All Forum Posts by: Kyle R.

@Daniel Denning

I agree. The high rise buildings in MB and NBM have high HOAs over $1000 but they usually have indoor pools and slides for the kids. The low rise buidings (3-4 stories) in South Myrtle beach have HOAs around 400-700.

HOAs seem high compared to what people thinking of buying stand alone houses look at but the HOA fees cover all roofs, siding, and insurance, flood especially, which a homeowner would have to put aside anyway so it all evens out. This also makes it easier for out of state owners to manage their units remotely

@Philip Mullinax

The Myrtle Beach vacation market is more like 5 or 6 total towns from Little River all the way down to Garden City Beach. It’s a well established market where they depend on the hospitality industry so I don’t see much regulations risk.

I personally would look in the Surfside Beach and Garden City Beach area. Prices are going up but I would stick to the ocean side for best rental potential. Condos (in low rises) go from 200-400k whereas beach front houses are 800k-2M.

If you pick a nice property or renovate it to be one of the nicer ones you can count on 15-30% CoC return if you manage yourself. It's also a driving market as well as almost a full year market

@Erik Petrovich @Michael Karpie

I agree with most others here, I would like at either The North Myrtle beach area known as Cherry Grove or the more popular South Strand of Myrtle Beach which is Surfside Beach, Garden City Beach, Murrells inlet, Pawleys Island. These towns don’t have the high rise resorts where amenities fees are high and management takes 40%. Instead they are all low rise 3-4 story condo buildings with lower HOAs where all the successful hosts I know in the area self manage.

Hey All

I am a frequent reader of this forum when I get the daily email of new posts. Reading all of the regular contributors has helped my business a lot especially about the automation/tools questions that get asked. So thanks for that.

I know we are not a big fan of Rental Arbitrage here and neither am I, but I have my 3rd STR under contract that is falling through due to appraisal issues (lagging comps compared to current listing prices). This is in the same town as my other two which is a well established driving vacation market on the SC Coast where Covid did not impact rentals. I am fairly confident in that my conservative rental income projections (50k) at the current prices would get ~25% CoC, but what I am not sure of how achievable the max income is (70k based on my estimates).

If the deal falls through due to financing, I would love hear your thoughts on my potential two creative options to the seller:

1. Rent to Own - Seller who had previously done vacation rentals through a small local realty company would turn into a traditional landlord and I would have 1 year lease at a higher monthly market rent and I would have the option to buy at agreed upon price at end of lease or anytime soon. This would let the seller still make more money annually then if he kept it with the local realty company (often break even) without any of the financial risk. I would own the STR listings and all income related to it. This would let me get an understanding of the true potential STR income with no long term risk before purchasing.

2. Host to Own - Seller would let me manage STR listings for him for 1 year instead of using local realty company. I would own the listings and take a small % of total income with the option to buy at end of 1 year for certain price. This substantial increased income to the the seller to will incentivize him to take it off the market until we come to terms at the end of the year. This also lets me again own the data on income and occupancy without having any financial risk.

The only risk to the seller is that the selling prices down by next year. What are some other key points that benefit the seller? For me, it is not about the money I would make during this but more about having the visibility into what kind if income this property can do to make the purchase less risky and stressful.

Hi BP

I know BP is real big on the cash our refinance method and the BRRR method.

I have a question when trying to fight out the actual net positive of it, maybe will these numbers it doesn’t make sense hence.

Example: I have a 200k property that I had put 20% down (40k investment) that is netting me 10k in cash flow per year

Say the property values in the area have increased so the property is now worth 270k. If I cash out refi at 75% LTV I would receive back around 45k-50k.

But now since my mortgage costs went up, I might only net 5k in cash flow per year from the original property.

With the cash out money I can go and buy property #2 but since the area’s property values have gone up (hence the original refi), I might only net in cash flow around 5k from the second property also.

In this case, Property 1 (with a higher mortgage) + Property 2 = cash flow if I never refinanced Property 1. It seems like In this example there is no net-net benefit?

Does anyone have an example of this strategy working? Does it depend all on the buy?

Hi Everyone

We've had a beach house STR for the past 2 seasons and are doing really well.

When I was setting up my first listing I created a gmail account with a specific name and used that email for my VRBO & Airbnb accounts. I use this email for record keeping,expenses, and specific communication related to my current unit.

How do you guys handle it when you purchase another unit? Do you add this new listing to your existing vrbo/Airbnb accounts? Do you create a new email and platform accounts specific to each property?

I could always create a new gmail account for the new property just to communicate with guests but still have the listing under the original accounts.

Thanks in advance!

Kyle

@Ashish Acharya thanks Ashish. 

I agree and think it would be easy to report all dollars collected as income then deduct out all paid occupancy taxes. 

The issue arises then (at least this year) where I collected occupancy tax money from guests at time of arrival in 4Q but don’t have to pay out the 4Q taxes until January of this year. This creates more gross sales but I don’t get to deduct out the paid taxes since 4Q’s taxes will be paid out in 2019. Essentially I’m reporting higher income so getting taxed on dollars Which should really just be a pass through back to the governments. 

Hi BP

I'm finishing up my first year as a vacation short term rental owner. I have a couple of tax questions that I want to familiarize myself with before I send everything to my CPA.

I rent my property through VRBO/Homeaway, Airbnb, and a local PM agency.

Question 1. My state, county, and town all have a occupancy/hospitality tax (similar to sales tax).

-VRBO allows owners to tack on Occupancy tax that gets directly passed through back to the owner to remit

-Airbnb collects the state occupancy tax and remits but does not collect on County/Local taxes and does not give the option for Hosts to charge an extra amount so basically the county/local taxes come out of the payout.

My question revolves around 2 options:

1. When you are disclosing Gross Sales on the Schedule E, should this include taxes paid to the owner that will be remitted later? And then a separate expense on the Schedule E with actual amount of Occupancy taxes paid. This option shows higher gross sales but also a higher amount of expenses.

2. Don't include Occupancy taxes as gross sales since theoretically they should all be pass through back to the government entities. In the expense line, only expense the additional taxes that were not collected but had to be paid out of pocket from rental payouts.

Question 2:

I know about the 14 day rules for classification of rental property vs personal home vs split. If the number of personal days for example is 10 and the total rental nights is 190, the total used nights is 200. Do we have to allocation expenses/depreciation to business and personal based on the % of 10/200? Or since it is under 14 days, are 100% of expenses and depreciation is deducted since it is a business property?

Also if any other hosts have year end financial performance templates that they would like to share that would be great!

Hi BP

I'm finishing up my first year as a vacation short term rental owner. I have a couple of tax questions that I want to familiarize myself with before I send everything to my CPA.

I rent my property through VRBO/Homeaway, Airbnb, and a local PM agency.

Question 1. My state, county, and town all have a occupancy/hospitality tax (similar to sales tax).

-VRBO allows owners to tack on Occupancy tax that gets directly passed through back to the owner to remit

-Airbnb collects the state occupancy tax and remits but does not collect on County/Local taxes and does not give the option for Hosts to charge an extra amount so basically the county/local taxes come out of the payout.

My question revolves around 2 options:

1. When you are disclosing Gross Sales on the Schedule E, should this include taxes paid to the owner that will be remitted later? And then a separate expense on the Schedule E with actual amount of Occupancy taxes paid. This option shows higher gross sales but also a higher amount of expenses.

2. Don't include Occupancy taxes as gross sales since theoretically they should all be pass through back to the government entities. In the expense line, only expense the additional taxes that were not collected but had to be paid out of pocket from rental payouts.

Question 2:

I know about the 14 day rules for classification of rental property vs personal home vs split. If the number of personal days for example is 10 and the total rental nights is 190, the total used nights is 200. Do we have to allocation expenses/depreciation to business and personal based on the % of 10/200? Or since it is under 14 days,  are 100% of expenses and depreciation is deducted since it is a business property?

@Basit Siddiqi

I am actually not looking in Trenton. Its an out of state investment.

I agree with all of you that a break even investment is not worthwhile. That is not the case was just an example.

Instead, if the property is cash flowing around $1500-$2500 a year, then with depreciation of over 2500$ per year along with some other expenses, you are going into the paper net loss territory, not actual cash loss. So while the 1500-2500$ might be a 7-10% Cash on Cash return, with tax savings can't that bring up the CoC return to say 9-12%. This just helps reinforce buying a property that might be a cheaper initial investment but might Net out a similar Cash on Cash return to a more expensive property.

Example 1:

Initial Down Payment: $30,000

Cash Net income: $2,000 6.6% CoC return.

After some tax write offs: Net Loss of -$4,000

Tax savings at 25% of that -4,000 = ~$1000

$2000 + $1000 = $3000/30,000 = 10% Cash on Cash return at the end of the year.

Example 2:

Initial Down Payment: $40,000

Cash net Income: $3000 7.5% CoC return

After tax write offs: Net Loss of -$3500

Tax savings at 25%: $875

$3000 + $875 = $3875/$40,000 = 9.7% cash on cash return.

So you are making more Actual Net Income per year ($3000 vs $2000 from property and $3875 vs $3000 from property & tax savings), but you have a higher initial capital investment of 10k more.

Is this feasible or make sense?

Thanks for all the insight.