In the short-term rental riches will discuss investing in real estate with a specific focus on short term rentals quick actionable items to wire. Scale your portfolio I’m your host Tim Hubbard.

Welcome back to the short-term rental riches podcast today we’re going to talk about 3 reasons why you should say no to a deal and this is going to be in regards to a deal that’s already in the market you want to be in and that makes sense and fits your budget so 3 reasons and questions ask yourself that might lead your answer to know to make you pass on the deal let’s jump right in. So I know what it’s like when a great deal comes along the perfect deal it looks awesome it seems like the numbers make sense it’s in the right market it’s got so much potential in eagle motion only attached I know I’ve been there I’ve been there a lots of times but sometimes we’ve just got to say no and there’s some certain things we’ve got to ask ourselves and those often lead to no no no no does not make sense and we’ve got a pass on it so I want to talk about 3 different reasons why you would say now that I want to tell you real quickly about 2 deals that I’ve passed on recently myself one of the U. S. and one down here in Medellin Colombia so let’s jump into number one and I know I talk about this a lot but it is the most important so we’re assuming you’re already in a market that makes sense the market has good fundamentals population growth strong employment all of those things in this property this potential property meets your budget but that doesn’t mean that it makes sense as an investment and the numbers are gonna tell you that so we have to run the numbers we have to we have to at the end of the day it all comes down to numbers and numbers tell us what to do so what numbers we’re talking about we’re talking about the rents or the potential rents and again I always like to run my properties on a long term basis first before I consider converting them to shore terminal so that’s what I’m talking about here so does your mortgage and your insurance and your property tax in your management and potentially till these 2 all those expenses on a long term basis equal less than your potential rent now if the units vacant well then you’re gonna have to look up rent Compson the area and be conservative if you’re looking a larger deals over 4 units you might have a nice fancy fluffy looking pro forma in front. Yeah that’s what commercial brokers use to sell commercial properties or apartments over 4 units and we’ve got a whole episode on that jump back and take a look but essentially if pro forma can be a bunch of bull it’s just a bunch of fluff it’s not the actual numbers so we need to do our due diligence and that is step one now the smaller deals are going to have the pro formas but there’s plenty of data to run now the second step as a short terminal investor that’s runner potentials on the short term rental side and you can do that with their DNA.CO they’ve got a lot of great data also by looking on OTA’s like Airbnb in the army in your neighborhood see what they’re running for that’s number one that’s the numbers I don’t want to continue to the labor that point because I talk about that a lot but that is the most important so there’s 2 other things we really want to consider here maybe you found this potential property it’s an awesome market that has great fundamentals the numbers seem to make sense it fits your budget but. You don’t have the time to do it that is a real consideration that you need to make you could find a fantastic deal as a ton of potential but you don’t have the time to put it together to manage it to renovate it or that’s the other side of this second point is the work that it needs maybe it needs a lot of renovation are you experience with renovations do you know how much to budget for that those are things of course we can always learn but they could be the reason why we say no to a project especially if you’re investing remote in a new market and you don’t know anyone and you’re looking to do a renovation and that could be a little trickier it’s hard to find good contractors these days especially if you’re in a market that you don’t know so be realistic about the time involved for this deal and again for looking at as a short term model do you have the time involved to transition this long terminal that has long term tenants in it to a short term I don’t do you have that time to furnish it and do all that or do you have the time just to simply find the people to help you with the property of course you can need a little more money if you’re not doing a lot of it yourself so that is the number 2 reason is time and worked in vault. Hey Hey just want to ask you guys real quick favor if you haven’t already left this review if you wouldn’t mind heading over to iTunes or Spotify wherever you’re listening to the podcast and just leave us a quick review we really really appreciate it and if you know someone that you think would find value in any of the episodes that you’ve listened to you could just take a screen shot send it over to that’ll help them but it’s also going to help us grow a little bit too and lastly we’re on YouTube so if you prefer you to you can head over to short term rental riches and you can find us there as well thanks for listening and thanks for all your great feedback. Let’s jump back in. The third reason. Is sort of a broad one it’s basically unknowns there are things that are hard to know in the beginning now our due diligence helps answer mosis questions so our physical due diligence property inspections roof inspections plumbing inspections whatever inspections you need if there’s any issue on the property and it seems like it could be a big cost down the road then you’ll want to have it inspected so we can figure out a lot of unknowns but when it comes to the short term rental world there’s a few others that may still be unknown what if there’s no short term rental regulations in that city yet is it a conservative city is at a more liberal liberal left sided city while you’ve got I considered that that that’s possible there’s no restrictions or rules in place it doesn’t mean that there can’t be in the near future so we like to invest in places that already have those rules established so we know that they’re available so that is an unknown if there are no regulations in place yet now if your trying to start a short term rental on a vacation or remote area and there’s no other data to go off of there’s no other short term rental comms well that can be another unknown to in that could make it a little riskier so most places now you can find pretty good data with air DNA or just by going on Airbnb and as we know Airbnb is are all over the world they’re everywhere in the few spots that they’re not well they’re coming soon so but that is an unknown so consider that so those are the 3 things number one basically numbers numbers tell us what to do number 2 to have the time to do all the work and number 3 are there some unknowns that make this deal little too scary to do so those are the 3 just to kind of sum those up into deals that I turned down recently and one was in the US. Is actually not a property that was going to purchase some came to me with a lease arbitrage deal if you guys will listen to the podcast for awhile you know that almost all my properties I own but I did sign a lease for 10 units and it’s working out really really well it’s crushing it actually it’s making a ton of money and someone came along and said Hey I heard you’re doing this other deal do you want to rent my 16 apartments and and really nice area of town the brand new construction for the long term and so I went through negotiations as was also happen to be with a commercial broker that I really want to work with he’s like the ultimate multi family broker in this city and I and I met him before so that was really nice he was easy to negotiate with but in the end it didn’t work out so he had a price that he want to rent them for I had a price that I thought was the Max amount that I could pay now a few things about this deal there were 16 units in a slightly different neighborhood in the city that I haven’t rented before and because the price that he wanted for it was so much higher than the price is going to pay coupled with the uncertainty of how many gas I was gonna get in there I had to say no on fortunately and there was a lot of great things about his brand new construction you did a great job on it look nice walking distance to amazing restaurants I mean I was getting attached to this thing it was a great opportunity it just didn’t make sense in the end the numbers didn’t make sense and there was also a time involved there you know I would have coordinated all that remotely from Colombia where I am right now but it just didn’t work just slightly too risky we even talked about outs you know like if it didn’t work out that I could get out of a lease without any risk but I wasn’t willing to invest for the 16 units maybe $7500000 and furniture. Of course I don’t want to mess that and then 3 months later find out that it just didn’t make sense and I had the 3 months and time in there so I passed on that 10 by the way I mean the the the longer were in this game this real estate world the more deals are going to come across your table the quicker you’ll be able to say no to them but you will have more of them will be more to look through so another 1 I’m down here in Columbia and I’m really excited about the opportunity to do my first development I’ve been researching the market I’m going to be partnering with a good friend of mine that’s just finishing his development of course we’re still making offers more in the we’re in that process so who knows if this is going to go through this year but at some point something like this is gonna happen so fantastic fantastic lot for sale in. The best part of the whole city I’ve I’ve been spending a lot of time down here years you know and I’m a real estate guy so I’ve done a lot of research fantastic location I was emotionally attach the location I I still am but this is a risky deal this is the bill the big big development like you know 15 stories plus would be demo owing to properties are already in the area and there was a lot of up front money for this so we we made it a great offer based on the amount of value that would be able to get out of the property and that really comes down to how many meters would be able to build going back and forth with the owners we weren’t able to work that out and fortunately the our bottom price was just too low for them but there’s a couple other things that turned me off to this deal 1 was the architect that was working on the plans here to have the plans together he just didn’t seem like a really easy guy to work with so that’s important to consider especially if you’re looking at doing a longer project for looking at partnering with someone for several years is probably a minimum 23 project whatever whichever 1 ends up happening in so if you’re starting off on the wrong foot well you got to be careful there so there was that and then there was the up front cost it was gonna take about 9 months to get this license to know how much we could build and that whole time we would be paying the sellers like a monthly amount and if it did work out in the end we would lose all that and we’re talking quite a bit of a quite a bit of money here and time again so multiple reasons there why I had to pass on the deal the plans by the way are to put a lot of short term rentals in whatever we end up doing stuff that’s exciting I’ll keep you guys updated on that so it just keep these things in mind more deals are gonna come up don’t get emotionally attached I know it’s hard to do but that’s when our judgment starts to let us down a little bit and we don’t want to get into a deal that doesn’t. Makes sense because it could take quite a long time to get out of it so hopefully those few tips help you guys out hopefully you’re doing really well out there wherever you are in the world and I really appreciate you listening then I can’t believe we’re coming up on our hundredth episode oh my gosh. 2 years a lot’s happened in 2 years so until next time I hope you have a wonderful day. There’s so much money to be made the short term rentals but it all starts by having the right property if you guys haven’t yet seen my free ebook on our website rest methods.com head over there and get a copy it’s going to break down what I look for in a property in some great short cuts so that you don’t have to spend hours and hours researching at over rest methods.com and you can grab your free copy there if you want a crash course in everything I’ve really learned to short term rentals in over 5 years managing over 15000 Gasol recorded on our last live event I am happy to say we broke it down really nicely into a bunch of different modules that you can watch at your own pace it takes you from start to finish from finding a property we talk about analyzing the property but then also some of the more important pieces how to find your team and how to set up everything so that you can run your operation is passively as possible and free up your time you can find that it rests methods.com forward slash virtual.

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