All Forum Posts by: Jude Campbell

Hey Bella!

Pretty intricate deal no doubt!

Here're my first impressions: chances are, a million dollar contraction in list price is not going to come by very easily.  More to the point, a 9% cap for a hotel room doesn't immediately strike me as a slam dunk, especially if it is run-down. 

Finding a partner:  the best strategy is to turn over as many rocks as you can until you find someone.  The better the deal, the easier time you're going to have in the search process.  Often, I would look to private/family offices with money to deploy, however, these institutions are pretty shrewd and like to be hands-off, meaning management must be in place and the deal has to be fantastic.  The beauty with this is it ties together partnership and capital raise. 

Tackling the challenge: this sounds like it is as much a lifestyle decision as it is an investment.  It depends on how you want to approach this: do you want this to become your life or are you looking at it from a sheer monetary perspective?  Keeping your eyes peeled and searching for other opportunities is always a good idea.

Passing off the deal: this is a tough one.  My immediate thought is no but you can get creative.  Similarly to finding a partner, if you want someone to unload this to, you'd have to find someone pretty eager to take it off your hands.  In this case, the deal would have to be attractive to them. 

Some other thoughts: I like the idea of getting into a property that could use some elbow grease, but the economics need to be glaringly obvious. The problem with CAPEX on investment properties is that it's often not appropriately baked into a model. To really see how an improvement is going to impact your investment, you'll need to model it with contingency, time accordingly. Many people overlook how serious this can be.

I have some additional thoughts but I'll send you a connection request and we can chat!

J

Hi Tony, 

My advice when looking into short-term rentals is to distill the DD process to a few key metrics.  Most importantly, what you're going to want to iron out is an estimate on average rental price per night and multiply it by expected number of days per year.  Of course, expenses play a big role but you won't have as much variance in expenses as you will revenue with a short-term rental.  

The problem with short-term rentals is that cash flow can be inconsistent and despite Costa Del Sol being a tourist hotspot, can turn quickly, really impacting expected IRR. It entails taking on more risk than long-term rentals but can be lucrative.

If you want to chat more, send me a private message!  Happy to help. 

J

Hi Laura,

The due diligence fee practice is quite specific to North and South Carolina.  In these states, the due diligence fee is paid directly to the seller and is non-refundable, but it is credited back to the buyer at closing.  This fee essentially purchases the buyer a period of time (the DD period) which buys them time to decide whether to move forward with the purchase.

Different states have similar variations of this; for example, Texas has the option period fee.  Beyond this, most states don't have these types of laws.