All Forum Posts by: Seth Nightengale

Anyone who lives in Milwaukee can go on and on about this, but the bottom line about the 100k homes in Milwaukee is that anyone with a choice would never be caught walking around in those neighborhoods, let alone renting there. They're dumps.

@Tim Ryan is giving great advice. Visit the market in person and take a look around. Compared to the amount of money you could lose on one of these "cheap" homes, an airplane ticket and a hotel isn't much.

 Hey Don,

I'm looking to make it another house hack with a STR as the source of income. I appreciate you pointing out the need to run the numbers in what would essentially be the worst case scenario (long term rental agreement). Always need to make sure the property can sustain itself in the long run.

I am familiar with MTRs and Jessie Rodriguez, as I've been a longtime follower of his. I'll take your advice and reach out to some midterm rental people in the area if I can find them. Ideally I would balance them with both properties and have short-term during the peak season and midterm through the winter. If I can establish a relationship like this before the next purchase I would be much more comfortable with a low money down option.

 Hey Kyle, thank you for your reply. I apologize that my post wasn't clear about how I financed my first property. I did so with a traditional 20% downpayment.

I understand the angle of playing the long game and cashing in on the equity someday. I suppose a healthy cash reserve could make me feel better, but man it feels like there's a good amount of opportunity cost there and I want to try to balance solvency with making sure I'm investing as much as possible as early as possible.

Thanks again for your comment! A lot to think about.

Hello BP world!

Longtime lurker, first time poster here.

In May of '21, I bought a duplex with the intention of house-hacking. After a bad experience with the tenants I inherited, I opted to convert the unit to an Airbnb, and my experience has been awesome. On average, I net about double the income I would've received from a long-term lease while still retaining complete control of the property, experiencing the benefits of Aircover and being able to offer the space to friends and family who come to visit. Instead of having a tenant pay a portion of the mortgage, I get to live here for free and the property makes me money. My wife's full-time job is raising our children, but her side hustle is managing the day to day operations of the Airbnb, so we have a unique situation that would allow us replicate this model in the future :). I've also gained invaluable experience in DIY repair and improvement regarding everything from basic cosmetics like painting and changing light fixtures to completely redoing the old caste-iron plumbing on the property.

Despite the increased cashflow, my family has had some unexpected medical costs that set back my savings goals for the next investment. Initially, my plan was to buy one property a year. It's a little over two years since my first purchase and now I'm finally on track to purchase this winter and get the listing ready for busy season. However, I don't know how much money I want to use on my next deal.

Since my first purchase, my W2 income has increased by a lot. I should be preapproved for almost any duplex I would want to purchase in the greater Milwaukee area, but I'm nervous about the idea of only putting 3.5% down on a property worth hundreds of thousands of dollars. On paper, this is the best option. In my head, I know that as long as the numbers work it will be okay (for my full-time job I'm a deal analyst, so I'm very familiar with building models and providing recommendations that take into account risk and various probabilities, etc). 

With a low down payment, I worry about bigger picture impacts down the road, particularly when it comes to getting access to equity for the sake of scaling my portfolio. If I purchase a property with 3.5% down and put money into it to improve it for my own residence and for Airbnb, doesn't that greatly increase my time horizon for getting that capital back out of the property? I'm young and just getting started, and one of my lessons I learned from my first purchase was the value of having cash in my pocket where I can use it rather than sitting in a home. 

Am I being crazy? What do the pros think? Has anyone been in this position before? 

Hey @Marcus Auerbach,

Super bummed to see I missed this! Looking forward to and staying tuned for events in the future!

Seth

Hey Melissa,

Congrats on this deal! I am not an expert in financing, but I wanted to chime in and talk a bit about the STR market in this area and what I would do as a STR investor.

Of course, the STR market is very segmented. My airbnb is in a different vertical (a replacement for a hotel) than yours (destination), but I can speak to general trends.

July and August are far and away the best months for Airbnb in Wisconsin. Gross cash flow for my property in the summer is 3x what I get in the slowest months. It's great that you have had success in the initial stages of your Airbnb journey, but regardless of what you do with the cash you have you should prepare yourself for the extremely cyclical nature of demand here in the north. Generally, there is a large taper through the fall and close to complete dry up through the coldest months, especially from Dec-Feb. 

Add speculations about a general slowdown/fall in discretionary spending across the economy to this cycle and I would encourage you to be very conservative with how you play the next few months. I'm sure it's tempting to take some dramatic actions now (pay off as much debt as possible, find some financing mechanism to get your money out), but if I were in your position I would put together a plan to achieve all of these goals and take it a few steps at a time to help with risk exposure.

Hope this was helpful.

Seth