All Forum Posts by: Dan H.

I have experience with

Kwikset smart lock: eats batteries, not as reliable as I like.  I used to have 5 units with this lock and an entry gate with it, but I am down to 2 units and the entry gate with this lock.  I recommend a different solution.

Kaba: no complaints. One of my STR managers prefers these locks.

Schlage Encode: no complaints. My co-host on one STR prefers this lock.

I hope to try @Michael Baum recommendation at my next STR assuming I can get the z wave setup.

How long have you owned?  The reason I ask is at that rent point there is no profit on a sustained hold.   this is regardless of furnished or not.

if you do not get rid of the tenant, the situation will degrade.   Easy decision to get rid of these tenants.  

More difficult question that was not asked is do you get rid of these tenants property and I think that is as easy a question.  Managing units is work.  You deserve to be compensated.   Owner RE has work and risk.  These deserve compensation.   Your cap ex will catch up with you.  Sell before it does.  

Good luck

Quote from @Stetson Oates:

As a suggestion, when you refer to net cashflow, I would include maintenance, vacancy, and repairs.  If not I fear you will be caught in a cash flow issue once you have a vacancy.  Section 8 would tend to carry higher repair and as a result, additional vacancy.

OP’s definition of cash flow is rent minus piti.  No maintenance/cap ex, vacancy, PM, book keeping, asset protection, miscellaneous, etc.

his actual cash flow when properly allocating for sustained expenses is a fraction of his advertised cash flow.   In addition, the book keeping and legal involved with a syndication process is greater than if partners are not involved.  These involve additional costs.

I am not saying that there definitely is negative cash flow, but I will say not including known expenses is providing a misleading cash flow estimate.  

OP has less than 3 years experience and it appears he has no mentor, he will learn by taking some setbacks.   It may work in the long term but can be a painful process.

i wish the OP the best and i believe he can benefit by recognizing the value in the various responses but seems unwilling.   He may have to suffer more pain than necessary.

best wishes

Quote from @Nick Rutkowski:

Quote from @Shiloh Lundahl:

I remember hearing people in 2017 and 2018 saying that they were going to wait on the sidelines until it was a good time to buy again. We all know that properties kept going up until mid 2022. Then in 2022 that said that they were going to definitely wait because it was a bad time to buy.

My question is, when is a good time to buy? And how will you recognize it? And if you recognize it is a good time to buy won’t everyone else see that it is a good time to buy too and then jump into the market and drive prices up?

 My favorite quote I got off of BP. “The best time to buy real estate was 5 years ago. The next best time is today.” I don’t know who said it but I’ve been quoting this since people ask when the best time to buy. 

 Just to point out few people in 2012 were thinking 2007 was a better time to purchase RE than 2012.   Property values and interest rate (but with higher standards) were lower in 2012 than 2007.

In general it is often true, but not always.  

Quote from @Russell Brazil:

Quote from @Aaron Murphy:

Quote from @Kristi K.:

Quote from @Aaron Murphy:

you are probably feeling like BRRR doesn't work because you are trying to turn a 600k house into a rental. It would be hard to cash flow on a 600k house that has 3600 in rent regardless of the broader economic situation going on in society.

i find that when someone says BRRR doesn't work anymore they end up meaning it doesn't work well for the specific types of real estate that they want to buy. And I've got no qualm with someone saying they aren't doing BRRR anymore but the bolder "brrr is not effective today" is in my view not very accurate. 

Funny you mentioned a $600K house doesn’t pencil out as a rental. This just got sent to me this am. 

 https://eyeonhousing.org/2025/01/cost-of-constructing-a-home...

cool break down thanks for sharing! This seems to be breaking down new construction and is a national average so kind of hard to read into this what it means in general but I would not expect a 665k new construction house to be my target for a rental property. 

Im a medium sized operator - 46 units- and my typical deal has an ARV from 200 to 230 when its finished. Wich goes back to my comment to the initial poster. people who want to buy homes in DC and top markets like that are the ones saying BRRR is impossible right now. Im not even sure that it is impossible in those markets but the main issue is that BRRR isnt working where they want to buy not that BRRR doesnt work.

A typical BRRRR in DC creates $200k in equity. Seems pretty good to me.

 It is not that good at the price point of DC or in my market (but better than my market).  My market $155k average flipper equity gain according to Attom.   Flippers get a 20% equity gain.  I am assuming brrrr do similar but in reality, due to conservative nature of refi appraisals, I suspect they achieve less valuation if based on the refi appraisal.

https://www.sandiegouniontribune.com/2024/12/16/home-flippin...

“Attom said the median price for a home flip purchase was $760,000 in San Diego County and sold for $915,000. That’s a 20% return on investment before expenses, down from 26.1% at the same time last year. The average for the U.S. in the third quarter was a 28.7% return on investment.

It’s impossible to know what every flipper in the U.S. spent to remake homes but Attom said the 28.7% return is within a range that could be easily wiped out by renovation expenses, mortgage payments and property taxes.”

My large last extensive rehab was a little unit and I spent over $100k and I have done quite a few rehabs (3 last year, so hopefully my cost is competitive with what can be achieved).  Fortunately it was a location with a PSF of ~$1.5k, so I added more than $100k of valuation (suspect I may not have quite achieved my $2 added for every $1 spent).

But the bigger issue I see, if I add $200k of equity at hopefully a cost of no more than $100k it seems like maybe a good brrrr but what if it has expenses on a sustained hold that results in negative $1k/month?  I can sell and get ~$93k of that value add (using 7% selling costs) or I can hold and in 8 months have less of the value add present after accounting for the negative cash flow ($92k and decreasing monthly).

My last two planned BRRRRs I never did the refi and one has over a $1m equity position. I have low 3% rate on a jumbo loan (valuation just over $3m after value add and 3 years of market appreciation). If I were to finance at current rates at max LTV it would have huge negative cash flow. The other is a similar situation but maybe $700k equity on a $2m valuation.

If these were purchased at today’s rates, they scream flip and not to hold them.  Fortunately at my rate they have some cash flow and good appreciation.

The rates make it rare that the brrrr is the best option available.  The equity gain is just one part of the equation on if brrrr is appropriate.

Good luck

Quote from @Alan F.:

Quote from @Dan H.:

Quote from @Alan F.:

In CA it is a violation of CSLB business and professions code 7159(d)(5) to execute residential time and materials contracts. I. E. Licensed contractors supply materials and subsequently warranties.

Also how would a flipper comply with assembly bill 968 if they supply materials?

 I know of nothing in ab968 that has to do with source of materials.  It is about disclosing the scope of the rehab.   I think it helps flippers as it is easy to find the purchase pricesp versus selling price.   Having to “disclose” the work in the flip basically is mandating doing something that helps the buyer recognize the scope of the change which justifies the mark up.  It is nice of the state to mandate that flippers do this.  I would do it even if I sell far outside the 18 month window.  It justifies the property selling for greater than just market appreciation

I do owner builder rehabs but sometimes use contractors for large work scope or scope beyond expertise.  The contractors who do work for me have zero issues with me sourcing the material if disclosed up front and not holding them accountable for any material issues.  Because of the relationship I have with the contractors I use, there is no material mark up when they source the material.

Basically there is not an issue.

The CSLB law on prohibition of T&M residential home improvement contracts has been around a long time. The only exception is for handyman doing work under $500. Commercial work is also exempt. Commercial, in terms of CSLB is retail, offices etc. Multifamily is considered residential since people reside in the structure. 

it's part of contractors license law, our testing is on it and violating can and will result in punitive actions. Dont believe me? Call the registrar and ask. 1-800 321-2752

 https://www.cslb.ca.gov/newsletter/2010-summer/page9.htm

The current text of ab968 requires FULL disclosure with copies of all contracts, permits and warranties within the two year window. The full download is available from the state. I'm not going to download it for you from my phone.

https://www.cccba.org/article/flip-or-flop-disclosure-rules-...

I've read many of your posts and am aware that you feel that you can decide when you want a permit or not. That's your way of doing business. 

I follow the letter of the law( no matter how much I may not like it) that's part of my risk management and my reputation. It's how I've maintained a perfect bond rating and managed my business with the CSLB

>I've read many of your posts and am aware that you feel that you can decide when you want a permit or not

 I would word it differently.   I go by city actions and not what is written.   The licensed plumbers do not get permits for water heaters, I have never heard of one being red tagged solely for not having a permit so I do not get permits (and know no one that does) for swapping a water heater.  In my area this is the primary permit that is required that is virtually never got. 

For my rehabs, I pull owner builder permits where needed even for work done by licensed contractors.

My jurisdiction does not require permits for cabinets, counters, or flooring replacement.  So permits are not relevant to the subject of this thread for my jurisdiction

Not sure if there are jurisdictions that require permits for cabinets or counters but if there is, I suspect the motivation is the fees collected for the permits.

So permits SHOULD be irrelevant on this thread.

best wishes

Quote from @Carini Rochester:

Since you inherited the house, you get the stepped up basis. The fix-up and increased value will not matter to the IRS as long as you sell within a reasonable time frame of the house passing into the estate. (Reasonable time? a couple of years.) You will, most likely own no taxes.

 Have you ever done this or been involved in this?  do not answer on a public forum.

I have done it as trustee on 3 properties fairly recently and helped another trustee a couple/few times long ago.

The step up basis is time of death (TOD) value.  The safest way to establish this is with a TOD appraisal.   All work done to raise value after TOD is not legally in that stepped up basis.   There is no 2 year window that current value can establish the TOD value.  The step up value is to be determined from the value and condition of the property at TOD.

@Dylan Gomez did you have an estate lawyer help with the estate?  Did you get a TOD valuation that would hold up to IRS scrutiny?  Please consult your trusted professional in getting accurate information as it relates to the estate.

This site has 1031 intermediaries that have far more expertise than I have about 1031 but 1) you cannot 1031 a pure OO property. In addition, due to the 2 of 5 year rule there often is no need. 2) you cannot 1031 a property that has not been put into service to be an investment property 3) you cannot 1031 a flip. @Dave Foster   @bill Exeter

My view is without violating any irs rules your best option may be to live in the property 2 years and use the exemption.  Or you can violate various tax rules at your own peril and claim the current rehab was dne prior to TOD.  I do not recommend this level of tax fraud as the consequences can be serious.

good luck

Quote from @Alan F.:

In CA it is a violation of CSLB business and professions code 7159(d)(5) to execute residential time and materials contracts. I. E. Licensed contractors supply materials and subsequently warranties.

Also how would a flipper comply with assembly bill 968 if they supply materials?

 I know of nothing in ab968 that has to do with source of materials.  It is about disclosing the scope of the rehab.   I think it helps flippers as it is easy to find the purchase pricesp versus selling price.   Having to “disclose” the work in the flip basically is mandating doing something that helps the buyer recognize the scope of the change which justifies the mark up.  It is nice of the state to mandate that flippers do this.  I would do it even if I sell far outside the 18 month window.  It justifies the property selling for greater than just market appreciation

I do owner builder rehabs but sometimes use contractors for large work scope or scope beyond expertise.  The contractors who do work for me have zero issues with me sourcing the material if disclosed up front and not holding them accountable for any material issues.  Because of the relationship I have with the contractors I use, there is no material mark up when they source the material.

Basically there is not an issue.

Quote from @Krissi Miramontes:

Newbie help needed!  
I purchased 2 SFH and one duplex in Toledo last year. Hired a one man's show property manager after 10 months. Now self managing but trying to find a PM.
1 is going fine, 1 is going but always needs work on something (no CF yet), and then there is the duplex. It has been an awful pain. Started replacing and getting rent ready. New HVAC stolen, electricity being stolen by neighbors. 
I thought I found a PM but I’m not sure now (It is a big company and not very flexible). 
at this point I’m wondering if I should sell at a loss or try and get it ready again with a new PM.

Duplex purchased for 45k, put in 10k. Now need to put another 10k, plus management fees. Will rent for $1200 total. Is it worth moving forward or just sell for 30k and get out?

The SFH next door I paid 50k, put in 10, and needs another 5. It is rented for 775.
im looking for the best thing to do at this point. 
I’ve started flipping in my market in CA and like it WAY better thank LD investing. 
should I keep pouring money into these tiny things for long term returns or cut my losses?

 No brainer, sell:

- area that has historical appreciation far worse than inflation

- area that has historical rent growth far worse than inflation

- at that rent point there is no cash flow as the maintenance/cap ex will consume a very large percentage of the rent

- as described by the thefts, difficulty obtaining PM and rent amount, I conclude the same as other posts that this is a class d area.  Class d area is a specialty to manage and labor and knowledge intensive.  
- you have an option that you not only enjoy ,ore bit is likely much more profitable.  
- OOS does not allow for heroics if/when required and even without the need for heroics has increased level of risks.

I suspect I am telling you what you already concluded.   Take the loss and the education that resulted and move on.

Good luck

Quote from @Joel Oh:

Quote from @Dan H.:

Quote from @Joel Oh:

@Dan H. 

Being a super host and knowing how to place claims are two different things. You can be super hosts for 10 years and have 0 claim experience. It is a matter of how bottom-line-oriented they are and knowing how to file insurance claims. I got 20k+ from just reimbursement in 2024. At this level of scale, it is almost the same as running an extra unit. You would wish your PM to know how to file claims and protect your assets when your unit is vandalized or someone sues you for slip and fall. Moreover, I filter horrible guests from Airbnb so it is a win-win :)

Your post is so stupid .  Let me enumerate the reasons:

1) my pm paid for the damages.  It did not cost me $0.01.  This was stated in my post.  They simply did not desire to spend more time than it was worth to recover the money from Airbnb. Maybe you would spend the time to recover such a small amount but should you?

2) dropping a vape in a toilet mid stay is clearly an accident.  If it was being done on purpose they would do it just before check out and probably put something worth less than a vape. So quality of tenant is irrelevant as accidents can happen.

So most of your post demonstrates that you did not really think about it.  I am glad my pm does not spend more time than it is worth recovering a small expense like a toilet.  I am glad they realize that I should not be responsible for the cost of a toilet that failed due to a guest accidentally dropping a vape in the toilet and picked up the replacement cost.  I really have zero idea what you think I should be disappointed with my PM about.  I was criticizing Airbnb for not immediately covering the cost.  I was not criticizing my pm for covering my cost or deciding it was not worth further effort dealing with Airbnb.  In my view they made the correct decision and if you spent significant time recovering this cost, well I think we all know what that is.

 Yes, your PM paid for this incident. How many other incidents did he decide not to reimburse because he thinks those are too small? If you throw away 30 linens per year without getting reimbursed, it is $1,000. You can get reimbursed for cleaning if guests smoke or bring unauthorized pets which easily can be a few hundred dollars per incident. I am not criticizing your PM. It sounds like you trust your PM and he is doing what he is getting paid for. Just like every professional has a different pay range and skill cap, PM has differences in knowledge and skills. If you are happy with your current PM, that is really fine. 

I am just saying if I managed your property, I would never paid for the damage out of my pocket simply because I have a solid system and team to win any reimbursement cases. My cleaners take a video after every turn, my team goes in to check everything is good after cleaning and record salt and PH level logs and I have a licensed plumber who is in charge of maintaining plumbing, water heater, and boiler system with logs. I have no room for any guest to put the blame on my business. It is just like law firms from NYC have a full team vs local independent lawyers have a one-man army or a very small team. Not everyone needs to or can use DLA Piper for their cases. I didn't mean to criticize your PM. It is just a reality how many PMs have no idea how to process claims and have close to 0 systems to protect assets for business owners. 

You make a lot of assumptions as I have never been charged for linens, towels, etc   This is true for all my PMs in this area going back to my 1st 2 STRs in 1999.

Do you scope the toilet between each guest?

The PM knows how to process claims.  They also know when to cut bait.  I question if you know when to cut bait.  

I have had PMs successfully get large reimbursement including this PM got one last year (but I do not remember which OTA).

It is my belief that AirBnb rejects some smaller claims hoping that it is not worth pursuing.  Unfortunately they are correct, but the policy is a bad policy for hosts.  But if the OTA has a significant market share, there are limited options for the host.  The host can exert too much time to collect or they can choose to not collect and pay the expense.  What they should not do is have the owner/asset manager pay for their decision for damage that was clearly caused by the guest.  I look at the PM decision as their business decision; it impacts me in no way. 

Good luck