All Forum Posts by: Jon Crosby

I was able to get around this once, but had to speak directly with the underwriter and explain that I was following the exact same business model as the other properties and that the expected revenue should tie to that.  However, those properties were in the same area, so the fact the TN property is further away may be a problem. 

Best of luck to you.  

@David VanWert Sorry to hear about your re-finance struggles. In the few STR refinances I have done in CA, I have never had a problem using schedule E and/or C for DTI calculations. I'm assuming you have owned these for multiple years so seems strange you are hitting roadblocks since you should have tax history to support the income.

@Brian Suit could you see if you can point David in the right direction maybe with some of your resources? 

Thanks! 

@Joe Splitrock 

Excellent points and it certainly is important, and likely the reason Airdna uses this methodology.  One problem I have with with including fees in this manner (unless you are the one doing the cleaning) is that those are pass thru fees to the guest generally (some people charge a little more also), so it's one less expense to analyze against. 

Additionally, if you include it as expected revenue on your cash flow statement then you have to have a corresponding line item for the expense (as you mentioned), but here is where the problem lies...what is your expected expense on that?  Cleaning fees are directly correlated to the number of bookings you get, not the number of nights occupied so there is an inherent disconnect there since revenue is a product of occupancy and average daily rate (not number of bookings).  That is why I prefer to back the cleaning fees out of the ADR and then calculate my expected revenue on non-cleaning ADR and expected Occupancy rates when looking at a new property. 

Hopefully that makes sense, once again, this is simply a preference from my experiences with the data and my own business models. 

Thanks!

@Chase Davidson  Be advised that Airdna ADR and Revenue includes cleaning fees, this is going to give you an inflated expected return if you are not aware of that and plug it into your analysis without the proper adjustments.  That being said, it's an amazing resource and I'm a fan, client and API consumer.  If you need help pulling the cleaning fees out of the numbers let me know.  

@Sarah Oladokun  If you are going to do the cleanings and self-manage (which is the only thing that would make sense here), then why stop at a duplex.  Go Tri or Quad if you can make the acquisition numbers work!  ;) 

Best of luck! 

Just be aware that AirDNA's figures include housekeeping so it will give you a rosier ADR/Revenue prediction if you are not aware of that.  I have a way to extract that using their API if you want me to check out your numbers though.  Feel free to PM if interested. 

@Casey Dye  In general, if the property doesn't cash flow then you should not invest as you are then investing on long term appreciation which is speculation.  Additionally, if you are burning your reserves each month eventually you are going to run out of money to keep operating the investment. 

All that being said, I have owned a few homes where it was a 'vacation home for free' rental model. So as long as it went between -$5k to +5k per year in cash flow (excluding tax/depreciation benefits), the negative years I accepted because of the other ancillary benefits of owning my own vacation home. We used it for 14 days per year for personal use and made as many 'maintenance' trips as needed (where we also enjoyed the home). One year, I was even able to leverage it as a trade where we wanted to stay at a beach house and offered a trade to that STR owner.

Long story short though, you never want to over-leverage and you really do want to have positive cash flow in most situations.  In California, many investors end playing the long-term appreciation game with their STRs simply due to the high average cost to acquire vs net revenue. 

Best of luck! 

@Wes Delabar  I don't believe there is any California mandate for licenses to manage other peoples' properties, however there could be at the city or county level that you will want to check first.  I would simply reach out to the contact email for whatever municipality you are currently paying your occupancy taxes to as a first step in answering that question.

Best of luck! 

@David Smith  There are a variety of business models and like any other real estate investment strategy it's going to really depend on your long and short term investing goals.  Just my 2 cents..if you can cash flow positive enough on a property that will cover expenses and cap ex reserves AND you still have 6 months minimum of mortgage reserves available, then by all means...go for the 15 year fixed...the sooner you own it, the sooner your swimming in more cash.  I will not get into ARMs as that is speculation in my opinion and I try not to make that a variable in my investment equations.

Prices are high everywhere it seems like, if you are cash heavy, wait for the election to play out, see what happens with all these forbearances and then maybe there are some actual decent buying opportunities available early 2021. 

Best of luck! 

@Joe S.  The closest thing I have seen/done is use a company like Evolve who takes only 10% for managing bookings, payments, calendars, etc. and you handle everything after the guest checks in.  I managed remotely (few hours drive) successfully for several years under that model, but to be honest, there is no reason you can't self manage if you have the right local resources and systems in place.