All Forum Posts by: Luke Stewart

Hello @Jean-Marie Poth!

I have been running a midterm rental for more than three years. When someone books, I ask if they would like a fixed term lease without the option to extend, or a month-to-month agreement.  My contract for people who select the month-to- month option says they must provide me a 30 day notice prior to vacating. If they leave without the 30 day notice, they are obligated to pay rent for 30 days, or until I find a replacement tenant.  Only once did someone leave without giving a 30 day notice, and I had someone new book to 10 days after they left.  I received payment for the 10 days without issue.

I have found that most travel nurses want the fixed term lease because their contract ends on a specific date and they don’t plan to stay beyond that. Other professional travelers seem to prefer the month-to-month option so that they have the flexibility to extend.

I communicate to the month-to-month traveler upfront that I have my listing posted and available, so other people may inquire.  When I receive a booking request, I contact the current traveler and ask if they would like to stay another month or if I should accept the other booking.  If they opt to stay, I update my calendar availability for one month from that date. The system has worked really well for me.

best wishes,

Melissa 

Yes, I absolutely agree with your stress test concept @Don Konipol and have been thinking about it quite a lot lately. MTR has burst onto the scene (despite some people continuing to insist it's not a "thing") as an investing and hospitality niche in its own right. I hear many new investors wanting to get into MTR investing specifically, which I think is a risky move if you're a new investor and in it solely for the purpose of offering MTRs. And now we have the new pressure of failed STR properties or those regulated out of their markets shifting to this niche, which makes sense as an option if you already have a furnished rental that you probably paid top dollar for, but unfortunately, the underwriting for MTRs is very different than STRs. VERY different. Further, it can be tricky to find your ideal guest and to market to that niche. It's not as easy as just throwing your property in Airbnb. So it's likely that many investors making a last ditch effort to pivot to MTR won't be successful because the numbers just don't work and lead gen is more challenging. I think we're seeing a lot of low quality hosts fail in STRs not just because their markets are saturated but because the properties are sub-par and so is the guest experience. Those factors are no different in MTR so if you're failing in STR and trying to salvage your investment in MTR, you're likely to be plagued by the same issues. However, if you've bought your property right, underwritten it conservatively, AND you have a great property, great design and a hospitality mindset, you'll probably beat the vast majority of the competition. Personally, we always underwrite out MTRs as LTRs. If they work as an LTR, they'll work (at last from a numbers standpoing) as an MTR. It would be much, much harder to have underwritten it as an aspirational STR then have to try to pivot. As you pointed out, the MTR space is about to get real crowded, but I'm fairly confident the market will normalize. We saw a lot of people jump into STRs over the last few years since it became more well known, folks like Avery Carl helped de-mystify and systematize it and we all heard the hype of people just killing it through COVID. Those days are mostly over and I suspect we'll see the numbers of STR units normalize over this year and next and, more importantly, the number of low quality operators disappear first from the STR space. I think we can pretty much predict the same will happen in the MTR space as well. It's just my guess, but it seems likely.

@Tanner Pile - If you refinance into a 20% investment loan then you don't, however if you refinance into another low down payment owner occupied loan, I believe there is a requirement to live in the property for a year. Definitely a question for a lender. 

You also have the option of simply keeping the FHA and using another low down payment loan option for another house hack. That is what I did. My first house hack was a FHA and for my second house hack, I did a 5% conventional loan. And for my third, I will be doing another 5% down conventional loan while keeping my past loans since I've lived in each property for at least a year. All my previous owner occupied loans are between 3-4% hence it would be dumb for me to refinance out of that fantastic debt.

@Amy Lee I need to provide some clarification on your post if you don't mind.

1. Downpayment - there is no 5% downpayment using a conventional loan with a 2-4 unit property.  A few years back there was, but there hasn't been that option for a while now.  So your options using a conventional loan are 15% down with a duplex as your own primary home and 20% down with a 2-4 unit property. 

2. FHA Rules - now FHA has this rule called the "self-sufficiency" rule on 3-4 units properties. This rule basically states that the rents have to be OVER the mortgage payment. And since rates are so high right now, and properties are so expensive, satisfying the "self-sufficiency" rule is next to impossible. And that means no FHA loans on 3-4 unit properties right now. This is an economic environment problem that will not always be around but be aware of this. Keep in mind that this does not apply on duplexes.

I know that was a lot but feel free to ask anything additional.  Thanks!

I think it makes a lot of sense for investors to hold a real estate license. I saved $24,000 in commission last summer when we sold a duplex, and am set to make $17,000 in commission on a property we will close on later this week. That $17k is going straight to a 3 point permanent rate buy down putting us in the mid 5s.

I think it makes a lot of sense for investors to hold a real estate license. I saved $24,000 in commission last summer when we sold a duplex, and am set to make $17,000 in commission on a property we will close on later this week. That $17k is going straight to a 3 point permanent rate buy down putting us in the mid 5s.