All Forum Posts by: Mathias Simmons

You can also sometimes finance them using a second home conventional loan. I know there have been recent changes, but we used it last year and got a 30 year fixed with a 10% down payment. If you live in the property, you can get even more favorable terms. I believe the down payment range @Eric Morel is talking about is with the lender treating it as an investment property and not a primary or second home.

First off, what an awesome problem to have! I would respectfully disagree with the other commenters about paying off your mortgage being a huge mistake. I don't know too many people who went bankrupt owning free and clear properties that cashflow like crazy. In my opinion, either option is a good decision. I was listening to podcast the other day with Gary Keller and Morgan Housel and one of the things they talked about was that creating wealth and keeping wealth are two different skillsets and both are equally important. I see paying off the mortgage as more of a wealth keeping play, where continuing to scale is wealth creation. Again, don't see anything fundamentally wrong with either.

For me personally, I'd probably reinvest. It just fits better with my long-term goals now. I think the only reason I'd pay off the mortgage is if I needed to replace my W2 very soon. I'd also consider how much wealth I want tied up in one asset as well. I'd consider how stable the STR regulations are in the area where this property is and seriously consider what would happen to your goals if regulations changed and cut your cashflow. I'd also probably consider looking at other markets. It sucks having to build a new team, but something to consider if you can't meet your goals where you're at.

For disclaimer, I'm not a CPA, just have some experience and enough knowledge on the topic to be dangerous.

I'm assuming you lived there for more than 14 days or 10% of the rental days. How many days exactly did you have it rented out? Sounds like less than 15 if your first booking was in late December. If those assumptions are true, then there's bad and good news. The bad news is that the IRS treats this as a personal residence and your expenses are not deductible as rental expenses. The good news is the the IRS treats this as a personal residence and the income is tax free. Mortgage interest and property taxes are still deductible on your personal tax return. Talk to a CPA if you can carryover other expenses into a future tax year.

FYI, chapter 5 of the Advanced Tax Strategies book talks about short-term rentals and mixed-use property if you're interested in more info.

@Hannah Leiker Thank you so much for that! I definitely appreciate the local perspective. I've searched the whole KC metro for listings with ADU, in-law suite, etc. etc. and come up with like 5 listings across the entire city. The walk-out basement idea is great and what we were thinking seems most viable as well. Would love to connect and talk with you about it. I'll follow-up in the DMs.

@Kirk Simpson Hey Kirk, just curious how your search went and if you ended up finding anything? I'm looking to do something similar in Kansas City. I'm just starting my search, but am running into the roadblock of even finding listings that have a separate living area. Just looking for any insights you may have gained from your search!

Hi,

Does anyone have any recommendations for a real estate lawyer licensed in Tennessee? I'm specifically looking for someone familiar with contract law and can help us navigate a dispute with a contractor.

Thanks in advance,
Mathias

Hello, 

Do you have any recommendations for a real estate attorney that is familiar with contract law and can help in a dispute with a contractor?

Thanks in advance,

Mathias

Hi Brian,

I'm a fairly new host, but I think the answer depends on how you're marketing your place. If you're appealing to people who want an escape from digital distractions or a younger generation that increasingly uses streaming over cable, then probably not a big deal. On the other hand, if you're appealing to the average Gatlinburg tourist, then you probably want to keep it as the average American still has cable and probably will take it for granted that the place they're renting has it as well. 

I'm a researcher by training though, so I think you could probably do better than getting the opinion of some biased (both ways!) people on a forum. Could you survey your guests for the next few months and get a much more accurate idea on how much it's being used and what effect it would have had on their stay if you didn't have cable? Could you have a test run where you cut it and then adjust if it affects occupancies/your nightly rate too much? Better yet, we live in a world of abundant data now so is there somebody out there that has data for your market and has quantified the value of having cable as an amenity? I'm guessing places like AirDNA and Mashvisor probably have the data based on actual customer behavior that you can use to answer this question.

@Victoria Pena

Hi Victoria, I know at least in Gatlinburg, that a budget of 200k means that cabins are out of the picture and that you're going to be limited to condos. Not sure about the other markets, but I'm guessing it's similar since they're expensive as well. Investing in condos still works for a lot of people, but they come with unique pluses and minuses so make sure to add those and HOAs to the list of things you're researching and determine if that's something you'd be willing to do or if you want to wait until you can get something you have more control over.

Hi Shawn, 

First off, if you are new to this, it seems like jumping in and getting loans on multiple places might not be the best idea. For one, I don't know many lenders that are willing to throw a lot of cash at unproven businesses. Two, if you did find one, then having someone throw a bunch of cash at you when you don't really know what you're doing seems like a good way to put your family in a tight spot if something goes wrong.

My understanding of LLCs is that they're primarily for asset protection. Do you, your wife, and brother have a lot of assets that need protecting at this point?

If not, what is your (and your other partners) financial position like? Do you have good credit? Is your debt-to-income pretty low? If you all are in a good financial spot and bankable personally, my opinion would be to start out by taking personal loans. Money is so cheap right now and you can lock in great rates for a long time. Not to mention that you can put in low down-payments if you do something like a second-home mortgage or buy a place as a personal residence and move out after a year and rent it then. 

Doing that plus having a good umbrella insurance policy to take care of any mishaps that might happen seems like a good way to build a track record while you all are figuring the short-term rental game out.