All Forum Posts by: Julia Ferris

Hello,

I am looking for Real Estate knowledgeable Accountants and/or tx advisors. I don’t want to waste anyone’s time; I know this topic has been covered, and I have done searches. However, I am at the point where I'm still too small to pay a lot, and I'm a little too big to not go to Real Estate experts. For example, I still can't figure out if I'm supposed to get a cost segregation study for a house I renovated last year. I bought it in 2021, but did the majority of renovations in 2022. But it is only in $250,000 house, so would a cost segregation study be economical (I heard they are expensive).

But on the other hand, I am debt-to-income ratio conscience; so if I want my income to be high, should I suck it up, and pay the taxes?

My regular accountant is up to $1000 just to file my tax return. But I have never gotten the feeling that that firm was super Real Estate savvy. This is why I am having trouble with searching for the answers myself.

Hello,

I am not giving you legal advice (disclaimer), as I am not an expert, but .... The mid-term rental can be tricky, because although it is 30 days or more, it is your intention that it should not be a residential sitution. In other words, your "guests" will not live there, they are just visiting. Therefore, I would follow all of the requirements and guidelines for a short-term rental, and get a vacation house lincense. 

I have a short-term rental in Flordia, that I rent for mid-term periods also. I live in an ADU on the property, so I am exempt from needing a license. But I want all the protection of transient, Innkeeper laws, not being mistaken for a long term rental. Therefore, I do not allow guest to receive mail at my property (even mid-term guest), and I do not allow guests to establish residency. If a guest did establish residencies, aside for the difficulty in evicting them, the Fair Houseing Act would also apply to them giving them even more protections under the law. For example, you would have to allow emotional support animals. For "transient", short term rentals, the Fair Houseing Act does not apply.

Establishing residency in Florida can be a gray area too. There are a list of things taken into consideration. The length of stay is one, but only one. The intention of the parties is only one too. Using the address on ID, reigstering vehicle, kids in school, voters registration, etc. are other, which is why no mail at my place. Therefore, you would not able to say that the guest is transient and not a resident, if you did not register yourself as a short-term property.

So should think of yourself as a having a short-term rental that has a minimum stay of 30 nights, and do everything you are supposed to for a short term rental.

Hello,

I am looking to get a HELOC on my second home to convert the garage to an ADU. The property is located in Petoskey, Michigan, but I live in Florida. Are there any brokers out there who could help me with this? Thanks.

Although I haave read in the FHA FAQs that you are not supposed to short term rent an FHA loan property, I have not found a clause in my mortgage that says that (but I could miss it). Consider mid-term renting if you are worried. I think the living in it for 1 year is the big rule. I have heard that as long as the mortgage is paid, there is not too much follow up to worry about.

You don't really need management software for one STR.

 Are you interested in selling any with seller finanacing? I am a Hotelier with a few STRs. I think I with be leaving my job soon, and I'm looking for other opportunies.

Hi, I own a STR right outside the city limits of Petoskey (because Petoskey was not allowing any new STR when I bought). I wonder if some cities or townships will make people sue to test the law? If the city requires a license, but will not issue it .... what will happen? Is the city you are looking at tolerent of any STRs? Do they require a license? Have fines? What county/city are you looking at?

Do them as quickly as possible, all at once. Shut down 5 or 10 for the contractors to work on (you can still rent the others, but put on all booking sites that a renovention is going on, ss that you don't get noise complaints), then shut down next 5 or 10. When you shut down last group of rooms, raise rates, and market as newly renovented. You want the renovention done as quickly as possible. Plan it out carefully with your contractors before you start. Shut down a couple rooms to store all new furnishings and supplies. Try not to be waiting for something to come in before you can continue. To get bulk pricing on some things, you will order many things for 20 rooms before using them, so think about storage. 

I would take 10 rooms out of order, empty out 3 to 5 rooms for storage, renovate 5 to 7 rooms, with those are finished do next 5 to 7. Move storage rooms to renovated, but not set up rooms, and complete rest.

When finished, have a grand re-opening. Think about, maybe changing the name, or other ways of re-branding. With name change you can get new Tripadvisor page to disassociate yourself with old hotel. Don't do things peice meal in the same room. Don't rent out a renovated room until it is complately done (meaning the room is completely done. Don't replace mattresses, and still have to paint). 

Quote from @Diya L.:

Hi Everyone, 
We bought 3 hotels & motels this year and are quickly ramping up to buy more hotels in this upcoming recession. I started in real estate with househacking (renting rooms in my house out as STR/MTR), then quickly bought 9 STRs without partners (I was an attorney at the time, so used mostly conventional financing), then quit my job to focus on real estate investing full time.

After doing a few creative STR deals (BRRRR STR, wrapped note reselling of STR, etc.) I decided to focus on hotel investing.

We plan on applying the BRRRR strategy to hotel deals, pushing the valuation of hotel deals higher with operating them better (unlike with residential real estate, the hotel valuations is tied to financial performance). 

Most recently, we were able to pull off this deal:
Bought: 48 Keys, $750K acquisition 

Rehab/FF&E: $500K 
Refinancing Appraisal: $2 Mil 
[Bonus Equity Gain: $750K] 
This is without 1 year financials yet, and we have pushed the ADR from $79-89 range to over $200+ during peak season with the renovated rooms. 

We will be using the refinancing to do more improvements to the hotel and push for a $3 mil valuation in a year or two, once we have more financial data. 

BEFORE/DURING: 

AFTER: (these are cellphone pics - we did get pro ones but I'm not 100% happy with them yet!)

There are SO many lessons learned... I've visited north of 50 hotels, underwritten at least 200-300 if not more, and made offers on about 2 dozen of these deals. We tend to be very conservative with our underwriting (assuming higher exit CAP, higher exit interest rate, market average performance even though our track record has been always outperforming market, etc.).

Here are some of the photos of us looking at hotel deals over the last 2 years...

 Great job, and congratulations!

What areas are you looking in? Do you plan to hold them and operate them long term, or flip?

How are you habdling the labor shortage?