All Forum Posts by: Patrick J. Mayo

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I've been looking for ocean front property but they are all just slightly out of my current range in this area. Now I have a choice. Do I hold off, save up, and wait for the right property? OR... Do I invest in this second tier property with good cash flow and trade up later? The rental estimates are conservative. I didn't use the highest estimate. Vacancy is built in to that estimate.

Something I can't quite get over... This property sold before the pandemic at half this price. I don't think it will ever go back to that level but am I buying at the peak? Will this second tier Gulf Coast home still appreciate or will it correct? If this wasn't my first STR I probably wouldn't hesitate. Fear of making a mistake is holding me back.

Quote from @Melissa Nash:

Personally I pick areas that I want to visit and possibly live in full time someday. I am not just chasing the cashflow.... my strategy is more a lifestyle choice. All of my properties cashflow well...... and I am diversified with desert, mountains, etc. But reading your post- you mentioned that you want to use them also.... so I would pick the places that you love to go and chances are others want to go there also and its a win win. 

At the end of the day what is your EXIT strategy? That will also help you decided. Some markets appreciate much faster than others and that might be important to you. 

My properties in CA will grow the fastest and I know I am giving up a little cashflow on a couple of them but that is ok bc I am planning for future growth. 

Also what about tax strategy? Are you looking for that? that also affects the type of property you buy. 

Lots to think about..........  Hopefully I triggered more questions for you to think about. 

Yes thank you. I need to learn more about the tax strategy. Does anyone have a good book to recommend that focuses on the tax benefits and strategies in real estate? I'm reading "Real Estate by the Numbers" by J Scott and Dave Meyer at the moment. It has a couple of chapters on it that I haven't reached yet. May be great.

Honestly I don't know what my EXIT would be at this point. I just want to make the best long term investments I can, hopefully finding cash flow to help fund scaling, and if I'm savvy enough I can 1031 multiple times and eventually leave some investments to my kids. (Thereby avoiding the taxes all together I believe) I'm learning a lot, but what I know for sure is that I have a long way to go. At least I know that! 

Quote from @Michael Baum:

I would be curious as to what incredible tax benefits to the LLC.

Plus this is pretty blatant advertising. 

Absolutely. (Both points.) One BP podcast explained that an LLC might be beneficial in shielding yourself if you are a high net worth individual, but other than that the tax benefits are minimal. If you don't need the shield, say you have an umbrella policy that covers quite a bit, you're better off not creating an LLC from a borrowing point of view. A company has to borrow at a higher rate. I'd love to hear from someone with experience in this.

For example... If you have the cash and don't need to borrow, does that mean an LLC is the better route?

I'm new to real estate. My rookie brain would like to pick 3-5 areas to purchase STRs that compliment each other so that one area is cash flowing when the other is not. Like a summer beach house and a winter cabin. Is anyone using this strategy? Personally I'd love to have STRs on the Gulf Coast, near ski resorts, and a few other spots. I'd love to visit them with my family during the off season as well. If this has merit... what would be a good combination of locations? Thanks.

Quote from @Jeff Costa:

Can you maintain it yourself to eliminate the management fee? That would help your cashflow problem. 

Also, where are you getting a 5.3% rate? If you updated that to current rates, it might tip this more into unfavorable territory. 

Thanks everyone for your replies! The 5.25 is a quote from my agent in the area for a variable rate. Yes it will change after 3 years I believe. The property is a 10 hour drive from me and I work full time at my business. I don’t believe I will be able to manage this myself.

Quote from @Marcela Hoag:

I noticed the vacancy rate was set to 0%, not sure how realistic that is given the area and your strategy. 

I would say appreciation is the goal. The vacancy was set to 0% because the property management company built that into their rental projection. I need to ask what that was now that you mention it.

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I'm a new investor and I'd like to give the BP Forum a test drive. This property is on the Gulf Coast. (beachfront) The cash flow isn't there at the rental projections, but this property should appreciate nicely over time. This isn't what I had in mind for my first project, but I don't want to pass up a good deal. I'm pretty sure David Greene would call this a "shiny object." Help! Would you invest in this property? Thanks.