Friday, June 4, 2021

149 Short Term Rentals | Passive Wealth Show | Hard Money Lenders

Since the pandemic, it has been an issue on whether you should invest in short-term rentals or not. Are short-term rentals only viable for destinations? In today’s episode of Passive Wealth Show, Bill Fairman and Wendy Sweet of Carolina Capital Management will deep dive into this relevant topic. Timestamps: 0:01 - Should you invest in short-term rentals? 0:42 - Quest Trust - Trillion Dollar Investment Mixers (May 25th at 6:30pm CT - https://us02web.zoom.us/u/kb7SciOHFV 1:26 - Introduction 1:35 - https://www.CarolinaHardMoney.com 3:06 - Advantages of short-term rentals. 6:20 - Due diligence & short-term rentals. 7:19 - Monthly income on short-term rentals. 8:44 - Expenses to consider for short-term rentals 13:36 - Master Lease 16:13 - Newly bought mobile homes by Wendy & Bill 18:12 - Bill & Wendy’s course on short-term rentals 18:45 - Wednesday With Wendy: https://calendly.com/wendysweet/wednesdays-with-wendy?month=2021-06 Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the "Small Builder" borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and "Ground-up Construction Loans" for investors only in NC, SC, GA, VA, and TN (some areas of FL, as well). As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.

Subscribe:

https://thealternativeinvestor.libsyn.com/rss


Visit our website:

https://carolinahardmoney.com


YouTube Channel:

https://www.youtube.com/channel/UCYzCFOvEt2n9TchgECLwpww/


Facebook:

https://www.facebook.com/CarolinaHardMoney

 

Listen to our Podcast:


-------------

Bill Fairman (03:06):

I want to talk about my first and foremost advantage of short-term rentals over a term is there aren’t leases, which means you don’t have to evict people who don’t pay you. The sheriff can come and throw them out as soon as their time is up. So that part, you’re not going to worry about the government coming in here.

Wendy Sweet (03:34):

There’s different ways to do short-terms too because there’s people that do one-day rentals, three-day rentals, five-day rentals but there’s also that short-term, that falls in between the 30, 60, 90 days like in rock hill — we’re where we are.

Short-term rentals within three miles of our office here in downtown rock hill. In fact, the pandemic was a good thing for our Airbnb business because we stayed full. We had cancellations in the very beginning, but we stayed full in fact that March, April, May, and June of last year were the best months we’ve ever had. We stayed booked because traveling nurses, crews, that are coming in to do work, we had engineers from Columbia, South America coming up and staying with their families.

Now that people were working from their homes, they were able to travel and go and just stay in the short-term rental to be able to go someplace different because they were all tired of being in their house. But they were able to work right out of the short-term rentals. So it doesn’t have to be a destination. And I think people are kind of looking at that.

Bill Fairman (05:00):

There are homes in the middle of nowhere in the country that are on Airbnb because people would like to get a chance to get away from it. There are homes in any town in the USA. There’s a few things that are always going to be constant. People are going to get married and people are going to die.

Bill Fairman (05:30):

My point is usually there’s some sort of family get together and it’s expensive to have a whole family in a hotel. You don’t want to be crammed into one room,  and you don’t want to get a bunch of different rooms. So it’s a lot cheaper to have a house. 

Rock Hill is known for its AAU, sporting events, soccer, and BMX bicycle. It’s only a few exits from Carowinds. There’s a lot to do for the family and if you have a place where you can have what sleeps 8:00 sleeps 11:00, it works out well.

Wendy Sweet (06:19):

A dear friend of mine who’s my king city mastermind has two short-term rentals in a dinky little town called Monroe, North Carolina way outside of Charlotte and is doing really well with it.

She found a property in Charlotte and it’s in a neighborhood in the outskirts of Charlotte and it’s a house that’s already been renovated — she found a good deal. It had some issues underneath the house: the piers underneath the house were dry stacked that showed up in the inspection, that’s not a big deal. It’s been there since 1940 and dress back works just fine. It did have some water issues underneath, a couple thousand dollars to fix that and that’s it. But it was renovated and it was really cute on the inside. It’s probably worth $170, $175.

Wendy Sweet (07:18):

She’s going to try to get into it in the 150-ish, 155-ish range, to see if she can get a hold of it. Her normal rent on that property would be about $1,100, maybe $1,150.

On that particular property, it has a three bedroom and one bath. Now, she can more than double that by being short-term rental. So she’s saying, “Should I buy this house?” Well, let’s go through the numbers. If you’re in at say $155 and you can get $1,150 for rent, what would your mortgage payment be? We figured that out that she would make an all in with taxes and insurance and everything she had to pay. She’d be putting out about $750 a month on that and she can rent it for $1,100 plus.

Bill Fairman (08:16):

So that’s a seven to 8% cap rate somewhere.

Wendy Sweet (08:21):

You don’t cap rates on single families.

Bill Fairman (08:25):

You don’t understand that we tend to think about return on investments. Most rental properties in the Charlotte market are, and if you’re going, multi-family they’re probably going to be in the 6% to 7% capitalism.

Wendy Sweet (08:42):

Let’s say she’s at $800 a month with her taxes, insurance, and the mortgage payment on it. She could normally get about a hundred or $1150 for it. So that’s a pretty good return.

Now, if you’re going to Airbnb it or short-term rent, you’ve got to add your monthly cable — your internet. I don’t do cable in houses so your monthly internet payment is going to be for utilities.

Bill Fairman (09:13):

You don’t have to have cable. If you have a smart TV and internet, then they can use that. Most people have their own streaming services.

Wendy Sweet (09:24):

That’s why we use the internet only. It needs to be a good internet because a lot of people are working. They want to make sure they can get online and have good download and upload speeds. We do the internet, you’ve got to add the power at utilities. You got to get the yard taken care of, you’re going to have to put that in there. So now really you go from 800 a month to about 1100 a month, really on what you’re paying. 

If you’re sitting at about $1,100 a month, when you rent short-term, you can count on doubling that $1,100 for a house like that’s kind of a no brainer. You’re going to use a 50% occupancy when you’re running your numbers on it. What most people do, we will call an extended stay hotel, that’s nearby two or three extended stay hotels and see what they’re charging per room for their extended stay. You want to come in just under that because that’s really what it is. That’s who you’re going up against. And remember, even in an extended stay, you might get two bedrooms in there, but not normally in your house, when you’re renting your house, you’re getting two to three bedrooms, possibly four plus you’re able to put people on a sleeper sofa so people can get a lot more folks in one house.

Bill Fairman (10:47):

The only thing you’re missing in a house versus a hotel is that country or service.

Wendy Sweet (10:56):

That’s exactly right. You do have the extra cost of furniture to put furniture in, depending upon how you’re going to decorate it. It’s going to cost you between $3,000 to $7,000 depending on what you do. 

I put money into my mattresses. I care about my mattresses. I use those beds in a box so I care about the beds a lot. I also wanna make sure that I’m using nice sheets, nice thick sheets because if they sleep well, they kind of overlook everything else, look past everything else I should say. 

I also like a nice little outdoor area with the plastic inner on deck chairs, a little fire pit in the backyard, and a gas grill. They are happy campers when they have stuff like that.

Bill Fairman (11:44):

There’s plenty of estate sales and auctions. Every week you can pick up all the stuff. That’s not because most of your people that are bidding on these estate sales or they’re picking out the antiques are their shops,but they don’t care about the stuff that’s newer. That’s pretty cheap.

Wendy Sweet (12:09):

You can paint anything. If it isn’t your color that entails that doesn’t really match your colors, who cares! Take a can of spray paint and paint it. It’s easy stuff! The thing is, people tend to love the funkiness when you decorate something. Something just a little odd.

I talked about a friend of mine, Pam Whitworth. She got me into short-term rentals six years ago. You walk into her house and she’s got a Volkswagen VW door leaning up against her fireplace. It is the coolest thing I’ve ever seen and everything in the house is like it’s just really strange. People love that. You wouldn’t have it in your own house but it looks really cool in short-term rentals.

Bill Fairman (13:03):

She has an old Airstream trailer that’s about as big as this room and she has a clawfoot tub in the back.

Wendy Sweet (13:10):

It’s super cool. They just do really neat stuff. When you go to a destination, you have to understand that destination has ups and downs. They have seasons. You don’t have that in you and her house next door.

Wendy Sweet (13:45):

A couple of years ago, I rented a couple of apartments that were in downtown Rock Hill. They were industrial apartments that were located upstairs above stores. They were really cool, and very nouveau-looking. There were really cool brick walls and all that but the place itself wasn’t that nice that countertops were laminate. It was an older appliance but we decorated them really funky. We did great business out of that.

When we rented that I told the management company right up front what we were going to do and the way I sold it to them allowed me to do that. We’ve got cleaners coming in every week that are cleaning these apartments. We know when cabinets are going to be loose.

Wendy Sweet (14:35):

We know if there’s something leaking, we’re on top of it. It’s better than when you’re renting it to a long-term person because somebody’s checking on it on a regular basis. When you’re arbitraging, which is what that’s called when you’re renting somebody else’s place in there, it takes you a few months, maybe four to six months to get your clientele built up and you just start making money in the second half of the year. The owners of the apartments realized what we were doing, and wouldn’t let us renew the lease and started doing it themselves. So be careful who you tell.

Wendy Sweet (15:14):

Yeah, you should always tell them what you’re doing.

Bill Fairman (15:17):

Otherwise you might be breaking your lease. You may not be able to sublease. And that’s what they might consider.

Wendy Sweet (15:25):

Same thing with a condo. If you’re planning on writing any kind of condo, you gotta read the guidelines there, HOA, covenants, and making sure even in neighborhoods. You need to make sure that you’re allowed short-term rent. The other thing too, they may not want you to do below 30 days, but 30 days and up, that’s a very good type of short-term rentals to do. Plus our county, like in our taxes for our county, what they collect and occupancy tax, they only will make us collect the occupancy tax in 28 days or less. If somebody stays 29 days, then it’s considered a different type of rental. We don’t have to collect the occupancy tax on that, which is really nice. Everybody’s different though.

Bill Fairman (16:13):

Wendy and I are purchasing a single-wide mobile home on a salt-water canal in Inglewood, Florida, which is about 20 minutes by boat to the Gulf of Mexico and all the beaches. It’s really one of the things I discovered while I was doing my research, they have some KOA campgrounds in the area and there are people that will take an RV and they’ll add a porch to it, or an extra sunroom. Now they’ve made that RV a permanent structure.

Bill Fairman (16:51):

Those things are for sale. You rent those out like an Airbnb depending on where it’s located, there’s going to be seasons in Inglewood, Florida. 

For example, if it’s below Tampa, it’s going to be warm all year. Their high season is going to be during the winter, but you’ll still have people that’ll come camping in the summer because it’s hot in central Florida. If you can go to the coast and go fishing a lot, it’s still gonna be cooler than in central Florida. And you’ve got all the water to play in too.

Wendy Sweet (17:29):

There’s a lot of experience out there that people are looking for rather than just where they’re going, tiny houses. I’ve got a tiny house in my yard at the farm. My partner, Darren has a whole complex of like 12 tiny houses that he’s doing up in the mountains. They’re doing tents on a platform. You can even camp, you throw in a fire pit and people are camping right there in your yard. It’s crazy what you can do for the short-term.

Bill Fairman (18:00):

When I say we’re going to put together a course on short-term rentals, we’ll have actual case studies in there and because we’re doing it, we’ve actually taken our old office, which was a house built in 1902. Beautiful Victorian with a wraparound front porch, turning it into a duplex and then we’ll rent both sides out as well.

Wendy Sweet (18:35):

On one side and three bedrooms.

Bill Fairman (18:38):

We’re going to put a course together and we’ll let you guys know when it’s available.

No comments: