All Forum Posts by: Julie McCoy

@Luke Hoge Yeah if your DTI is that high based on conventional metrics, you're not going to get a conventional loan. It's the hazard fo quitting your job "too soon". Gotta be patient now or find alternate means!

@Luke Hoge It's going to be tough if you don't have other income beyond the STRs.  How long have you owned these STRs?  Having them on a couple years' tax returns should get you over the hump to the best of my knowledge (I am not a lender) but if you have owned most of them less than 2 years it's going to be tough.  

Visio and HostFinancial are two portfolio lenders who will specifically underwrite short term rentals.  I don't know about in your market, but in mine (TN Smokies) some appraisers will use a very conservative overnight rental estimate for an income-based approach.  

@Parker Borofsky is a great person to shed more light on this topic.

@Chris John Will depend on the local laws.  Some states will be tougher than others.  Tennessee is easy, the cops will come kick them out.  For a short stay most jurisdictions should be relatively easy; but if they stay long enough to acquire tenants' rights, it's a much different scenario.  I will not rent more than 28 days under any circumstances for this reason.

Re: snow, hardly ever happens in the Smokies, but sometimes you just gotta roll with the punches.  I've got some guests snowed in at the moment but it's melting fast and I expect they'll be able to get out this afternoon without a problem.  Fortunately I also don't have a guest checking in until tomorrow, if I did I'd let them know we're running behind due to the weather and ask them to check in late or, if we couldn't get them in today at all, I'd refund the night (or the entire stay if they wanted to cancel).  My rule of thumb is if one guest can't get out, and my cleaners can't get in, a new guest can't get in either!

@Collin Hays 1BR?

@Collin Hays What's been your experience in Douglas Lake?  (and which side of the lake?)  

I live in Wears Valley because it's the most convenient place to be while still providing great access to Pigeon Forge/Gatlinburg (where I work every day).  Plus it's very beautiful :)  Lots of visitors feel the same way - they don't want to be in the middle of everything 24/7, they want to feel like they're off in nature but still be able to be in town in 15-20 minutes when they want to go out to dinner.  Your revenue in Wears Valley should be comparable to Pigeon Forge/Sevierville - like @Collin Hays said, Gatlinburg has a bit of an edge, but it's also $$$$$ so do your own math.

So much wrong here I don't know where to start.  RE agents are not permitted to select appraisers. The buyer's bank works with an independent appraisal agency, who then facilitates the assignment of an appraiser.  The process is deliberately and specifically independent so as to avoid the manipulation of appraisal values.  

Most STRs are single family residences, which are valued as such and appraised as such with a typical conventional loan; they are not, fundamentally, businesses, and a buyer's lender is not going to treat them as such.  

There are certain markets where the overnight rental market is strong enough that an appraiser MAY consider income as a consideration in value, but that would also depend on the loan the buyer is obtaining.  

Unless the seller SPECIFICALLY wants to sell as a business, limit their buyer pool to buyers who want to buy a business *and are obtaining financing that will value it as a business* then this is all nonsense. And if the seller is selling because they failed to operate a good STR, why would they want to market it as a desirable business in the first place and cut themselves off from the vast majority of buyers who are not looking for an STR?

@Collin Hays The most straightforward way to avoid a tax hit on a property sale is to either do a 1031 exchange or invest the gains in an opportunity zone or other tax-deferred investment.  I know Biden has floated the idea of eliminating the 1031 exchange, but until that actually happens (I think there would be VERY strong headwinds against this) I am going to continue utilizing it.

If you're fine with holding the property, yeah, cash-out refi or a line of credit is the way to go, but that doesn't address the question of gains when the property sells. I believe there are certain limitations on this, so check with your tax professional, but if you were to do a cash-out refi for the maximum available amount (let's say 75% LTV) and then turn around and sell the property, your gain would be approximately 25% - which would be a better tax outcome than if you had a gain of 50%. However, I believe the IRS frowns on cash-out refis and then selling a property quickly thereafter, so definitely something you want to do with professional advice.

Outcome for the STR market? Savvy real estate investors have a plethora of tax benefits they can take advantage of, and while any new tax regulations will prompt adjustments to strategies, I have every confidence that this will continue to be one of the most tax-advantaged means to generate income. Real estate investors will continue to utilize the 1031 exchange and that will eliminate most concerns about taxes on income.

Until there's a more concrete idea of what any new tax law will actually look like, I don't anticipate any changes to the market, and once we have that there will be new strategies born.  

I can't say I'm very familiar with STRs in that area (I'd never heard of it until a local shop owner I knew in California said they were moving there), though I know there is a tourist presence.  Regardless, your property sounds awesome!  It may be something to view as an experiment for several months and see how it goes.  Your property sounds like it would cater very well to outdoor enthusiasts, with amenities/access that probably are not common, so those are things you'd want to highlight in your listing.  And definitely find out how to make sure you're covered from an insurance perspective if people are bringing horses onto the property, etc. Look into what's available in the local market on AirBNB/VRBO and see how booked they tend to be, what prices are, maybe reach out to a couple of successful hosts and see if they're willing to share their experiences with you.  

Unfortunately the roommate would probably have to go, as most people traveling for a vacation are not keen on sharing spaces.  I don't know enough about the market to say if this is worth doing or not, but definitely seems worth doing some additional research to find out!

Keeping that winning streak going, @Paul Sandhu!