All Forum Posts by: Mike Downey

BE CAREFUL!

Have seen many rookie mistakes in DIY LLC setups.

1) Don't make yourself the registered agent. Otherwise, defeats purpose of making it difficult to find owners.

2) Operating Agreement must be bullet-proof

3) Appear OA will also be a partnership agreement. Doubt you can think of every reasonable scenario that should be covered.

Quote from @Mike Downey:

Hello,

I am closing on a home in Panama City Beach, Fl. I have 2 partners that are putting in money toward all the expenses involved in purchase and startup of this property as a short-term rental. All 3 of us live outside of FL. We plan to split the expenses and profits according to the percentage that we contributed in purchasing the property and we plan to share the burden of property management. We are looking into starting an LLC with an operating agreement that lays out the rules for distributing expenses/profit sharing etc.

I am looking for advise on where to start with generating this LLC/operating agreement? What state to create it in? Is it worth paying a service to be the registered agent or should we designate one of the partners and use their address for the LLC?

We are looking into "Legalzoom" as a starting place. 

Thank you!

This my personal perspective, others will do things differently. I wouldn't do an LLC with people I'm not related to.

DO You Need An LLC - It Gives Me Protection, Right? My Attorney / CPA Says That. . .

https://www.biggerpockets.com/forums/311/topics/1098136-do-y...


All my REIs are in an LLC! Why am I being personally sued?

https://www.biggerpockets.com/forums/926/topics/1097903-all-...


What I would do, are Joint Venture Agreements (which don't cost any money by the way, after the first one is drawn up. You can reuse them by changing a couple of lines to fit the new property (address, amount, duration, etc.) and each of you can have your own LLC if you think you want/need that, as a signatory to the Agreement or you can use your personal name.

I wouldn't use an online website to creat an LLC. An attorney is worth the money here. 

One of the most important parts is your exit strategy. Who gets to decide to sell and under what circumstances and how proceeds are to be divided. 

Quote from @Mike Downey:

Hello,

I am looking to purchase an investment property in PCB that I will use for STR. I have seen a lot of mixed reviews on whether to go CONDO or SFR. I spoke with a realtor in the area and he is saying that a CONDO will have better cash flow due to occupancy rates. I am looking for a place $700k and under. I can get a condo on the beach or a SFR several blocks from the beach from what I am seeing. Does anyone have any SFR in this area that can validate occupancy rates on STR? The realtor is telling me that even for a CONDO I should not plan more than 60% and that if I get a SFR north of HWY 98, it will be closer to 20% occupancy rate.

Things to consider when buying condos and the future assessments: This section outlines the requirement for mandatory structural inspections of condominium and cooperative buildings in the state of Florida. The law requires a milestone inspection to be performed every 10 years for each building that is three stories or more in height, beginning at the 30-year mark from the date the certificate of occupancy was issued. Buildings located within 3 miles of a coastline must have their first milestone inspection at 25 years. The condominium or cooperative association must arrange for the milestone inspection and is responsible for all costs associated with the inspection. The inspection must be performed by a licensed architect or engineer authorized to practice in the state of Florida. The milestone inspection consists of two phases: a visual examination of habitable and nonhabitable areas of the building in phase one and, if needed, a phase two inspection that may involve destructive or nondestructive testing to fully assess areas of structural distress. Upon completion of the milestone inspection, the architect or engineer must submit a sealed copy of the inspection report with a separate summary of the material findings and recommendations to the condominium association or cooperative association and the building official of the local government which has jurisdiction. Condo unit owners may see higher premiums and now face the added cost of flood insurance if they move to Citizens, which is the alternative insurer. Senate Bill 2A and previous reforms are expected to stabilize the market, but officials have said it may take another year or two before the full effect is felt. 

I prefer townhomes or single family residences close to the beach. We current bought one in gulf highlands and 30A! Reaching 10% gross or purchase or more. 

@Mike Downey To get an accurate insurance quote, you're going to need a current (within the last 3 years, I think) 4-point inspection and a wind mitigation report (so you can know what kind of fasteners the roof has). If the current seller will share those, great.  If not, you're going to have to wait until you are under contract and have your own inspections done.

Quote from @Mike Downey:

Quote from @Debbie James:

I am a Realtor in the area, my husband and I own a SFR in Laguna Beach, and we owned and operated a vacation rental company along 30A and the west end of PCB for about 10 years (Sold the company last year). That being said, there are some differences in SFR and Condos.

In general, figure 24-26 weeks per year for rentals. Northside of 98 won't rent short term. Too far to the beach. There is way to much competition. Ideally you want to be less then 1/3 of a mile to the beach. Ideally around 1/4. 

Keep in mind that you can't be all things to all people. Those wanting to be beach front, a home won't do. Those that don't want to deal with elevators and want their own space, a condo won't do. Regarding condos, definitely get onto VRBO.com and read reviews. Some complain that they had to wait 30 minutes to get an elevator, other complexes are fine. The larger the condo, the higher the association fees. There are now new laws in place, due to the collapse of the south Florida condo building, regarding the reserves the condo needs to have and getting maintenance completed. Make sure to ask if there are any special assessments.

For a SFR, the 'trifecta' for rentals is, pet friendly (dogs only), fenced yard and private heated pool. When we had our company, about half of the rentals were pet friendly. It is very hard for people to find 'nice' pet friendly homes. Condos do not allow guests to bring pets, only owners. Our rental is not a large home, 3/2 plus bunks (sleeps 8) and about 1,100 SF. Huge backyard, screened porch and updated. We are completely booked from now till early Sept and then about 3 weeks in the fall.

When looking at SFR in PCB, make sure the street allows short term rentals as some streets don't. All in all, it's going to be a personal preference as to whether you buy a condo vs. home. Do you want to use the property? If so, what fits your families needs?

I will also mention that we are purchasing a 1-bedroom condo in Port St. Joe. New construction, great location and that condo complex will allow guests to bring pets. I'm not against condos, but you need to decide what's right for you.

Hope this all makes sense and helps. Let me know if you have other questions.

Thank you Debbie. That is great information. We will definitely do solid research on the reviews for Condominiums. Is that your SFR in Laguna that is fully booked out through September? That sounds like a great occupancy rate. How close is that rental to the beach?

 Yes, it's our personal rental. We have a management company handling the rentals as when we sold our company, my Husband didn't want to deal with it :-). He gives them his thoughts on pricing as well. Earlier this year he had them reduce the rates as they had them too high. 

The home is about 6 homes from the beach. Here's a link: Leo's Hideaway

Love the "north of 98 is the death zone for STR"! We had a realtor pretty much tell us the same thing. Unfortunately, everything south of 98 in PCB is usually a condo or townhouse but usually they are a short ride or walk to the beach, which does makes them book quicker. Beware that most condos are non-warrantable, so be prepared for that if you choose to go the condo route.

Quote from @Mike Downey:

Hello,

I am looking to purchase an investment property in PCB that I will use for STR. I have seen a lot of mixed reviews on whether to go CONDO or SFR. I spoke with a realtor in the area and he is saying that a CONDO will have better cash flow due to occupancy rates. I am looking for a place $700k and under. I can get a condo on the beach or a SFR several blocks from the beach from what I am seeing. Does anyone have any SFR in this area that can validate occupancy rates on STR? The realtor is telling me that even for a CONDO I should not plan more than 60% and that if I get a SFR north of HWY 98, it will be closer to 20% occupancy rate.

 @Mike, if you look at the current occupancy rates for PCB through Air DNA, they are at 64%. I would also take those numbers with a grain of salt b/c Vacasa and Soleil/Walmart Management Companies will skew those numbers, so as someone who solely sells STRs, I disagree with the estimates you were given.  I have clients right now with 70% occupancy rates. With proper targeting and self management you can do that.  The Short Term Shop will help you excel in both of those areas.
North of 98 is the Death Zone for STR, with the exception of a few spots closer to 30a/Inlet Beach.
Between @January Johnson and myself, we can answer any questions that you may have. Good luck!  Let us know if you'd like any help and keep us updated on the forum with your progress!

Hi @Mike Downey, reach out to @January Johnson. I am also happy to answer any lending questions that you may have! 

@January Johnson is who you want for this question!