All Forum Posts by: Timothy Gleason

@Arianne L.  Awesome creativity and congrats on the deal!

@James DeRoest.  I'll speak only on my own experience - I think these small meetups have immense value.  While the GCREA/PIG 'Corporate' meetups are great, I've gotten far more out of smaller/less formal group discussions, along the lines of this meetup.  My experience is that these small discussions are where the mechanics of deals are discussed, relationships are cemented and trust is built - all fostering a more collaborative and successful RE future.

I come to PIG every month, but I get more out of another monthly small-group discussion that I participate in. Like you, I'm struggling to find time to squeeze any more REI in my life, but on my end I see a clear value in these groups. I'm aiming to get up to Pace next go-round. Hope to see you there.

-Tim

There is a lot of insight in @Ryan Rabideau post, almost all of which I agree with. 

Valuation is tough on two fronts: 

First up is actual rental rates.  Just viewing the rates of competitors is akin to valuing property based on "For Sale" signs.  As an owner/manager, I'm often providing concessions that impact value - preferred check in/out times, discounts, repeat-guest incentives, etc.  These items are unknown to any competition shopping my rates page. 

Second issue is the expense ratio of the VR. My home is a SF waterfront home and one of the more expensive rentals in my local market. I'm not selling days in my home, I'm selling a temporary luxury experience to my guests. With that comes a high expense ratio. My home better be in tip-top shape, hospital-clean, and exude an air of elegance. Additionally, my guests have paid a high cost - they rightfully expect premium service and occasionally demand some extra benefits, which comes in many flavors...but always exerts a time or cost on my bottom line. Simply put - my VR has a much higher expense ratio than a condo on the same block, and much higher than a bread & butter SFR.

Lastly - I see the greatest risk to our market is local policy. VR's are usually located in affluent areas, and many neighbors are power-players in the community. In my case, my greatest risk is the stroke of my HOA's pen, followed by local regulations, and then Acts of God. On a macro level, local acceptance of VR's certainly impacts value.

I have a unique management structure that gives me an "edge" in this situation.  I handle all the bookings myself - I run my VRBO page and handle all care & feeding of potential and future guests.  This way I control my brand and can apply a personal owner's touch up front.  I do employ a property manager though - a large firm that manages 100+ rentals in my market.  Their usual management fee is 20%, but discounted for my arrangement down to 10%. 

So I pay 10% for them to be my "Hotel Front desk".  They take care of the contract signing, financial transactions, key pickup, and they're "on call" 24/7.  Basically, once I get a verbal commitment via VRBO, I link the guests up with my property management for booking admin.  Because of my manager's size, I have access to preferred contractor relationships.  Their economy of scale gets them head-of-line privileges with the essential contractors in the area.

A bonus to this arrangement popped this March with the VRBO booking fees.  Since I don't take payments via my VRBO page, my guests were not impacted by the rate establishment.

@Leigh Ann Smith Great point.  I noticed a lack of unified support for any home automation product line when I was looking to do the same thing earlier this year.  I attribute it to the 'feeling out' phase similar to that awkward Blu-ray vs HD-DVD time. 

For door locks, I'm considering the Schlage Connect product line, using a Wink hub.  I'm planning on running two systems simultaneously  (Two hubs, two door locks on different doors connected to two different routers).  In my experience w/ all things tech, "1 is none, and 2 is one."  I already have (2) internet routers (different brands) so my guests have backup WiFi if a storm knocks one offline and I can't get out there to reset.  Another great tip I heard is using the guest's last (4) of their phone number as their door lock code.  (A nice personal touch)

For thermostats, I use the Honeywell product line (non-touchscreen), and I've been happy.  They look like "Dumb" thermostats, and I would guess that 90% of my guests have no idea I monitor their set points throughout their stay.  Interesting point here- I find a VERY HIGH correlation between "Thermostat Abuse" (55 degree setpoints in July) and problem tenants.  It's been a great early warning indicator for me that I need to apply some extra attention to those guests.

If you have success w/ the door locks & garage doors, let us know!

Matt Holmer this is a GREAT question, one that I'm wrestling with myself. I haven't committed either way yet, but I see less exposure with the DOS clause. The liability exposure is potentially unlimited. The DOS has a very clearly defined exposure level (loan balance + new closing costs). Either option is generally slow (foreclosure 90+days). I'm leaning towards taking the DOS risk. I can find a lot of money in 90 days for a performing asset...but I can't afford personal liability exposure.

...this smells like a business opportunity for Milwaukee!  Could even be as simple as a reverse-ATM kiosk. (Put the cash in, instead of taking it out) 

There are subtle advantages to the BRRR concept, and @Lesley Resnick has nailed one of them - that profit gap that the flippers can't get excited about.

There are other advantages too: Say you can find a home on the 1% rule on the market. (1k rent, 100k purchase). That home is the equivalent of buying a used car - the HVAC could go out tomorrow, the roof has only 5yrs left on it, etc. The finishes might not be durable enough to handle rentals, etc. Now take a moderate rehab - replace the HVAC, windows, roof, and maybe plumbing or wiring, plus cosmetics. Assuming it costs the same (60k purchase, 40k repairs = 100k), I'd pick the rebab, and I'd rehab for a rental (Tile, low-maint landscaping, 5/8" gyp board, etc). That way I can coast on all the CAPEX costs for the next few years, and if I sell at the 5-10 year mark, most of my rehab work is still marketable.

In 5 years (when my loan is due), I repaint the house, plant some flowers, and I'm moving on to the next opportunity.  If the market doesn't support a sale decision at 5 years, I refinance and adjust to the market..

@Derrick O.  I own & run a VR in Pensacola Beach.  While not PCB, I'm sure some of my experience could translate to your area.  PM or email me if you want to connect.

 @Jeff Hink gave you a HUGE tip and one that I find true myself - a pool, or access to a pool is a MAJOR bonus and translates to lower occupancy and increased rates.  My home is 75yds from the Gulf of Mexico and is literally on a protected cove/canal (i.e. You can swim off a dock 30' from the back door) and I still lose bookings because I don't have a pool. 

@Brandon Turner  @Brie Schmidt  This is a great "Ask BP" topic, as the Family Dollar/PNM fallout/pullout has affected many of us.  Looking forward to some creative responses.