All Forum Posts by: Marcello Di Gerlando

The smallest you can get away with. Ensure its a 240V and not a 120V. I have 5BR and my 7ft by 8ft tub is too big. way too much maintenance if it requires a water change. Set rules. e.g "No more than 4 people at a time in the spa"

Recep Tayyip Erdoğan "arguably the most unpleasant character on the world stage: jealous and proud of it; a petty, unjust, unforgiving control freak; a vindictive, bloodthirsty ethnic cleanser; a misogynistic, homophobic, racist, infanticidal, genocidal, filicidal, pestilential, megalomaniacal, wanna be king of kings, defender of the faith and ruler of the universe'

Other than his personal characteristics Turkey has out of control inflation and a crippled economy is always looking for a fight with anyone that will advance the 'caliphates' own interest; other than that...go for it. 

I wouldn't but what the hell do I know.

do it

This sounds like an arbitrage outreach campaign. Search 'STR arbitrage' on this forum to get an understanding of what it entails. Not all bad as some would make it sound but it a'int all good either. From an owner perspective, that does not want to deal with an STR it may be good. I briefly considered signing my STR over to an arbitrage group last year under much less favorable terms last year.

If this suites you it may be advantageous. However, I would proceed with caution. Ask a lot of questions and have a good understanding what STR arbitrage: Questions to ask: How long have they been doing this? who are their other clients? References? local ordinance requirements for your property? who covers maintenance and damage? how long would the contract be for? who owns the furniture? etc. etc. etc.

Why not keep it as one unit to accommodate larger groups? less hassle, less cleaning, less maintenance and bigger tickets. I had the option of converting my STR to two units and choose to keep it as one larger unit. best decision we made. competing with other smaller units is much harder than competing with larger units. PLENTY of demand for larger groups.

The biggest you can get. Drying towels will be your bottle neck if you have large groups.

Proper Insurance has been a great partner for us, except, they will be dropping us due to high fire risk for our mountain cabin property. 

Their Commercial STR insurance product and services has served us well and I would highly recommend them from my personal experience. However, its time to move on.

I'm asking for recommendations from the BP STR community. Anyone had experience with CBIZ or other commercial providers they would care to share?

I'm not interested in LTR or home owner insurance with STR addendums. Unless they are exceptional and have coverage for furniture damage and guest shenanigan's including liability for alcoholic related incidents and other guests Bulls__t.

Respectfully,

Marcello

Can you clarify your question please. Not sure what your intent is. 

Do you want to roll the furniture cost into the loan? or do you want to negotiate it separately under a mutually exclusive agreement?

I probably would not pay more than 10% or 12% of its retail value.

When considering the investment potential of an STR I would consider everything you have listed as well as following:

Principal, Interest, taxes, and Insurance; When using a loan, PITI goes without saying and of course any closing costs should also be considered.

Taxes in the case of an STR should be carefully analyzed as this expense can vary depending on lots of different factors and location.

It's important to note that even though cleaning is paid by the customer and considered a pass through expense to the owner, the customer is the one paying. Any increase or decrease in cleaning costs to your customer will impact the customers nightly expense and therefore will impact the customers decision when choosing a place to stay.

I also include the following. Some of these will not be applicable to everyone:

1) Supplies -  I categorize these in two ways Durable's and Expendables. Example: Durable is anything typically expected to last 3 months or more including: Linens, towels, cutlery, floor mats etc. and Expendables: Toilet paper, sponges, snacks etc.)

2) Operating/business licenses

3) Capital expense CAPEX ( This is a big one - and should not be confused with maintenance/repairs)

4) Professional services ( accountants, lawyers etc.)

5) Hot tub and or pool service

6) Septic pump and clean (annually)

7) Snow removal

8) Water filters (Whole house filters can be expensive. Heavily used ones should be changed twice a year)

Your list is very important and very helpful for folks considering investing in an STR. I also believe that analyzing expenses as a percentage of revenue is critical to identify if an investment is within industry standards and to help identify inefficiencies.

What is the industry standard for the top 3 STR expenses? I surely don't know but below are my top 3.

As a percentage of revenue aggregated over the past 12months my top 3 expenses are cleaning, supplies, Capex.

1) Cleaning expense was 17.5% of revenue ( includes hot tub services)

2) Supplies, both durable and expendable  11%.

3) Capex - 16% ( this expense was self imposed to upgrade and add value to the property - 2021 Capex projected to be less than 10% and 2022 >1%)

Note: All other expenses are each in the low single digits. Total expense for my STR is 60% of revenue. Definitely room for improvement. If I can get my expenses to 55% for 2021 and 50% 2022 I will be thrilled.

Question: 

Does anyone else analyze expenses this way? if so please share. What are your top 3?

Being that its your dad and the scope of your mutual interests are more than just financial any deal that keeps your relationship happy would work. 

I highly recommend a written agreement by a real estate attorney to avoid miss understandings. There are no shortage of horror stories of family partnerships gone bad because of spilled milk. We only sign agreements with those we trust and never with those we don't. A mutually agreeable and comprehensive document is the best safe guard against miss understandings.

Assuming this wasn't your dad - a 50 - 50 deal would be sweet for you but crappy for the money man ( dad ). Why? The money man holds -all- of the risk. Failure to perform by the management team (you) by either walking away or doing a bad job leaves the money man holding the note with the risk of foreclosure and any other nightmare the management team and guests would leave behind. 

Also, you need to consider if any additional capitol is needed down the road. Example: In the next 3 months you unexpectedly need a new roof.  Who pays? if money bags puts up more money then are your shares diluted?  They should be. Are you prepared to work for a smaller percentage than you were before doing the same work?  For the sake of your family; speak with a real estate attorney. Dads are cool.

Good luck.