All Forum Posts by: Ola Rask

Hi,

I just furnished my first VR in LA and I thought I'd share my figures here. It's a 3 bedroom in a very hip neighborhood.

These are my total up front costs from having nothing to being completely set up:

Acquiring the apartment:

3600 in deposit (1 month rent)

3600 in 1st months rent

Rent is very expensive but it is in LA after all and I expect to still make a decent profit. I would have started with something smaller but the opportunity presented itself and I jumped at it.

Furnishing:

The biggest items on the list were 3 brand new mattresses from IKEA at approx $300 each.

- 1 nice second hand sofa for $400. I got lucky and found a very nice one. You could get a cheaper one but I'm tired of     staying in apartments where the sofa is so cheap that your back is wrecked after 2 minutes of sitting. 

- 3 used bed frames, IKEA MALM from craigslist. Got them all the same to get a uniform look for the bedrooms, for $100  each.

- 50" TV from Best Buy + sound bar - approx $400

- One very large brand new rug from IKEA, $200 or something like that.

Various IKEA:

- Kitchen utensils from IKEA, mid range. Don't go for the cheapest things because they break in one second and also feel super cheap. The mid range utensils are pretty good quality and will last longer.

- Sheets + towels, 2 complete sets for each bed. (more expensive than you think)

- Various bits and pieces like hangers, iron board, laundry basket, garbage bins etc. 

My total IKEA bill was about $2500, including the mattresses. 

- I also bought 6 night stands on craigslist, about $300 in total

- The rest of the furniture and appliances I got from thrift stores and Target and managed to find very good deals.

The main part to remember is that there is always more to buy than you think.

I can post a complete checklist for furnishing an apartment later when I have access to my receipts, if you so wish!

I also ended up getting a few more items after my first couple of bookings, mainly fans for the bedrooms since the place doesn't have central A/C.

All in all I spent around $4000 on furnishing the apartment from scratch. Obviously it would be cheaper with a smaller place.

I'm also spending about $50/month in internet costs, plus whatever gas and electricity amounts to.

My total up front cost for setting up the apartment, including deposit and first rent was about $11000. 

And here is the end result!

https://www.airbnb.com/rooms/19735024

Thanks

Ola

Wesley Kuo: Just looking quickly at your numbers I'm not sure how your mortgage calculation works? Is there an amortization in there also? Otherwise, on a 300k loan with 4.75% interest I get your monthly mortgage payments to $1187/month.
I'm guessing you also have an amortization in there and paying down the mortgage over 30 years. In that case it seems to me that your mortgage costs will eat up any potential profits. Unless you're looking at it as an investment purely for appreciation.

The Cap Rate is more a measurement of risk than anything else - meaning you need comps to know if it's good or not. For example - a 4% cap rate can be really good in a low-risk neighborhood where the going cap rate is 2%, but if you're in an area where others are getting 8% it's not a very attractive number. That said - I personally look for deals with cap rates above 8% because otherwise the cash flow is simply too small.

Hope this helps and that I haven't messed up the numbers myself!

Cheers

Hi Anthony,

Have you considered vacation rentals? I'm also looking at properties in Las Vegas and what I found is very much the same as you have mentioned, which is also true for every real estate market in general, that more affordable properties are usually located in rougher parts of town. What I have found about Las Vegas however is that there seems to be a bit of a shift in where people want to live and where they want to vacation.

For instance you can find affordable 3-bedrooms just a few minutes from the convention center, which may appeal to short term renters and have the potential for great cash flow, but isn't necessarily the "fanciest" part of town. These would obviously require a bit of rehabbing, and legally it's still a bit of a gray area, but the cash flow potential is much higher than the normal "$100/month" that people are looking at for SFR's. Especially if you're local and plan on managing everything yourself.

Hi Kim, and everyone else.

It's very nice to hear from other out of country investors since I am very much in the same position. To me the US market holds possibilities that you simply cannot find elsewhere in the world. At least as an English speaker. Europe is a huge market - and many of the countries are very interesting from a real estate investing point of view. The problem I have found is primarily the fact that everybody speaks different languages and many times the bureaucracy is outdated, cumbersome and backwards. Spain and Portugal are good examples of countries with great investment potential but the logistics are just a huge burden.

I'm currently looking at acquiring an E2 investors Visa and setting up an LLC based on the West Coast, dealing in real estate, long term rentals and vacation rentals. A big part of this would also be to help foreign investors get a more direct access to the US market.
I'm just starting out trying to be more active with Biggerpockets and I would love to keep in touch and connect further.

//Ola

This guy has a pretty solid (get it?) relationship with gold:

Having spent quite a bit of time working on private yachts which is largely a cash business I also know some people who use gold as a way of transporting money across borders, since it is a lot easier and less suspicious to carry around a few pieces of jewelry or an expensive watch than large bundles of cash. 

If you don't live in a mansion with 24/7 security and are worried about someone potentially sneaking in and grabbing your hard earned gold I would perhaps look into ways of investing in gold without physically holding it. If you are interested in leveraging your trades there are gold CFD's that will expose you to the market, with the leverage of your choice. Another, perhaps safer, option is gold funds, like the SPDR Gold Trust ETF that has as an objective to follow the price of gold.

There is a very informative article on investopedia discussing the matter, which can be found here:

Invest in Gold without holding it

Cheers

I really like this thread!
I am looking at relocating to LA and setting up this very model either there or in Las Vegas. I am a strong believer in the AirBnB and vacation rental future, and I think going through landlords is a very good option right now, with property prices being so high.
I think paying market rent and profit sharing, combined with signing a long lease absolutely should be a good way to convince landlords that vacation rentals is the way to go. This would allow me to still "own" my listing, and not be just a manager, whereas the landlord is still just a landlord, the passive owner. Essentially this is exactly what the big hotel chains are doing - except this model works "horizontally".
What I really like is the scalability of the model, potentially allowing for hundreds of listings spread over multiple cities or even countries, without the need for cash heavy investments.  

I would love to connect further with some of you guys who are already doing this successfully and maybe exchange ideas on how to move this whole industry forward. Seeing as there are a lot of Californians commenting - perhaps we could even organize a meet-up at some point.

Cheers

Hey everyone!

Long time reader - first time poster from Sweden. I joined BP a while ago as a bit of skeptic, thinking it was probably just another one of those "Click here to get rich"-sites, or yet another guru claiming to turn people into millionaires left and right. 

I have since then spent a lot of time in the forums, as well as listened to most of the amazing podcasts and I've now decided it's time to take the step and become more active since I am convinced this is one of the best networking resources for people interested in real estate.

Anyway - a little about myself: I am currently a 2nd officer at a cruise line in Asia, which means I do 8 weeks of work followed by 8 weeks off, thus leaving me with 6 months of vacation a year, meaning I have plenty of time to think about what to do with my money. 
Lately I've become very interested in short term vacation rentals, as it is an absolutely exploding market, all over the world, and I think there are good opportunities around to grab a piece of that cake.
At the moment i am primarily looking at Las Vegas and Los Angeles to get started, as they are tourist heavy cities with good all-year climates and somewhat friendly laws towards vacation rentals. I am not really looking at purchasing properties at the moment but rather finding landlords who might be interested in subletting to me for market rent, plus a share in the profits.
I do not want to be simply a manager but rather own the listings myself, just paying rent to a landlord.

I would love to hear from anyone who might be interested in discussing things further - or perhaps even meeting up for a lunch or a drink in LA.

Thank you!

Ola