And then, the second bad fundamental Pookie just detailed right above:

- floating unhealthy amounts of debt

Oh sure, there are plenty of times when that works. And then, the many environments when it doesn't? Such as, say, 2020: when Cardone was making videos that got him sued, where he was unhinged?

Ol Jock 99 said:

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Interesting thread. What did you base your 75% occupancy on?

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As one MEEN Ag mentioned, AirBNB's in the area are renting between $200 and $300 per night. We could certainly charge the higher end of that range off the bat and accept a lower occupancy, but I feel comfortable underwriting 75% occupancy knowing that we are at the lower end of the range given our 3+ year history with AirBNB hosting. Also, assuming we lease up beyond 75%, I'll increase the price slowly over time to see how the market reacts to a higher rate.

Finally, as a word of caution, if you are considering doing this for the first time, you should underwrite a much lower occupancy for the first few months, as well as a rent rate at the lower end of the spectrum. Basically, nobody wants to take a chance on a new listing with zero reviews and pay market rate for it. But once you obtain Superhost status, or get above that 25-50 review range (we are at 125 today), then it becomes much easier to get bookings.

itsyourboypookie said:

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Ol Jock 99 said:

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Interesting thread. What did you base your 75% occupancy on?

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We only buy what will cashflow rented on a monthly basis. And try to stick to the 2% rent rule in everything we buy. I 100% agree with this. The Tabor deal above works for both.

We are closing on a 20 unit apartment complex this month for 680k. Will invest 150k into it. Gross rents will be $15,000 a month. This sounds like an awesome deal. Can you do a video or post about it at some point? Maybe several?

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Redstone said:

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Cardone's primary principle of business is fee structures for himself very much NOT IN LINE AT ALL with industry norms.

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You're talking about Cardone syndications.

I'm talking about his sales training.

Two different businesses

Ok. Let's take his sales training:

Did he violate federal securities laws? More than a few of those who paid for his products think so.

I'm not qualified to say....but let's watch. At a bare minimum, his fees structure is wholly absurd, his videos are even more absurd (and also got him sued), and his advise to load up on debt...well, I'm personally very negative on that. And then you have the Scientology stuff, where he is proven to have been abusive many times, if anyone cares to follow investigative journalist Tony Ortega for details.

one MEEN Ag said:

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Facebook marketplace is frugal. 10k ain't frugal. You might be deal hunting, but you still went to restoration hardware, not exclusive furniture (where low prices live).

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Well, Star Furniture, but I see your point.

I can understand picking up a piece or two on FB Marketplace ... I'm certainly not above shopping there.. But seems like it might be tough to outfit an an entire home that way, especially all at one time.

Not trying to be difficult; just trying to understand the finances. My experience with a vacation rental wasn't a good one (and I know others with similar experiences). So I'm always a little skeptical.

Redstone said:

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Ok. Let's take his sales training:

Did he violate federal securities laws? More than a few of those who paid for his products think so.

I'm not qualified to say....but let's watch. At a bare minimum, his fees structure is wholly absurd, his videos are even more absurd (and also got him sued), and his advise to load up on debt...well, I'm personally very negative on that. And then you have the Scientology stuff, where he is proven to have been abusive many times, if anyone cares to follow investigative journalist Tony Ortega for details.

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The syndication lawsuit was dismissed. Very valuable lesson about taking money from unaccredited investors though.

Cardone pays monthly on his syndications which is rare. The real money on every syndication is made on the exit, not on the monthly flow.

If your income comes 100% from REI like mine, the bonus depreciation is nice too.

Most low net worth people know nothing about the true benefits of what they invest in is.

Class A product, in class A locations is hard to beat though.

I interviewed him a little over a year ago and asked him about class A product vs affordable rent which is where he use to invest. His answers were good.

Red Pear Realty said:

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itsyourboypookie said:

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Ol Jock 99 said:

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Interesting thread. What did you base your 75% occupancy on?

---

We only buy what will cashflow rented on a monthly basis. And try to stick to the 2% rent rule in everything we buy. I 100% agree with this. The Tabor deal above works for both.

We are closing on a 20 unit apartment complex this month for 680k. Will invest 150k into it. Gross rents will be $15,000 a month. This sounds like an awesome deal. Can you do a video or post about it at some point? Maybe several?

---

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I'll get a playlist together on the others we've done. This one will be well documented.

Construction Budget Post

Here's our budget for turning this 2/1 into a 3/2. Again, we aren't moving any exterior walls, and we walked the house with our contractor prior to the option to get his take on feasibility of our plan before we even got out of option. This GC is a guy we've worked with a lot in the past, and I trust him completely. Could I maybe find cheaper labor elsewhere? Probably. But for the area, and the peace of mind that working with this one contractor brings, I'll pay it. Win, win, win.

For one MEEN Ag: As much as I enjoy construction, it just didn't make sense for me to do the work on this one myself. I could either do it myself, take 3 months, and save 75% of the cost, but lose out on 3 months of income, or I could pay someone and spend some more, but free up my time to spend with family or other revenue producing activities. So that's why we chose to go the GC route. Sad but true.

The Budget:

Framing/Drywall/Punching Holes Through Walls - $8,660
Tankless Water Heater - $3,725
Replace Attic Door - $687
Replace Old Back Door - $987
Plumbing - $4,150
SubTotal - $18,209

Not included in the above:
Toilet - $250
Vanity - $1,000
Shower Enclosure - $1,000
Subtotal - $2,250

Grand Total - $20,459

Estimated Final Cost Basis - $425,459

PS....anybody know a local artist that might be interested in doing some mini murals for us at the house? If you do, please send their contact info my way!

You mentioned the aged roof previously. What is ur plan for tackling that?

Also- what is ur exit strategy on this? Long term hold? Looking for continued appreciation in land? What is long term to you if so.

Do you have a contingency for a black swan such as what occurred in 2020 ?


Or are you advocating playing small and diverse in this segment ?

I read about a lot of bnb owners who bk'd bc their STR net income instantly went from anywhere to 10-20k monthly to 0. Lots were also forced to sell or got foreclosed because the drop in income prevented ability to pull equity on a refi to get through the event.

This dude did my mural. He usually does larger/commercial stuff so no idea if he'd be a good fit but maybe worth reaching out. https://www.eyefulart.com/

Also, I lived 1 block away from this house on Tabor St. for 16 years (til last year). Good friends of mine bought it and now live there. Great street/hood.

My wife and I started out with "house hacking" and used that strategy for our first rental. It was her starter home that we kept as a rental when we bought our first primary together. That primary was a 74' home that was original and we did a complete remodel of it while we lived in it for 5 years, we cleared $100k tax free on that one when we sold.

Our third deal was a BRRR of a 1910 built SFR converted into a triplex near the Pearl in SA. We purchased from a wholesaler in 2016 for $165k, we budgeted $90k and 8 months to put a new foundation, plumbing, HVAC and electrical and to put new kitchens and baths in. In reality it took us $150k and 14 months, including an extension on the hard money load, ouch. We very easily could have lost it all at that point but my HML is outstanding and worked behind the scenes to make sure we kept it. In the end we refinanced the house in 2018 and got all our $60k back and had all three units rented in 4 days once we hit the market, we self managed that 100%.

Fast forward to Jan 2019 when we sold the house hack above so we combined the house hack with the BRRRed triplex and we now owner occupy the 2/1.5 downstairs and have been operating airbnb's in the two 1/1's upstairs. We keep setting new best months and are averaging 91% occupancy, we're on pace for $55-60k in gross revenues on two 1/1 apartments in an investment that covers all our housing cost and even cash flow a little bit.

We are now faced with some indecision, I've posted about it here a few times but this thread really fits the question. We can refi, lower our payment and move out of this apartment which we can rent long term for $1800m while maintaining our short term rentals above. The additional rents would net us about $1500/m in cash flow. It's truly been a homerun for us.

The indecision comes in that the prices in this area are stupid right now. We are considering listing (wife is a Realtor) which after taxes we would walkaway with close to $200k and we can use 1031 to put the taxes into another deal. I am also gravely concerned about the disposable income people will have in the 3-5 year range and if the short term rentals will be viable. I also believe that owning 30 year debt at these rates is a GREAT hedge against inflation. I never thought I'd sell the home, it's truly a home run deal, but if the rule is to buy cheap and sell high it looks like its a great time to sell.

TLDR...use the BRRR combined with the house hack strategy for small multifamily to grow wealth FAST.

Quote:

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You mentioned the aged roof previously. What is ur plan for tackling that? The more I think about it, I'm leaning toward waiting out the lack of supply issues right now and doing this next spring. I have two quotes right at $8,000, so I'll probably time it right around refi time. It still has a few years left on it, but I'll definitely get a cheaper insurance rate if I replace it.

Also- what is ur exit strategy on this? Long term hold? Looking for continued appreciation in land? What is long term to you if so. I plan to refi this property at some point in the next 6-18 months, and cash out as much money as the bank will allow when I do it. At that point, my basis will hopefully be at or close to $0 (I'll explore this in another post), and it will continue cash flowing, even as a long term rental. So I have a "free" asset that cash flows, and I'll keep doing it again and again. Long term, I'd like to build a portfolio of 50-100 of these AirBNB's that I own (and possibly manage for others) and eventually explore the idea of selling them as a business someday.

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Quote:

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Do you have a contingency for a black swan such as what occurred in 2020 ? Or are you advocating playing small and diverse in this segment ? I closed on two properties in the Heights during covid. The first was during the height of the covid mania, and a LOT of people told me not to do it. It turned out to be one of the best investments I've ever made. Then we closed on Tabor a couple of weeks ago, putting it under contract before the majority of buyers and sellers realized how hot the market was in Houston. My biggest regret for this downturn is that I wasn't MORE aggressive early on, because I could have made a lot more money than I did. I played defense really well, and on offense, I'd give myself a "B". Next downtown, I'll be ready.

I read about a lot of bnb owners who bk'd bc their STR net income instantly went from anywhere to 10-20k monthly to 0. Lots were also forced to sell or got foreclosed because the drop in income prevented ability to pull equity on a refi to get through the event.

First, I feel for the lives and businesses that were destroyed because of COVID. I was very fortunate. As mentioned above, I think I played defense really well and was prepared for a downturn type of event. My AirBNB's were only down 1.5 months from March 15 to May 1, and after that, resumed normal booking activity. Also, my AirBNB's are roughly a third of my total doors, my basis in them is zero, and I could rent all of them as long term rentals and cash flow. I would advise others to have cash reserves (don't live paycheck to paycheck) and don't derive all of your income from one place. I have multiple revenue streams, so I didn't/don't worry much about going BK. If all of your income comes from one place (job?), you should definitely worry about this. Also, God Bless Texas.

Final thought here, I'd say the biggest threat to AirBNB's in Houston is governmental restrictions. I don't see that happening at the Federal or State level, but locally, the powers that be could make things difficult. I don't see a lot of pressure from them until long term rents get stupid and renters start blaming AirBNB hosts for their problem (long time from that happening here) or until AirBNB guests get so unruly as a bunch that neighbors get together and figure out a way to ban AirBNB (so that's on me to have responsible guests and keep problems to a minimum - so far, that hasn't been an issue).

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Quote:

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This dude did my mural. He usually does larger/commercial stuff so no idea if he'd be a good fit but maybe worth reaching out. https://www.eyefulart.com/. Thank you! I'm going to give him a call today.

Also, I lived 1 block away from this house on Tabor St. for 16 years (til last year). Good friends of mine bought it and now live there. Great street/hood. I just met one of the neighbors this weekend. He was drinking beer and working on his 1971 SS Chevelle. Really cool dude.

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mwp02ag said:

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My wife and I started out with "house hacking" and used that strategy for our first rental. It was her starter home that we kept as a rental when we bought our first primary together. That primary was a 74' home that was original and we did a complete remodel of it while we lived in it for 5 years, we cleared $100k tax free on that one when we sold.

Our third deal was a BRRR of a 1910 built SFR converted into a triplex near the Pearl in SA. We purchased from a wholesaler in 2016 for $165k, we budgeted $90k and 8 months to put a new foundation, plumbing, HVAC and electrical and to put new kitchens and baths in. In reality it took us $150k and 14 months, including an extension on the hard money load, ouch. We very easily could have lost it all at that point but my HML is outstanding and worked behind the scenes to make sure we kept it. In the end we refinanced the house in 2018 and got all our $60k back and had all three units rented in 4 days once we hit the market, we self managed that 100%.

Fast forward to Jan 2019 when we sold the house hack above so we combined the house hack with the BRRRed triplex and we now owner occupy the 2/1.5 downstairs and have been operating airbnb's in the two 1/1's upstairs. We keep setting new best months and are averaging 91% occupancy, we're on pace for $55-60k in gross revenues on two 1/1 apartments in an investment that covers all our housing cost and even cash flow a little bit.

We are now faced with some indecision, I've posted about it here a few times but this thread really fits the question. We can refi, lower our payment and move out of this apartment which we can rent long term for $1800m while maintaining our short term rentals above. The additional rents would net us about $1500/m in cash flow. It's truly been a homerun for us.

The indecision comes in that the prices in this area are stupid right now. We are considering listing (wife is a Realtor) which after taxes we would walkaway with close to $200k and we can use 1031 to put the taxes into another deal. I am also gravely concerned about the disposable income people will have in the 3-5 year range and if the short term rentals will be viable. I also believe that owning 30 year debt at these rates is a GREAT hedge against inflation. I never thought I'd sell the home, it's truly a home run deal, but if the rule is to buy cheap and sell high it looks like its a great time to sell.

TLDR...use the BRRR combined with the house hack strategy for small multifamily to grow wealth FAST.

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Could you put a heloc against that home, pull 100k+ equity out and keep investing? Or is that too much leverage. (honest question).

We have to refi if we're keeping it, it's in a portfolio loan right now. So we could take up to $80k or so out and keep the payment about the same. If I didn't have longer term concerns about the economy and people's ability to travel this would be what we would do.

Red Pear Realty said:

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Quote:

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until AirBNB guests get so unruly as a bunch that neighbors get together and figure out a way to ban AirBNB

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Pirates Cove homeowners in Galveston recently voted to ban all short-term rentals. They just amended their deed restrictions.

how does that work...aren't they part of the same HOA as Pirates Beach?

They breaking it down by section?

Diggity said:

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how does that work...aren't they part of the same HOA as Pirates Beach?

They breaking it down by section?

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Yes ... there was a movement by homeowners in Pirates Beach to do the same but it was tabled because I'm guessing they couldn't get the petition signatures to call for a vote.

Pirates Cove has far more full-time residents than PB so it passed easily there.

gotcha. I can see the logic. I'm sure they are sick of the non-stop parties that occur during the high season.

Diggity said:

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gotcha. I can see the logic. I'm sure they are sick of the non-stop parties that occur during the high season.

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We rented a really nice house down in Pirates Cove last summer (no parties)!. Shame that it's not available any more.

If I still had a rental in PB, I'd be getting nervous. When Sand N Sea was about the only game in town, the rental business was manageable because it was in SNS's best interests to keep it family friendly. Even in the summer, PB was relatively sleepy, at least in my experience.

But now, everyone is a free-lancer via VRBO and AirBnB and it's tougher to stop the big groups, prom parties, etc. The full-time residents -- the ones who sit on the board, etc. -- aren't happy.

If that happens, will just mean more business for Sea Isle, Pointe West, etc.

What's the climate for STR in Jamaica Beach?

bkag9824 said:

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What's the climate for STR in Jamaica Beach?

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Not really sure. Does Jamaica Beach have a lot of full-time residents?

What are the refinance requirements for something being used as an STR?

JobSecurity said:

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What are the refinance requirements for something being used as an STR?

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Some lenders won't lend on them at all. Others just want to see your STR income claimed on a tax return.

Great looking place!!

I help BRRR people all the time.
I am a hard money/private lender, we fund the purchase and repairs then refinance them if they need help. we offer long term (non bank- non conventional loans)

BRRR has picked up since finding profitable flips has become harder but you can fix and rent and build equity.

Monty

Yall all give me a shout when your ready to buy or refi. I've done several loans for RedPear customers, all closed on time! PM me if interested. We specialize in multiple properties and self employed, so don't be bashful, I am here to help.

Red Pear,

Are you a Ken McElroy fan? I've heard him talk about very similar topics on YT.