All Forum Posts by: Jonathon Hunt

Thank you so much for sharing your write up. I'm considering purchasing a Lodging House in my market. NOI is far superior to what can be found in traditional multifamily. Tricky part may be financing. Mortgage brokers are telling me 50% LTV at 7-8% rates. Hard money 65-70% LTV at 9-12%. Have not yet spoke to local credit unions.

This has all been validating to what I’ve been thinking about, but you also brought up a few real world examples that i would have missed. 

Thanks!

Jon

 Sure. If you are purchasing this property with a loan, you will be making monthly payments. Part of this is interest you are paying on the loan, the other is principal paydown (paying down the total amount of the loan, usually over a 30 year period).

Here is some simple math:  

Duplex costs $300,000. 

Down payment: 20% ($60,000)

Total Loan: $240,000

Interest Rate: 7%

Term: 30 Years

Monthly Payment: $1,597 

This monthly payment, you are paying down a small amount of principal each month. In Month 1 in the example above, you would be paying down $197 of the loan amount. The remaining $1,400 would be interest. This will change over time where principal paydown increases (paying down the loan) and interest payment would decrease.

Below is a table looking at the total principal paid down per year for the first 10 years of this loan. You can also use this free calculator here to plug in your own assumptions: https://www.calculator.net/amo...

It seems to me that this is gross negligence on behalf of your property manager. I would first seek to have a follow up conversation with your PM showing your written confirmation of this. It does seem reasonable for a prospective tenant to negotiate a later start date which your PM may have agreed to with the tenant, but it would be prudent to have your PM notify you of this prior to agreeing.

I don't know the details of your relationship with your property manager or what lives in your property management agreement, but if you provided the 9/1 date, and PM actually listed at 10/15, then you should be entitled to some credit, in my opinion. No idea how you would collect on this. I would obviously try to resolve this with the PM first to avoid small claims.

I hope you are able to work this out.


 

I look at it in two ways. 

1) Will house hacking with the duplex reduce your current monthly spend on rent? If yes, then I would go for it. If no, when you factor in principal reduction, are you doing better than monthy rent? If yes, I would consider it still if you are able to meet your other financial obligations.

2) Can you get a better return on your investment today for $200-$300 per month with the same amount of risk? Real estate is just one of many ways to diversify your funds.

Just some simple questions to get you thinking and moving in the right direction.

 Hi Jared,

I don't know who is still buying these days, but there was a lot of money raised across the institutional spectrum by large private equity groups. They usually partner with smaller operators to purchase in certain markets. I don't know who these smaller operators are either, but you could start doing dives into the following groups:

Blackstone Group (obviously huge, but maybe you could dig into who they partner with)

Alaska Permanent Fund

Oaktree Capital Management

Colony Capital

GI Partners

Waypoint Homes

Hi Andriana,

This is a very interesting problem you've brought up with the reoccurring credit card fees for background checks. This is one of those business ideas that has been on my list of ideas. It would be great if we had an easier way to run credit / background checks by having a social profile with all of this information verified in advance. This could be an annual subscription service where you have a pre-approved, real-time stamped approval to share with any STR, MTR, and LTR that can be shared across all platforms. It will be interesting to see who is the first to get this to market.

 Hi Taylor,

This is a great question and the answer lies in who is your target audience and what your market will bear. For me personally, my preference is to deliver a higher end finish in my properties and price this accordingly to attract higher paying tenants/guests, who may have higher expectations, they communicate better, leave the place in better condition, and cause far fewer headaches than those asking for discounts/price sensitive groups.

The better question to ask is where are you not marketing your MTR. You need to diversify your listing presence everywhere. If you are getting more than 75% of your bookings from 1 site (Airbnb?) then you are not diversified. If you get kicked off that platform, what is your plan?

I'm listing my MTR properties on Airbnb, VBRO, Furnished Finder, Zillow, Google Vacation Rentals, Facebook, Instagram, word of mouth, friends and family... 

I hope this helps. 

- J

Hi Patricia, 

This will vary market by market and neighborhood by neighborhood but you should be able to gather some market statistics from STR data collectors, talking to people on BP and local Airbnb/STR Facebook groups in your area.

My market (Sacramento) has been able to consistently be in the 85-90% occupancy for Medium Term Rentals. My daily rate for MTR is ~$155. If I were to rent to STR, my daily rate would be $185 (a 20% premium).

Once you have a good idea what the daily rates are for each lease option you can back into your own breakpoint analysis by solving for occupancy rate needed in each scenario to earn the same amount. If your market has a 45% occupancy rate on STR, but a 85% occupancy rate for MTR, then a 20% price difference would make the MTR the far better options.

If you are looking to invest in a MTR property, I would start high level and think about what markets could see some growth in flexible work. One strategy you could employ would be to look at cities that have not seen their workforce come back to the office yet and the submarkets within a 2-3 hour drive from these major cities. 

I do believe this is a cyclical change and we will see a reversion back to the STR being the leader along with traditional rentals. I don't believe the Work From Anywhere movement is lasting and as the real estate cycle resets itself, people will become more conservative and reduce their spending into categories that are essential. Medium Term Rentals are a unique offering, but they are very expensive to the consumer. As we will see in the months to come, consumer confidence will erode and the number of people willing to spend 50-75% premiums on their monthly rent spend will go away.

Wealth accumulation requires patience, thoughtfulness, and is often slow. Stay the path and you will get there, but be careful to make investment decisions on cyclical trends that are new and are likely to fade away. Position yourself with real estate assets that have versatility, are well located, and are places people want to be in any market.

- J

Hi Jeffrey, any luck with this? I've started making a few calls to SBA lenders who can lend on something similar to the Coliving podshare. 

I've got a property in my market where I would live in, run my business and also rent out to other people to live and work in... 

Hey Brian, I'm a new local investor and in a similar boat. Not an agent looking to sell you my services, but happy to connect and chat RE. I'm also using house hacks to build my portfolio. Just at about a year on my airbnb hack in midtown. Preparing for a multi next and asking the same questions.

PM me and we can share notes!