All Forum Posts by: Leon Lee

Quote from @Ken Boone:

Yep that pretty much sums it up.  We are in a different market than when the book was written.  There may be some deals to be had, but I have found none that match my risk tolerance in the last year.  

I am no expert but I believe we are still in somewhat of a stalemate condition.  There are folks that want to get out of their over leveraged non cash flowing properties that were purchased during the peak, but they wont sell at a loss.  There are buyers, but they don't want to buy at a premium, especially due to the current rates.  

The "deals" that exist are most likely getting handled off-market.  When anything close to reasonable hits the market, there are still enough buyers that it gets pounced on fast.

And yes, your observation, of more expensive properties with higher incomes can be advantageous, but that is more of a general statement.  In general the returns are greater the larger the property.  Again, that is a general statement.  But keep in mind, the debt/risk ratio is also higher and you typically have to deal with more issues.  i.e. large groups tend to trash a place more often than small groups.

And finally, no it is not really easy to jack up rates anymore.  The COVID years were a gravy train with rates jacking up every few months.  Those days are gone.  In my market, we have 6 bedroom cabins that were bought during peak, slashing their prices that now compete with 2 bedroom cabins, because they are desperate to get bookings to cover their high mortgages.

I know a number of folks who have really worked hard with Rankbreeze to get their property to the front of the list, but they have all told me the only thing that moved them now is price - and that would be a lower price.

At a 5% CoC, I would be dumping my money in a hands off, no stress CD vs an STR. An STR is a job that is not worth the 5% for ME. It may be for someone else, but not me personally. There are other reasons to invest at 5%, but if cash flow is one of them, then it's not for me.

Ken,

Thank you for the valuable insights from South Carolina! Your perspective on the potential risks of property damage from large groups in higher-end rentals is something I hadn't fully considered. I'm interested in seeing some of your numbers for a clearer comparison. The "1% rule" for long-term rentals and "2% rule" for short-term rentals seem still relevant, with properties now showing only roughly 0.5% monthly rent-to-purchase price for long-term and just over 1% for short-term in my market. Given the current high interest rates, achieving positive cash flow seems challenging without significant value additions and refinancing when rates drop.

As someone who began as an investor before moving into short-term rentals, I view the 5% Cash on Cash (CoC) return differently. If these properties are not cabins but are located near metro areas, particularly in Sun Belt cities, they are likely to appreciate significantly. For instance, house prices have nearly doubled since I purchased another property in early 2020. Additionally, short-term rental properties often experience less wear and tear compared to those with long-term tenants, which is advantageous for owners of recently renovated properties. Moreover, the absence of eviction processes and the potential for tax deductions through depreciation are significant benefits. Therefore, I don't equate a 5% CoC in real estate with a 5% return from a Certificate of Deposit (CD) due to these additional factors, at least for now :-)

Looking forward to hearing more about your experiences and insights.
Lee

Quote from @Andrew Steffens:

Hey Leon

Its not as easy to find high performance properties as it once way, but here in the Tampa metro area you can still achieve a straight 15% CoC and even as high as 30% when leveraging a low down payment loan.

 Andrew

Thank you for the encouraging news! Do you have more specific numbers on these potential deals? By looking at the breakdown of the numbers, it will definitely help me and other investors to figure out why there are differences and how we should pivot in our business strategy. 

Thanks again!

Lee

Hi, Fellow BPers

I recently read "Long-Term Wealth" by Avery, which mentioned a 25% Cash on Cash (CoC) return, and it seemed extremely optimistic compared to current standards. I'm curious about the CoC returns you're experiencing with newly acquired properties.

I did a rough calculation for a property in the metro Atlanta area, near I-75, and the numbers are somewhat disheartening. Here are the details:

Sale Price: $270,000 for a single-family home with 3 beds/2 baths.

Gross Income: $3,500 per month, including nightly rates and cleaning fees.

Expenses breakdown:

• Cleaning and Supplies: 15%
• Maintenance: 7%
• Utilities (Electricity, Water, Gas, Internet, Pest Control, Lawn Care): 10%
• Software: 3%
• Property Management: 15%

With a 25% down payment and a 7% interest rate, after cosmetic updates and furnishing, the property yields less than a 1% CoC return. If purchased with cash, it shows about a 5% CoC return and an annual cash flow of $15,000.

What are your figures like? I've noticed that many expenses, such as utilities and cleaning, don't seem to increase proportionally with gross income like those cabins in Smoky Mountain National Park. This observation suggests that more expensive properties with higher income might be more advantageous. Do your analyses reflect this trend? Is it that easy to just jack up nightly rates nowadays?

Any insights or information you can provide would be highly appreciated!

Best regards, Lee

Quote from @Doug Fluckiger:

Quote from @Sarah Kensinger:

Yeah, I'm curious too! We know people that use them successfully, especially with boutique hotels.

Sarah, our manager said it best: "People use booking.com when they can't get approved by Airbnb." Most of our booking.com guests used drugs, contrary to rules, and many were completely calloused about messes and damage to the townhouse. Most of them appear to have false credit card numbers, and their phone numbers definitely do not work (believe me, I called them all.) Booking.com allows you to "set up" a damage deposit, but in my experience it doesn't work. No damage deposit is charged.
See below for more horrors.

I give up Booking.com and Expedia.com mainly for these reasons: trashy guests who can not pass verification process on Airbnb go to booking.com and Expedia.com, because there is no vetting process. 80% of our issues from guests from these platforms, i.e., using fake credit cards, smoking weeds. Originally we were thinking that we might get extra 15% bookings if we use these platforms, but given the headaches they have brought to us and another 10% of bookings probably would come from Airbnb and VRBO anyway if bookings from Booking.com didn't block the calendar, we gave up on them. Such a great decision!

Quote from @Andrew Steffens:

Hey Lee - We do not yet offer that service.  We refer them designers and labor and then utilize our maintenance to finish set up if necessary.

For a 2,000 sqft house I, at least here in Tampa, would be $2.50 per foot ($4,500) and 2 guys 2 days at a day rate of $250 ($5000).  So about $5,000 I would estimate.

We utilize the cleaners to set up the house as its their job to maintain that afterward.

 Andrew 

This information is helpful! And the idea of having the cleaners to set up the house is great!

Thank you again!

Lee

Quote from @Andrew Steffens:

Hey Lee

This post is probably best answered by a single investor who is self managing, but perhaps I can give you some tips as a PM company owner and how we do/how I do it for my person investment properties.

1 - Designer is very important nowadays with a lot of competition unless you are personally very good at it, which I am not.  It is especially important in areas with increased competition and those segments with the most competition and scrutiny such as luxury.  I also think hiring a designer for 2-5$ per foot is worth it in time saved.

2 - Set up we use our maintenance team to do, however we have used labor ready type places before.  Maybe check with them if that helps.

3 - Again with maintenance department, but finding a local handyman who you can call (will need one on your team anyways) can give you a day rate for punch list.

Hope this helps!

 Andrew

Thank you for the helpful information! For a 2000 sq ft house, how much do you usually spend on labor (design, furniture assembling and household items organized) to have everything set up and ready for guests to check in? If you have a client who wants you to set up a 2000 sq ft house for airbnb, how much would you charge him/her?

Thanks

Lee

Don't know where "old contractor or cleaner" in my original post came from, it must be a typo by chatGPT lol. 

HI, All

Just some updates: I have been using Google Mesh and so far it seems that it works really well. A cable guy did recommend Netgear WIFI mesh, but it is quite expensive compared to the Google Mesh. I will keep an eye once all these units are online and see how it performs.

Thank you all for the input!

Lee

Hey STR fellow investors,

I've been setting up quite a few short-term rentals now, and I think it's time I got smarter about it.

Since I don't know how I can do better about the renovation part, so let's skip to the part about furnishing. Here's what I'm thinking about:

1. **Streamlining Design**: design is key to me and not something you can just offload to any old contractor or cleaner. Hiring a designer has not bee on my list yet, as it is usually quite expensive and takes a while. How do you guys handle this? Any tricks to make it smoother?

2. **Dealing with Furniture**: After buying the furniture, what's your plan for getting it all put together? Also, curious about what you're paying the contractors. I do have a price table for all furniture assembling. The price is discounted compared to what handyman will charge you for occasional jobs, but still, it can be quite some if you consider all the work that needs to be done (hanging curtain rods, all furniture in a 3be house, hanging TVs)

3. **The Finishing Touches**: Once the furniture is in place, there's still a bunch of stuff to sort out, like kitchen bits, drawer liners, and hanging pictures. What's your go-to method for outsourcing these fiddly tasks, and how much does it usually set you back?

Overall, I feel like I'm doing okay, usually getting a renovated place ready from the closing in about 30 days (keeping in mind furniture delivery can be a 15-day wait). I always focus on the bits that are harder to delegate, like choosing designs and decor, but I was exhausted every time. Wondering if there's a smoother way to do this.

Would love to hear your thoughts and tips!

Lee

Quote from @Richard Elvin:

@Leon Lee I don't know what you mean by "signal booster". If you mean wifi range extender, I wouldn't even consider it. Range extender's are flaky and require being reset/moved/rebooted often. It's a very high touch device. 

I would route everything through one modem, one router, one switch, and then each unit would get it's own Access Point (AP). (AP's are hardlined back to the switch and much more bulletproof than a range extender) Each unit could have it's own wifi network and password if you wanted or, easier option, just enable "network isolation" checkbox. (It's literally that easy on business grade equipment, even entry level business grade)

I've worked in telecom and am currently in IT. Feel free to DM me if you have any questions I can answer.

Hey Richard,

Thanks a bunch for the info! 👍 Can Google Mesh pull off this setup? Or is it a no-go?

If it's not a good fit, any recommendations for other products?

Big thanks again!

Lee