All Forum Posts by: Neal Z.

Quote from @Jake Theis:

I'm looking to start my journey investing in real estate. I'm a 26 year-old recent college graduate living in a college town in Stevens Point, Wisconsin. After finding Bigger Pockets and the concept of house hacking I knew this was the perfect way to get into real estate investing. Feel free to leave a comment if you have some words of wisdom for a newbie like me and/or are in a similar market and have insights you'd be willing to share. Cheers!

Get your hands dirty anyway you can. Start networking now.. Forums are great, but you'll also benefit from local meetup groups and other networking opportunities. Be willing to help anyway possible. Do this consistently. Like to an obnoxious degree (weekly at minimum). You won't have specific knowledge or insight to share with owners, but you have you're youth and hunger to do what it takes to succeed. They'll sense that and opportunities will likely come your way. 

My first deal was a "house hack" but, I didn't really get my full head around how to succeed in this until I was all in managing properties for guys ahead of me. With just one property, it means the problems come sporadically. Learning is slow. Helping a larger owner manage their portfolio will be like drinking from a firehose of solving problems. You'll learn a ton that way. 

Do you have a job currently? Can you qualify for an FHA loan? Get a pre-approval now so you know how much you have to shop around with.

Quote from @Cindy Wilson:

Quote from @Neal Z.:

Quote from @Collin Hays:

AirDNA isn't a useful tool; its numbers are usually wildly off.  To accurately gauge an area:

Go to VRBO for that area, and look at various homes, amenities, prices, and calendars.  Of course, the calendar is only useful for the current time - reservations within the next 30 days.  But start keeping track of that.  Next month, the next month, and so on, for one year.

I would never invest in an area where I couldn't study over a 12-month period. Because I have nearly 20 years in the Smokies, I have the luxury of knowing that market first hand.  But if I wanted to invest in say Palm Springs, I would need to spend a year really studying it.  

It is a whole lot easier not investing in something poor, than investing in something poor and trying to extract yourself from it later.

 Agreed, and do same with Airbnb for the area. AirDNA is just one piece of data. I know it's wildly off at times. Found many of my listings in its data and the numbers were so far off what my listings actually did, that it kinda lost me as viewing it reputably. Market wide data and trends I think are useful, but don't bank on the expected revenue figures for given zip codes. 

If looking for market to start in and you're in Chicago, why not look for areas within say an hour of there and see if anything might work. For your first unit, unless hiring outside management which means giving up 20% of earnings, you're going to have quite a hurdle to operate a place remotely.

I don't necessarily think looking at market specific data around the country and thinking you can just dive into that market and do well makes much sense. The local guys have the upper hand. 

I think you'd do better by getting in touch with guys in the business, seeing which of their properties perform well, figuring out why, and trying to find something similar will be best route. 

Each market has unique seasonality, amenity expectations, operational challenges, etc. You'll figure those things out much quicker chatting with operators in markets you're attracted to. 

@Neal Z. 

Can you clarify what you mean by ”I think you'd do better by getting in touch with guys in the business”. 

I have 3 LTR homes, considering my first STR in SanDestin.

Thank you,

-c

What I mean by guys in the business is people currently operating Short Term Rentals in the area. Either via Facebook groups or here if you can find people specific to market you're interested in. They'll be much more candid about how things are doing and how things have been historically. You'll also can a sense for their excitement for the future. 

They'll also help with specific nuances to a given market, i.e. average cleaning rates, pool rates, how easy finding help is, etc. 

Quote from @Michael Baum:

I am not sure what you can do. It's not like property management is something new and disruptive. It is a very stable and mature type of business IMHO.

Frankly just providing the best service with a lot of options is the best way to succeed I think.

Like @Andrew Steffens does.

Agree with Michael here. To add, I don't actively advertise management services and all my management deals have come via partners and referrals. I'm not offering anything "new". It's a relationship game. I've just developed specific knowledge in this arena. Personally set up and ran over 100 properties. I needed to solve the same problems individual STR operators face when operating. Build out systems and support staff that then make it easy for me to just plug another unit in. To be honest, I don't love management because you then manage the different owner personalities involved, so I'm very slow to take on just anyone's property to manage. When I have "competed" against another manager for a deal, I'm usually very passive about it. I give the owner everything he needs to know if he wants to operate on his own. I hide nothing and tell him exactly how to set it up if he wants to be relatively hands off. I'm also very conservative in my estimates on revenue projections which are near impossible to be accurate on. Other managers I've found sell the dream as if they have some super power to higher revenue. It's not magic. It's a marketplace. You put out the best product possible within your means, provide the best, most consistent service you can, and constantly iterate along the way.

Quote from @Collin Hays:

AirDNA isn't a useful tool; its numbers are usually wildly off.  To accurately gauge an area:

Go to VRBO for that area, and look at various homes, amenities, prices, and calendars.  Of course, the calendar is only useful for the current time - reservations within the next 30 days.  But start keeping track of that.  Next month, the next month, and so on, for one year.

I would never invest in an area where I couldn't study over a 12-month period. Because I have nearly 20 years in the Smokies, I have the luxury of knowing that market first hand.  But if I wanted to invest in say Palm Springs, I would need to spend a year really studying it.  

It is a whole lot easier not investing in something poor, than investing in something poor and trying to extract yourself from it later.

 Agreed, and do same with Airbnb for the area. AirDNA is just one piece of data. I know it's wildly off at times. Found many of my listings in its data and the numbers were so far off what my listings actually did, that it kinda lost me as viewing it reputably. Market wide data and trends I think are useful, but don't bank on the expected revenue figures for given zip codes. 

If looking for market to start in and you're in Chicago, why not look for areas within say an hour of there and see if anything might work. For your first unit, unless hiring outside management which means giving up 20% of earnings, you're going to have quite a hurdle to operate a place remotely.

I don't necessarily think looking at market specific data around the country and thinking you can just dive into that market and do well makes much sense. The local guys have the upper hand. 

I think you'd do better by getting in touch with guys in the business, seeing which of their properties perform well, figuring out why, and trying to find something similar will be best route. 

Each market has unique seasonality, amenity expectations, operational challenges, etc. You'll figure those things out much quicker chatting with operators in markets you're attracted to. 

Quote from @Zachary Cain Humphrey:

Quote from @Neal Z.:

Quote from @Zachary Cain Humphrey:

I would analyze an arbitrage the same as an owned investment. Replace the mortgage payment instead with a monthly rent payment, add up all other expenses, then subtract from your reasonably numbered monthly gross income based on market trends for nightly rates for your size property with similar design and occupancy rates of the area.

Once you get this number add up the yearly net income and divide it by total cash invested and you will get your ROI number to tell you if you think it will be a good investment or not.

Usually rental arbitrage units you want your ROI to be several notches higher than if you owned. For STR think 15% minimum and up on ROI for owned investments. Think 30% and way up for arbitrage investments.

imo Arbitrage gotta be over 100% ROI year one. Otherwise, not worth doing since you can't control a renewal for second year. Meaning, you have to recoup all your furniture and decor and set up expenses (invested capital) 100% before you make any money. Guess some could argue there's liquidation value in the furniture or use in other units, but I've found that to be negligible and not worth factoring into the deal.

 I would agree on a personal note I think a good arbitrage unit should be 100% return first year. I wouldnt settle for the risk of not recouping furniture first year unless the lease is multiple years. Overall I just dont like arbitrage. I had 3 units and sold them all . they were okay but a waste as I should have used all that money to do a down payment on a property instead. 

You get in where you fit in. Arbitrage got my foot in the door. Learned the ropes, introduced me to others in the game. That led to management deals and additional arbitrage opportunities that made sense at the time. One of those arbitrage deals I had 6 units with same owner when COVID hit, I got out, found long term tenants to replace me and that owner funded stuff for us to buy together. Why? Cuz I knew how to operate a STR, he didn't. His market was shut down, I moved to one that was open. I became the only guy who he could still do deals with when everyone he knew locally was stuck waiting for things to open up.

I guess my point is, deal has to make sense from pure analysis point, but I don't hate on guys just trying to hustle and make a buck doing whatever they can. Never know where it leads. 

Also, arbitrage is way less risk than buying. Significantly less capital and you get to run your test on a property or new market/neighborhood for a year and see with real numbers whether it's worth doing again. Sure, your upside is capped, there's no equity gained, it's purely cashflow, but 5-6 great arbitrage units can replace a full time income. You just have to be very disciplined in what leaseholds you take on. Need to know you have a healthy margin between your base rent and what you can generate monthly.

Years ago, I managed an account for a friend who leased a 4 unit building. Just 1 of those units did 20k monthly in gross revenue. His rent on that unit? 4500. Those types of deals are few and far between, maybe impossible now, but seeing that was eye opening for me. 

Quote from @James Carlson:

@Brady Ingledue

Agreed with all the above about not doing STRs in an HOA that doesn't allow them. Choose a rental strategy you can rely on and get in that groove.

@Neal Z. Yeah, I think something happened to Furnished Finder in the last year or so. Our medium-term rentals in Denver and Colorado Springs used to get solid bookings on there. Now they don't. It's all no-response people looking for a killer deal. 

We use Airbnb for our midterm rentals as do most of our MTR clients in Colorado. It seems to be the way to go for us. 

And I don't agree with going after the insurance agencies for MTR guests. Or, I should say, it shouldn't be your only tactic. My wife/business partner is kind of the MTR expert between us, and she's always saying, you don't care who your tenant is -- traveling nurse, displaced homeowner due to remodeling or home damage, remote worker, transplant wanting to figure out the city, etc. -- you care that you get a good tenant; that's all. So get on Airbnb, where the biggest pool of potential tenants are, furnish your place well and hire a professional photographer and you should be good.

(Also, total plug here, check out Erin's books on Amazon if you want more info on medium-term rentals -- Erin's Guide to Midterm Rentals and American Nomads are both solid.) 

 I've never done the insurance relocation stays, but, have heard from others they pay well. Since insurance pays, it's guaranteed money, which is nice. Plus, it's usually a family displaced due to some major issue at their house, meaning, they owned a house, paying a mortgage with insurance coverage, etc. That's plenty reference for me to take on as a tenant. 

Airbnb still best platform for biggest exposure to number of people. MTR, STR, whatever, everyone looks there these days.

Quote from @Zachary Cain Humphrey:

I would analyze an arbitrage the same as an owned investment. Replace the mortgage payment instead with a monthly rent payment, add up all other expenses, then subtract from your reasonably numbered monthly gross income based on market trends for nightly rates for your size property with similar design and occupancy rates of the area.

Once you get this number add up the yearly net income and divide it by total cash invested and you will get your ROI number to tell you if you think it will be a good investment or not.

Usually rental arbitrage units you want your ROI to be several notches higher than if you owned. For STR think 15% minimum and up on ROI for owned investments. Think 30% and way up for arbitrage investments.

imo Arbitrage gotta be over 100% ROI year one. Otherwise, not worth doing since you can't control a renewal for second year. Meaning, you have to recoup all your furniture and decor and set up expenses (invested capital) 100% before you make any money. Guess some could argue there's liquidation value in the furniture or use in other units, but I've found that to be negligible and not worth factoring into the deal.

Not saying that house is good STR... But, will be eye opening what some people have built out there.

Think I'm wrong on the 5 acre min, might be 2.5 to build.

Oakland Park can be a bit rough. Hence the reason there's deals to be found. 

No idea your budget, but you can set up huge resort style Airbnb's out in the Redlands of Miami. 5 Acre minimum properties, no noise ordinance, people let you be. Popular for venues, weddings, event spaces, etc. 

Houses are still just an hour from South Beach. 

Look up the Bacardi House in the Redlands.

If talking specifically from a mgmt perspective, will be no different than if you managed a property far enough way that you can't visit at drop of a hat. Meaning, gotta have some systems in place to oversee things. I'm assuming you're looking to self manage, otherwise, you'd just hire a reputable mgmt company in the area. 

When I go into a new market, I order everything to set the house up and fly out for the week. I get to know neighborhood, introduce myself to neighbors, try to feel out who can be helpful. Interview cleaners and be clear on what you need from them as they'll be your lifeline. Spend some time early AM at local hardware store and supply shops jotting down phone numbers of different trades posted on vans or on uniforms. You'll want a plumber you can call on short notice, handyman, etc. 

Set Up cameras, wifi enabled keypads to maintain direct oversight. 

Beyond that, it's how ballsy are you. If completely ignorant to how to operate short term rentals, I can't imagine my first being out of the country.