All Forum Posts by: Robert M.

I am considering a property in Pocono Pines, PA that will require rehab.  I'm interested in hearing from investors working in the area to learn about how challenging they've found it to find and maintain good support - both for contractors on a rehab and for ongoing caretaking, cleaning, and maintenance on a short-term rental.  I've heard from one or two people that the area can be challenging in terms of securing good cleaning help.  What has been your experience?

Yes, this is possible - have done it. Be aware that if you're looking to expand your portfolio, though, that the debt for a second home will count against your DTI, but the income will not count towards future mortgages until it shows up on your tax returns. This differs from an investment mortgage where they'll count 75% of an appraised long-term rent on the short-term rental as income - even when you go to apply for another mortgage later. That means that for the first year, your DTI may be too high to finance another property (mortgage on the Airbnb counts when you go to apply for another mortgage, no income does). In year two, it may still be too high if you claim any purchase- or setup-related deductions during your first year income tax return (i.e. say you net $20K on the Airbnb property, but you claim $8-9K in depreciation and $10-12K in furnishing expenses; the tax record will reflect that you lost money when you in fact improved your cash position by $20K). Obviously, there are other options for future acquisitions - private lending, non-conforming mortgages, etc., but terms are generally less desirable. You do still have the potential to purchase long-term rentals conventionally (because they'll count 75% of the income from the new acquisition) and to purchase short-term rentals where the appraised long-term rent is sufficient to offset your mortgage (this is harder because Airbnb properties are usually nicer than long-term rentals and, in turn, wouldn't make for great long-term rentals because they won't cash flow). And, of course, perhaps you earn enough that you won't be bumping against your DTI in the first place! Just some things to consider for those who are considering maxing out their DTI with a second home mortgage in order to pull this off. It's still a great strategy - just need to be aware of the potential pitfalls, too.

Thanks for the feedback here everyone.  Seems prudent to go ahead and list.  As I’ve thought about it, I’d imagine Airbnb will compare my current performance against other properties’ current performance, which may be just the same as comparing the two in a better market.  The timing is what it is!  Appreciate the responses and collective wisdom.

Thanks again!

I recently purchased a new property that I was planning to make available on Airbnb for May 1. Recognizing that the first 30 days of an Airbnb listing are pretty critical for determining Airbnb search rankings, I'm trying to decide between getting my listing up now, even if it can't be rented or reviewed for the first 30 days because of COVID-19, or waiting until June when my local board of supervisors is likely to re-open STVRs.  It seems like a no-brainer to try to start collecting bookings given the present climate on STVRs, but I don't know how critical the activity on a property during the first 30 days really is for future rankings on Airbnb.  I don't want to be short-sighted.  I can afford to wait if that's what's going to be best for the long-term.  Thoughts?

Looking for a commercial, portfolio, or private asset-based lender with good terms for a licensed short term vacation rentals in the state of Virginia. Recommendations welcome.

The answer to why you wouldn’t do it yourself is simple: managing short term rentals requires more time, effort, and coordination than long term.  I’ll say, though, that short term rental tenants usually take better care of your place and are lower risk than long term.  I’d say raise his long-term monthly rent by a couple of hundred bucks so you both benefit and go for it!

@Jaden Adams, full disclosure here: I’m an educator—a K-12 college prep school administrator, actually—so I’ve dedicated my life to schooling, both personally and for a career. I can’t say I’m without bias, but I can also say that your points and concerns are valid. I’ve argued for a while now that students can get a better education spending 8 hours a day in the public library for four years than they can get at many modern colleges. Still, I think I would probably frame the challenges you face a bit differently than you may be seeing them.

There was a time in this country when education was less about the training of a man (or woman) and more about the making of a man. Where higher education went wrong was when it started focusing so much on creating social cogs in the workforce rather than on forming thoughtful, winsome, wise, well-rounded, and engaged husbands, fathers, mothers, sisters, brothers, citizens, AND workers. In the twentieth century, schooling became a social tool for an industrialized society or, worse, a perceived panacea for social injustice, crime, and poverty. There was a form of education that predated these cosmic shifts. It was another form of education that was responsible for the thoughtfulness of the founders of our country. It was this paradigm that formed the original curriculum of institutions like Harvard, Princeton, and other Ivy League schools—institutions to which I wouldn’t send my own children today. We’ve fallen so far.

I would not advise you to abandon education as a whole, but to abandon it in the form you are presently pursuing. Look for a college with a strong liberal arts base—one that teaches thinking and expression; one that gives as much time to wrestling with ideas and questions that matter as it does to teaching you how to be a cog in society. There are still some great schools out there that do this, though they are fewer and fewer. Likewise, some do it at a more reasonable price than others.

Search for liberal arts colleges and then evaluate which ones offer a ripe core curriculum that focuses upon well-roundedness. By keeping their eyes on the main things, these are the schools that are in fact preparing a workforce—the kind of people that know how to think, solve problems, lead, and collaborate.

In brief: Don’t neglect the training you need, but don’t neglect what it means to be fully human and get the most out of life either.

Cheers.

@Bill Plymouth, do you know if they used hard money? I’m also concerned about not being able to refinance a property when lending tightens, even with good income and a good track record.

Experienced flippers who have weathered a recession well: how much is “enough” when it comes to cash reserves?  I see 6 months as a rule of thumb.  Is that accurate?  I’m assuming that this includes salary to self + carrying costs for all investment real estate.  I’m also assuming that those who have 6 months cash are not using hard money for their flips, but are instead using their own cash for the whole transaction and improvements.  Is that accurate?  Does that mean one can continue to flip and make money during the recession, even if supplementing with reserves as needed?  I understand that cash is king when the market drops (so more is better so that you can snatch up properties).  My question has more to do with getting through my first few years of accumulating cash and earning a living without putting my family in a bad spot if and when the market bottom falls out.  I recognize that no one knows, of course-just looking for recommended cash reserves from those with experience needing them!

Given the option, would you bid on an auctioned townhouse built in the 90s that appears to be in decent shape but is generally an unknown or an auctioned house built in the 60s that shows serious pride of ownership (looks great from the outside—flowers, plants on the porch, wreath on door, etc.)?