All Forum Posts by: Scott Winter

@Jason Young

Why are you not interested in SDIRA? Curious because I’m starting to look into SDIRA instead of investing so much into 401(k).

Since you're using the phrase, and you've said you're interested in reading more to learn, I have to at least ask if you have read Brandon Turner's book Investing in Real Estate with No (and Low) Money Down?  It seems like that may help clear some things up. 

My story: I've had a roommate ever since I purchased my primary residence. 7 years later, I get into real estate investing and I was able to used "little or no money down" on my first investment property because I was able to refinance and pull equity out of my primary residence. Could have used HELOC, could have sold and bought multiple discounted properties, etc. but point is, it is appreciation that bought my investment property and not really money I traded my time for. Now I can let the investment property pay that money back I refinanced out of my primary residence while having a second property also building wealth.

You mentioned paying equally as much as those you rent to.  In my case, my wife and I paid $2,300 (plus utilities) and our roommates have paid around $800 (flat).  Although you may not be cash flowing or living for free, you are still making money to pay down your mortgage, you get the tax benefits, and you get the housing appreciation.  

I think the best way to minimize risk is through education and experience. Keep on asking questions and learning!

Investment Info:

Single-family residence buy & hold investment in Running Springs.

Purchase price: $150,000
Cash invested: $62,000

MLS Purchase: $150k
Offer: $150k
Down $30k + $7k closing
Light Rehab, decoration, and furnish: $25k (Wife killed it with decorating and furnishing on a budget)
Strategy: Short term rental

www.eisleycabin.com

Comments: Starting a short term rental in COVID-19 has been a wild ride!!! We'll see what 2021 has in store for us.

What made you interested in investing in this type of deal?

The idea birthed as a second home with subsidized rental income. Once we got into it, we matured our thinking to a true investment property with business mindset.

How did you find this deal and how did you negotiate it?

Property was listed on MLS. Wife saw on Redfin. Added to our list of properties to see with an agent.
Full price offer. 20% down. 21 day close. Standard inspection and finance contingencies.

How did you finance this deal?

Refinanced primary residence and pulled 50k out
20% down conventional "vacation home" loan
Overage came from savings

How did you add value to the deal?

Took out janky closet to open up master bedroom.
Moved and added some electrical.
Decorate with stylish touches.
Include everything we personally would want if we were staying at a STR.

Later: Rebuild stairs, run gas to house and add HVAC and gas stove, new windows, asphalt driveway,

What was the outcome?

Due to COVID and restrictions on domestic and international travel, there was a huge increase in local travel demand. This was great for our first year and allowed us to be >90% booked each month. We will have to see what this looks like moving into a more normal state of demand especially as STR becomes more saturated. So far, the return is better than we ever imagined and property values have increased 30-50%.

Lessons learned? Challenges?

STR:
God is good. We are very blessed.
Pricing for short term rentals is critical. We started out too low and were leaving thousands of dollars on the table.
Be/Get a good manager. My wife manages the guest bookings and communication. She loves it and is really good at it.
If you're managing remotely, you must have a good cleaning team so you don't have to be engaged in the business constantly.
Shoveling snow is a good workout, but not all guests want the full mountain experience.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Michelle Calkins of Coldwell Banker is one of the "all stars" David talks about finding in his books and on the podcasts. She steered us away from properties that weren't right, and she used her expertise about the area, pricing, negotiating, and the purchase process to help us through locking this property up.
Billy Knight of Monarch Funding for our loan. All stars recommend other all stars. He made the process easy and was able to close in 3 weeks.

@Sean Delagrange

I just went through this. In the end, I realized that I just wasted so much time figuring out a name. I realized it really doesn't matter. Like @Joe Splitrock said, use DBA if you want to get fancy. I'd say your energy is better spent finding more deals.

When you want to build a national brand, you’ll make enough to pay someone to figure it out for you, or you can just buy out the name you want 😉

@Andrew Lee

Persistence and patience. Sounds like you’re taking action, which is the toughest part for most people. Keep tracking your rates and try tweaking your material until you find something that works better than your current content/material.

If you have time for more approaches, connecting with others is always a good approach to finding deals.

@Andrew Freed

That’s an excellent plan, especially in this sellers market. Obviously you could pay a higher price assuming the higher rent by the room model, which could help in this market.

What size houses are you looking at?

Have you found a property manager in the area that will support renting by the room?

A bit of a tangent, but have you considered short term rental too? Definitely a different beast than long term rentals, but sure can bring in the revenue. As soon as things open back up, I imagine bigger metros will be ripe for short term business travel and tourist travel again. And, you’ll have a furnished place to stay when you visit.

@Scott Winter

Oops, wrong thread :)

@Griffin Baumoel

Specifically with wholesalers, they may have a property under contract with an expiration/close date, so timing may be the issue for traditional financing.

@Griffin Baumoel

I believe a vast majority of the reference to “off market” within real estate investor lingo has to do with distressed sales (although obviously not always the case). Typically you are solving a problem for the owner by buying off market. If that problem can be solved without having to pay cash then go for it! There are so many ways to fund a deal.

Like mentioned already, traditional funding comes with more strings attached and therefore may simply not be an option for many of the off market deals you may find.

@Justin Kerstetter

VERY DIFFERENT STRATEGIES

Don’t switch strategies because of the moratorium. Since you don’t know much about short term rentals, it seems as though your trading one unknown for another. I’d first ask some questions to people about how big the risk of renters not paying is (I hear it is pretty small). Then see what you could do to mitigate that risk.

If you do want to get into short term rentals I’d suggest starting with figuring out the demand in your market. Just look at similar properties in your area and see if they are booked. Reach out to the owners and ask the question.

IF the Redding short term rental market will support it, and you think you are up for the part time job, I’m just going to say go with short term. Especially right now with COVID, you may be able to stay booked with higher local travel demand through most/all of this year.

Here is why it is very different though, you mentioned more work, and yes it is. Also more up front costs to furnish, more up front costs to make it look nicer than a long term rental, more monthly costs because your paying for monthly expenses (utilities, consumables, broken things, (snow removal?), yard work, cleaning service), and most definitely you can sprinkle some more stress in there at times. To do it well, it will take time, customer service, and potentially some conflict resolution skills with your neighbors if you ever have guests partying all night. BUT it can be SO much more financially lucrative and for me rewarding being able to have a happy vacation spot for people to come make memories.

Long term as you probably know, doesn’t usually have those upfront or ongoing expenses. Although you’ll still get a stressful situation every once in a while, it is much more passive. And what you also get is the “much more passive” income to match.

Feel free to message me if you have any specific short term rental questions.