All Forum Posts by: Peter Ulstad

Welcome Travis, looking forward to following your journey! The site has a lot of great networking opportunities and is full of great information. I agree, every time I think about starting a discussion, I generally find that somebody has already had the thought and its been fully discussed on here. 

@Vivian O. Congrats! Hopefully closing goes smoothly. Welcome to the R/E Investing world!

There's an open house tonight at the new YMCA in Downtown Minneapolis at 5:30 hosted by the City of Minneapolis to discuss Minneapolis 2040. It will likely be a good forum to express opinions to the city planners. Maybe I'll see some of you there!

https://www.facebook.com/events/618219388524709/

If you can't make it tonight, there will be another on 5/31 at Powderhorn Rec Center

facebook.com/events/299581933909776/

I have a duplex which both units are rented as a STR in South Minneapolis.

Pros: 

1) Potential for much higher cash flow (depending on the location). With the property fully rented with long-term tenants, cash flow was ~$600 a month or $7,200 a year including capex reserves. With STR In the winter months I about break even or lose a little, June-August I should net between $4,000-$6,000 depending on occupancy

2) Immediate payment by VRBO or Airbnb, no more waiting for the tenants to pay or if they will pay, 

3) The revenue stream makes it easier to justify a property manager (or Co-host in Airbnb terms). You will want to hire this out. I'm sure your time could be better spent than cleaning or communicating with guests. Hire this out to someone who has systems in place to handle it. PM me if you want the name of the company that handles my property. 

Cons: 

1) A lot more stress! With a regular tenant, they are much more responsible and capable of making their space livable. STR guests expect a certain level of hospitality and service. You have to worry about things like guests trashing your space, noise to your neighbors that you can't control, getting bad reviews, etc. If your cleaners don't show up or don't make it completely spotless, guests tend to complain (I don't blame them, I would too.)

2) Carry costs are much higher. My insurance went up about 3 times when I switched from standard property insurance to a STR policy ($1,200 a year to $3,400 a year). You now have to pay for internet, gas, electric, water, sewer, snow removal, and anything else. No more passing utility costs directly onto your tenants. This can make a slow month like February or March a little harder to stomach.

3) You are competing against a different type of industry than a regular multi-family property as you now compete with hotels or resorts. Another added layer of complexity from an underwriting and marketing standpoint, but you fall into a grey area of regulation at the city level (some hotel regulation, some residential). 

Make sure you run conservative numbers and benchmark against the data. I also use Airdna like @Andrew Kerr suggested. This is an ever-changing industry and no one really knows how far it is going to go.

Hope this helps!

@Caleb Heimsoth and @Sam Elder, appreciate the feedback!

My fiance is looking at buying a duplex with an FHA loan. I already own a property (purchased with an FHA loan) and we are planning on moving out of my place and into hers. My question is whether or not all of the cash used for the down payment needs to come from her since her name is on the mortgage. Can I give her the money as a gift or does the down payment need to come from her personal sources of income?

Just an update. I received one of the letters from the City of Minneapolis. It was rather threatening, so I called the city as I have an active rental license. The clerk from Mpls 311 basically told me that they hired a third party to do the research and are sending letters to everyone with a property listed on Airbnb and not checking whether or not there are active rental licenses on the properties. I was told to just ignore the letter. I wonder how many people are going to get scared off because of these notices. 

St Paul actually made the first move in the Airbnb regulations beating Minneapolis to the punch, if you can believe that. 

St Paul did the same thing (see link below)

https://www.twincities.com/2018/03/02/attention-ai...

I have a property that is listed on Airbnb full time and the demand has been very low the past couple of months, most likely due to the influx of properties listed for the Superbowl. I'm hoping that many of those places drop off and the supply goes back to a more manageable level. I read somewhere (can't find the source right now) that there were 1,200 units on Airbnb in the Twin Cities in February 2017 and 5,600 in February 2018. 

@Steve Gerage I would check your loan agreementand see if there were any clauses about subleasing or about the bank needing to approve any new leases in the property. Many commercial loans have clauses that state that the bank has final approval rights for any major lease in the space (the square footage is usually stated in these clauses).