All Forum Posts by: Jon Martin

@Nicholas L. yes absolutely, everyone should do their own DD. I am comfortable saying this because I have seen it work and replicated it. I even kept the cash flow number conservative and the math still works, $1K/month on a $400K property is good but not a home run by any means. Caveat is that you should be reinvesting those profits back into other smart investments so that you aren't missing out on compounding gains. 

Paying taxes on early withdrawal is not much different than taxes on any other income. All are profits/income tand you are still coming out ahead, even if you have to pay taxes on them. 

Out of state, southeast and midwest college/mid-sized towns. High bedroom counts to attract guests for weddings, families etc. Mostly class B because the purchase price is accessible and still profitable. 

Hi @Kevin S. yes you absolutely can. I picked up a home for $422k that does $8k+month in revenue, some months well over. After all expenses paid the profits are closer to $2k at $8k/month revenue. 5+ bedroom homes in mid-sized cities is my strategy. 

The math I posted above get's a lot more impressive if you can push $2k+ cash flow. 

I'm surprised to see so many posts favoring blinds over curtains. Most blinds are tough and time consuming to clean, prone to breakage/creases, strings break and get stained etc.  Whereas curtains you can easily throw in the washing machine. Not to mention the cost. 

Am I missing something? I thought that curtains over blinds was something that a lot of the STR gurus pushed.

Definitely do blackout curtains in the bedrooms. Not sure which color though 

Pretty basic, and I am small scale. I take a percent off of total top line (including cleaning fees) that is 5-10% less than what a local "hands on" operator would charge. I am managing remotely so I am not much different than Evolve, so I don't feel I can justify 25% like a local operator would, but I do care a whole lot more! Then split bottom line 50/50 with the partner (individual) after all other expenses are paid. Went in 50/50 with partner for all upfront cash expenses. 

Currently finalizing a deal for another property with a different individual investor where we will have the same payout model, but they will put up a bit more cash to cover all the admin work I have to do to set things up. 

Works great because I get guaranteed revenue either way and the partners are happy to be silent investors who get a check every month. 

Agreed- with a long term rental you can be very clear and upfront about all the nuances/quirks of the property and what is included because the transaction has far more direct communication. Whereas with an STR, even with clear english detailing any issues up front, is often booked on a whim with an overload of information digested in a short period of time. Which does not give the renter a pass for paying attention, although that is often the context of the transaction from the guest end.

Not to mention that in many states, appliances are not even required to be provided by the landlord. As with an STR, so long as you set and document clear expections, it is on the guest or tenant to proceed accordingly.

All fair questions and yes, there are far too many variables to say with any sort of certainty. Here is how I look at it:

If you have $125K in a Roth 401K that will earn tax free earning at just under 10% per year, you will get a doubling every 4 years based on the rule of 72, making that $125K worth $2M in 30 years. That $2M would be worth $100K on a safe 5% withdrawal rate at that time. Very significant, and demostrates the power of compounding interest. 

Now, if you pull out that $125K and pay the tax penalties, that would get knocked down to ~$100K after fees and taxes (rough numbers for easy math sake). Given that some of that would be your contributions that were paid with after tax income, especially after other REI tax benefits offsetting the blow, the cash eaten by taxes/fees wouldn't be as bad as the back of the envelope math suggests. Either way, you would be left with roughly enough to put 10% down on a $400-600K property and still have cash leftover for closing costs, furnishings and minor touch up renovations.

At 4% appreciation, that home would be worth $1.35M and be paid off by the end of 30 years which yes, is significantly less than $2M. However, if you can profit $1K/month off of that property and cycle that cash flow back into something that makes the same return as your boring 401K, that will net you another $1.8M in 30 years, pushing you well over $3M. That's without figuring in tax benefits, increasing revenue per year with inflation, picking a market with more appreciation potential, making more than $1K/month profit (very doable) etc that could supercharge those numbers even more. 

That's how pulling money from a retirement fund can net you far more in the end if you do it right. 

Cleaner is paid a fixed rate for a specific job, you are paid a % of revenue. My smaller property averages $450 per stay (3 nights) and the cleaners charge $90, so they make more than a property manager would. My larger property scales up similarly. Work on raising revenue so that you can pay yourself more.

Plus if you have good systems in place, you should be spending much less time on each booking than what your cleaner spends cleaning it. 

Self managing is easy money with tech and systems. I do relatively well in my day job by today's standards but my hourly rate for self managing is closer to that of a surgeon. 

I have partnerships where I take a management fee off of topline and split profits from bottom line. Partners are happy because I don't charge an exorbitant fee and do a much better job. If I scale to a point where I no longer have time and have to outsource, that line item is already accounted for and the property will still be profitable.