All Forum Posts by: Michael Furcron

Hi Everyone,

Looking for thoughts, opinions, things to consider...

My Wife and I run 4 Airbnbs, 3 on one property including a Tugboat, Airstream and log cabin on a large property an 8 acre completely private lake. We live on the same property.

We are considering purchasing a Traditional Bed and Breakfast on a farm in wine country and transforming it to run more like an Airbnb. There are 6 Cottages (technically 8 units as 2 have suites above as well) on 40 acres (most fairly close to each other), a 5 bed 5 bath house with commercial kitchen, pool etc... Kitchen has operated as a fancy restaurant in the past. One of the cabins was built in 1699, the house and other cabins were built in the mid 1700s.. Each has a fireplace, full bath, small fridge, microwave. There is a lot of room for improvement on the property. I would probably add an outdoor kitchen area, game barn, game room/theater in the house, in addition to slowly redecorating and upgrading bathrooms to be more spa like.  We may rent rooms in the house separately or the the whole house at once.  They are currently getting 225 avg per cabin (with the above units barely rented). and 175-200/ for rooms in the house. 

I know we would lose some of their customer base as we would not be providing breakfast or be there when they arrive. I think the in house room rentals would take the biggest hit(they aren't doing as well as the cabins anyway), but maybe could get some whole house bookings instead.  It's 12 minutes from our other property which is why I think we might be able to swing it.  There is opportunity to host small weddings/ events/ retreats etc.. too. 

They are asking about 2 million with 600-650 gross and 0-200k net depending on the year (I need a deeper dive into the P&Ls as some of the expenses may be flowing back to the owners).

If I can get the 6 cottages to 250/night with 50% booked, I believe we would break even. I think there is a good opportunity to use the kitchen to host catered events and sell tickets vs a restaurant that i don't want to run and of course use it for weddings and guests events.

Are we nuts or on to something... anyone changed a BnB to an Airbnb before?

Thanks,

Mike

Hi Guys,

Looking for some advice...

Okay so we are 1.5 weeks away from (hopefully) closing on a property in rural Virginia.  It is 2 parcels in 1 contract, 100 acres and 30 acres.  The 100 acre parcel has the main house, guest house, and several out buildings.  The 2nd parcel is all wooded, no buildings. 

The contract is for 930k w/ 20k seller subsidy

We are putting down 20-25% depending on what is needed. The lender is ready to do 2 trusts because depending on how the appraiser considers the guest house (2 unit vs guest house?) we may or may not hit the max for jumbo loans in that area.

The mortgage broker I am using was upfront that this was going to be a tough deal, but thought he could make it happen. He has saved a few deals for me in the past and is very experienced. So I am trying to have faith.

The appriser came by on Friday and basically apologized because he could only apprise the properties separately as they would have 2 different "Highest and Best Uses". He seemed to think that this was likely to make the deal much tougher to do. However, he said (and is the 2nd to mention this) that a local bank would likely not have a problem with the 2 lots being different highest and best uses, but a mortgage broker would.

I am hoping to get a better answer in the next couple of days, but would like to be prepared if my mortgage broker can't make it happen.

Am I worrying for no reason? Is a local bank a good option or does that come with another set of problems?

Thanks guys your expertise is greatly appreciated!

David - I will definitely explore looking a little further south and see if the numbers look any better.  We are 20 miles outside of DC so the rental market has been good and not that I am banking on it, but appreciation has also been great. I am certainly not completely opposed to looking outside this area, but I do like the idea of buying as close to my house as possible since I am self-managing.  Please don't miss understand, I DO care about cash flow, but being realistic to invest near my house I need to put a good bit down just to hit $100/month cash flow.

Elizabeth - I thought and hoped you might respond. I have read several of your posts and your strategy sounds similar to what I like. If I put less then 20% down I would definitely have trouble getting any cash flow.  I also like the idea of paying the houses off and retiring sooner and only recently considered refinancing.  I think I could prob swing my next house without pulling money out.  I am sure I could find partners and buy more houses faster, but not sure I want to.... I feel like there is a limit to the houses I can self-manage and don't want to get bogged down with houses I have a smaller % ownership in.

I have a general game plan, but would LOVE to hear what more experienced investors would do with my situation.

First off a quick description of my situation and my goals.

I am 31, we have about 50k in cash to invest and some equity in 2 houses. I worked for a small property management company for 5 years and manage the houses we own, I currently own a small carpet cleaning co. and make a good living (trying to same as much as I can to invest in RE).  I am pretty handy and do most of my own repairs and improvements.  I am mostly interested in buying, improving, and holding (for now). I am focusing more on the long term and not terribly worried about huge cash flow, although would not invest in a house without a least $100 positive cash flow, preferably $200.

We live in Northern VA, area which is a pretty expensive area... avg home price is $407k in my city. A 250k townhouse can probably get around 1,650 in rent.

My wife and I have owned our primary residence for 3 years...Bought it for 330k with 20% down as a short sale that needed some work and was a steal even at the time.  After some small and a few big improvements it is probably worth around 420k. (about 80k in equity, after leaving 20% in)

We rent out my old TH which is owned by a small partnership and can't use any of the equity in that house. So not much I can do there.

We also rent out my wifes old TH which she bought for 170K and is now worth about 220K. We owe about 134k on that house. We rent that one out for 1350/month and net about $100 a month. However, I am certain we can raise the rent next year $50 and PMI will be removed saving another $53/month. The rate is 5.5% so if we refi to pull money out I think we can prob get a better rate too. (about 42k in equity after leaving 20% in)

My plan (at least before talking to you)is to buy one house early next year, put down 20%.  Shoot for a house that needs a little work around 200-230k, fix it up and rent it.  I think if my numbers are right we can net around $150/ month on that. Once we are set, save up and do the same again with a 2nd house. Being that I am pretty busy with my business, planning on managing, and doing most of my own repairs... I don't really want to buy several units at once.

I guess I am wondering what someone with more experience would do with the equity, is it worth refinancing either house... is it better to refi the rental then my primary residence? 

What would you do? Can't wait to hear from you guys...