All Forum Posts by: Mark Bosworth

I'm seeing high electric bills in our STR properties and was wondering if anyone had tried using a web thermostat to reduce power usage when the unit was vacant. The idea would be to turn the AC up (higher temps) when unoccupied and then back down right before guests arrive.

1)  Anyone doing this?

2)  How much do you think it saves?

3) What thermostat do you used?

4) Has anyone automated this so you don't have to change temps manually?

Thanks for the help!!!

We agreed to split the profits 50/50 with our partners.  Feel free to split them any way you want as long as everyone agrees and you get it down on paper.  There is something "fair" about a 50/50 split.  Good luck!

Durga, I don't think you'd have a problem with replacing the revenue with a STR. My rough rule of thumb is that a STR can generate about twice the top line revenue that a long term rental can. Now you have to offset that increased revenue with the increased costs (utilities, repairs, consumable supplies, cleaning) - but you can make a lot more money with an STR. However, you are correct that there is a lot of UNKNOWN. The problem with a STR is that you don't know what the demand will be like in your location until you spin it up. And even after you have it on the market it can take up to a year to get the revenue up to what it should be.

A few thoughts for you:

If you sold the house, what type of a property would you replace it with?  Given the knowledge that you now have, what would a perfect rental property(s) look like in your market?  The point of the thought exercise is to separate the issues of financing from the ownership of the property.  In other words, do you have just a financing issue or both a financing and property issue.  If you think you might have a property issue then sell and replace with a better property.  Just remember that buying property in this market is difficult, and there are costs involved.  As a side note, if a rental property is merely covering the costs of interest and operating costs then it would not be profitable enough for me to hold. 

Generally speaking, I think a 15 year mortgage is a bad choice for real estate investors.  (My personal opinion).  It ends up using your cash in a very non productive way.  Your money is tied up in equity in your property that is hard to unlock.  We try to use as much of other people's money as we can to finance our investments.  Our banks here in TX give us 5 year loans with principal repayment amortized over 25 years.  I'd look at your options to refinance the loan.  Sometimes you can go back to the bank and ask them if they will modify the amortization schedule. Just remember that rates are rising so a refinance will almost certainly cost you more money.  The other side of that is that a 3.5% loan is a nice asset to have with inflation running at 8%.  

Lastly, you did not mention whether you have the option of raising rent.  Generally, landlords pass along rising costs to their tenants.  You've experienced rising costs and you should pass that along.  

Overall, given my limited knowledge of your situation, I'd lean towards selling.  If this was a great rental property then it should be throwing off more cash than it currently is.  

Good luck!

Hey Rob!

I think the biggest mistake real estate investors make is to take the quick money without a plan for what they are going to do with the profit.  In my opinion, the smart play for you is to keep the money in your building and keep the investment paying off.  So you get a $75 profit?  What are you going to do with the money?  The return on cash in the bank is currently about negative 6% when you include inflation.

So if you had a loan of $85 k at 5% then your interest cost would be about $350 per month.  I'd pay that any day for a $3,000 per month income stream.  Think about the decision as "If I had the money, would this be a good investment"?  If the answer is "yes" then your big question is where to get $85 k to invest.  (This analysis does not even count the appreciation on the building).

If I were you, I'd look hard to find the $85 k and keep the building.  Just be creative in finding the cash.

Good luck!

We had the exact same situation.  Most things got thrown straight into the dumpster, but there was a lot of good stuff there.  You might find a high school kid to sort and sell stuff online for  commission.  We gave some things to our tradesmen.  We donated some musical "stuff" to a local high school.  We ended up making a couple thousand on all the "stuff".  Just don't open the refrigerator!  The things that came out of that house are legendary with our rehab group.  

My parents house in Gulf Breeze had the same problem.  I think they had to pay an electrician $3K to fix it?  (It was in that range)  The best fix is to just upgrade the terminations.  The problem with aluminum is that is so soft that it "flows" over time.  So tight screw connections become loose and then heat up and create heat.  Consequently, there is no need to replace all the wires because a continuous wire conducts electricity just fine -  the only problem is where the wire terminates.   So you just need special terminations that connect the aluminum wire to a copper wire for termination. 

I'd look at aluminum wire as a way to get a better deal on the property.  Lots of buyers will be scared off and you can use it as a bargaining chip.  Go for it, but just get an estimate from an electrician on how much it will cost to fix.  Then when you fix it, any insurance company will take you on.  

Go for it!

We had the same issue and just tore our shed down.  Did not add any value or rental income to the property and was an eyesore.  From a cash perspective, it was cheaper to tear it down than repair it.  

Interesting question.  Where is your panel located?  (Garage?)  The most efficient way to do it would be to put a new panel right next to the old one and just separate all the circuits that are purely for one unit or the other.  Then you can run the new wiring in the attic and just drop it down into the walls where it really needs to be.  You might want to put the new panel on an exterior wall so the tenant can have access to it without entering the other tenant's space. You will have to be creative on any circuits that span both units, but there probably are not too many of those.  I'd start out by mapping all the circuits to see which ones are purely for one unit or the other.  With thought, should not have to open many walls.  Just fish the new power lines from the top header down to where they need to be.  

We finance with conventional loans with a 25 year amortization and a 5 year term.  So they come "due" after 5 years, but you can roll them over at current interest rates.  I'd rather not share our lender because we are having some issues with the service we are getting from them.  Too slow to recommend.