All Forum Posts by: Reese Newell

I forgot to note that the seller’s agent has been a bully the whole way.  It was listed at $479k and I had comped it at $505k.  Right when she kept telling us firm price and came up she told us they relisted it at $495k.  Now she keeps telling us the seller’s will not concede an inch and has been very tough to deal with.  Although she is a nightmare, if I can get these few things taken care of it is ideal for what I am trying to do.

I bought a house without viewing it due to the owner’s not wanting anyone in during the virus until under contract.  It has a tenant as well until December.  They were very stingy and not flexible at all on asking price.  My contact stipulates that I was allowed to view the property and receive 3 months of rent proof from the current tenant.  

Upon viewing it today, I found some small issues inside.  However, the outside yard was not maintained well anymore and muddy, and there were other issues with the fence and landscaping.  I told the other agent these issues today and she said the seller will not want to negotiate now and after the inspection.  My fear is it will become an effective contract in 2 days and I would have negotiated the price differently if I was able to see these issues prior to viewing the property.  I fear that if the inspection does not include things about the yard then I will not have protection to get help for those and they could come after my deposit.  I am pushing my agent to try and negotiate tomorrow and stipulate either that we negotiate those things now, or that we amend the contract that I still have a contingency after the inspection to negotiate these other issues without them being able to decline them since they are not in the inspection.

this is my first purchase and I would be very thankful for advice on how to handle this situation before the contract becomes effective tomorrow.  I will still have 3 days from tomorrow to put down my escrow. 

A quick update, I was outbid on the one and the other is still sitting at $495k. I can get it for $487k or so and will have my agent run the comps on it today.  The fact that it has a tenant in means I miss the early part of high season, have the eviction moratorium risk, as well as not being able to start my learning as fast.  Back to the drawing board, thanks again everyone.

Thanks @Glenna Wood, they had 2 offers on the $600k house both in the $550-$560k range it sounded like, they countered us both at $580k to come with our best offers.  I believe with my agent as well that it is worth ~$600k.  In addition, having about $8000 worth of furniture that is less cash outlay helps my margins and moving parts on my first deal.  I countered at a strong $572k (since a few extra thousand off hardly changes any math), waiving my mortgage contingency as I know I can get that done w/ myself and a bank, while keeping in my appraisal contingency.  The comments here helped me feel comfortable with it today, I'll report back when I hear by this evening!  If not, there will always be other deals!

 Thanks for the reply Glenna, they are both built in the 1960s, these are the facts of both:

$600k house - Built 1954, fairly well remodel inside from 2015, beautiful pool and good outdoor space.  A slightly better location, and about $8-10k worth of furniture that I can use instead of coming out of pocket.  This has had roof paneling redone in 2015, but not a new roof.  This property is more walkable to main stuff in that area, but both are a quick ride to everything good.  

$495k house - Built 1961, recently remodeled inside w/ nicer finished in 2018.  The pool is not as nice, but still nice and needs some paver work near it, and the backyard is slightly bigger.  Also has new plumbing.  I could not get information on the roof here.

Overall, I think the $495k house is slightly more family oriented, while the other house caters to families, but also caters to 25-40 range that wants quicker access to some nightlife and a slightly more happening area.  It is also closer to the main drag of the restaurants and bars in the city.  Both are equidistant to the beach.

My gut tells me that if the $495k house did not have a tenant in it, I would go for it a little above the other one.  The fact that I have to wait another 4.5 months to get in, while risking having a tenant not paying, and having to do a little extra work to get it ready and cutting in to high season, makes me lean towards the $600k house with the idea of keeping my eye on the $495k house if I do not get the $600k house or if it is still available when I begin to feel more comfortable with my airbnb experience.

The seller of the $600k house came back at $580k to both of our parties to come back with best and final.  I am looking to get my feet wet earlier than later and I really value the experience of learning now than later to build this future.

Thanks for the input, the property itself was not really affected by Covid-19, I think I misworded what I wrote some.  The property had declining revenues each year coming in to 2020 and is ran by a group in Canada.  I think this is due to some mismanagement on their part.  The county I am in put a temporary ban on short term rentals in the beginning and then again during the last surge until August 20th.  The negative reviews came in July when they tried to reopen, but did not have the same cleaner or something happened there.  The last 2 reviews stated that the place was not as clean as the past and that the grass was not taken care of.  It seems like disinterest on an asset that is underperforming for them.  

Blue pill ($600k) location .3 miles from bunch of restaurants and bars in a great location.  It is 20 minutes from the aiport, 10 minutes to the most popular restaurant and bar areas by car/uber and 10 minutes from the beach.  The location is highly sought after.

The red pill ($495k) is 20 minutes from the airport, 8 minutes to the beach and a very happening area, and about a 3 minutes drive to a lot of restaurants, although you could easily bike to this area.  It is very modern, listed under market value, has a good sized backyard for the area, and is also a house that I could happily move in to come July of next year if the airbnb model did not work out as planned.

Your last point of a true vacation rental that a family would really want to spend a week at is hitting home and making me think harder about them.

Thanks for your input, the tenant side does make me a little nervous, but I can see the upside to it during these times.  There is no guarantee though that I can get them to leave if I do not renew the lease, or that they will just not stop paying currently.  That one I would be furnishing also which would help with the learning process, but would leave me about 3-4 weeks in to the prime season w/o any rental and no reviews.

An extra aside, the first deal of $495k will be there in 2 weeks if I do not get deal 2 if that changes anything.

I want to thank everyone here for the learning I have been able to grasp from reading the forums and putting together a solid template to running a STR business. These are for 2 properties in the Southeastern part of the Florida where I believe they will open STR for good again starting Aug 20th, with the latest being Sept 20th. I am debating between which of the 2 deals to try and close.

Red Pill: Property is listed @ $495k.  It was listed at $479k and the agent kept telling me the price was firm and being virtually unresponsive for a week.  I came up to full ask as I believe the property comps at ~$550k or so.  The agent then said they were pulling the listing and moved it up to $495k leaving a sour taste in my mouth.  This property has a tenant that is paying $3500/month until Dec 31st which on 1 side brings in a little cash flow while waiting out the virus situation a little longer.  I believe the property will bring in around $7000/month from rentals leaving my projection at a 15% CoCR in year 2, with a lower 4% CoCR in year 1 due to 3 months of the tenant being in place and then needing to do some work for ~3weeks to begin renting it.  I need to fully furnish it, and do pavers around the pool.  The owner is not allowing anyone inside to see it until a contract is drafted (scaring away most first time home buyers and letting it sit a little under market value).

Blue Pill: Property is a former airbnb that began to go downhill during covid listed at $600,000.  I was able to see their annual revenue which declined for the past 2 years.  I do not believe it has to do with the place itself as they had nothing but rave reviews, but in their pricing.  I also believe they had a little higher expenses than they should have.  It comes furnished (although I estimate I will still put in around $5000 for some new things to make it slightly more attractive).  It also has the smartlock and nest already installed.  I do need to hire someone to get the landscaping up to par.  This lowers my cash outlay for the project putting it very similar to that of Deal #1.  I believe this property will be able to bring in ~$7500/month from rentals.  I would be able to occupy this in early October during low season and get my systems in place and streamlined for High Season which begins in December.  I also believe I can close this property at $575k and it appears to be a good value relative to comps as well.  The CoCR on this one is lower at 12%.

On one hand, having the place already decently furnished with no pool work to do and being able to learn faster seems very appealing oif I took the Red Pill. At this point, I am fine losing a little bit on deals, as long as I facilitate my learning so I can scale faster over time. The flipside of this is that I am exposed to the virus a little more. I believe the city will be totally fine w/ STR by the date I have it ready to run, but I could see a slowdown in traffic from tourism.

However, the Blue Pill returns a higher CoCR and avoids some extra risk with the virus.  Does anyone use some other metrics to analyze the deal?  The CoCR is one metric, but the Blue Pill also has a higher cash return per property value which is something else I was considering and I thought should be weighed.

A little background on myself that may sway your decision, I played poker professionally for ~10 years and was able to amass a solid net worth in the low 7 figures. I no longer wish to play full time (I have not played in 3 months now), but will most likely play part time to bring in ~100k/year for another 2 years while I build up my real estate portfolio. I have $1.3MM as a first note on a retirement home that will be completed in December, where I will then own the property and retain 22% equity in the business as a silent partner with the opportunity to finance as many of them as we end up doing. I am very comfortable with risk, playing at the highest stakes poker for my game for a long time. I have only been learning about STR for about 3 weeks now after deciding LTR were not as appealing to me after learning that side for ~5 months. Knowledge is very important to me, and I am completely comfortable losing on a deal if it happens and then taking the data I have to refine my deals. I would like to learn quicker so I am able to scale going forward after I see my processes are fine tuned and working.

I am leaning towards the Blue Pill to acquire knowledge earlier at the expense of some extra risk, with the possibility that the Red Pill still exists on the market after the Blue Pill has begun to show some promise, allowing me to also scoop it.  I would love the input of this great community, and could easily be swayed one way or the other...At the end of the day, both are wins for me to learn.

Are you taking the Red Pill or Blue Pill and why?

Thanks @Jon Crosby, that is highly useful.  I was not sure if it would be easiest to just take out a percentage or a set figure.  I know that the percentage will very by size and bedrooms, but it is definitely easier to work with numbers if you simplify it like that instead of trying to figure out how many average cleanings per month multiplied by the cost per a specific unit type.