All Forum Posts by: Jonathan Avellaneda

Hi BP community!

I am wondering if anyone is currently investing long distance in Colombia. My family has a rental home there but we have had a horrible time with management of the property and need a new management company to step in and help to evict some tenants so we can sell. Does anyone have recommendations on companies or strategies to do this while in the US? Any and all help or referrals is appreciated!

Jonathan

STR VS LTR- remember this distinction. What are your local landlord laws? Does making them jump through all these hoops then give them status as a tenant vs as a guest in home through Airbnb?

I would consult a local attorney before making them do anything. This could get sticky depending on your local laws. For me in Washington I would not do anything outside of Airbnb because then they would be considered a tenant and they would be allowed to have tenant rights, which here is immensely more than landlord rights.  

If you don't have time to do this, go with your gut. Have a conversation with them on Airbnb about their stay and see what you can dig out through social media  and the Googles. After that make a decision- but don't determine it on being empty vs not being empty, make sure you are basing it on the quality of the guest coming in and the standard you want to try to keep so your home stays in order. Avoiding a bad guest and losing some occupancy is way better than getting paid but having to deal with them for 6 months of who knows what!

I think it depends how automated you want to be and on what platforms you want to be listed on. 

I use Guesty because they integrate directly with Airbnb/VRBO/Booking.com which also has access to other Expedia sides indirectly. The calendar, messaging, cleaning tasks, income reports, and so much more I have found invaluable since i do t actually have to send anything myself once i set it all up. One little known secret that this also automates is that it changes unseen things in your listing so that the algorithm from the platforms detect changes on your listing and pushes it towards the top. This is amazing because people are always seeing yours as an option.

For pricing Pricelabs has been crazy good. I don't have to worry about updating my calendar to match high demand dates as it changes prices daily for an entire year at a time, everyday! You set a base price and a minimum and Pricelabs does the rest. It will even start to reduce the price closer to today, allowing for you to have less occupancy. I keep my base rate higher now simply because i know that eventually it will lower to catch that happy medium of price and quality of guest. 

I believe a little more analysis is needed. 

1. Look up Airbnb, VRBO, and probably Airdna in your area. What are places similar to yours renting for? Also consider that with STR you are responsible for all the water/gas/sewer etc bills that you wouldn't normally be for in a LTR.

2. Is your place fully furnished and ready to go as an STR? Are you OK leaving all your furniture there with the expectation that everything will get wear, and things will get broken that need to be replaced? If it's not furnished, what do you think it would cost to do so?

3. If you sell, would you invest the difference in something else? If that would be real estate would you do a 1031 or flat out sell and buy. Consider if you would need to pay capital gains tax if you do sell...not sure the situation.

4. How passive do you want to have your investment? STR is going to yield more revenue, but it requires customer service, management of cleaners (or cleaning the place yourself), dealing with repairs or damage to the property after stays, initial setup of platforms, and continued inventory replenishment to keep the place stocked. Mind you, a lot of these you can systemize, but it takes time initially to set everything up and some management to maintain.

Also, I agree with Dave Stokely that if short term rent analysis supports it , you can refi out the cash and do STR.

I have the same home type you are talking about, And it has a bedroom, bathroom, and second kitchen downstairs. I still have room for a game room space with tables and arcade. It is totally worth it to have this because you have the possibility of splitting it into 2 Airbnb's for smaller group, 1 large one for bigger groups, and long term rental would also bring in better cash flow if needed.  

Depends on your property. Cabin in the woods with a lot of land, go for it. Suburban home, probably not a great idea to have large events. 

You will also need to consider that you will need to draw up legal contracts for the events, liability insurance, possibly food and safety/alcohol permits, and a bevy of other things that I probably don't know about. 

If you think this would be a good idea I would ask around your local area and see who is doing events and try to get info from them. Once that is done you will have a better idea of whether or not you actually want to go this route. Good luck!

The only thing I would create outside of using already mentioned pricing and channel managers would be a good checklist or expectations list for your cleaners. Make sure they know how you want things done after the cleaning piece is done, otherwise they will just clean and you have to reset for the next guest. Include things like linens, how beds should be made, refilling any soaps or anything else that you need. This will reduce your stress around it and will allow you to hold them accountable to what you need done.

@Christian Bullen no problem! Let me know if you need help with anything else.

Christian,

The refinance is not too difficult, however, the financing is not necessarily going to be based on your investor experience. If this is your first property and you are not house hacking then conventional lenders will typically require 20-30% down which in the case of the BRRRR is already built in. You will need to keep in mind though that a lot of conventional lenders have seasoning requirements of 6 months to a year before they will put a loan on the property, from the date of purchase. You will need to account for this for your holding costs. Not all of them do this but it is a common thing to see.

if you go the hard money route then you will need to discuss the terms with the hard money lender and see what they are offering. They do usually charge higher for less experience, but may not even lend if it's already been flipped and such. Just ask around and find one that fits what your goals are 

Hey Christian, great detailed write up. I would just note 3 things, but everything else looks great.

1. There is no 1031 exchange during a BRRRR. You own the property being purchased outright. The money pulled out is your money via a refinance. The lender gives you this money, it is not a capital gain tax event because you are not selling the property, you are just loaning against the property.

2. Closing costs- when you get the loan there will be closing costs. Depending on the loan amount and lender these will vary, but a rough sum should be calculated into your cost and will reduce the cash out you end up with.

3. Holding costs- in your example there probably wouldn't be much if any holding costs because the renters are staying during the rehab, but most BRRRRs are empty so you would have some holding costs in the form of insurance, utilities, maybe taxes depending on how long the rehab takes so you will want to have those in the numbers as well.