All Forum Posts by: William Anderson

Sean,   you have found what many have discovered, the price is not always the reason why people rent or do not rent STRs.  It's the marketing, luck, and lots of other factors too.  An example:  I own a townhome, one of four near the beach.  We would put it up for about $300 per night.  The person who owns the other three has him at various rates testing the waters.  One is at $250, the other at $350, and the other at $425.  He has found that they all rent at about the same occupancy.  They are all identical in size, bedrooms, etc. decor is just slightly different.  

You are welcome.  Most of my days are spent helping others.  I bought my first 4plex with my brother using the document I described.  

I have done many of these ventures. All of them involve a specific property. The only one that did not involve a property but was created to buy properties was with my brother. We used the same LLC agreement because it does not specify properties. An LLC agreement is a partnership agreement. You attach a sheet listing the buying or equities or properties that the LLC owns.

When you buy a property create a separate LLC using the same agreement changing the names but the 100% owner will be the LLC partnership. For each successive property, a new LLC lists the business partnership as the sole owner.

I recommend that you spend a few dollars with an attorney once to get started then use the document the attorney creates for future projects.

Michael, I could not avoid replying as your name is the same as my son who also lives in the LA area.  There are lots of good recommendations on this site.  Before you jump in anywhere be sure to have six months of reserves.  This is critical.  Stuff happens, that's the life you are getting into.  

If you have sufficient reserves to start, you will not have to take money from your current income to support your investment. There are lots of basic business strategies that are part of being an investor. Treat your project as a real business from the start. File for an organization e.g. LLC. Open a business checking account and a savings account. Obtain a "business" credit card, don't use your consumer card. Always keep your business accounts separate from your personal. When you close on the property flip it into your organization for protection.

You live in an extremely expensive area both in terms of property cost, property taxes, and income taxes.  You are right to invest elsewhere.  I made my first pile of money when living in CA years ago and took it with me when I moved to the Mississippi Gulf Coast where property here costs far, far less.  A couple employed at a fast food place working full time can own a house here.  

Good luck "son".
 

July is our biggest month.  How is your year looking on the same basis?  When discussing income, I use a 12-month average because July is about 4 times the revenue of June which is the next best month.  It sounds like you are doing well.  

If you want to drill down, create a spreadsheet for every month of the year.  Create four lines under this for every 4 weeks.  

Drop down further and repeat the process and do it one more time.

You have three sections.  Use the first to indicate the number of nights in each week of each month.  Use the second to determine the price per night for that week.  The third section indicates the total dollars which multiply the price x the nights.

Take the total$ and insert it into your master budget sheet where you break down utilities and other expenses by month. 

You will have the potential revenue by month, occupancy rate, etc. You can drop those numbers into one of the online calculators. The problem with most of the ones on the web is that they do not accommodate STR. You have to take your totals from the spreadsheet above and enter total year revenue to get their systems to work right.

When I work with clients, I leave no stone unturned when it comes to an accurate analysis.  It takes time to analyze rental income in an area but once done, your analysis can apply to many available properties.  I have tried some of the online tools and found them wanting.  Create your own tool and your own process for analyzing your next investment.

Include of course some of the great info on this forum.

Keep in mind that you found that one so you will find another.  There are always good deals.  You should be prepared when you decide to seek out the next property but if after running your analysis the hairs on the back of your head stand up, walk away.  It's hard to leave emotions out of investing but frankly, there is almost no room for emotions.  It's all about money so if the numbers line up and the inspection looks good and more important, you feel good about the deal, lock it up.

Who has ever said that there are no risks in real estate investing?  A key reason most of us are or will become successful investors is that we were willing to take a risk that someone else does not.  Our gain, their loss.  

Consider getting your first one to cashflow first.  Experience operating STRs will help with financing in the future.  Financial organizations will discount 25% of gross so if yours is not cash flowing with 75% of gross, it's a drain.

Could be several reasons.  You paid too much, you are not charging enough, the size/type of property is not ideal for the location, etc.  If you do not have your website to help market, set one up.  Continue to use ABB and VRBO along with your website.  Write good blog articles on your site to draw traffic.

Set a time, if the property does not improve with all of your changes, sell it and move on.  Look at it this way, the earlier you get your mistake (if it is one) behind you the better. 

I purchased a house built in the 1920's for my office, its located in an area where many professionals have purchased and turned these great old homes into offices.  I also own a vacation rental built in 1880 and another in 1905.  This is what I look for.

1. Copper wire, replacing the old steel wire with insulators.

2. New panel with at least 200 amp service

3. Pex, plastic or copper pipe.  Iron pipe and galvanized should have been replaced

4. AC fitted to the house with ducts rather than window AC units.

5. Modern water heater, preferably natural gas if available (insta hot units are good)

6. Original windows are ok (mine are original) as long as there is weather stripping 

7. Check the floor for elevated homes, look for wood rot 

8. Make sure the sewer system is free of tree roots

9. Check the foundation for cracks that are serious

10.  Basements should have been remediated for Radon and moisture

Other than the above, go for it. For STR, people love the character of those old homes. You can have modern fixtures and electrical without destroying the original character.

Improvements are not factored by this lender. From a value perspective improvements may not move the needle depending on what they are. Without an appraisal I can't see any lender approving removal of PMI.