Latest / Short Term Rental Problems and Solutions / Two Managers Failed, Is It Time To Sell??

Transcript

Two Managers Failed, Is It Time To Sell?? · Short Term Rental Problems and Solutions

• Jeremiah Noll: Admit it. You expected your guests and contractors to act reasonably. Now you've realized it's not all sunshine and five star reviews. That means you're in the right place. Today we're joined by Steven. He's been dealing with Vacasa and another property manager and feels like it's time to cut his losses and sell. Listen in while we discuss options and help Steven build a plan for whatever will be best for his situation. That's because this is the community where we talk about the gross, the awkward, and the operational messes, as well as the real strategies that will help you keep going instead of taking the loss. Welcome to Short-Term Amount of Problems and Solutions. Let's get right into today's question. Stephen, thank you for joining me. Stephen Flecker: Great to be here. Jeremiah Noll: Awesome. So, ⁓ why don't you, why don't you tell me what that question was, ⁓ to kind of topic out our, our episode today. Stephen Flecker: ⁓ Well, I bought this house in ⁓ the Poconos. I was looking for ⁓ quite a while. I actually was looking for almost two years to find the right house that I was looking for. So I bought this about a year ago. ⁓ Needed some work ⁓ and I paid two... Jeremiah Noll: Wow. Stephen Flecker: 39 if I remember correctly. Put about 100,000, maybe 120,000 in renovations and improvements. And it was ⁓ ready to go, ⁓ interviewed a number of different ⁓ managers ⁓ Vacasa also seemed to come out on top. ⁓ I went with them and that was a disaster. They were just nothing like what they said they were gonna do. ⁓ They didn't rent the property much as ⁓ had said. They didn't rent it for as much ⁓ ⁓ we had agreed upon. ⁓ were supposed to be... or I was supposed to be hands off. They were supposed to take care of everything. They took care of just about nothing. ⁓ ⁓ everything, which I ⁓ mind, ⁓ I was paying them a lot of ⁓ money for not a lot of service. Was with for about a year, ⁓ switched. ⁓ Recently, at the end of 25, we switched over again after a number of interviews and whatnot. And speaking to different companies, went with a Luxury Lodging, I remember correctly is the name of their company, presented themselves as having a huge presence in the Poconos. Once I signed on, I come to find out I'm the only house ⁓ that ⁓ they had in the Poconos. had one, I think, in Pittsburgh, one in Philadelphia. ⁓ were two closest to the Poconos. ⁓ Again, hands off, paying them a lot of money and... ⁓ Jeremiah Noll: Wow. Stephen Flecker: everything from the amount of rentals to the dollar amount per night to the cleaning to just a complete disaster. Even their reporting was ⁓ a They didn't even understand their own reporting system. ⁓ They send me an owner statement that said I would be getting... ⁓ Jeremiah Noll: Mm-hmm. Stephen Flecker: $1,000 and I'd get a check for and then I would ask them why they couldn't explain it ⁓ It it was disastrous ⁓ I have decided that ⁓ It makes most sense right now if I can get the price that I'm looking for ⁓ which is ⁓ $335 ⁓ Jeremiah Noll: Mm-hmm. Stephen Flecker: ⁓ It makes sense to sell it and start over again possibly in the Poconos or maybe somewhere else I don't know yet but ⁓ my losses on this one and to ⁓ move the next to the next project Jeremiah Noll: Mm-hmm. Mm-hmm. Yeah. All right. That sounds pretty good. ⁓ unfortunately, lot of stuff that you've gone through is really not all that uncommon. ⁓ I've seen this over and over again, and it's part of the reason I'm also a property manager. don't just sell homes. but I'm not pitching property management to you. I'm not pitching selling. ⁓ this is really a, a ⁓ agenda kind of conversation. ⁓ want to ⁓ you about, what I've seen. ⁓ I over and checked out the house last week. I got some video. I'm going to be adding that to our YouTube episode. And, uh, for all you folks who are watching on Apple podcasts or on Spotify, we're going to try and present the visual side of this as well, but you're going to get the full picture if you look on YouTube. So, um, why don't we start with getting into what are some of the renovations that you did that added up to that one to one $20,000 range? Stephen Flecker: ⁓ Yeah, sure. I started with the outside, ⁓ just up. ⁓ There a few things that needed to be done even just to get the permits for rentals. up the deck around the house, the railings ⁓ and ⁓ some loose ⁓ Put a new barbecue there. ⁓ and created a fire pit, cleaned up the yard and put in a real nice brick patio ⁓ surrounding ⁓ the side and rear of the house. Hot tub. Thank you, thank you. ⁓ That was a huge project. We actually brought in 20... Jeremiah Noll: Yeah, that's a really nice patio. Mm-hmm. Stephen Flecker: 25 yards, I believe it was, of crushed stone, 50,000 pounds, something like that. And I moved it all by myself with a wheelbarrow. The yard itself was so uneven, we needed to bring in ⁓ a tractor to level out the ground first before I even spread the crushed rock. Then obviously put down about... Jeremiah Noll: That's a lot. Wow. Mm-hmm. Stephen Flecker: $8,000 worth of pavers. Inside, upgraded both bathrooms, ⁓ tile, shower doors, fixtures, ⁓ everything in there. ⁓ the crawl space, the crawl space had no insulation, insulated the crawl space, put in a brand new larger hot water heater. ⁓ did the simple things, the painting and that kind of stuff, upgraded all the furniture as well. some improvements in the kitchen, ⁓ the bedrooms, the lighting, the fireplace upgraded, the fireplace upgraded, the lighting, like I said, we built an owner's closet under the stairs. The staircase was actually an open staircase. So I closed that in, put in an owner's closet under there. ⁓ So. ⁓ We did a lot. We did a lot of work. ⁓ Jeremiah Noll: Yeah. Yes. It really does sound like it. 50,000 pounds of stone. That's, that's like two truckloads, you know, like two really big dump trucks. Stephen Flecker: Yeah, yeah, it was actually it was one big 18 wheeler truckload. Huge, huge, huge truck that brought it in. was a big pile. Jeremiah Noll: Wow. so this was under good management, what would you expect to earn on like a monthly or annual basis? Stephen Flecker: Everything that I've seen from both the management companies that have done some reports and research and whatnot, as well as the research that I've done, both other homes in the exact community, three bedroom, two bath, mine's technically a three bedroom with a loft. I don't see any reason why we should not be netting $50 to $60,000 a month. I'm sorry, I'm sorry, annual. I would love to do $50,000 a month. That would be beautiful. yeah, no, per year, I don't see any reason why, you know, 70 to 80 % occupancy, you know, Jeremiah Noll: Okay. Pretty year. Yes. Mm-hmm. Mm-hmm. Stephen Flecker: $5,000 to $6,000 a month should not be difficult at all. Jeremiah Noll: Okay, very good. How did you come up with your sale price of $335,000 to sell at? Stephen Flecker: Basically, what they were asking for when I first bought the house, I believe they were asking $265, $269, ⁓ which I felt was a fair price, but I was able to negotiate them down because it had been on the market for quite a while. And they were also looking at... Jeremiah Noll: Mm-hmm. Stephen Flecker: using it as a short-term rental. They had a bunch of houses in New Jersey and this was their first in the Poconos and they decided after sitting on it for a little while and not getting permits that they would just get rid of it. I was able to get them down, like I said, to, I believe it was $239. Like I said, put in... Jeremiah Noll: Mm-hmm. Stephen Flecker: $100 - $120,000 so even just the $239 plus the hundred is $339 ⁓ know if we look at their $265 ⁓ And $120 that I put in you know we're up to you know $380 so I think $335 especially with the potential of what this house ⁓ has it's Definitely worth $335 Jeremiah Noll: Mm-hmm. All right. Very good. So, ⁓ when I sell a house that's an active short-term rental, ⁓ there's a few different strategies that we do. You had indicated to me that you'd like to continue renting it until we can find somebody to purchase this property. Is that right? Yeah. So one of the things that I think is a good idea for any time, you know, you have limited access to a property is to give buyers a way to see the house without seeing the house, you know, and a lot of people will do. Stephen Flecker: Yeah, absolutely. Jeremiah Noll: these 360 tours, ⁓ it's a, sometimes they call it a Matterport or a Giraffe 360. I ⁓ a 360 camera as well. ⁓ just ⁓ ⁓ it for that purpose. what we do instead in Investment Real Estate of the Poconos, we create a video walkthrough tour. So we take short clips, of the best parts of the property, the biggest selling points. ⁓ And then we those in sequence from the hook and what's going to pull somebody in. to get to start watching this. So there's bonus points if it can go viral. That's not really the point. It's really there so that it can something that your buyers are able to see if they're not gonna be able to see the house. Because if you have renters there for a weekend like the 4th of July, that's actually when you're gonna get your most showings ⁓ when people are up here renting the homes for ⁓ ⁓ when they wanna start looking at houses. ⁓ mindset and tell me if you went through this as well. is like, they'll come here themselves or with some friends and they realize like, wow, we're spending like $1,200 for a weekend. Imagine if we just owned one of these houses and we were charging somebody else $1,200 a weekend. That's four weeks per month. That's $4,800 we raking in the mortgage on this place can't be that high. and they start looking on Zillow. They start seeing, oh my gosh, I can get one for $225. I can get one for $350. You know how much, how fast I'll make back my money. And I'll get to use it myself every now and then. So that's actually our ideal buyer. It's somebody who is not necessarily a sophisticated investor. They're just looking for something that's going to cover his expenses and they figure, Hey, the numbers should work out this way. What are some assumptions that that buyer is making that are not exactly accurate? Well, number one, they don't realize there's 9 % of that $1,200 is taxes, right? 6 % goes to the state for sales tax. 3 % goes to the county for hotel tax. Stephen Flecker: Right, right. Jeremiah Noll: And in some counties, it's even higher up in Scranton. think it's 9 % over in Luzerne County. It's five. So it varies within the state, but they think that $1,200 is all going to the homeowner and that's not even close. So after taking off that, then you've got Airbnb fees. Now that's if they booked on Airbnb. If they didn't, we can get into a different topic of other platforms, but on Airbnb, they're going to take 15 and a half percent. out of that $1,200, you now go down 9%. You know, another 15%. Stephen Flecker: So. Jeremiah Noll: And now you're left with what the homeowner gets, but they've got to take their smaller portion now and they've got to pay out all the pass-throughs. So where your house is located in Pocono Country Place, you've got $50 registration fee. to be paid to the community. and then you've also got cleaners. when you're dealing with cleaners in the Poconos, they always overcharge. Stephen Flecker: June. Jeremiah Noll: They all think that their time is worth like $80 bucks an hour and they figure it's going to take them two hours to clean your house. So they're charging you $160 or, or they, they figure it's going to take five hours to clean your house and they charge $200. So the prices just seem like astronomical, right? so in a lot of primary home ownership markets, like Philadelphia or, or Brooklyn, or even like Lancaster, right? Where one of my clients was from, um, they're getting like a full house, deep clean 4,000 square feet for like $500 bucks. So they're thinking, well, that's 5,000 square feet for $500. That's like, you know, how many cents per square foot? So my house in the Poconos should be relatively low, right? Like $200 bucks for a 2000 square foot house. And it's just not, and the cleaners that are out here, they seem to be always overcharging, but I digress. So out of that $1,200, we've got taxes that come out. We've got HOA fees that come out. That's the registration $50 If the registration goes in late, it's $125 total. And so then you've got your cleaner to pay and that's probably $250 to $200. So it's like $2 to $250 for that cleaner. And that's every single time. So now what you're left with for that weekend is maybe more like $600 bucks. And if you multiply that by four times in a month, they are at $2,400, which for this value home, you're like barely breaking even if that's what you're earning. and so their perception when they're looking to purchase these properties, we don't want to burst their bubble, right? We don't want to tell them that they're going to lose money on this property if we're going to sell it. But at the same time, ideal buyer is actually somebody who is already in town. they're having good experience staying at a rental nearby ⁓ and they're to look on Zillow to see what's available. And when they're in town, that's on that holiday weekend. So that's when they want to go see something. So they just click the button on Zillow. They find an agent who can show it to them. The agent's going to contact us and find out, ⁓ it can't be seen. So how do we still get them to see the house without seeing the house? We encourage them to drive by, not to stop in the driveway, not to slow down too much, because that might feel creepy to your guests, but we give them a nice video walkthrough tour. So that takes two, three minutes, very thorough, so they can get a good feel of the property as well as like a nice idea of what the layout is, the size of the bedrooms and so on and so forth and what they might be missing, right? So with that being our ideal buyer, like that's, that's the strategy that we take in order to get the home sold, even though it continues to be renting out. I do know of a few real estate brokers out in this area that will not list a property for sale. If it's actively rented, they will make you block out the next five weekends so they can have showings during those weekends. And then like two weekends out of every month after that, or they just say, take it off the market, take it off the market completely. there's pros and cons to that approach. And it's something for a homeowner to decide because it will get you sold faster. Even with the video, there's still some people who don't want to pull the trigger until they've seen it in person, right? ⁓ it'll also get you better quality offers if they see it in person, because sometimes buyers are willing to waive their inspections because they've basically done their own inspection by walking through and making sure that it's in good shape. ⁓ they can tell that the floor is not squishy, that there's not like, you know, crawl space issues. They can tell that everything seems and feels solid and it's kind of the feel that they have when they look at the deck, not under a microscope necessarily, but they squat down and they look at the joists and whatever. I've seen buyers make offers that are not contingent upon inspections after they've seen it in person. I've never seen that happen when they view it through a video, right? But on the positive side, if we're going to be rented, we can at least give them a video that makes them know that it's worth coming back. They might want to come back next weekend or on Tuesday, or maybe they have a day off on Wednesday or a half day. They can come over to the Pocono so they can see your house in person because maybe they don't have guests that day. So it's a matter of communicating. Any good agent is going to do that. It's the video tour. It's, suggesting a reschedule based on your calendar and what's available. And, um, like that's, that's the basic strategy that we use in order to get these homes sold, uh, you know, regardless, where a lot of agents will just. lower the price, you know? So, ⁓ the way we get to the price, we got to think about our competition. So there's a couple of different things to think through. One is what it would cost to build a new one, just like yours. So it's like your roof. You can't really go above that. If somebody's able to just build your house, from the ground up, so that's, that's ⁓ one value. Another one is appraisal and that's based on the number of square feet and comps. ⁓ And then the last one that going to look at is. the competition. Now this actually is the most fun part. I am honestly, Steven, this is the first time I'm doing this. I'm going to share my screen and hope this works. So hopefully you can see it. Do you see the MLS here? Awesome. So this first house, by the way, the filter that I put in here, this is anything that's in your community. That's three beds, two baths exactly. So it's gotta be the same layout and $335,000 or lower. So this would be your competition. Stephen Flecker: ⁓ I can, yep. Okay. Jeremiah Noll: All right, so this house is on Fairhaven Drive, 2914 Fairhaven. It's listed for $323,000. And you can see it's newly renovated, but it doesn't have any furniture. It looks like it has new flooring. new kitchen, everything's bright, very bright. We have vaulted ceilings. There's barely any wood in here, which is probably my biggest criticism. I feel like people who come to the Poconos want to see something that feels like a cabin, right? Where this is more like vaulted ceilings, but it's kind of a little bit too new. So then this next one, 2711 Starlight Terrace. This one's listed at $319,000. And this one also is furnished. Stephen Flecker: right. Jeremiah Noll: Do you see this photo here? This house is a very modern. It looks like a flip. looks like they took the time to decorate it intentionally with stylish furniture, accent walls, ⁓ bold, like black and white colors. ⁓ This house looks like it's ready to rent, right? Butcher block counters, stainless steel appliances. They've already got the coffee out there, floating shelves, and a picture of the house, like. Stephen Flecker: Yep. Jeremiah Noll: It looks like it's a drawing, right? That's, that's pretty incredible. So then if we go down to a 1355 Winding Way, ⁓ number one, I hate the color. This thing is like an orange red. I would get out of the way if this was behind me. ⁓ cause I would assume it's a fire truck. ⁓ but this looks like a nice big deck on the back. I see some hanging lights above that makes it well for, for Airbnb. That's a nice fire pit. You've got one of those. It's a nice fire pit as well. Stephen Flecker: Bye. Jeremiah Noll: ⁓ playground now, are we missing from these last couple of houses? A hot tub. This one has a hot tub. ⁓ the hot tub looks pretty basic, but a buyer is going to assign about a $10,000 value to a hot tub. They're considering that the hot tub itself might cost them six or seven grand. And then the install might be like another $2,000. ⁓ last two we looked at Starlight and Fair Haven. If you add $10,000 to both of ⁓ them. then like, you know, that, that's, that's my point. It's like, that's pretty much what people will be thinking. house though, ⁓ not really well decorated. If you notice like ⁓ tile is really kind of dated, the air hockey table looks like it's hard to get to. ⁓ the lights are kind of old. ⁓ just got, I don't know, like this ⁓ ⁓ couch. ⁓ nothing really special about this one. Stephen Flecker: Right. Yeah. Jeremiah Noll: And every surface is painted. It's painted white or it's painted gray. I'm not seeing anything really like cabin feel. I'm not really seeing anything rustic about it, but it does look recently renovated. So this would be another comp once it sells, it'd be another comp in the appraisal value. Um, 9246 Westwood Drive. We'll go through this one looks nice. It has an accent wall honestly, it just looks a lot like a combination of the last three, right? Where we've got new flooring. new furniture, well, the last one didn't have any furniture, but it's got like these, these looks to it. This one maybe has a little bit more character. I like the dark wood floors. That's a nice contrast against all the white. And then they actually put a color on the wall. Everything we've seen so far doesn't have any color to it. Where this one actually has a nice like blue hue ⁓ on that accent wall. And then we've got some updated lights recessed. Stephen Flecker: ⁓ not to interrupt you, I just just saw it on their wall. ⁓ I also put in one of those ⁓ HVAC ⁓ systems. ⁓ Split. Yes, yes. Air conditioning and heating system. ⁓ The house had no conditioning before and the heat was all electric, which was ⁓ horrible. ⁓ Jeremiah Noll: A mini split. Yeah. Mm-hmm. That's very good. Yeah, electric heat, electric baseboard heat is going to be your most expensive. Stephen Flecker: Yeah, so the mini split cut my bill in half. Jeremiah Noll: Nice. Well, that's what they advertise. So I'm really glad that worked out. the, uh, the, rest of this house, I mean, it looks fully decorated. It looks fully furnished. This is a turnkey property, except for maybe that ugly shower. Um, I'm not a big fan of those. I feel like they're very dated. I see them in almost every house in the Poconos. I don't know exactly why, but anything built between like 1975 and 1995 has that exact same. Stephen Flecker: Yeah. Jeremiah Noll: tub shower combo and they're almost never ever white. Now you can paint something like this white and it'll look at least a little bit better, but it stands out in this bath like a sore thumb. ⁓ so most buyers are going to look at that and be like, Ooh, I like the bathroom, but I think I have to upgrade the shower. ⁓ they go into, you know, the rest of these photos and they're like, man, at $300,000, this one looks like the total package. ⁓ the only thing I would say that they probably didn't do is they lost of that cabin feel ⁓ painting everything white. And they also lost, ⁓ should have done something with the brick, right? That old brick, just looks original to the house. I think it's adding much value at all. ⁓ All moving on to ⁓ 7042 Drive. This one's for sale for $296. Now this one has vinyl siding, some cool lights on the exterior. I don't really like the decor. We've got kind of a light gray and white going on for the walls and everything, except for we do have a dark wood floor. Looks like upgraded light but a big section of comfy couch maybe. This one's not really all that attractive. I think somebody might buy your house before they buy this one. The tiki bar is not something I've ever seen a guest get excited about. I've never seen a buyer get excited about these. if this was in the Bahamas or if it was in Puerto Rico, I like this would be like a must, right? ⁓ But are near Kalahari. We're near Great Wolf Lodge. Tiki just doesn't really go with that. Stephen Flecker: Well, it kinda goes with Kalahari, but... Little bit. Little. Right. Jeremiah Noll: Uh, yeah, Africa, the African theme. I guess so. Um, but all right, moving on to the next one, 9197 Buttonwood Court, Tobyhanna This one looks a lot like that last one where we've got, you know, basic furniture, upgraded kitchen, but still kind of basic. We do have a couple of accent walls. looks like two different beds. with the same accent wall. ⁓ no, those are different bedrooms. So they've put some stylish stuff into this. I really like that shower, that subway tile shower. That's not that different from yours. Couple different bedrooms. ⁓ This looks like a garage that was turned into a game room, but instead of going like authentic pool table, they went with the kit that flips over into a ping pong table. I feel like you should go one way or the other. Like get a really good ping pong table or get a really good pool table. Stephen Flecker: ⁓ okay. Jeremiah Noll: these things that do both, I don't think they do it well. ⁓ all right. Next house, 2330 Melody Lane. I'm moving through these pretty quickly, ⁓ just to save a little time. ⁓ when you look at this one, 2930 Melody, this is also three beds, two baths, but it's completely renovated. ⁓ ⁓ I was impressed, honestly, with this one and the price. It looks like it's got brand new gravel on the driveway, not even rained on yet. ⁓ the interior is all painted new flooring. Now the downside, this one's not fully furnished, but they painted everything. They've got some wood accents still, so they didn't get rid of all of that. ⁓ I feel like ⁓ an interior decorator could really do a nice job finishing this house off. ⁓ what's funny about this one is it's a split level. You don't see many split levels these days, but in these competition in the stack competition that I'm giving you. Um, there's like two or three of them. So they were a little bit more common in this neighborhood. The next house is 95 25 Jasmine Drive. And this one's listed at $289 and it's got this cool little ⁓ like swing near the fire pit, which I think is attractive. but it's not like a swing set. It's like a half pergola kind of thing with a swing that's built for adults, not really just for swinging. cool little hangout spot on that patio. We do have some bold colors in this one. I'm seeing like this dark blue, the fireplace brick was painted dark blue and it matches the couch, which is pretty interesting. I think it's a good choice. ⁓ still got the dark wood for the stairs ⁓ it contrasts nicely with all the white on the walls. I think a lot of people to go with white for all their walls because ⁓ want ⁓ be able to pick whatever furniture they want, right? ⁓ furniture will kind of match with that. I do like this accent wall behind this bed. And the end tables are like slabs of, of pine. That's pretty awesome. You know, issue I'm already noticing they've got window ACs. Stephen Flecker: Yeah, that's cool. Jeremiah Noll: So if I put up a house for sale, I prefer to get the pictures before the window ACs go in. Because if you have them in your picture, that reminds people that there's no central air. If you do not have them in your picture, they just assume that there's some sort of air conditioning solution. Stephen Flecker: Yeah. Right. Jeremiah Noll: So this bathroom looks kind of okay, right? It looks like it was renovated maybe 15, 10 years ago. And the jacuzzi looks like it's from before that. Like that that was kept and they just put tile around it. It's a nice layout and everything, but that jetted tub is really dated. And not only that, but to take a shower in this space, you've got to stand in the jetted tub, which has a high wall, you know, to step over. Stephen Flecker: ha ha Jeremiah Noll: And then we've got these brass fixtures for like, the drawer pulls handles ⁓ and the faucet, ⁓ but you've got nickel your showers. So they're not actually matching with their doorknobs and other other hardware. ⁓ it's not necessarily bad. A lot of people won't notice, ⁓ but in ⁓ some situations, people will just kind of feel like house is not quite finished. Like they did all this renovation, but they, they stopped short of replacing like doorknobs and some hinges. And honestly, that's like an expensive thing. Those doorknobs really add up. like at 30 bucks a piece for the designer ones. ⁓ which was another one of the things I was surprised by with that last house. Take a look at this photo. This is pretty cool looking. Stephen Flecker: Yeah. right Jeremiah Noll: this bedroom with the lights on the back wall. That looks pretty awesome. So like these things, that bath is ugly. ⁓ what's going to happen is a buyer is going to walk through a house like this at $290,000. And they're going to say, it's really good, but ⁓ need two new bathrooms. They're going to estimate each bathroom at like 10 to $12,000. You're going to say, so ⁓ this property worth, you know, ⁓ If I need to put $20,000 into it for new baths. And the answer is going to be no, not compared to the one on Melody. So they actually do look at each one exactly that way. They're like, well, in order to bring this one up to that one standard, then here's what I have to put into it. And so for the houses that don't have a hot tub, they're estimating, all right, I'm going to need $10,000 for the hot tub. I'm going to need $12,000 for this bathroom. I'm going to need $10,000 for that bathroom. And I need mini splits. So that's going to be another $20. So they look at like the house on Melody and they say that one's the total package. It's got furniture. It's got everything except for the hot tub It's $290. So let's just say it's worth $300 with a hot tub So what is now Jasmine Drive is, is not even close compared to that. Right. So that's kind of the buyer's perspective when they're looking at all these comps. And I've got a few more I could go through. I don't want to do all of them though. Let's just skip to Runnymede. This one I think is a lot of more closely related to your house. Now it's a Chalet. It's not a Contemporary style. And most of what we've been looking at is Contemporary, but look at this interior. The paneling is nice and dark wood. We've got, ⁓ you know, a kitchen that's a little bit on the smaller side, but it's still light. Our staircase, we've got a lot of this like darker hardwood. accents between the paneling on the walls, the staircase, and the layout is different than yours, obviously. Your layout's much different, but being a Chalet, ⁓ it's going to appeal to some folks. It doesn't come furnished, but take a look at these colors down here. So the lower level, we've got this like olive green and these hardwood floors. And that reminds me of your house as well, because you've also got character in the colors that you chose between the dark reds and the, the yellows and then your wooden floors. We also have, this is going to be a deal killer for this house for some buyers. It's a spiral staircase. Stephen Flecker: right right Jeremiah Noll: A lot of buyers hate spiral staircases and I feel like they're a necessary evil sometimes based on the layout. In chalets, typically they're not necessary. And so this house probably could have been redone with a regular staircase rather than a spiral. It's not going to bother everybody, but it's going to bother enough people that this house is going to sit on the market a lot longer. The other thing to notice about this one is these ceiling tiles. Ceiling tiles are kind of rare in finished space. So they're counting all those bedrooms and everything, but they still have ceiling tiles above. It looks like this photo is hard to place. I can't really see a door, so it's difficult to tell where that is located in the house. I'm thinking it's on the main floor and that they just took two bedrooms and turned them into one, one larger bedroom. Stephen Flecker: You don't think that might be the garage? Jeremiah Noll: this next picture, I'm seeing it from the other direction and there's a door there. I mean, it could be the garage. It looks like there used to be a wall right there in the center and that they opened it up. ⁓ they would have had to have closed up a door if there were two rooms here, but it's hard to tell. I mean, there's, there's times when it's a good idea and there's a good return on investment for consolidating two smaller rooms into one bigger room. ⁓ Stephen Flecker: in. Right, right. Right. Right. Jeremiah Noll: particularly if you're going towards like, you know, the smaller, more intimate settings for like a romantic getaway. You don't really need three bedrooms. If it's just a couple that's going to be staying at your house, but having a larger space, a larger bedroom would be, you know, much better than having a room that's not getting used at all. This bath isn't even close to yours. Like your bathrooms are so much better than this one. This is kind of like, this is a turnoff. This bathroom is a reason why somebody doesn't buy this house. This and the spiral staircase, right? Stephen Flecker: right Right. Yeah. Jeremiah Noll: Now, if we go down in price to $270, this house on Winding Way, I'm just gonna scroll through this really quickly. It looks like it's got a lot of square footage and I would say like average decor, average finishes. It is light and bright, but look how small that bedroom is. When you put like a queen size bed in a room and there's only like two feet to the side of it, or whenever there's a bed up against a wall. It makes buyers say, ⁓ that's a small bedroom. Just because the bed's up against the wall. It actually be better for selling to put a smaller bed in there, like a full size and a center it on a wall. Like people are used to seeing rather than have one leaning up against the wall because that's going to make them just assume that it's a small bedroom. Now, is it a small bedroom? Yes, it absolutely is. so there's not a whole lot we can do about making it look bigger, you know, wide angle photos we can take and everything, but, ⁓ If this house is going to sell on Winding Way, people are going to kind of complain about, not complain necessarily, but they'll, they'll remark to their agent about how small the rooms felt. With a rental, it's not always that big of a deal how big the bedrooms are. People aren't necessarily going to the house to enjoy the bedroom, right? That's just kind of where they sleep for the night. This is a cool bathroom, but it's definitely showing its age. I feel like that paneling on the back wall would be better with a new vanity, maybe, um, a backlit glass mirror ⁓ where it's got the LED and then a new vanity there for the sink would maybe make this look a lot more attractive. Those two little upgrades. And we're talking about a $500 vanity ⁓ and $175 mirror that gets hung on the wall. And then you're set. Like that would improve the value of this house because most people are going to think, ⁓ I need a new bathroom, $10,000. And what we're talking about putting in there is like, $900 bucks of work, you know? Stephen Flecker: right Jeremiah Noll: Anyway, so this one on Ventor Ventor Drive. Got to remember why I put this one on here. this one is incredibly poorly marketed. Do you see how all the pictures are vertical? Buyers don't see them that way. I mean, they do on their phone, but generally like they're looking through Zillow or Realtor.com or something like that. And images are going to get cropped. So there's going to be these big blank spaces on either side ⁓ and pictures are not well lit. There's no lamps in the rooms. Stephen Flecker: Yeah. Jeremiah Noll: So like, it looks like a decent renovation. They put in flooring and paint, but it's just so poorly marketed. ⁓ For the purpose of the podcast, I'm not going to show people who listed it, but I did look it up when I saw that house. This one has much nicer photos. This is Deerfield Road, 8948 Deerfield. But look at that kitchen. That kitchen looks incredible. The backsplash, the open shelves, the stone counters. Stephen Flecker: Yeah. Yeah. Jeremiah Noll: the new cabinets, the range hood. Like none of these items individually are expensive, but the way it's perceived, the way it looks, probably what I would do better if I was renovating that kitchen is better lighting, right? I'd want to have maybe some lighting that shines underneath those shelves, down onto those countertops. ⁓ But otherwise, like that's a, that's a beautiful kitchen. Refrigerator looks a little bit out of place, like it wasn't part of it. But overall, this is a nice property. Do you see that, ⁓ the fireplace? ⁓ Stephen one of my pet peeves. When somebody decorates a house for a vacation rental in the Poconos and they put like cattle, like a cowhide rug. Do you see that? That is so out of place. There's, there's like five cows in the Poconos. We are not in Texas. This is not shiplap. Yeah. You need a bear rug. ⁓ Stephen Flecker: Mm-hmm. Right? Yeah. No. ⁓ You need a bear rug, not a cow, not a cow. Jeremiah Noll: Now it's a little untimely, but you know, with Chuck Norris recently passing, I do have a Chuck Norris joke. ⁓ You know, Chuck Norris has a bearskin rug in his house. It's not dead. It's just scared to move. Stephen Flecker: Yeah Jeremiah Noll: Sorry, a little off topic, but, yeah. So I like a couple of things about this house that the furniture looked like, looks like it was chosen intentionally. It looks like it was decorated with, with Hobby Lobby and Ikea furniture and decor. I probably would have skipped the ones that make it seem like a farmhouse. Like the, like the cowhide rug, but a buyer is going to walk through a house like this and say, you know what, all I need to do is bring some bags and luggage and I can stay here. Now this one is listed at $262. So the question becomes, Stephen, how are we going to sell your house at $335 when there's a house like this still on the market at $262 that is, I don't want to say better. It's just different. It's ready to go. It kind of checks all the boxes that our buyers are looking for except for the hot tub. So a buyer is going to walk through a house like this and they're going to walk through a house like yours and they're going to say, all right, well, I could add a patio out back. and I could add a hot tub and let's just say that's $20,000. That brings a total cost of this one on Deerfield up to $280, 85 we'll say. And how does that compare to somebody that's $335 that already has all those things? So we have to develop a strategy to present that value to them. One of the ways is we could show them rental history or a rental projection. Like if a buyer knew that they could get your house, it's turned key, it's got You know, upgraded amenities crawl spaces insulated and all this other good stuff that you put into it. Then they'll realize that there's a value there where they might not know that with Deerfield. This one could have a terrible crawl space. It could be a very unhealthy situation. So if we decided to list at $335 then one of the things that I would do as a listing agent is I would walk through these 14 houses. to see what all those other buyers are getting the impression of as they're walking through those homes. Because I can tell you the one on Melody Lane is likely to sell the first of all the ones that we just looked at. That one's the most ready to go. Just needs a hot tub. It looks like it's in a pretty decent location. And it's got a lot of the things they're looking for. It doesn't have all the furniture they need, but it has a good number. It's got a good amount of it, right? So they could take something like that and finish it off. ⁓ another one of those ones that they would be very interested in is this one on Deerfield. Now, in reality, Deerfield might be under contract next week. You know, this might've just hit the market and it's getting its first 15 showings and they're going to get their offer soon. But it's, it doesn't look like it's an active rental. If it is, then they're in the same boat we are where we're not able to get as many showings or anything, but, ⁓ we've got to present that value. And just from our photos, people think that there's five other houses on this list that they would rather see, then ⁓ not really seeing ours. Do you know what I mean? So in order for us to sell super we'd have to be one of the best priced in our category. So that will bring us down to like maybe $270, maybe $280. But in order for us to, ⁓ sell the price that you're looking for, We would need there to be no new competition in this price range of like $300 or less. And we'd have to present a value that's like $35,000 more than what they're looking for. So that's something for you to consider is that we've put a lot of money into this place up. Stephen Flecker: Right. Jeremiah Noll: We've put a lot of money into fixing up your house. Some of it was like, you know, a closet under the stairs. Some of it was insulating the crawl space. Some of it was, you know, stone for your driveway. Some of these things don't present a value to the average buyer. It will present a value to some buyers for sure. I have definitely walked through homes where a buyer said like, there's no closets here. Like where would I build a closet? And then they estimate the value of adding a closet. It's a little bit rare. Stephen Flecker: Right. Jeremiah Noll: during the inspection is usually when somebody finds out that the crawl space is like wet or that it's uninsulated or that it's humid. ⁓ ⁓ usually when the value is lost on that, on that improvement. You're not going to have to worry about that because it sounds like you've got a great condition crawl space. ⁓ when we go through inspections, you know, we can let them see that area and we don't have to worry about them negotiating down the price because of it, but doesn't help. necessarily us get under contract. We can mention it in the description. I definitely would all the different upgrades that you made. The, ⁓ the images are going to, you know, they're going to be Photoshopped. We're going to make the space look really good, consistent color quality. have to kind of present your home as something with character because all of the competition you just saw, it's basically the same. It's black, white, and gray. It's the same Ikea furniture. It's the same subway tile everywhere. And how we present value may be based on that. you know, that, that character, because ⁓ did put a nice red into it and you put like a yellow color elsewhere. ⁓ for all of our listeners who are watching on YouTube, I'm rolling through some footage that I took at the house last week so that you can see some of these images and some of the colors. Now your fireplace. is that like brass color, right? ⁓ were just talking about the brass color in that other house as kind of a negative because it didn't really fit the finishes of the rest of the house, but it doesn't really stand out as much for us. Your fireplace is kind of the main, that's kind of the primary feature here, right? But in our bedrooms, we've got like a yellow, kind of a darker wood everywhere. we do have beds that are up against the wall. ⁓ that's going to give buyers the impression that the rooms feel small. we don't have to have them that way in the picture. We can kind of move things around. Maybe, we should probably get like a couch cover just to make it look like the couch is a little bit younger. ⁓ you might want to look on marketplace or just keep an eye out for maybe a better dining table, ⁓ but like bathrooms are beautiful. You've done a really nice job with the tile and the accents and everything that you have going on there. Your kitchen looks really good. We just have a lot of competition basically. So some of those things that we have to think through. So if you were to switch to better management and that might be something that you're considering looking at the prices that other people are asking, not even getting, we didn't look at closed listings. We looked at listings that are for sale. if you're considering changing management or even self-managing, then there's a few things that you might want to consider doing. Like that you saw in some of those other homes. ⁓ the biggest return on investment that I've seen in, ⁓ vacation rentals is professional decor. If you had a, ⁓ like an interior designer come through your home and you said, look, my budget is $25,000. What can you do to make this house look incredible? You know, they might recommend a paint job. They might recommend some accent walls. I did notice that a couple of those, uh, like a light fixtures where there was a bright white, like what you see at a, in a, in a hospital, it's almost like a neon white. Um, so they call that daylight white, and then they call the other one soft white. So incandescent bulbs are typically a soft white. So going all with like soft white bulbs is it's. really an inexpensive way to just kind of tie the whole space together. ⁓ so there may be some things that you want to in to, ⁓ the house stand out as a, as a short-term rental that will produce more for you long-term. ⁓ And in that period of time, you may just decide to keep reinvesting the earnings your house into. ⁓ You know, maybe changing up some of the beds, maybe some of the layouts, maybe some of the furniture, because you could take all the ideas that the designer gives you. And then you can decide, well, I'm going to do that in the fall and I'm going to do that spring. And I'm going to do that myself. ⁓ I don't have to pay somebody else to do it. ⁓ ⁓ and that's really how you're going to get those rental numbers. Now, if your house was the total package, ⁓ it was fully furnished, has a hot tub, has a fire pit has, ⁓ know, 162 reviews on Airbnb. Stephen Flecker: Right. Jeremiah Noll: and they're all very positive reviews. You have a high occupancy rate, like barely any nights vacant, And you're bringing in like five or $6,000 a month. What you're going to see is that buyers are very impressed by this. They're willing to pay $300, $350,000 for a house that's earning $65 because it has the proof. that may be your strategy to getting the sale price that you're looking for is to successfully rent this for the next year. And then show that rental history. The rental history that you're getting from Vacasa. Stephen Flecker: right. Jeremiah Noll: probably not going to make this house sell. The rental history that you're getting from Luxury Landing, probably not going to make the house sell too, right? But if you can be successful at that, then that's the biggest selling point. I've seen multiple transactions where buyers were willing to pay over appraisal value for a house because it had rental history that was like 20 % of the cost of the home. So a house that had $110,000 of rental history sold for $550,000. A house 113 Aaron Drive in Pocono Lake. So I sold that for $550. It was likely to appraise lower. It did actually appraise that value. ⁓ but we were anticipating appraisal value around $500,000, but that one averaged $108,000 a year over two years. So because of the rental history, people were willing to pay the extra, the extra price for it. ⁓ fortunately it didn't appraise low, but another one, ⁓ 1038 Kilmer which is also there in, Tobyhanna like yours is, that one sold for $415,000 and it was appraised at $365. So somebody paid roughly $60,000 over appraisal value for that house because of its rental history of $110,000 a year. So if we can show ⁓ strong rental numbers the house, then we present a full package. remember we were talking about the kind of buyers that's most likely to purchase this property. so we're going to add in the second buyer avatar. The first one was what we described that somebody who's just here on a weekend, they can afford a second mortgage. They want the property to cashflow and pay for itself. And they're going to make the assumption that it's going to bring in based on their $1,200 weekend. They're making the assumption that that house is going to bring in $4,800 a month. And that they should be, you know, perfectly fine covering their electric bill and everything else with that. So the second type of buyer though. is actually a high income earner. It's somebody who's just heard about the tax loophole for short-term metals. So what they're interested in doing is just getting something turnkey already has management or doesn't have management, but they could, you know, hire management. They want to get something that's completely furnished. Doesn't take any of their, you know, valuable time. So the, the, I want to say stereotypical buyer. When I was selling a house over on Clearview, I can't remember the number, over on Clearview in Long Pond, the was the top heart surgeon in the U S he was based out of a hospital in Philadelphia ⁓ and he had such a good income. But he was looking for this STR loophole so that he could save enough money on taxes. And he ended up just buying something. It wasn't cash. He still used a conventional mortgage, but he ended up just buying something for $350,000 and turning it right over to a manager. It was just something, it was a tax strategy. He was holding onto over two years. He didn't care how much money it made. He just wanted something that wasn't going to lose money. And seeing rental history was how he knew it wasn't going to lose money. So that's our second avatar. We have ⁓ a number of buyers looking in this area that have just heard about the tax loophole. for them, it's ⁓ hands off. They're barely even going to walk through the house. They'll have an agent walk through a couple of homes, tell them which ones to make offers on. They'll make offers on two houses. ⁓ don't really care which one it is. They want to get the best price. Yeah. So they have an inspection done. They'll negotiate with you, but not really negotiate hard. ⁓ not running the numbers. They're not putting everything into their software calculator like some investors are. They're just looking for something that checks the boxes because your $335,000 investment is going to save them $300,000 over the next three years because they don't have to pay Uncle Sam as much. So that is one of our ideal buyers. The other one is the one that's just here on weekends. In the first strategy, we don't really need the rental history. They're not going to ask for it. They're not sophisticated investors. They're not trying to underwrite this whole deal. And the other one, they are looking for rental history. They're looking for something that is a safe bet. That's just a decent investment. They're looking for something that they would feel comfortable going to themselves. Although they probably never will. they want something that can be turned right over to management and it'll be nice and simple and easy. So. ⁓ An investor like that looks very briefly through the homes that I've, shown you the 14 different three bedroom, two bath houses. And they, they pick five and they tell the realtor to go check them out. that realtor is scared to make mistake. ⁓ Honestly, I've been in that seat ⁓ And when your buyer is asking how money is this one going to make? How much money is this one going to make? How much money is this one going to make? You're trying to compare it to like other houses and what they've made. But like, I'm not sure if you can see my fingers, but the curve for how nice a house is, right? And here's the graph. The curve is exponential. So between like the bottom 80 % of homes make like 20 % of the income. The top 20 % of homes make 80 % of the income. So it's an exponential curve. So the agents are constantly making mistakes like this. They're saying, ⁓ this house should make like $60,000 because they saw another three bedroom, bath in Pocono Country Place that made $60,000. They hate making those estimates though. And they're scared that somebody is gonna come back to them later on and say, hey, you said this would make $60 and it only made $20. So what makes it way easier is if we provide them with a projection, which we could do now, we could provide them with a projection of what the house is expected to make, or if we provide them with some rental history. So your way of selling the house and having the fewest days on market and still getting your asking price is to prove that this house can make $60,000 a year. If we listed the way it is that we're using rental projections and we're, we're using the video, we're likely to be on the market until probably November, until we find a buyer. Most buyers are offering around 10 % less than asking price. So the offer that you would probably get is probably closer to $300,000, which is only what like $20,000 off of buying that first house that I showed you the one that's $260 and adding in those other couple of things that we talked about, like the fire pit and the hot tub and. and whatever else. So we could also see interest rates come down. We could see the war end and we could see people, ⁓ you know, kind of renew their, their interest in real estate. And that would also have an impact because fewer homes would hit the market in that lower priced category. We'd have more homes selling for higher. ⁓ but we've not even talked about appraisal value yet. ⁓ What this house is likely to appraise at is about the average of the cost per square foot for other houses in this square footage range. I think just if I had to estimate it that your house is like 1400 square feet, does that sound about right? Stephen Flecker: ⁓ that might be a little big. I think it's about 1300. Jeremiah Noll: Okay. So 1300 square feet times we'll say $200 a square foot. That would put it at $260. So if the appraisal value was $260, plus they add in the hot tub, that would be like $270. So we have to consider that if we go under contract with somebody at $300, then once their appraisal happens, they're going to ask us to lower the price. So right from, you know, accepting the offer, we have to think about what are we going to do when we hit this hurdle? Now, if somebody comes by with a cash offer, cash offers They're typically 20, 15 to 20 % below asking price. Now, not every cash offer is like that. I got a cash offer on a listing yesterday. That's full asking price. ⁓ it's rare, but it's contingent upon the sale of their property in Brooklyn. So if they don't sell their house in Brooklyn, then we'll be off the market for two months with nothing to show for it. Because if their house didn't sell, they get to get their deposit back and walk away. And we've just lost two months. so. ⁓ cash offers are good, but typically they have contingencies. Other cash offers that have no contingencies are typically very bad offers. So we might run into a couple of those as well. If we list at $335 the ⁓ one thing that we have going for us is sometimes those cash buyers make the assumption that the value is the list price. So for them to feel like they're getting a good deal, they just have to get you to negotiate down to like something below list price. But you know, it doesn't cost anything to list a house for sale. I'm happy to put it up at whatever number works for you. We could test the market. We could see how many showing requests we get and there's really nothing to lose. You know, it doesn't hurt me if we have a house on the market for 180 days. It doesn't hurt me if we have it on for 360 days. And it doesn't mean that you're willing to accept a low offer just because it's been on the market for a while. Because if you are putting the work into this Stephen Flecker: Right. Jeremiah Noll: property and getting it rented where it's a cash cow, right? To where it's making $60,000 a year, ⁓ then ⁓ that builds case sell this for that much. If it doesn't get booked, ⁓ if it's not getting occupancy, if any of those things are amiss, then all of our buyers are to question that rental assessment. That what we expect it to make is maybe $60 to $72,000 a year. And what it's actually making is a lot less. Now I've also seen this happen. 206 Adams Place also in Tobyhanna is a bed, two bath. That one was for sale for $500,000. ⁓ And the history they had was like three weeks. ⁓ So had this thing listed for like three weeks. Their calendar booked up for September, October, November, and December. They only had like three days open. And listed it at $500,000 and ⁓ buyer ended up making a cash purchase of $460. Now the problem with that house is the same size as yours. It's like ⁓ square feet. So getting that to appraise at $460 would have been a really long shot. It had updated everything, ⁓ new decor. It was actually very nice. Instagramable detached garage became finished space. that probably brought it up to 1500 square feet, but nevertheless, our estimated appraisal value for that was like $400 to $420. But my buyer was willing to pay more for it because it had $10,000 a month booked in future income. September, October, November, December were all close to $10,000 a month. So because he was projecting this property is going to earn $120,000 over the next 12, he said, this is not a bad investment because I'll make my money back of what I paid over appraisal value within five months. So that rental history is what's going to enable us to get over appraisal value. And the appraiser is going to look at, you know, the other comps. just showed you things that are currently active, but things that are, you know, currently ⁓ is what they're going to use. ⁓ generally they're for this marketplace, they're like 5 % less than asking price. Stephen Flecker: Right. Jeremiah Noll: But, but that kind of gives you an idea of where we're standing with this. So Steven, you've got a couple of decisions you are going to have to make, you know, just like you took a couple of years to make the purchase. You're very analytical and you were very careful about which house you purchased and what you did. You're also going to probably want a week or two to think through what is it going to look like for me to find a better manager or to manage it myself? How am going to get this property to earn what I anticipate it can earn? Because that's the most likely case of me actually getting a really good number on the sale. And that's not an easy place to be. You know, when you're thinking about selling because you had bad management, it's, it's sometimes best to just put your nose down with grindstone and just get to work making that property make money ⁓ because we know it can, we know it can do much better than it did under Vacasa ⁓ And so we're looking for ⁓ is a why somebody is going to pay $335,000. Stephen Flecker: Right. Jeremiah Noll: when there's all these other homes on the market that don't have any rental history and only some of them come furnished, you know, that are priced below ours, we've got to present that compelling argument for them to pay more. And I think that that comes through managing the property really well and getting that income in that way, people will be willing to pay that, right? Our two guests, our two buyer avatars, both of them will be impressed if we show them rental history like that. So if today's episode sounds familiar, you're not alone. These are the challenges no one talks about when they sell the dream of easy passive income, but they're exactly the problems that make or break your operation. If you've got a situation you want to share, then please send me an email info at galvanized management.com. Your problem might be the next one that we break down chances you'll help a lot of other hosts in the process too. If this episode helped you share it with another host who's in the trenches. That's how we make this industry better. I'd also love to see you follow us on TikTok at galvanized investments and Facebook and YouTube at galvanized management. Until next time, stay steady, keep learning and keep building something real. This is. ⁓ Stephen Flecker: short-term rental problems and solutions. Jeremiah Noll: Thank you, Stephen. I appreciate your time. Stephen Flecker: No problem, loved it.