All Forum Posts by: Tom Kastorff

Thanks @Shelby Pracht. Assume you know Arwen? She is my main PM and has been great. MRB is just stuck in the 80s-90s, and I was on MRBO after that, they outsource too much. Vacasa focusing on building out their own full in-house managed staff was the deal maker for me. Too many horror stories of outsourced housekeeping that caused headaches, as I am sure you are well aware of in Mammoth. Hard to keep good staff around. Hope you and your business is doing well! Also fingers crossed for this big storm in March :) 

@Brian Dudash no worries, just giving you a hard time to think from all angles. I used to sell insurance, so I know things happen. But they are very small % likelihood. If you own property you need to protect yourself, but only if you truly have a ton to protect and don't have enough up front (insurance, safeguards) in place to protect you. Just having a true SFH rental, not many reasons to need more than $1M insurance, maybe $2M if you really are paranoid. Most accidents that happen at a property will be that tenant's issues or their own insurance (theft, slip and fall, etc.). You are really only worried about catastrophe that somehow comes back to the property owner. Really only something I would get worried about if I had tons of assets to be sued for.

@Joshua J Cawthorn asks a lot of great questions. OP your questions are far too wide ranging and generic. SD is a huge town with 4+M people, dozens and hundreds of neighborhoods. Get more specific. What do you want to buy? Own? Manage? What deal size? $400k condos or $1M beach properties? BRRRR or rentals or flips? We are not here to walk you through every angle dude, we have **** to do. Get more specific. I've lived here my whole life, and aside from my main residence, I do not invest here and likely never will. Too expensive, and frankly incredibly competitive at super high price points. I literally see wholesalers driving down my street every day, taking photos, marking houses, and get mailers by the day. It's a tough place to invest. Tell us more about your goals and we can help. It's a great market but tough on cash flow and slim on real "deal" opportunity IMO.

@Brian Dudash are you a multi-millionaire? Millions in assets and cash and properties? So much in the bank you cannot sleep due to paranoia? 

If not, probably a $1-2M GL policy or umbrella is plenty to protect you. Talk to an insurance agent, or your CPA, whatever makes you feel comfortable. The insurance guy can tell you what typical claims in his area look like for homeowner / rental policies. Not many ways for a renter to need to sue for more than $1M unless someone drowns or dies horrifically on your property due to YOUR property or malpractice. I really think the talk about LLC and protection is overblown for the average buyer.

Best answer. First of all, if you can market time a recession, kudos to you (OP or whomever), I look forward to watching you nightly on CNBC as an overpaid talking head that guessed correctly. Everyone else has failed the last ~5 years when they thought "the next one" was coming. Meanwhile my VTSAX Vanguard index fund made 31% last year for a six figure investment income. Crazy recession! 

Otherwise, I believe Nicky's comments are spot on. The country has small dips / recessions every decade, anyone on this site should be 20-30 years old or older and have gone through at least one or two. It's life. But are we likely to have another "Great Recession" complete with banking meltdowns and sub prime mortgage crisis and all that death? No. I wouldn't be selling anything unless you bought something you shouldn't have, or cannot afford. Typically a small recession does not cause rents or travel to go down too much. Again, the people that -might- suffer as owners, are folks that put themselves in bad business situations. Business as usual for me. Probably even hoard more cash over the next 12+ months to wait for buying opportunities for those desperate to sell "fearing some huge recession" is coming. You can read more into Warren Buffet's mindset about buying when others are selling. 

Sorry @Mark H. Porter, just not believable as apples to apples PM for 6%, no PM can make money at that rate if truly full service (photos, run your listing, promote to airbnb for STR, cleanings, manage maintenance, taxes, etc.). You have a link to your prop managers website? Even for turnkey multifamily I see 7-10% and that requires far less work than an STR (no photos, no listings, just collect rent).

@Shelby Pracht and I are talking about the same ski town. So, Shelby I am an owner with real world Vacasa feedback for you. Your rate is very competitive. I was on MRB before, from when I bought my unit, and they were low-end and terrible website and advertising, made you drive into their office to pickup / dropoff keys, too old school for modern rental clientele. Vacasa bought out one of the larger PM's in town and has cleaned it up and hired a solid team. So far I am pleased. They are pretty much a tech company, and they have it down pretty well, but their website does lack some functionality that a tech company should have. They are still growing. 

@Brian what I will say about breaking even / in the red - I have not been on Vacasa program for a full year, so I cannot make a decision based on a full year's breakdown of income vs expenses. My prior 2 years were either in the red or close. The main reason I dumped my last PM was due to extremely poor summer rental vacancy, so all the profit I made from winter went down the tubes in summer, through shoulder season, until snow hit the ground again later in the year. Vacasa had my place super rented out (80%+) this last summer, so I believe I should be well into the green when looking at a full 12 months P&L on their program. But make no mistake, any STR with 25-30% PM fees AND a good size HOA fee (which any mountain town will have because of snow removal) will cause your expenses to be much higher than a typical rental. Thus for a vacation rental of this style, you cannot base the purchase off LTR because in a place like Mammoth an LTR income is peanuts compared to STR off the bat, not even close. The only way units in Mammoth can be profitable are if you pimp them out, have prime location, and get top STR rates. Also currently Mammoth you cannot STR a SFH, only condos, so again, every location has quirks. A SFH would be much easier without HOA, more rooms, private jacuzzi, higher rates. I have been eyeballing another property here for several months, but so far none of them would be profiable by my numbers. I have started considering properties in 3 other locations instead. I would prefer to buy again in Mammoth because I know the market, have a system down, have a team of people I trust there, but the market is a bit frothy and many properties are way overvalued right now.

Also, I bought the place to use it and rent it out, so LTR is always out of the question if that is part of the business model. I have renters that pay for my family to have a ski condo, and the place is appreciating while the mortgage is being paid down. Win win. I am looking to do the same thing in Palm Springs currently. 

@Brian Tustin, I am currently doing exactly what you are trying to do: long distance vacation rental hosted with Vacasa. I did a ton of research on this, and cancelled a contract with my first agency to switch to Vacasa.

Folks in this thread talking about 6-10% fees are talking about different products. Period. In most true vacation rental towns, options are limited, and conditions usually mean 20-30% management fees. In the ski town where my place is, 30% is actually pretty decent, some are 40-50% which is ludicrous. No one can make profit from those.

Vacasa is a full turnkey vacation rental company - they take all the photos for you (very high end, and free), have a linen program, do the cleans (charged to renter) with in-house cleaning crews, manage the listings, manage keys or door codes, push the listing to all the other vacation sites (airbnb, vrbo, homeaway, etc.), take all the revenues, pay the local taxes, and then cut you your profits once a month. You do very little. They only call me when something big happens, they don't even call me for the little stuff (changing bulbs, fixing a light, small plumbing), I just see it on my monthly statement. They have a local management crew, with an area GM to run operations, and their own in house cleaning and maintenance teams. I find that very advantageous in the ski town I am in, as other PM's have outsourced these functions and had a lot of issues with quitters and no-shows. I wanted a PM with in-house ownership of employees. So, do research on the town you are buying into, and the Vacasa team built around that town.

After a bumpy start, I have had no issues with Vacasa since last spring. I would give them a thumbs up. I have no plans to change PM's at this time, or try to self-manage Airbnb from long distance. Not worth it to me.

I would say, for many vacation rentals, the break-even / loss statement is sadly not far off. I doubt most owners in the ski town I am in, make money. You have to really buy low, keep costs low, keep nightly rates high, and keep the place booked, to make a profit with PITI + utilities + HOA + PM fees. I have mostly been profitable but not by a big margin, because we do use our place during season and enjoy it as a vacation home, it is not just a pure investment vehicle. But like @John Morgan, mine has already appreciated considerably, and I am in process of doing a cash-out refi to pull some cash and buy another property. So, overall it's been a success. You just have to run the numbers tight and accurately.

I am also local to you (and I know Moniker well) if you want to chat or meet up some time to talk further. Sounds like we have similar goals.

-T

From the conference website

Saw in another thread there would be roughly 1500 tickets avail.  

Good add-on thoughts @Jeff Davis. I am open to chatting anytime if you want to ping me. Some reactions to your inputs:

If you plan to STR in PS, you have to add 25-30% PM fees to your gross estimates. Period. Unless your mom lives around the corner and wants to manage 30-150 cleans and maintenance checks a year for free, that is not going to work. I'm a momma's boy but I doubt my mom would put in tens of hundreds of hours of work for me for nothing. So no matter how you slice this, you will need to pay something somewhere. This sector is the biggest eater of margins and can decide a profitable holding versus a loser. I see no logical way you can go from $800/mo cash flow to only $500/mo factoring in PM fees. You have to take 25-30% margins off the estimated gross rents. Something like this as an example of a simple SFH purchase in PS with PM fees.

$600k SFH purchase price (decent 3br/2ba with pool in walkable area)

25% down 4.5% non-owner occupied loan rate = around $3000/mo PITI allin

let's say you can do 1% rule on $600000 place is $6000/mo in gross rents which would be awesome for PS ($72k a year, way above avg)

$6000/mo * 30% PM fee = $1800 fees = $4200 left net to you

Add in for STR you pay all the utilities - power, pool, gas, heater, AC (summer in PS baby!), pool cleaner, lawn, maintenance, cable, internet, netflix

How much will you really have after $4200 minus $3000 PITI minus all your utilities and expenses and factoring in maint / capex / etc?

Probably not $500-800 ...

And $72k annual gross on a $600k house in PS is likely VERY generous. Prob closer to $50-60k annual gross

Also I didn't even factor in the $944 annual permit cost for STR in PS, and the 12% town TOT taxes you pay on every rental. $$$$

You will need a lot higher booking rate to make money.

Some data to chew on.

Open to chatting anytime. As you can see I have been doing my homework too. If this is the route you want to go - SFH rental - I would call John D, that is what he is doing with volume. He can probably steer you in a better direction. I am trying to stay away from the SFH model.

Thanks @John D. I will give Wheelhouse a 30 day trial when the time comes. Appreciate the insight. Agree on the need to steer/guide just to make sure, too many big events in PS to overlook and miss out on revenue.