All Forum Posts by: Jeremy Baker

@Jay Hinrichs , so you're saying we should invest and open a home improvement store :)

@Bill S. , thanks for that insight. As beginners, my wife and I are basically not going to leave any stone unturned when looking for properties. Some may see it as a waste of time, but even if a certain niche is drying up and very competitive, at least we get some experience looking within those avenues.

@Bill S. thanks for sharing your experiences w/ contacting PMs. We will probably still talk with them about their services, but not if the owner is willing to sell. If anything, maybe we can get a better feel for the rental market in certain areas.

We've found a few townhomes and condos that had a small yard (ok, smaller yards than my kitchen) and garages, but those numbers are way too tight.

Thanks for the eviction court tip. We have just started looking into foreclosures/ pre foreclosure properties.

Bill S. , thanks for your response. From just driving around the Denver metro, I see a lot of apartment/ condo construction. About the only new home construction I see is SE Centennial and Parker areas. My wife and I drove around for the first time this past weekend and was amazed at how many houses were listed for sale that were not in the MLS. We are running some numbers on these houses and looking to put some offers together. We also saw some houses for rent and will be contacting their property managers for more info and to see if the owners would entertain selling. We will also "interview" these PMs to see if they would be a good fit for us in the future. We've been trying to get the #'s to meet our 10% cash on cash return goal. This way we can handle any rental price fluctuation better. Maybe this is a hard goal to meet, but that's what makes us comfortable. Although we are not banking on appreciation, it's sure nice to have that going in. Something I've noticed you really can't count on when looking at condos/ town homes. We are new to all this, so if we are going about this the wrong way then please chime in. We value all of your input and advise!

Originally posted by @Kevin Fletcher:

@Jeremy Baker I have seen some of the same problems, Ive noticed are that if your looking for the 2% rule on a rental property its almost impossible. I.E. If you spend 200k on a house its not likely you will get 4k per month in rent. Many of the properties are at the below 1%, so you will have to do some creative financing to make the deals work. but I am also a little apprehensive about investing out of state so I keep searching...

@Kevin Fletcher I understand being apprehensive investing out of state. We are digging hard and going out driving around town to find a deal here. However, at the end of the day, we all want a good return on our cash, so if we have to go out of state to do so, then we will. I don't think we would go into an are where we don't have friends and family. Knowing people in the area makes us much more comfortable...then again, we bought our Maui condo sight unseen and didn't know anyone there! We did have our local agent call a few agents to interview them for us and luckily we go a great Maui agent that helped us put together a great team over there. Even then, it took us a good 6-8 months to get rid of the nervousness and worry we had about investing out of state.

@Alex Silang here's an article I was just reading the other day. Things to Consider when Interviewing Property Management Companies. There are other articles, posts and downloadable files about this subject on the site too. Just search on the top right of the page and you'll find lots of info.

I don't have any experience to really offer you as we are just starting out ourselves.

Each area and each community within VRBO is different.

We try not to give our guests a long laundry list of things to do before they leave. We do ask that they throw out any trash/ recycle, clean any dirty dishes or put them in the dishwasher and run the cleaning cycle, put all dirty towels in the laundry basket and turn off all ceiling fans and air conditioner. All similar to what each owner in our complex asks of their guests.

We only charge a cleaning fee if the guests stay less than 7 days, which is the policy that most owners in our complex uses with their VRBO listing. However, there are many owners that will charge that fee even if you stay longer than a month.

As for taxes, Hawaii has the general excise tax and transient accommodations tax that is passed on to each renter (total of 13.42%). Tourism is the big business in Hawaii, so some other states/ cities may not charge the transient tax.

@Bobby Beard we do bring in a small profit each year. We have been between 6 - 7% cash-on-cash flow each year. The past few years have been great, but with the economy and flight pricing, that can change quickly.

This was our first investment property and it was more of an emotional purchase for us. We went into this hoping to get enough rental income to pay 1/2 the mortgage. We've far surpassed that goal and I think much has to do with the uptick in the economy (how ever slight that may be), the way we priced our rental rates, our marketing strategy and probably most of all our location.

@Jennifer Lee , my wife and I are doing the total opposite of you. We started with our vacation rental property and now looking into buy and hold properties.

We have a great 1bd/1bth condo in Kihei, Maui that is not exactly water front, but we are directly across the street from Kamaole II beach (about 50 yard walk or so). We bought this place because we loved the area and wanted a place in Maui. Although we went into it as an investment, it was more an emotional purchase for us. We really only wanted to get enough rental income to cover 1/2 the mortgage.

That being said, there's really no "down season" in Maui and we have far surpassed our goals and bring in between $28K - $30K gross a yr. With expenses we bring in on average 6-7% cash on cash.

We do have a property manager, which is onsite at the complex. They charge $5/nt for owner bookings and we do 99% of our bookings ourselves through our VRBO listing site. If they book any reservations, then they charge 18%. Being out of state, their services come in real handy if something needs to be repaired or a guest has any questions or concerns.

Pros, well it's been a better investment than we imagined, so far. Because of our location, we've been able to keep an occupancy rate of 89% for each yr (we've owned it since 2012).

Cons - Expenses are much more than on your run of the mill buy and hold property. Here's a recent thread where a member asked to list our expenses: Vacation Rental Expenses. Since we provide the unit furnished, there's also the extra cost to replace items due to wear and tear. We are replacing our sleeper sofa this year and it's only about 5 yrs old. We buy new sets of sheets, towels, beach chairs and other items every year. We had a new water heater put in this January. Because of the climate there, most of our fellow owners there change out the water heater every 4-5 years. Don't want a water heater to leak or blow while a guest is staying there. So lots replacement and preventative costs.

As you accountant mentioned, tax classification is important and the amount of days you personally use it is very important. You can use the property 14 days of the year or 10% of your occupancy days and have the property classified as an investment/ transient property. Lots of great tax breaks such as mortgage/ mortgage interest, expenses to maintain, travel expenses to maintain, insurance, PM fees, credit card fees, etc... If you let family or friends stay for free, that counts towards your 14 days. If you rent it out lower than market value (giving 50% discount to friends for example) also counts against your 14 days. If you break the 14 day/ 10% rule, then your property is classified as a second home and there goes all your tax breaks. I'm no accountant, so please make sure to go over these numbers with your accountant.

I hope this info is helpful. This is our only vacation rental we own and we've only had it since March 2012, so we are far from being experts on this subject. Let me know if you have any further questions and I'd be happy to answer them!

Looks like my link to our VRBO listing was removed. A previous comment asked for the link and I apologize if I violated any rules as I wasn't trying to promote or advertise.