All Forum Posts by: Steve K.

@Amber K. It sounds like you’re just a bit undercapitalized for what you want to do. Maybe get your license and/or sell your current home instead of turning it into a rental, and use that money to back your subject 2/ wholesaling enterprise or just building a solid buy and hold portfolio with properties more suited to rent. Since you’re asking this question I think your ethics are sound fundamentally. Go towards the light!

Exactly @Bill F.and @Joe Splitrock, No matter what our individual opinions are on this, or how invested we are in STR's, it's no longer debatable whether or not STR's are to be regulated like hotel businesses because all of this has been settled in court already numerous times, and AirBNB has lost nearly every case. Perhaps the most famous one was AirBNB vs. NYC starting back in 2010 and then literally dozens of other cities across the US and the world: San Fran, LA, Austin, Denver, London, Paris, Barcelona, Anaheim, Santa Monica... AirBNB has sued and lost and appealed and lost over and over. Some cities have moderate regulations, others outright bans. AirBNB has argued the rules violate their freedom of speech and that the rules are unfair and unconstitutional and they've won minor concessions at times but absolutely lost the war. In the NYC case they had laws going back to 1929's Multiple Dwelling Law that prevents nightly rentals in residential areas, and they just had to update it to include online listings, so it's not like this is a new debate. Legal precedent is well established. STR's are hotels in the eyes of the law. Personal property rights don't allow individuals to operate hotel businesses without taxation and regulation or ignore zoning restrictions. AirBNB knows this, they know Boston can regulate the crap out of STR's. AirBNB is only suing to fight back against increased severity of restrictions especially in regards to the enforcement and liability components, which could force them to alter their business model and put them in legal jeopardy. Stricter regulations are definitely the trend as more cities are emboldened by successful regulatory policies on STR's throughout the US and the world over the past 8 years.

Personal opinions aside, like it or not, courts have ruled time and time again that cities are within their rights to regulate STR's as they see fit, and many are planning to do so if they haven't already. The question of whether or not they can was decided years ago, now the question is to what degree can they. STR's have consistently been ruled as commercial activity and thereby subject to zoning, taxes and regulations like any other business. The assertion that STR regulations infringe on personal property rights has limited legal basis, as overwhelmingly courts have ruled that the rights of STR owner/operators does not supersede the rights of their neighbors who bought in with the expectation that commercial activity would not be allowed in a residentially zoned area.

 AirBNB knows they wouldn't win a case to overturn any of Boston's regulations, as they've lost every similar battle against other cities, even in their own hometown San Francisco, so the legal precedent is extremely strong against them. The current suit against Boston is not about overturning regulations. AirBNB is suing because in addition to regulating Boston also wants to make online listing providers entirely responsible for enforcement and liable for the actions of the sites users, which is a step beyond what even the strictest cities such as Santa Barbara and Jackson Hole have done. What AirBNB is trying to achieve with this suit is to shed liability to their hosts, to not be responsible for enforcement, and to stem the flow of the tide against them as DC and other areas get ready to kick their own new rules into gear.   

Sorry you’re going through this @Eric Seppala.  I think there is at least a partial list of investors available because one of these threads mentions that someone from MI sent out an email blast to all investors and forgot to blind copy everybody. This was back in April/May I believe. I’d be surprised if a class action wasn’t in the works. Perhaps @Colin Zhu or @Tyler Jahnke or @Brian Freeman or @Ben Lacher  can steer you in the right direction to join a suit. Good luck, I feel for those involved and can’t understand how this scam has been allowed to go on for as long as it has. Hopefully justice will be served soon. 

Great post @Neal Bawa!! Very well written and right on. Thanks for sharing. 

 Another way the 1% rule can lead investors astray is by applying it to inexpensive properties. I mention this because I've seen posts where folks are looking at something like a $35,000 house that rents for $525, which achieves the 1% rule PLUS .5% to spare. So they're saying, "Great deal, right?" Not so much, because owning a $35,000 house gets expensive just like any house, and $525 doesn't go very far at all in offsetting the unavoidable costs of the occasional capital expenditure. When something as simple as the water heater crapping the bed happens, you've lost any profit you might have had, and now you're coming out of pocket to replace the water heater/roof/deck/sewer line/windows/driveway etc. whatever it may be. Whereas a $300,000 property that rents for $2,250 falls short of the 1% rule, but since you're pocketing at least enough money to cover things like a new water heater every so often, you're doing better in that you're less likely to lose money on cap ex. A water heater costs about the same for a $35,000 house as it does for a $300,000 house. 1.5% looks better than .75% on paper, but not if 1.5% isn't enough actual money to maintain a property. 

@Lindsey Thomspon Hard to say without seeing the house but 5k won’t get you very far in addressing issues of long term water penetration which appears to be what you’re looking at from your description. I second the folks saying to get bids from several experienced contractors, perhaps including a restoration company. Mold isn’t that big of a deal in itself if caught and addressed early, which means stopping the cause (water penetration) early, but if you have rotten wood, saggy floors, ceiling damage etc. then the ship has sailed on nipping it in the bud early. Now you very well may be dealing with structural issues, and the masonry damage is a concern for that as well, so you’re potentIally looking at a very expensive rehab. Get some expert’s eyes on this one. nobody wants a money pit as a first or even 50th Investment property. In my experience as a carpenter, when you have visible rot, you’re opening a can of worms and want to budget for a big project. Take the bids you get from your trusted contractors to the sellers and ask for a price reduction. If they say no then walk. If they agree, make sure you’re prepared/capitalized to take on the work and can afford the vacancy time. Projects like this often run well over budget and take months to complete because once you start pulling things apart more and more problems are discovered. Let us know how it goes!

@Dan Broughton forgot to tag you, see comment above

Hi Dan,  There are a lot of solar contractors operating in Chicago, which is a good indication that solar electric systems make economic sense in your market, but it will depend on the specifics of the roof, electrical usage history, type of meter at the property, and net metering agreement available from the utility. Best place to start would be to contact local installers, who will be able to provide free consultation and put together quotes for you. I would get 3 quotes to compare. Energysage, a rating website of solar installers, is a great place to find local companies to talk to. 

Call me crazy, but I like my houses like I like my wine. Scope the sewer line. Check the roof and plumbing for leaks. See if the floors sag. Check for settling (indicated by gaps in the door frames and cracks in the plaster/drywall). Check to be sure walls are plumb. Look for any cracks, moisture or decay in the foundation, especially if it's brick or stone. Make sure the lot has drainage/isn't in a depression or flood prone area. Smell and look for mold, termites, rodents, birds, bats, and critters. Check electrical, not just for knob & tube but also fuse boxes, FPE panels, anything less than 100A main, signs of arcing (black burns around an outlet or breaker), aluminum wiring, etc. Windows can be a big expense that is often over looked. So is maintaining or removing mature trees. Utilities will be more if it's poorly insulated, with dated appliances. Lead paint and asbestos aren't too big a deal but you should know the scope of remediation project you're getting into. Often times, these completely addressable issues can help you negotiate a better price based on what you find during inspection. You will have to do some work on an old house, but working on old houses is fun. I'd prefer an old one with good bones to one built last week out of glued together sawdust, nearly identical to it's neighbor. Just be ready to make some repairs, and whatever you do, don't buy in a historic district! 

@Account Closed If I were your heir, I’d prefer to inherit passive dividend yielding stocks over aging physical structures that require constant influx of capital and effort to maintain. Poor kids better know the business end of a sewer snake!