All Forum Posts by: Account Closed

Hey Everyone!

We are planning a get-together this week in St George. Rich Weese is going to be in town and he emailed me today about getting together for breakfast while he's here.

We are planning to have breakfast at IHOP on Thursday (Apr 18) at 8am. So far there are four of us confirmed.

Please let me know if you'd like to join us!

You need to check your city ordinances on short term rentals. Cities typically consider anything less than 30 day stays to be temporary lodging, which falls under a different set of rules than long-term rentals (basically running it as a hotel instead of private residence). The city might not allow temporary lodging in residential neighborhoods. If they do allow it, you might be required to collect transient room taxes like a hotel.

If you look through your city's ordinances for "temporary lodging" and "transient room tax" you should be able to find most of the information you need.

And yes, cities do check. I know my city is cracking down on owners that are renting out their houses on AirBNB, HomeAway, VRBO, etc. I have been helping rent out a 6-bedroom house and the city has been giving the owners a hard time about it for the last couple months.

I figured I would chime in since Rich Weese mentioned me. It was great getting to visit with him last week and I appreciate all the time he took to show me what he has been doing in the St George area. He showed me some of the houses he built here several years ago, the houses he closed on recently, the lots he is getting ready to build on, and also the raw land he is looking to subdivide -- all while answering my questions along the way. Each time we saw a lot that looked interesting, he was quick to pull over and make a call. He talked with the owner of that one lot for a while, then we ended up going back to the lot to see what view there would be from the house (great view across the city and out to Pine Mountain). He knew the area, knew what would sell, and was quick to pull the trigger on a good deal when it came along. It was fun to watch the process in action.

As Steven Hamilton II said, all I had to do was ask. I did, and I got one heck of an education! It's great that Rich is willing to take the time and help those of us just starting out in real estate!

Minh L., you forgot the California residents voted to raise taxes an extra 3 percentage points on those "evil rich" people in their state. The top state income tax rate will be going from 10.3% to 13.3%.

I'm sure some more experienced BP members will chime in here soon with more detailed information, but in the meantime, take a look at Loc R's blog post that talks about starting with that exact figure in a Roth IRA:

Snowballing Your Money

There is also Kevin Kaczmarek's article on buying partial notes:

Get your Slice of the Land Contract Pie with a Partial Note

Jon K. HomeAway owns VRBO. If you sign up for a HomeAway account, they will start sending you emails with discounts for a VRBO listing. I received one last week that takes $80 off their yearly subscription rate of $349. When I set up the HomeAway account the end of last year, it more than exceeded our expectations. We were hoping to get at least 25% occupancy for the first year, but we are already over 50%. May, June, and July are booked solid. August has one week still available (Fri-Thurs). September has two 5-night windows still open. I need to get October and later filled, so I'm planning on setting up a VRBO account this week. According to HomeAway, only 20% of the visitors between HomeAway and VRBO overlap, so it should help get our rental in front of a lot more people. HomeAway has been my only paid advertising and I also use Craigslist. I have my Craigslist ad link to the HomeAway listing. "Check availability on our Availability Calendar." "Availability Calendar" links to the calendar on HomeAway.

Also, when I log into my HomeAway account it gives me a promo code for $75 off any subscription level if I want to add a second listing. If you want to set up an account with them, let me know and I'll send you the code.

Jim Hamrick I have been helping one of my business partners book a house in my area. It is just under 6,000 sq.ft., 6 bed, 6.5 bath. He bought the house the end of last year and we started renting it out earlier this year -- first guests stayed in February. We are renting the house for between $500-$525/nt or $2,500-$2,625/week plus tax, plus a separate $300 cleaning fee.

A few things to research and consider:

Look at your city's ordinances for short-term rentals. Some have strange hoops to jump through. For my area, we had to get permission from all other homeowners within 300' from the house. Luckily the partner that bought the house has lived in that area for years, so that was an easy one for him. There also had to be adequate off-street parking.

Find out what taxes you need to collect. For my area, there are transient room taxes that total 11.5% between the city and county. 6.25% sales tax, 1.0% city transient room tax, and 4.25% county transient room tax. Make sure you know your taxes, otherwise you might get a nasty surprise from the city and county.

Make sure you collect a security deposit AND get the guests to authorize you to charge their credit card for extra damages. Last week we finally got our first "disaster group." Normally it takes 8-10 hours for our cleaning crew to clean the house. After this group left, it took them over 20 hours. This was the first time I was not able to refund the group's security deposit. It wasn't a pleasant experience having to do that to them, but after sending them a few pictures of the damages and mess, they paid for the extra damages without much hassle. Normally we try to be very lenient with groups on damages. If it costs us an extra $50, but we can get them to stay again, we won't worry about charging them the extra amount. In this case it cost us an additional $355, plus there is no way we would allow this group to stay here again, so we went ahead and charged them.

That leads me to the rental agreement. I have a 6-page agreement and the guests must initial each page and sign the last page. It goes over the rental amount (breaks out the rental fee, cleaning fee, and room taxes), releases our liability for anything done on the property, PLUS it explicitly releases our liability for the pool/spa (always a worrisome situation with kids around pools). It also tells them what they are required to do upon check-out (returning items to their original places, pick up all trash, etc.). I was a little worried about people not being willing to sign it -- seriously, it is a LONG contract with a lot of "we're not responsible for anything" language in there -- but so far I've only had one person ask to make one small change to the contract. It was actually a good change, so I used it for all other contracts since then. All other guests have filled out their contact info, initialed each page, and signed the last page without any questions.

While it is more hands-on than a regular rental, the extra rental fees you collect should be worth it so long as you are in a good tourist area.

It looks like Ryan M. and K. Marie Poe missed Rich's other points.

He wants to leverage money against his property to free up cash, which he will use for other investments (point #8). He has two choices: leverage again his primary residence or leverage against one of his rental properties.

If he leverages against his primary residence, he gets a lower interest rate, plus he gets the interest deduction. As Ryan M. said, this is the situation where you "mail me 9k/year and at tax time I will mail 1.5k back."

If he leverages against one of his rental properties, he pays a higher interest rate, plus he doesn't get the interest deduction. In this case it would be "mail me 10k/year and at tax time I will mail you $0 back."

So, do you want $1.5k back or $0 back at tax time?

Normally I agree with ignoring the interest deduction since it is spending a dollar to save a quarter. But, in the example from Rich Weese, I certainly understand why he chose to leverage his primary residence instead of a rental property. Cheaper money to leverage, resulting in higher returns on his other investments. That doesn't sound "goofy" to me.

I've always joked about people needing an IQ test before allowing them to have kids. All males should receive a vasectomy when they are in their early teens. When a couple wants to have a child, they have to take an IQ test and show they are financially able to support that child. If they both pass the tests, the male can have his vasectomy reversed.

Again, I normally mean that as a joke. But, when I hear about parents putting their kids in microwaves, dryers, or all the other psychos that abuse their kids -- or leave them on top of a car -- I start to think it's not such a bad idea.

Happy Birthday, Rich!

I watched part of the Miss USA pageant last night and was going to look for you in the crowd, but for some reason I kept getting distracted. :) Sounds like a fun time!