All Forum Posts by: Tom Dean

I've been keeping my eye on San Antonio a bit as it seems it's going through a correction and potential for cash flow may be increasing. It seems potentially possibly to get a property for 150k that can rent for $1500 a month but this is just from reviewing listings without seeing anything in person. (any feedback on that estimate is appreciated BTW). Wondering if people see the correction accelerating through the winter? Could this be a time to pickup a decent property for a bit of a steal there (at least relative to how crazy high the market has been recently).

Interested to connect with realtors there who work with investors also.

Why would you have someone start a huge project like this without agreeing to a price beforehand? I can't even comprehend that. The only times I do anything like that is when I'm paying them hourly and then I pay them each day so there are no disputes. I'm not against hiring people without a solid estimate for the whole project but then it just means the work is paid based on an hourly / daily rate and I get daily updates on the progress and I watch them very very closely. I've had projects like this where it went fine for a while, was almost done and then we get into some disagreement and then I fire them on the spot and just pull someone else in to finish. Usually it's something like that I feel they are trying to milk the project for extra time when it should be just about done and they start showing up for half days half-assing it while clearly starting another project for someone else.

Maybe with plumbing work that's not ideal but for most types of work its fine and they have accepted it, they got paid for the work they did so there were no further disputes. In my experience you have to deal with contractors in person, be on-site and be a bit of a tough guy, you have to know enough about what they're doing to constantly call them on any BS, even if you're not an expert you can usually research enough to keep them in line.

I'm looking into possibly doing BRRR in OKC area but I'm not sure I could find deals on the MLS, my budget for the property purchase would be under 100k, ideally under 80k so wasn't sure if that's enough? I do have experience with significant home renovation but for a personal residence, based on my experience with this I would prefer to buy a property built after 1970 if possible but not sure if that's realistic, the only deals I could seem to find from the MLS are very old houses which I know often brings more challenges with the renovation.

Would appreciate any references or suggestions anyone has, so far I've only invested in rental properties that were already in good condition bought with a loan. Thanks

As I've mentioned, tax savings is not my primary motivation, I already own two LTR's and I do know quite a bit about LTR investing, you are correct that I'm not as familiar with the str markets being discussed though. With my LTR's they are mid tier for the market and in areas that have had consistent appreciation for years (before I bought it and have continued after my purchase). To me, mid-tier houses are likely one of the best long-term appreciation investments because they are sought after by so many people in that market, a smaller percentage of people can afford luxury houses and also they may be more volatile but there's always demand for the mid tier price range for the average Joe.

I consider myself a serious investor, my LTR's are in a place I would otherwise never travel to, my own preferences and opinions on the location are meaningless as this is purely a long-term investment decision for me and I won't allow personal preference for a location to impact my decisions. The reason I like the southeast is that I feel there's population growth in that region and long-term trends of people moving there, not because it's where I live or prefer to be personally although there are parts of the southeast I do certainly love and enjoy.

You don't need an operating loss to get tax benefits with depreciation and mortgage interest writeoffs, I'm not sure why someone would ever take on an operating loss for tax benefits, that makes no sense. Being at a slight operating profit or break even is completely fine with my though as I'm not looking at this as some get rich scheme, it's a long-term investment.

Based on this, I'm looking now more into getting a more utilitarian STR targeted at business travelers where the goal is similar to my LTR's, getting long-term appreciation and mortgage pay down and making enough cash flow simply to cover repairs.

I know this isn't the usual STR approach as most are going after high end vacation spots, etc but to me this strategy is low risk as I'll make sure the numbers work so that I can convert to LTR if needed.

I've been researching this quite a bit and am looking into acquiring an STR that I would actively manage and would keep average stay at 7 days or less. I would like to meet the requirement of spending over 100 hours on it yearly and spending more time than anyone else.

I realize this is a complex concern so just looking for general advice here based on the experiences of others.

I would manage bookings and client communications aside from maybe an on call service for at night. I would use cleaning services but it's my understanding I could use more than one company over the course of the year to limit how many hours one company spends on it.

I'm looking into a utilitarian STR more for business travelers, so this won't be one where everything is perfect, it's bound to accumulate wear and tear I think.

The STR would be out of state, but I plan to travel there for probably two weeks a year where I would perform many repairs myself. Possibly fix furniture, etc if needed too. Also I would shop for whatever new furniture is needed, work on landscaping, etc. It's an active business, not passive so I believe that requires continually evaluating the property, adjustments to decor, etc may be needed as well to make sure I'm fully optimizing the property.

I have a lot of home renovation experience from my own personal home and my LTR's already so I'm very used to this kind of work. I would only hire out for major work I can't do myself or emergency repairs.

I've dealt with older houses before and the house may be fine for occupants but there's still usually lots of things that can be fixed / improved so it seems a house that isn't perfect would give more opportunities for ongoing maintenance of this sort.

To me it seems fairly straightforward to meet the time requirements but I think I need to have extensive documentation? Would taking before and after photos of everything I do help? I'm trying to plan this out as well as possible to avoid any issues down the road.

I've seen the stories where people run into issues meeting this requirement and get scrutiny from the IRS, to me it seems the two biggest red flags might be when they hire a property manager and also when they rarely go out to the property to work on it themselves, always relying on contractors. But not sure if I'm overlooking anything else that would cause increased scrutiny.

Also, to clarify, my overall goal with the property is simply long-term wealth building through mortgage pay down and appreciation so I'm not targeting properties with very high cash flow thus the focus on tax writeoffs. From what I've been looking at I feel that properties that are mid tier for the market, rather than high end, can often appreciate very well as they are sought after by a large segment of the local population.

I've researched this a fair amount, from what I understand there's an exception section 469 of the tax code that says if you actively manage the str and have an average stay length of 7 days or less then it's treated as an active business and the income is therefore not passive and expenses are able to be written off against W2 income. I've seen other posts on bigger pockets that discuss this as well.

Interesting, thanks for the reply, yeah I would imagine there could be potential in smaller towns for relatively frugal accommodations that are well located as it would still beat a hotel. I'm not at the level where I can buy like a 450k+ property and then spend a bunch of money furnishing it so it may make sense to just take the risk on trying an STR in a more regular town and make sure the numbers still work if I need to later convert to LTR. I've stayed in places like this myself before while traveling but back then I never looked at what the market was like in those places.

No, as I mentioned I have LTR rentals but it's becoming difficult to keep buying these when I don't get any immediate tax benefits from them, I've bought two in the last 2 years and had to put out a bunch of money to get them ready, etc and not one cent of that is a writeoff for me until years in the future when I actually have passive profit. MY LTR's are mid-tier for their market and have minimal cash flow at the moment so it all gets eaten up by  repairs and manager fee, my goal with these is mainly long-term appreciation and eventual cashflow as rents rise. Meanwhile I live in a high tax, high COL state. Tax writeoffs are a big motivator for sure but not my sole reason for being in real estate. My overall reason for being in real estate is long-term wealth building as I have a decent job for now so I don't need real estate revenue to live off of.

It sounds like investing in a condo in a place like Branson may be one of the only viable options for me, basically I'm looking to diversify to have more than just LTR's at this moment. I really like LTR's but I understand that STR's can cash flow better, to me an MTR just seems like a lot of extra work and money upfront while still being viewed the same as an LTR for tax purposes.