All Forum Posts by: Jacob St. Martin

Hey John, 

One thing to keep in mind around the ski resorts is that there are a TON of STRs around them. I am a little less familiar with Massanutten but around wintergreen there are so many STRs that they tend to have terrible occupancy rates and lower ADRs because of the competition. 

This doesn't mean it is impossible, it just means that you will need to find a way to stand out against your competitors. Can you have better interior design? Maybe you have a hot tub and others don't. If they have hot tubs, maybe you put in a sauna. Maybe you can add in a theater room or game room to distinguish yourself. Give them a reason to book your STR over others and you can make it work.

Hello Linda and Merry Christmas!

okay so first, it sounds like you either left out some details or you are confused about some real estate investing terms which is totally understandable for someone new to real estate! 

When you say you paid of 50% of your heloc in the first two years so you actually mean that you paid down 50% of your primary loan balance or did you take out a heloc on equity you had and you have now paid 50% of that money back? 

If you still have 50% balance on a heloc you should probably pay that off before buying any real estate because that is high rate, variable interest debt and it will affect your debt to income ratio. If you meant to say that you paid off 50% of your loan balance then great!

Either way there is absolutely no reason for you to transfer into an LLC at this point, and no reason to get a business loan to pay off the heloc. Asset protection only really matters when you have enough assets that you start attracting people who may want to scam you. Also it is significantly harder to get financing for an LLC and your terms will be less favorable. A business loan is probably not going to have that good of a rate either, will require a down payment, and you will pay points and origination fees so you will lose money and accomplish nothing.

Here is my thought: Keep paying down your heloc and in the meantime start aggressively learning about real estate. Read books, listen to BP, stalk Zillow everyday, start analyzing deals, talk to other investors and agents and find out what rents are like in your area. Then once you are confident in that information start looking for a rental that you can house hack and rent out your first home.

We are not in a forgiving market right now and if you jump in without being prepared you might find yourself in a sticky situation. 

 I am a UVA alum and investor in Charlottesville. I would be glad to talk about the Charlottesville market more in depth sometime if you want but here are my general thoughts:

1. Appreciation is absolutely crazy in Charlottesville. I bought my first house here a little over two years ago and the value has gone up about 25%. 

2. Strong demand for renters from the university, hospital, and a growing list of companies. 

3. Strong housing demand from the University, hospital, companies, and alum who want to move back to the area. 

4. Home prices have rises so quickly that rents have not really caught up. If you try to pencil out a long term rental from the MLS it is next to impossible to find something that will cash flow, and this was a problem even before rates went up.

5. MTR is a viable strategy, however you pay a high premium for properties close to the hospital and that is where most of the demand is. Also, the ideal size for an MTR is either a 1/1 or a 2/1 as that is what most travel nurses are looking for. You also pay a premium on lower sq ft homes and end up paying a much higher price per sq ft. For instance, my first home 2 years ago was a 6/2 that I bought for $385,000 near the art park and there were 2/1 houses selling for $320,000. Because of this, I have had a hard time even finding houses that would cash flow as MTRs. The best thing you can do is look for an over under duplex that you can make into two 2/1 MTRs but these are somewhat rare. 

6. STR is off the table unless you live here due to regulations (which I do) but if you do is a great market for it.

7. One strategy I have used here to boost income and get cash flow is long term rent by the room. Where you will furnish the living spaces and market the individual rooms to grad students/recent grads, or students if you are close enough. This ends up getting you more cash flow than a traditional long term rental. 

Overall Charlottesville is an amazing market, you just have to be creative to make deals cash flow. You should ask questions like: Is there unused square footage that I can use to add bedrooms? Can I add bedrooms in the basement? Can I turn the basement into a seperate MTR? Can I build an ADU for MTR or convert a garage into an ADU? Can I mix LTR and MTR in one property to offset the weaknesses of both strategies?

If you are willing to get creative the deals are out there. Let me know if you want to discuss further!

Hello Jon, 

You are definitely thinking through this in the right way. Your return on equity is pretty low so I agree that it is time to utilize that equity somehow. As you mentioned your two options are take out a heloc or sell. Here are the things that I am thinking:

1. How strong is the market that you first rental is in? It seems like you property has nearly doubled in a two year period which is pretty crazy. Do you think there is enough demand that you will continue to see prices rise at that pace? I'd be hesitant to sell in a market with that much appreciation. 

2. What is your strategy for redeploying whatever capital you get out? With rates as high as they are it really only makes sense to use the heloc if you are doing something that has a relatively short time horizon like a flip or BRRRR.

3. How confident are you in your ability to find a good deal if you sell? The worst thing you can do is sell out of an appreciating asset, not be able to find a good place to park your capital, and end up paying capital gains tax AND not having an asset, or being forced into a bad asset before the 1031 window runs out. 

From what I know it sounds to me like the best option is to get a heloc and to start looking for a flip or BRRRR. The heloc won't accrue any interest until you pull from it, so you are not time pressured, it should allow you to force equity on whatever property you get into which is great, and you still have your assets in what seems like a highly appreciating market.

i hope this helpful! Feel free to reach out if you have any more questions!

I am not familiar with furnished finders policy but Airbnb has a $1 million dollar insurance policy for all properties on their platform so renter's insurance is a little unnecessary. I will say though that Airbnb is very very difficult to work with as a host in any sort of claim. They will side with the guest even if it was obvious what they did and you have to fight them a lot to get them to budge. Ultimately I don't think it is unreasonable to ask them to get renter's insurance if it is cheap but it may be unnecessary. 

If there is just a smart lock on the door I don't think they need the key. However if it is a smart deadbolt and a normal lock on the door handle they will need that key bc they will inevitably lock that one on accident and lock themselves out. 

There are often Facebook groups for mid term rentals in certain areas, try looking for one of those and marketing there. 

Also, I think the best way to stand out as a MTR or STR host is to offer amenities that other places don't have. For instance, if you buy a cheap hot tub it will probably pay for itself if you get one or two bookings that you wouldn't have gotten otherwise and it will lead guests to choose your place even if they are not really going to use it

Assuming that you are interested in single family investing I would recommend using conventional loans until you max out your DTI and then switching to DSCR loans

Hello Kelby, 

Sounds like a good deal you have here. Here are my thoughts: 

Anyone who has built an $8 million real estate portfolio has some real estate experience and a solid understanding of investment principles. Maybe you can start by looking at the cash flow of this portfolio and working out what rate you would need to get your desired cash on cash return based on the price the seller wants. Then you could go to him and show him the numbers and I think he will most likely think that is reasonable. 

Another point though, it is okay to be laughed at sometimes. If he doesn't want to give you a number to start with then go in and make a lowball one and if he laughs at you then you ask what he would need in order to play ball and now you guys are in negotiations. 

In my opinion if you can comfortably fit a queen bed then that is the way to go. If a family is visiting kids will just as easily share a bed as sleep in bunk beds and having the queen will make it more appealing if you have a group of two couples.