All Forum Posts by: Mike D'Arrigo

@Marcus Johnson I've never been a propoenent of the 2% or 1% rule to begin with. It doesn't say anything about the bottom line. On top of that, it's of no use when comparing opportunites across markets with different operting cost structures. A 1% ratio in TX which has some of the highest property taxes and insurance rates in the nation is far different than 1% in a market with far lower taxes and insurance. The only metric that matters is the bottom line and that is income and equity over time. 

@Monique Pett Congratulations! Looks like a home run.

@Cesar Villeda We've been active in Kansas City, Indianapolis and the Quad Cities for over 10 years. I would definitely add these markets to your radar. No one gets rich from cash flow alone, so therefore you should be looking for markets that not only have good cash flow today, but also have good population growth, job growth and modern/diverse economies. They are the markets that have the greatest opportunity for appreciation and rent increases. That is how you buld long term wealth.

We've been involved in the Kansas City market for about 10 years and it has been great. All of the things that @Alex Gunnerson mentioned are a testament to what makes it a great market and major reasons for why it is a strong STR market. You don't have to be in one of the popular vacation destinations to be successful with short term rentals. You just need to be in a market that gets a lof of visitors and KC get over 24 million visitors a year.

@Katrina Villasin it's easier to get in to and evaluate a LTR than a STR. Estimating the rent and rental income on a LTR is much easier. With a STR, you can't just set a monthly rent and be set. STR rates vary according to a lot of factors so you have to figure out what the average daily rental rate will be. You also have to figure out what the occupancy rate will be. There are also a lof of other property management issues involved that most traditional property mangers are not equiped to handle. Don't let all of this discourage you however. The rewards can be well worth it. You can often get 2 to 3 times the rental income in the right locations. Don't think that you have to be in a vacation desitnation or resort. Personally, I think a lof of the vacation destinations have become oversaturated which is driving occupancies and daily rates down. I like Kansas City for STR. The regulations aren't overly burdensome and KC get nearly 25 million visitors a year, all needing somewhere to stay.

@Kevin Parnella it is subjective and everyone has their own defination so make sure that your definition aligns with whoever you are talking to. The factors that usually go in to a classification are owner occupancy rate, home prices, home sizes incomes, and crime levels. I highly recommend sticking with upper C class and better neighborhoods. Here is my criteria:

A class: Primarily owner occupied, usually suburbs, middle/upper middle income, white colar. Larger homes typically 3Br 1.5Ba. or more. Low crime. 

B Class: Mix of rental and owner occupied. Middle income, blue colar, medium sized home 1,200 sq ft, 3Br 1Ba. Moderate, non violent crime

C Class: Predominently rental neighborhoods. Lower income/Lower middle income, working class, smalleer homes. Moderate crime

D Class: All rental neighborhoods, often inner city, low income, high crime 

You definitely should do your due diligence and validate what the turn key company tells you. You can do this by knowing the prices and rents in your chosen market. If the median price is $180K and median rents are $1200 and you're looking at a property selling for $100K and renting for $900, it's clearly in a lower class neighborhood. Get to know the numbers. Also, you can tell a lot by GoogleMaps. Not just the street view but satelite view also. Look at what's in the immediate area. If you see a strip mall with a tattoo parler and bail bondsman, you can pretty much figure it's not a great neighborhood. 

@Chris H. Make that a contingency in the contract.

@Chris Miller you really need to talk to a 1031 facilitator to make sure you're getting proper advice. 

@Michael A. I just realized that I failed to give you the most important piece of advice in my previous response. Some cities and counties have some pretty Draconian ordinances and restrictions on STR's that you need to research first. For instance, I just looked at Orlando FL and if I'm reading it right, it appears that they don't allow STR on residential (R) zoned districts. Check out the restrictions in your market of choice first.

@Wilfredo Torres with all due respect, it's kind of late to be looking in to this. The time to do that is before going under contract. I just did a quick search on Orlando's short term rental ordinance and if I'm interpreting it correctly, you might have some problems. It looks to me like it is not allowed in any residential R zoning district which is pretty restrictive. Some local governments have pretty Draconian restictions on STR's so it's best to do your research first. Hope it all works oout.