All Forum Posts by: Jon Martin

It's your money. Lots of very successful RE investors use their 401k/IRAs to get started. Not hard to outperform a retirement account with sound RE investments. That said I do agree that investing in a self directed IRA could be the best of both worlds.

The 10% fee is unavoidable but you can offset the income tax obligation with cost seg/bonus depreciation, mortgage interest and other deductions. Also, IIRC the taxes and/or fees only applies to the employer contributions. 

Sounds like you are in a bear market 

***bah dum Ching***

Update . . . Spoke with someone at "superhost support" (lol) today. Sounded like they were out of India. They told me that I would be deactivating the listing, which would automatically cancel any outstanding listings without penalty. 

Considering the source I won't hang my hat on it, although he at least sent a summary of what we discussed. Will update if/when the time comes. 

Quote from @Collin Hays:

I’m living this nightmare now.  We had one home listed on Airbnb at the homeowner’s request. Then they sold the house and I had to cancel all reservations. Now Airbnb wants to fine me cancellation fees for all if that.  Been fighting for days now. 

 Yikes . . . How bad are the fines?!

Thanks @Michael Baum all great questions and ideas. 

Would expect to sell it to an owner occupant but you never know, the numbers are good enough to justify keeping it an STR and sell it turn key. Hot "path of progress" market where I got in low, so it would move quick.

Might put a property up for sale in a few months. Could keep most reservations in place while active and in escrow but would likely have to cancel some bookings.

Anyone have experience with this? I’m guessing that I could lose Superhost for a quarter- any other potential consequences? I would still have at least 2 active listings so I don’t want to burn the boats so to speak.

Thanks in advance!

Quote from @Eddy Encinas:

Hi, I am debating putting a barrel Sauna vs a hot tub in my Vermont Ski Cabin STR. I am weighing the pro's and cons, Which would be the best ROI if I can only afford one?

Does anyone have any experience managing a hot tub for a ski cabin? Could you offer some tips? Thank you very much!! 

Biggest difference is that the hot tub will require regular visits for cleaning and chemical balancing, probably weekly during season plus the cost of chemicals. Which could easily be $300-400/month because a big part of the cost is someone driving over there. You could potentially train your cleaners to do this, although they may not be comfortable with it, and that will still cost extra because it’s outside of their normal scope. Whereas a sauna just has to be cleared and wiped down like anything else. If I had to guess I imagine that the sauna costs less to heat up as well. 

That said it seems like the data is strong on ROI in general with hot tubs so it would probably more than pay for itself. Why not do both? It would really stand out!

34X is high but nothing compared to Tesla, Palantir and many others in the tech space, which is what AirBnb essentially is. You could argue that some of that price is justifiably built in because there is still a lot of room to scale. Plus they have plenty of liquidity because they hold our earnings hostage from booking until check in and collect interest on it, which may be the most genius part of their business model. 

That said the issues that are plaguing Airbnb and VRBO are only going to get worse as they continue to grow and will eventually lead to some harsh corrections and losses. 

Quote from @V.G Jason:

Inventory is no longer low. Rates are persistent.  See the former increasing, and latter hanging tight. Correction/bearish territory is very present.

Makes sense. Inventory is still tight in coastal California where I live and some other hot markets but I see your point, it is always local. It is more important than ever to buy properties with unique attributes that are not easily replicated- views, larger lots, walkability/easy access to amenities etc and furnish/manage them properly

Quote from @Myka Artis:

The problem with the STR tax loophole is the current cash flow issue due to interest rates. The strategy I have found for exploiting the tax loophole is to acquire a multifamily property, such as a duplex, at a minimum.

Please take my advice with a grain of salt and consult a tax strategist or CPA before taking action. My friend's approach is to buy a duplex. Make one side an MTR and the other side an STR. He is cash flowing because his MTR covers a majority of the mortgage, and the STR side is just a bonus.

He leases each side of the property to his LLC. However, on the tax side, it appears that his one lease qualifies for the loophole due to the average stay being 7 days. I'll get further details on how this has worked out for him, but you may want to run this by a tax professional first.

Additionally, I'd recommend reaching out to Avery and Luke Carl if you're looking for a cash-flowing vacation rental, as this can also help you take advantage of the tax loophole.

While I don’t disagree with any of this, IMO the biggest issue with the “STR Loophole” is that it really doesn’t return that much money to you relative to what you put in. You can only get as much back as what was deducted, and to write off your entire W2 burden you would have to put down a lot of cash. Getting $15-20k back is great, but you probably have to put down $80-100k+ in cash towards a down payment, rehab and furniture to get there.

As mentioned above, the tail is wagging the dog.