All Forum Posts by: J. Martin

@Eric Moeller,

Yes, quite a few people are using this model. 
If you haven't checked it out yet, Scott Shattford, CEO of AirDNA.com, literally wrote the book on exactly how to do this. You can get the book free on their site my signing up for a free subscription to their newsletter. Some people tell the landlords. Some do not. I always do. You will hear from most people on BP (who are not doing it) that it cannot be done - landlords won't let you. regulatory environment too difficult. guests will light your house on fire. etc. etc. etc. Most people probably said these same things about UBER when they first started. Owners won't want strangers riding in their cars. It might not be legal. Riders can trash your car. etc etc. etc. Know the laws and the consequences.

Major issues you may run into include:
- Short-term rental regulations from local municipalities [hint: read the regs right at the top of the law and see what activities the regulations apply to. It won't be applicable to all furnished rentals or any particular website.. ;)
- HOA restrictions (or future restrictions) as @Kim Bayless pointed out. 
- Yes, as others stated, you are responsible for collecting any TOT (transient occupancy tax) and submitting appropriately. (Airbnb already does this for you in some areas.)
- More vacancy than you expected maybe
- This is a business that increases and decreases with the economic/business cycle. Things are about as good as they get. So watch your *** on the next downturn... 

I recommend the Guesty short term property management software if you scale up. Will save you a lot of time and errors. And can add your cleaners to get texts or emails at certain times relative to check out or check in dates/times, without giving them access to your Airbnb account (3% of revenue)

@Mike Hanneman , @Thomas S. yes, owners are doing it. Focus on the value proposition to the landlord.. why does it make sense for them? Sometimes owners just want guaranteed rent, a low-headache tenant that doesn't call them, want to pre-lease multiple units undergoing construction, etc. etc.

@Bruno 

@Bruno C., preach it! I'm just about there in the Bay Area..

@Brian Lacey, you bring up a good point. Do you know what rentals are exempt from short term rental regulations? 

@Andy Whitcomb, good for you :)  Am I reading correctly? $15K/mo in profit? Even during high season, this is very good. Are you renting for $600-$1,000/night. I would think that after you subtract paying market rent, utilities, vacancy, etc, it would be tough to clear $15K in NET profit in one month, unless it's a big, baller house, or running it like a hostel with 10+ beds in the house.. Any tips for us getting less than $15K/mo in net profit on a single property? I know one guy doing about $25k/mo gross on a big hacker house in SF Bay Area, but still only nets about $10k/mo in high season after paying market rents for the use of the property, and everything else.. 

@Syed Lateef, if you're already making good money on regular long-term rentals, your risk should be pretty well covered. It's always there if you need it, but you can pump out the extra money while the going is good.. 

Hey Investors,

I'm going to be taking a train trip to Portland, Seattle, and Vancouver in early May 2017 (next week), and was wondering if there are going to be any meetups or REIA meetings.

@Troy Fisher, what's going on in Seattle? 
I'll be staying in Kirkland while I'm there. How far is that from you?

Looking forward to meeting some new folks and seeing some old ones! :)

@Brian Garrett,

The main advantage of the S Corp is to only pay a portion of the total profits from an ACTIVE business as salary income. So you only have to pay the self-employment tax (Social Security and Medicare) on a fair and reasonable salary, and don't need to pay self-employment tax on the profit portion above and beyond your reasonable salary. If you had an ACTIVE business in a pass-through LLC, you would have to pay self-employment taxes on the entire profit of the LLC.

https://turbotax.intuit.com/tax-tools/tax-tips/Sma...

"The tax rate for self-employed individuals is a combination of the social security tax rate (12.4) and the Medicare tax rate (2.9), which equals 15.3%."
https://www.paycor.com/resource-center/2016-social...

If you have passive income in a pass-through LLC (like Schedule E income from passive real estate investment), you don't have to pay any self-employment taxes anyway, because it's passive - not active. LLC's are a bit cheaper and easier to run. So most use pass-through LLC's if it is not an active business.

Brian, you said, "The part I don't understand is how rentals are not considered self employed income when I'm the sole owner of the properties and that income is paid directly to my LLC and ultimately me."

Read this article from BP below on passive vs active income. If you do not materially participate in the operation of a business and are just an investor, it is considered passive income. Passive income from real estate is what schedule E is for - and that's not taxed as self-employed income. It is Uncle Sam's gift to you for buying dirt in the good 'ol US of A, along with depreciation :)

https://www.biggerpockets.com/renewsblog/2013/11/0...

Hopefully these links help clear things up!

@Alex Shaughnessy, is this your understanding? @Linda Weygant? 

I am not a lawyer, but did some research and will be incorporating my active real estate business as an S-corp (furnished rental business).  Also makes it easier to sell shares later in some ways. The properties will continue to stay out of the S-corp and remain passive income on Schedule E. 

@Lynn Currie, 

So happy you're spending more time on the lake out in Austin :) We're here for a good time! Not for a long time! ;)
Save on Oct 7 & 8 2017 on your calendar to come back out to Oakland! :)

@Alnie F.,
Thanks for the shout out. I worked hard for those pictures!! hahahaha

@Account Closed,

There are plenty of flip flops for all of us!!! hheheheehe

Thanks for the shout out Peter.

Jose, there are a few meetup groups down in Monterey area (check BP events or meetup). And @Shane Pearlman  has a meetup in Santa Cruz about each month that's great.

We'll be having the big Summit on Oct 7 & 8 this year, so mark your calendar, and get ready for more info!

@Calvin Kwan,

Thanks for the shout out. My furnished rental business is a bunch of furnished apartments in Oakland, Richmond, San Francisco, Redwood City, Mountain View, and San Jose. Yes, we rent to professionals like traveling nurses, interns, and business folks 

@Arlen Chou,

Some sh*t don't change! Still beard and flip flops! hehe See you tomorrow w/ Shannon & Isara. Get that pass!

@Chris Mason,

Thanks. I'll give you a call soon to ask a few questions about qualifying. Thinking Im going to form an S-Corp. 

@Jerry W.,

I was curious how things were going out in oil country. I remember quite a while back the two of us and others were speculating what the fall-out might be. Hopefully there are some good opportunities to pick up. Just don't grab the falling knife! And keep those reserves! :) 

@Andrey Y.,

Sure, send me a colleague request and you'll have all my contact info. Glad you enjoyed the pics from SouthEast Asia and Mexico. Would be happy to share some travel advice. I didn't go to Chiang Mai this time. But will be going back later this year to check it out I'm pretty sure.. 

@David Zheng,

Thanks for the shout out from St Louis! Sounds like we were twins in our w2 life! lol You don't need any more money - just to gain momentum to exit! The trips were great. And so much less expensive in SE Asia.. Highly recommended!

@Arlen Chou,

Thanks for all your help, and glad you came to drinks some of the Oakland Kool-Aid w/ me ;)
Happy I met that poor, paint-spattered asian contractor looking guy  in a beat-up pickup out in Oakland a couple years back :) hehe Working on my mini-me. So far, so good! Feb '18 Vietnam motorcycle trip! We'll visit the orphanage near @Account Closed, 
Thanks for the shout out from Dallas and New York City! Do you two have any tips to share that you've learned along the way? 

*** 1 YEAR UPDATE ***

Still alive and kickin!
Since I quit my job a year ago, I have been traveling the world, growing my furnished rental business, and enjoying life! Check out the updates here:

https://www.biggerpockets.com/forums/223/topics/43...

It's been 1 year since I quit my W2 job with the help of BP, and couldn't be happier!
As BP said, "Life isn't meant to be lived in a cubicle." 

I started the corporate world at $45k/yr, and left at $70K/yr. You don't have to be rich to quit the W2, but I sure as hell was frugal!

#1 piece of advice: Network early and often!

After starting a meetup group and partnering up to buy 4 properties in the SF Bay during the downtown with my modest government salary, and eventually growing my furnished rental business, I was able to quit my W2 job on my birthday in 2016, and pursue my dreams of traveling the world :) That's when I started hiring and really growing my furnished rental business. And I got to host another Summit and meet more BP greats! Love these!

Snorkeling in El Nido, Philippines. Feb 2017

As I was traveling, I was growing my furnished rental business, hired a business manager, 3 team members, and finally got started on some processes and procedures. (and a bookkeeper!) I'd been told this a million times, but have finally see it pay big time dividends after insistence to get my **** together by @Arlen Chou. Thanks Arlen! :)  The overhead is higher now, but I'm working a lot less :)

#2 Entrepreneur Piece of Advice: Get written processes and procedures in place! You'll thank yourself!

Street Scene in Oaxaca, Mexico. Dec 2016 

"The best things in life aren't things."
They are experiences, people, and enjoying your life. Don't put that off for too long!! If you're working your whole life to postpone the things you are working for, you're not living it! Don't be the ******* investment banker in the fisherman fable! ;)

#3 Piece of Advice: Enjoy your life!

Bonaroo Music Festival. US Cross-Country Road Trip. Summer 2016. Phoenix, Austin (thanks @Lynn Currie), Houston, New Orleans,Nashville,  Savannah, Atlanta, Jacksonville,  and more!

I hired all my new people on Upwork.com. You'd be surprised how many businesses mostly do NOT need their people in any particular location, so why not tap the global marketplace? Hiring more people was key to starting to focus more ON the business, rather than be wrapped up IN the day to day business. I haven't answered an inquiry in a few months! And growing more direct marketing to our clients to improve our margins through lower vacancy and better pricing. 

#4 Piece of Advise: Sacrifice the cash to hire someone and focus ON your business

Cocktails in Phuket, Thailand w/ my biz manager & friends. Jan 2017.

I am finally seeing the light of Silicon Valley. Expanding into San Jose, Mountain View, and now Redwood City has been an eye opener into the number of businesses down there. Same with San Francisco. My old stomping grounds of Oakland and Richmond are still doing well, but wish I would have followed @Account Closedundefined, and others into Silicon Valley back when the big deals were on the table. Hopefully there will be another opportunity down there! :)

#5 Piece of Advise - Keep your eyes open

You never know where opportunities will pop up! 

Taipei Night Market. March 2017.

Who else has some entrepreneurial advice for investors quitting their W2 jobs? Who else is living their dreams? Anyone enjoying traveling the world? :)

20 RSVP'd so far! THANKS EVERYONE FOR HELPING OUT! :)
*****RSVP BELOW!****

https://www.meetup.com/REmeetup/events/239064202/

@Katie P., @Merced, @Nick James, 

@Arlen Chou, looking forward to seeing you and the kids there (no golf clubs needed). 

@Kyle Zaylor, @Mel Selvidge, can you make it again this year?