All Forum Posts by: Jerry W.

@Charles C Blessing, Welcome to BP.  Congratulations on your first deal.  A couple of questions.  How big is the house.  What improvements if any did you make to raise the nightly rate?  What is the cost for your cleaners and utilities?  My final question is that you said you are turning a profit, but with all cash that is confusing as you have no mortgage payment.  Can you give us idea of gross expenses and income?

@Devon Belt, welcome back to Wyoming.  You must be in the Gillette area.  I am over in Thermopolis WY.  Give me a shout if I can answer some questions for you.

@Randy Cleveland, welcome to BP.  Great job on grabbing this and adding it to the herd.

@Joshua Bailey, Here is my 2 cents. First what you need depends a lot on your financial circumstances. If you start off wealthy you need to start off with strong asset protection. Definitely start off with an LLC and maybe even a double system of a management company over an individual LLC owning a property worth $2ook or much more, maybe even through in a trust or 2 to make a lawsuit have to look to even find you. Most people start off buying their first property while still fairly broke. Eighty percent of their net worth is their car and house. They probably buy their first couple of houses in their own name and use conventional financing in their own name. They use their own savings for things like replacing the water heater or even a roof. They have one checking account or credit card for the business. After buying several cheaper properties they start getting more and bigger properties. They form an LLC, they increase insurance coverage, get loans through the company name, and start having a separate LLC for each $500k to or so value. Eventually the protection gets more complex and you worry as much about how much you pay in taxes as you do about where the money comes from to replace a roof.

When you were a teen you drove a 20 year old car that you had to fix every other week with a shaky battery and not great tires.  You needed a more dependable car when you worked for someone so you could get to work every day.  You needed a safer car when you got married then one with more safety features when you got kids.  It had to be newer and completely reliable.  Eventually you needed a car for you and your wife that had to be very dependable, then eventually you got really nice new cars.

It is all about where you are in the cycle. If you are barely making it you need the cheap option because getting a loan is slightly more expensive in an LLC than in your own name. You are only doing books on one or two cheap properties that are highly leveraged. After you have an established business and several properties with a lot of equity you need an LLC and will probably have reserve accounts for large maintenance issues and for taxes, you may have several LLCs and maybe even an umbrella policy. Do this in steps. Educate yourself on how to make money then about how to run the properties properly and liability protection. Eventually you might have dozens of properties and millions in equity and multiple LLCs.

The biggest problem with this tenant is actually not how they maintain the property, it's when they leave.  They will never be able to move all of this to their new address, and their damage deposit will never cover having to clean the place out.  Heaven forbid she gets a mouse or 2 in there, because suddenly you have 300 mice.  I have a hard time kicking folks out for any reason, but I let a kindly couple who hoarded food and other stuff and it took 3 weeks to haul everything out and get rid of mice.  It is hard to do because there is a mental illness issue here, but clean up or get out.  I hope things are going well for you other than this bud.  Stay warm.  It's 12 below zero here as I am typing this.

@Becca F., its ok to take a few months or even longer to catch your breath and get comfortable where you are at.  In me experience real estate is get rich slow.  I started investing in real estate in the late 70s, but didn't really push it until the late 1980s and early 90s.  Once I decided I would be an investor it would get scary at times.  I had to take awhile to get comfortable.  I am not exactly big time even now as it was a sideline to my regular career.  Initially my investing was buying my own trailer house to live in, then it became a bigger nicer trailer, then land and trailer, then house, then a second house, etc.  I think I am about 60 doors now but I actually don't know as I have not counted them in awhile.  I have an old 12 unit apartment complex that is really a series of 3 large houses.  I have a few duplexes and lots of little houses and now 5 short term rentals.  I will be adding 2 more vacation rentals this year.  I was not able to retire after a few years, instead I just kept working up and now I have a level of financial comfort I never expected.  I lost my government job that paid poorly about 5 years ago and there was virtually no stress because my finances were so strong.  If it keeps you up at night it is not the investment for you.  There were times when I pushed hard to get bigger, and there were times I just consolidated what I had.  Find your own pace.  It doesn't hurt to be a little uncomfortable, I still get that way on every purchase, but I really enjoy the hunt.  My last 2 purchases at 9.5% and 9% interest are at best losing a little money each month, but I am still in the game.  I expect to refinance them in a year or so when rates drop and hopefully they will be cash positive or at least break even.  Many of my best houses were break even but are now cash cows 15 years later.  I did use equity to expand my portfolio, but at the time I knew I could make my monthly payments from my W2 if I had to.  Now of course there is no way I could make all of those payments, but my monthly income in rental income staggers my mind from what it was back then.  I simply reinvest every single penny back into acquiring or improving properties.  I got to where I enjoyed the game.

Anyway, move at your own pace, take your time, smell the flowers, and enjoy the ride.  Best of luck.

@Jay Hinrichs, actually, when you take out the 5 STRS from the 60, then take out the 3 that are under re novation, then the one or two that are direct deposit, and my brother is managing a couple we bought together out of state that I never see except on tax forms, the rent is maybe $800 or so with some lower and a few as high as $1,200.  I honestly have no idea how many doors I have as I have not counted them in a few years.  I should probably do that, but I always have something more important to do.  I guess my point to @Michael Norwood is that c class properties are a fair bit of work.  Yes you can turn bigger deals buying B or A properties, but where can you get them with a good enough cost to rent ratio to make much money?  Especially if you are paying 8% interest!  I would love to buy a $400k house and get massive cash flow with not much work, but I have yest to find many deals like this.

@Michael Norwood, I am sorry, but my experience does not match your expectations.  Perhaps the investing environment in my area is not as good as some of those posting.  In my experience I had to put in a fair amount of time learning about my local investing area in order to tell what was or was not a deal.  I imagine it would be more work for an area out of state.  Next real estate for me was get rich slow.  While I made a little money from monthly rents, it all went back in the kitty to fund repairs, upgrades, or the next purchase.  The real money came from appreciation over time and pay down on the mortgages.  I had to buy distressed properties and fix them up to even break even or make some monthly cash flow.  I couldn't buy a regular property in nice condition and rent it out and even break even.  You might want to consider another strategy other than buy and hold if you want a $20k cash flow in 10 years.  The amount of work initially was fairly small because a partner that was pretty handy and ran a small construction company.  Now my portfolio takes a pretty fair bit of time.  I have about 60 rental units of which 5 are STRs.  Gross income is about $30K a month not counting the STRs, but as much as I hate to admit it Not much of it is pure profit as I continually upgrade or add new properties hehe.  The big deal is what my portfolio is worth.  Accumulating a lot of rentals, natural appreciation, and loan pay down have made my rental portfolio worth several times of my net worth of retirement accounts and property I own like my house or office.  I absolutely love buy and hold, but would not advise it if you really want to be hands off.  I would look at things like REITs, etc. it is my experience that even triple net is fairly large amounts of money compared to what you seem to have available now.  Sorry to be slightly negative, but my experience is very different from what you seem to be expecting and what others are claiming.

@Susan Walker, I can't tell where you are based out of. You might see about converting one of your LTRs into a STR for your first go. Do you have any houses in areas with a lot of visitors? Near a sports arena or military base, or tourist attraction? Near a lake or mountain town? If so you might try one of them first. Being near it really helps for your first STR. Once you decide on a house I have a lot more advice, but it is premature until you have the house picked out. Best of luck either way. In case no one else has mentioned it, welcome to BP.

@Steve T., thanks for starting this thread. We had a week of 12 to 29 degrees below zero. I am ready to look for a STR out of state in a warmer area. I have been looking at the Blue Ridge area for awhile. Maybe I need to ramp that up.