis, verified against others such as Airdna, Mashvisor & excellent insight from our colleagues on BP.

My first STR experience, some 5 years ago was in San Francisco. That was trial by fire! Top global destination for sure...but extremely Draconian STR regs. You essentially have to live there (how they enforce this without invading privacy is anyone's guess?) most of the year. It succeeded as my Son attended USF, living there weekdays. We rented weekends & Holidays.Traded out of there after graduation.

I'd say avoid South Lake Tahoe (litigation pending) and Anaheim. They're hostile to STR's.

Good areas I've found include - Franklin, TN (not Nashville - litigation pending - too liberal & hostile to STR's. As someone mentioned likely hotel lobby far too strong politically), Palm Springs, La Quinta (not Palm Desert - Marriott too strong & outlawed them / and not Cathedral City - they just put a moratorium on STR permits late July 2019), and Joshua Tree.

Also interested in & would like to learn more about Joshua Tree, CA and also Pigeon Forge, Sevierville, Gatlinburg, TN. Anyone having more info on East TN would be greatly appreciated. Thanks!

@Avery Carl @Luke Carl @Julie McCoy

0 Votes

Originally posted by @Paul Sandhu:

You people make things difficult. I just go by each address every 7 days, the tenants are expecting me around 5:45 (they get off work at 5:30), and they pay me. I give them a receipt and come back a week later.

Heady play - arriving 45 mins before the prostitute to ensure you get paid before she does

0 Votes

Originally posted by @Karen Chenaille:

Hi Folks

I am taking a long hard look at my monthly subscription costs paid out to tools. One of the tools I subscribe to is OwnerRez. I haven’t found much utility with it. The only distinct feature it gives me is a website that was easy to get a basic set up. To make the web site visible I would need to pay someone to finish it out and get it to show up in the search engines. I am wondering what the group’s opinion is of whether a stand alone website is worth it. OwnerRez is hitting me for $80/month.

Thanks a million!

Karen

Has anyone used Lodgify? I thought this is the entire purpose of their business

1 Vote

Originally posted by @Brian Kehoe:

Originally posted by @Avery Carl:

Thanks @Eric P.! Happy to help however I can! @Lorraine Patterson I own 16 doors across Tennessee, 5 of which are vacation rentals. Happy to answer any questions you have on getting vacation rentals up and going if you need it!

Hi Avery. Are you self managing the vacation rentals or do you use property management and what made you choose one vs the other. Also how many days on avg are your rentals occupied?

@Luke Carl @Julie McCoy

I believe you can help this guy!

2 Votes

Originally posted by @Dennis Gallof:

I have an LLC for my side business and I know the benefits of having one like protecting / keeping my personal assets separated, being able to write-off any expenses, etc.; however, I'm wondering if it would be better to create the LLC in the same state I'm purchasing the condo or my home state?

I currently put in an offer on a condo but if the sale doesn't go through then I can't use that address on my LLC application; so I guess I have to wait for the sale to go through and then transfer the title to the LLC...unless I setup a PO Box in that state and use that for the LLC address on the application for now?

Thank you!

You can create the LLC in any state, not just where the property is & not just where you live. Do some googling & you'll get some general advice on which state(s) might be most favorable (there are a few factors to consider). Then consult an atty who specializes in business structures

1 Vote

I’m an investor who sides with the agents. I don’t buy without an agent bc I cherish their local knowledge, contacts, experience, etc. Also there are SO MANY bad agents that when you find a good one, treat them like gold! I can’t imagine doing anything that would risk pissing off a great agent & having them not want to work with you. It’s like they say “if you have 2 starting quarterbacks, you have none.” If you feel the need to have multiple agents, perhaps it’s bc they’re both mediocre & you haven’t yet found the rockstar agent you seek

3 Votes

Originally posted by @Scott Smith:

Originally posted by @Ken Latchers:

What? Any LLC is expected to have sufficient resources in case of liability. I highly doubt that only the balance of the bank account would be considered anything like that. I'm quite sure the judge would blow through this easily and quickly.

Originally posted by @Scott Smith:

You would need to operate the LLC by the guidelines that are laid out by the state you operate in. But that doesn't mean it needs to hold a massive balance. You would need it to hold enough money to fulfill it's business for a period of time, generally several months. But if that LLC is sued you will be facing smaller risk that having the LLC that holds your entire property exposed. The LLC would essentially function as the property manager for the property (properties.) Large corporations do this all the time by using the popularly termed shell companies to operate their more risky endeavors.

The idea is to create additional layers of defense again lawsuits. However, if you are not abiding by the law they can still dig through these entities to the assets beneath them pretty quickly, which is why it's important for investors to commit to good business practice as a first step toward a solid asset protection strategy. I often try break it down into the 5 Pillars of Asset Protection when explaining it to investors - helps place the initial strategies of asset protection into a better framework.

Scott - I received this response below from a lender when I mentioned the updated FNMA regulations. Am I misunderstanding something or is the lender misunderstanding something? Based on this, sounds like lenders won’t permit borrowers to transfer title after closing? From the lender:

The mortgage instrument ties the responsible individual to the loan and ultimately the collateral (the house). The verbage in the mortgage note does not allow for the title to be changed, transferred or altered in any way, as it will impact the lenders security in the loan.

Meaning if you stop paying, the collateral is no longer in your name, its in a business name, making it easier for you to walk away from the loan and near impossible for the bank to recoup its losses.
So FNMA may allow that, however for any lender who is securing these loans, it makes no sense to allow for that..

0 Votes

Originally posted by @John Underwood:

Originally posted by @Eric P.:

Originally posted by @John Underwood:

This is very bad for VR owners that have properties in Honolulu.

Laws across the country are getting more restrictive against VR properties. You never hear of some law being passed that is pro VR.

I believe it is important not to have only VR properties and not have them all in the same place.

If you do have them all in one area and this is all of your investment income, a simple law change can sink you and depress market prices as everyone rushes to dump their properties on the market.

You can never predict when laws might get tougher on VRs and the hotel industry puts more pressure on these properties due to the income they are losing.

I don't think the solution is to avoid having all your STRs in one place - I think the solution is only to have STRs in places that have supported them for the last 100+ years, such as Pigeon Forge, Outer Banks, Big Bear, Tahoe, etc. No one's itching to make STR illegal in Pigeon Forge for example bc the entire market is STR & has been for 100 years!

Just because something has been allowed for 100 years does not mean it can't change.

I'm sure it was allowed in Honolulu 100 years before it wasn't. Anyone with all their eggs in the Honolulu basket is feeling the pain now.

The areas that you mention may not change for another 100 years but you just can't know for sure.

To clarify, here's what I meant: STR has 2 main enemies:

1) hotels bc we are their competition

2) LTR renters bc we shrink their supply of housing which increases their rental rates

If you invest in places like Pigeon Forge or Outer Banks that don't really have many hotels & don't have many LTR renters, you should be relatively safe bc there's no one battling you. These are places that have been STR-friendly for 100 years & should continue to be bc they're literally built based on people wanting to rent a cabin in the woods / house on the beach / etc.

The same cannot be said for Nashville, Austin, Honolulu, etc

4 Votes

All Forum Posts by: Eric P.

Eric P. has started 55 posts and replied 461 times.

Post: STR Sites for Weekday Bookings

Post: Vacation/short term rentals

Post: Best locations for STR/vacation rental

Post: Is having your own website for your STR worth the expense ?

Post: Is having your own website for your STR worth the expense ?

Post: Vacation Rentals in the Poconos

Post: Setup LLC within the same state as condo or my home state?

Post: Using more than one agent

Post: Separate entities to manage vacation rentals?

Post: New STR Law in Honolulu