All Forum Posts by: Timothy Church

@Justin Anderson & @Karl McGarvey

Karl is right! The city of Galveston receives so much income from HOT as well as the economic boost of guests staying on the island that they aren't going to restrict STRs that way. Currently, the only places in the city of Galveston that have restrictions are those with HOAs. Galveston is a tourism market and we will always cater to that.

EDIT: As soon as I sent this, I got my email from the Parks Board about HOT. January, even though it is one of the slowest months, they collected $768,229.16! HOT is typically due quarterly so this is just a part of what they will get. Most months this number doesn't go under $1M. The city isn't going to stop this income stream from helping to improve the island.

Long term goal is stable cashflow with less risk. The part I'm on the fence about is that until the loan is paid low enough and there is a LOC in place, all that cash is essentially locked up. I am currently a personal guarantor on all of them excluding the Freddie Mac loan and would love to lower my personal reliability.

I guess the point becomes is it better to save up that money in liquid (aka after-tax) vanguard accounts and then bulk pay off down the line or to just put it straight towards the loan. I'm trying to balance paying off the loans with having accessible cash just in case.

Over the last few years of buying leveraged properties, I have amassed a decent amount of mortgage debt. I've decided to take a break from acquiring property (At least I say that. Who knows what will happen!) and to begin focusing on slowly deleveraging. The question is which loans should I focus on paying off versus sticking the money in Vanguard? Here is a loan overview breakdown.

Property           Amount      Rate       Term       Amortization

Commercial 1     $1.1M         3.6%      10 year      30 year           (Yay Freddie multifamily loans!)

Commercial 2     $480k          6%         5 year       20 year           

Commercial 3     $235k          6%         5 year       20 year

Commercial 4     $229k         5.5%       7 year        20 year         (Could be refinanced to residential loan)

Residential 1      $142k          4.5%      30 year      30 year

Since all these properties are down in Galveston, one benefit of paying off the loans is the control of the insured amount. We need flood, windstorm, and liability on all properties with loans. While I understand having insurance especially in a hazard area, I'd prefer to insure for closer to the amount that I'd actually be able to get or simply self insure. I'd rather have my insurance money going into a vanguard account than lining someone else's pockets.

Using VTI as a baseline, let's say the average return I'd get from index investing would be 9%. 

My original thought was any debt over 5% should be paid off first. With the lowering of insurance costs, I could make the case that these would near the 9% return. After that point, all investment funds would just be put into index investments. Upon payoff of a loan, an LOC would be opened just as a backup source of liquidity.

My question is at what percentage do I draw my line? Should I just keep them all and simply invest in vanguard and other projects? Do I just knock out these debts first and live off the returns?

I would love to year everyone's thoughts!

@Karl McGarvey Congratulations on closing! Should be able to have it running smoothly soon and kick things off with spring break. Hope it is a great performer for you!!

I've never done something that far west but I've heard good things! I currently manage about a dozen properties on the island but I am onboarding 4 this month! If you are looking on the island, let me know and I'd be happy to share my knowledge. I also have an AirDNA subscription for the island so I can generate some reports to give you an idea of potential performance.

Let me know if you make it over to the island and we can meet for a coffee and talk about the island

After lots of sanding, 6 gallons of watered down wood filler, 3 gallons of stain, & 5 gallons of poly, we have the first coat on our maple hardwood floors. They turned out great! We will be papering them tomorrow for safety and will put two more coats of poly on them after the rest of the house is complete.

The permitting process has been a bit like volleyball. Seems each time we submit they find another thing they'd like addressed. Back and forth it goes. We should finally be at the final submittal and hopefully have a beautiful piece of blue paper in the window soon! Once it is up the project should really get moving!

@Marcus Rios 

Galveston has definitely developed a lot over the last handful of years. Ever since the devastation of Ike, the property has been rebuilding and it has really shown in the last 4-5 years particularly.

The question becomes if you are looking to focus on a buy and hold or simply flipping these properties. Personally I am more of a buy and hold investor. When it comes to duplexes and triplexes on the island, it can be difficult for the numbers to work. While home prices have gone up, rents are still lagging behind. After you account for flood, windstorm, and liability insurance, as well as taxes and mortgage, the margins become slim. 

Now the STR market has still been holding strong as a great alternative to LTR. If you like the multifamily approach and want some stability of LTR, you might consider a home with a garage apartment or two. Since Galveston was built with alleyways on each block, there are many homes that have apartments above the garages. You can easily rent out the back apartments long term while running the front house as a vacation rental.

It all depends on y'all's plans. I'd be happy to give you more information if you can outline more of what y'all are wanting to do. Galveston can be a great place to invest if you do it right!

With the downstairs complete, we've turned our attention to upstairs. By pulling up the wood in the foyer, bathrooms, laundry room, & closets, we actually will have enough of the old maple to do all the floors in our house. We have started to transplant that wood and begin the sanding process. It is amazing the difference between 63-year-old stained wood and freshly sanded! We've decided to do the first round of staining before we build the walls. It will make the process of refinishing much easier. Hopefully will have the building permit for the upstairs soon so we can start putting up some walls!

@Bruce C.

It depends on the situation. On my commercial loans, I don't have to worry about seasoning the money. As long as everything else is in order, I can just use the money for the transaction. On residential, you have two options. You can season the money for a couple of months but you will be borrowing it and paying interest on it before you need it. The other option is having the funds personally ready and using the private money funds to reimburse after the fact.

I typically use private money lenders instead of hard money lenders. Hard money cost me too much!

Once you file your taxes, they should count the income. Obviously, if your Airbnb wasn't up this full year, it might not be a high enough income to make things work. Typically they will count Airbnb income that has been reported and taxed but will count future long term income with a lease in place.

@Tato Corcoran

Most of my properties were originally obtained through a bit of over leveraging. I borrowed funds from private money lenders to cover downpayment and upfront cost and either rehabbed and refinanced to pay them off or simply paid them down over time using the property cashflow and personal funds. It isn't the easiest way to do things and can be extremely stressful. You end up sinking a lot of time and effort into the property with no cash coming out of it. Now that I've paid off some investors and am wrapping up paying the others, they are finally cash flowing properly but it was three years of a lot of work with no return.

It is the same premise for this project. I took on capital and even still need to raise another $60k (yay for sprinklers!) but will refinance it this summer to pay back the debts. Till that time, I have to use my personal capital in order to cover things and keep the project moving but in the end it will pay off!