All Forum Posts by: Patrick Shea

Here is a quick update on the Lakehouse as people seem a little interested.

I think a lot of people may be interested in what happened during the Pandemic.  At first, all of our bookings went away for 2020.  As people realized that the only thing you could do was travel to Short Term rentals, the rentals picked back up pretty quickly.  Both AirBnB and VRBO touted the cleaning of the houses, so we had to answer some questionnaires, but honestly we were already cleaning up to those standards so less of an issue on our part. 2020 and 2021 both beat our records for stays. And in 2021 we turned our first profit while maintaining a pretty similar personal use.  I think there is two factors here, first one is the pandemic drove up demand and the second is that we have been operating long enough to stay high in the rankings.  We also refunded people when they canceled even if it was in the window, so we got the trusted badge from VRBO.

Here is our booked days update: 2017=109, 2018=92, 2019=103, 2020=165, 2021=211.  I don't think 200 days is going to be the norm moving forward. 150 days is what I am estimating on, but this is due to our good track record and maintaining high in the searches.

The laws have obviously been updated in the time that we have been operating.  Luckily, VRBO does a great job of paying all the taxes for us.  AirBnB pays most of the taxes, but I have to update them every month for the county taxes.  So our pricing is now different between the two platforms.

Our previous management still works great!!  We have a great new cleaning crew that we have been working with for the last two years.  We have improved our process for bookings, we updated our rental guide and created a video that walks people through the property that we send out immediately on booking (this is currently via email, until both sites get better at sharing videos and welcome guides).  We also schedule checkin and checkout emails that have made the whole process pretty automated.  Our remote keypad helps in several ways. First, we still use peoples last 4 phone numbers, along with the checkin video, we haven't had any questions on how to get it. Secondly, our cleaning crew has their own code so we know when the do the cleaning.  Third, we have a maintenance code for when we need our handy man to help out, also tracking when they come and go.  The process takes about 5 minutes to setup after each booking.

Overall we are still very happy with how it is working out, especially with the appreciation in home values.

Now for the weird:
1) Back in 2019, we had a bed bug infestation in one of the bedrooms.  We caught it somewhat early, but we had to refund some guests.  AirBnB and VRBO are not helpful in this situation.  We informed AirBnB because we wanted to fully refund and they suspended our listing until we had a clear check from the Pest Control.  They don't help with any of the costs.  This all makes sense, they are a transactional platform that assumes no risk for the owners or really the renters.  It is still frustrating as it was most likely an AirBnB guest that brought them in, but in the end we are solely responsible.
2) We allow dogs as we bring our dogs to the house.  We charge a $50 pet fee, which really goes to the cleaning crew.  This is an honesty fee, people have to say that they are bringing dogs or select the fee on the booking site.  We have some pretty strict rules around where the dogs can be, only common rooms and not on the furniture.  We have child gates on the main living space to help enforce.  However, it really is up to the honesty of the people.  We have had to clean a few markings in the carpet in the bedrooms.  We have had to wash the bed comforters due to wet dog smells.  But the kicker was this week, where some animal urinated all over one of our couches and we are probably going to have to replace it.  We found out when a renter mentioned the smell, it is very hard to tie it back to a specific person so we are going to eat that cost.  Price of remote managing and the cleaning crew either missing it or it got worse over time.  We think it is one of our differentiators in the market and we are working towards animal proofing our house.  We are going to replace all the carpets with LVP in the winter.  This one definitely is causing a pause on continuing the dog friendly listing or we may increase the pet fee to create a pet emergency fund.
3) We have found out that anyone who books for more than a week tends to suck.  Every time we do an off season booking for a month, we end up regretting it. One tenant flush a diaper down the toilet.  One tenant left the place really dirty and broke a bunch of stuff.  They complain when they get charged the security fee and threaten us, even after we explain that it doesn't cover our costs.  They assume since they stayed at a reduced rate for a month that they are entitled to wreck the house.  The wear and tear from people that stay over a week is pretty significant and we end up paying more in cleaning costs.  We have adjusted our rental fees so that you get a 10% discount for a booking of 7 days or greater, but we don't discount anymore than that.  It is better to not have it rented and avoid the headache.  It will probably rent for the weekend, not as much cash, but not as much headache.

Hope this helps everyone out!!

@Marcus Fisher as a veteran I have seen divorces with my shipmates and their significant others. These are usually pretty nasty and it sounds like she is looking for retribution if she wants you to penalize him. You may have to tread lightly.

Here is the skinny:

1. If he is on orders he should be able to get both out penalty free, that is both of them vacating the property.

2. He maybe required to pay some sort of alimony to her, the military is pretty strict about this. She might be able to get the lease on her own for full price, but definitely needs to be a new lease.

3. I would definitely try to offer option 1 and try to help her find a new place that she can afford, hopefully one of your other properties.

You are a neutral party in this and try to express that to them. This is one of those situations where as a landlord you are a bit of a problem solver to make the transition as painless for all parties, especially yourself.

@Alec McGinn, that is a great question. Most of the time you will need a earnest money deposit, which can be anywhere from $1000 to $10,000 (I did that for my last cash offer). If you structure the offer correctly (my agent usually does it) there should be a financing contingency, so you should be able to get all your earnest money back if your financing falls through.

Is it better to get your financing set up before hand, yeah it makes your offer stronger but it isn't absolutely necessary. Now if it is a good enough deal and you can explain (in writing normally) how it is a good deal, you may be able to reach out to family, friends, bigger pockets market place, etc to find private money. Or you can start calling banks, if you have a W2 job it maybe easier to get financing on your first few properties with conventional loans. Finding the money seems daunting but there are a lot of avenues, just have to swallow your pride and be ready for nos.

Hope this helps

@Russell Caraotta, you may not want to hear this, but sometimes it helps to have a property management company list your property. They usually have people contacting them looking for places. Plus they will list on multiple sources for you. It all depends on how quickly you want it rented. I have always used an agent or a property management company to list my properties, mostly because I dont have the time to do a bunch of showings and screenings, I just factor it into my costs. In the end, the $1000ish I pay them is worth it. I still manage the properties myself, just don't list them.

Also, did you look to see how long rentals are listed for before being filled? I am not sure if Rentometer does that. It maybe normal for your market to have long vacancy periods, especially if you are in a smaller city.

@Matthew McNeil. This is a good situation for you. It is interesting that you are at 80% to LTV. Did you recently purchase or refinance the property?

He looks like a motivated buyer, perhaps you can get him to pay the closing costs, which is extremely rare in this market. That would help with your profit margin.

I would change my mindset a little, as an investor everything is for sale and you should be looking at your exit strategies on at least a yearly basis. So if you get a number that makes sense for your goals you are ready to sell. Same idea for buying as well

@Noel Felix III, on AirBnB there is a work traveler friendly portion you can fill out. It requires you do have a hairdryer, iron, and supply shampoo, conditioner soap. That can help make your work traveler friendly. Also, you can adjust your rates during the week to be lower than the weekend. That's what we do with our basement apartment.

Hope this helps

@Lucas Carl thank you for your input, obviously our strategies are different. Like I said our main goal is for our own use and try to get it for near free. We are closer to lake house hacking then running a large short term rental business.

We also use the google number as texts and calls go to multiple phones for free.

Congrats on your large operation!! You must be absolutely killing it!!

So I have been operating a Lake House Short Term rental for the last two years.  And I have been getting a lot of questions from friends, acquaintances, my own real estate agent, renters, etc.  So I put together an email that I send out to all of them describing how it works.  I figured since I went to all the trouble for them, it wouldn't take me much time to share it here as well.

First of all our motivation in getting the Lake House was our own use.  My wife and I partnered with my wife's sister and brother-in-law.  So we had to find a house that was a reasonable commute between Atlanta (where we live) and Charlotte, NC.  We landed on Lake Hartwell.  We knew we would at least need a 3 bedroom, 2 bath to support the four of us and future kids. We also knew that we couldn't afford to own it outright, so we had to figure out away to minimize our cost, that meant short term rental.

To understand what we could afford, we needed to do an analysis of the rental market for Lake Hartwell itself.  First thing we did was look at what where the renting seasons. In our case, Lake Hartwell's main seasons are Memorial Day through Labor Day.  A huge perk of Lake Hartwell is the Clemson Football Season. Being a Penn State Grad, I knew that being close to the Stadium (within 30 minutes) would help float the fall and you could count on 7 weekends a year.   We thought that we could probably get one full week and two weekends per month in the summer, all Clemson football weekends and a perhaps one weekend per month in the off season.

We then did a cursory search on VRBO and AirBnB to see what houses (something around the size that would fit our needs) would rent for so we could get a decent estimate of how much money we would bring in.

Then we went house shopping, which took a while. we worked with a real estate agent and purchased off the MLS. Originally our price was a little too low for what we wanted for our own use. So we went up a little in price and found the one that we liked. The process almost took us 3 years. That is what happens with vacation homes, they don't turn over all that often and most get passed down.

All the while we were looking, we kept looking at VRBO and AirBnB to watch rental rates. They don't display passed bookings and vacancies, only future ones. So you kind of have to keep your eye on them. Or you can reach out to other owners in the area to find out, they might not be as willing to share info.

Once we selected the house, we did a little calculation on how much it would cost a year to own the house. Pull the tax records for annual taxes, get a quote on insurance, assume numbers for utilities (internet, water, electric, trash, etc), estimate repair costs, VRBO annual fee is $500, and add in mortgage costs as well. Ours comes out to about $2000 in operating costs every month, it has been pretty steady at that for the last two years.

Before making the offer, we took our estimated money coming in from renting and subtracted the money coming out for operating costs to see how how close to break even we were. In our case, we still have to pay money in, we just call it expensive boat storage.

Our stats for the two years that we have had the place are: 99 days book in 2017, 100 days booked in 2018. We have about $24,000 in expenses every year and we take in around $18,000 in rents. So we are negative $6000 a year, but we attribute that to our usage cost.  Personally, we go once a month and each have a week long in the summer.  So if we were actually were to rent that much, we would definitely have to pay that $6000 or more.

So the Pros:

1. We use our lake house at least once a month.

2. We don't have to fully cover the cost of owning a lake house and some else is building our equity.

3. With the exception of two stays, everyone has been super wonderful.

4. There are some nice tax advantages to having a short term rental that you should discuss with your CPA, if you have one.

The Cons:

1. You have to be in constant communications, not that you are always answering questions or bookings, just that you need to answer quickly.  Luckily, in the days of smart phones the app notifies us, we get a text and an email. So it is hard to miss.

2. If you want to maximize rental income, you don't use it during holidays. Memorial Day, Labor Day, and July 4th are obvious money makers, but we have had Thanksgiving, Christmas, and New Years booked every year we have owned it.

3. You are going to get bad apples from time to time. They are few and far between, but they do make you question renting out your favorite place on earth.

4. Our neighbors aren't super excited that we do short term rentals. They all own their lake house outright or can afford the mortgage so they don't really fully understand. They may complain a little, but end up using your cleaning lady.

Tips:

1. Get a good cleaning crew to do turnover or hire a property manager. We have two good cleaning crews right now. The full cleaning fee goes to them.

2. Get a system that you can remotely change the pin codes with. We use Vera and installed it ourselves, because we are handy like that.

3. Use both VRBO and AirBnB, we get a majority of our summer and longer bookings through VRBO, we get more of our off season through AirBnB.  Calendar updating is key, we haven't gotten them to play nice together, so we are doing it manually

4. Get a google number, separate email, and set up separate VRBO and AirBnB profiles. We use gmail and set up a google number to that gmail account, this number can ring at any of our phones and text any of our phones. Also having separate accounts means that you can transfer over the accounts if you ever decide to sell the house.  We have some friends who had a short term in Florida that was a personal AirBnB account and they couldn't transfer it.

I know that this isn't necessarily a money making investment, but it wasn't intended to be.  It was trying to live a much better lifestyle without having to pay for it, so I think goal met.

Hopefully this helps others out there looking for a similar situation.  And if you are looking for more of a money making strategy, this will definitely help as well as the pros, cons, and tips apply to all situations.

Best of Luck!!

I am currently on the hunt as well.  Just tried Peach State Credit Union, from their website it looked like a great option so I went to talk to them in person.  However you have to be a member of one of their many 'supporters' or you can file for a new sponsor.  The new sponsor requires you to have a personal account with them for a year.  Not the best option, so I am searching still as I need to open a business account pretty quickly for my new rental.  I will keep you updated on my search.

Here is an interesting scenario.  I have a set of applicants, a brother and a sister who are living together.  The Sister qualifies to rent the apartment all on her own; her income is 3x rent, her rental history and references are great, and she has a pretty strong credit score.  The brother on the other hand has a load of eviction notices, his references didn't check out (wrong numbers), and has a little bit of a credit issue, he does qualify on income.  They are looking to break their lease 3 months early (red flag) for a bigger space as they work opposite shifts and live in a small two bedroom.  I am little torn on the brother, he is a former marine and now is a cop and also went through a pretty dramatic divorce (hence why he is living with his sister).  All of his eviction notices come from when he was married. I am a navy veteran and on my second marriage so I am a proponent of second chances.  One thing that I was thinking is that the sister was just putting her name on the lease to get him out of her apartment, but she seems really invested in moving as most of the communications come from her.

I don't need to fill the vacancy right away as I bought the house out right and my only monthly costs are utilities.

In my mind there are far to many red flags on the brother to even consider it, but the sister is great and I have a slight emotional tie in helping out Veterans and Cops. 

Just want to know if other people have experienced this sort of issue and what they decided to do and how it worked out.