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HOA Deep Dive, Arrowhead Lakes POA. · Short Term Rental Problems and Solutions

• Jeremiah: It's not all sunshine and five-star reviews. If you've realized being an STR investor isn't glamorous, then you're in the right place. Today I'm helping Frank avoid being the stereotypical buyer and seller of an Airbnb. He's considering a very popular homeowners association, so we're doing another HOA deep dive. This time on Arrowhead Lakes Property Owners Association. I'm happy to help. Because this is the community where we talk about the gross, awkward, and the operational messes, as well as the real strategies that help you keep going instead of quitting. Anyone can win big in this industry. Or you can ignore education and you can quit. My name is Jeremiah, and I'm an investor with over a decade of experience, and I'm a property manager with over 140 units. I talk about what rental investing looks like from the inside. Welcome to Short Term Rental Problems and Solutions. Let's get right into today's email. Hi Jeremy, I just caught your episode on Pocono Country Place and was wondering if you could tell me more about Arrowhead Lakes. I've rented there a few times, and most recently my brother-in-law and I got the idea that we should just buy one. We paid almost $2,000 for a weekend, and it looks like we could get a place with a mortgage around $2,500 a month. So we'd make a profit just by renting it two times a month. And then we could use it the rest of the time practically for free, right? Well, actually that was our first thought, but in my research I came across your episode and know that there's some community specific expenses I should look out for. And maybe there's some other things I should be aware of before buying here. Would love to talk and maybe even see a few next week if you're a free. Frank. Well, Frank, no, you cannot own it for free. There's an expense, there's a price for everything, even if it's just your down payment, right? So let me get right into this $2,000 a weekend thing because you may have paid $2,000, but the owner did not get $2,000. There's a whole host of expenses in there that will surprise you. now you're also taking like a random weekend in August and you're multiplying that out by like twenty-four. And that is also not great because August is the most in demand. Arrowhead is a summer place. So, no, your two thousand dollars a weekend is not what the owner is getting. And if you were the owner, you wouldn't be getting that. You'd be getting like maybe 40% of it. So let me explain. Things that are coming out that you might not expect: six percent for sales tax, three percent for hotel tax. Airbnb fees is roughly 15.5% right after that. The community registration and related costs, which is $8.50 per person per day, plus $20 per vehicle, plus $20. And $100 if you're registered late. And then you've got other fees too, including cleaning and other expenses depending on how the reservation is structured. So taxes, about $166, Airbnb fees, $284. Registration fees, $196. Cleaning fee, approximately $250. Property management fees, $276. What is the owner left with for your weekend? $828. Now they get to use that $828 and they have to get their mortgage, their insurance, their taxes, and their annual HOA fees covered, plus maintenance and utilities. A weekend that costs you as the guest approximately $2,000 might ultimately represent something closer to $800 in revenue for the owner before the owner's expenses. So Frank, just because you paid $2,000 doesn't mean that the homeowner is getting $2,000. What they end up with, you'll see, is like maybe 40% of that. So what's actually coming out of your two grand? Well, there's 6% for hotel tax, 3% for sales tax, the Airbnb fees are roughly 15.5%, the community registration and related costs, and your cleaning and other expenses depending on how the reservation is structured. So what's that add up to? Well, for a $2,000 reservation, you're talking about $166 in sales tax. Airbnb fees are around $284, registration fees of around $196, cleaning fee of a hundred and two hundred and fifty dollars, property management fees of two hundred and seventy-six dollars, and what the owner's left with is eight hundred and twenty-eight dollars. Now that's before they pay their mortgage, their insurance, their taxes, their HOA fees, and any maintenance and utilities. You probably used some electricity while you were there. That might be another thirty-two dollars for your weekend. The grass had to be cut That was another $65 for the week. So there's obviously all these other expenses. And a weekend that costs the guest around $2,000 might ultimately represent something more like $800 in revenue to the owner before other expenses. So if you're gonna make $800 a weekend, then in the month of August, you're looking at around $3,200 for the month of August. And if your mortgage is $2,500, then maybe there is some margin. But remember, you have to cut the grass, you have to get it cleaned, you have to manage it yourself, so the point is, like there's a lot of expenses, and just because you paid $2,000 doesn't mean that the property owner's getting that much. You know, to you it might be worth that, this is a big point of disconnect sometimes. The guest thinks, I paid $2,000 for this weekend. This is nuts. They must be swimming in cash. And they don't see all these different people taking a piece of the pie. Just because the guest is a little upset and they want a hundred dollar refund, like that's being taken only out of like the owner's portion. Sometimes the property managers too. But that credit is coming from somebody, but It's not coming out of the taxes. It's not reducing the fees. It's not reducing the platform fees. None of that stuff is happening. You're giving them $100. So for the guest, that represents 5%. But for the homeowner, it represents like 12% of what they were going to get. So that $100 really makes a big difference. Now, the bigger problem is seasonality. See, Frank, you're writing in August. and August is one of Arrowhead's strongest periods. Arrowhead is primarily a summer destination. A weekend that commands a very high rate in August isn't necessarily worth anything close to that in September. So while a guest is paying $2,000 for a weekend in August, they might be spending only $700 to stay in September. President's Day, strong winter holiday weekend, potentially around $1,800. Weak winter weekends can perform considerably worse. And then the spring is usually just as bad as September. You can't take one premium summer reservation and just multiply it by 24 weekends in order to cover your expenses. So could someone actually own it almost for free, potentially, but particularly if they purchase the property in cash, Their goal is simply to offset ownership expenses. They buy the right property, they make the right improvements, they keep recurring expenses under control, and they operate it professionally. But there's a $2,500 mortgage on top of everything else. So your calculations change dramatically. So this is where Arrowhead becomes a little more interesting because there's some substantial expenses So Arrowhead has relatively high HOA fees. As far as gated communities go, the ones that are here locally, one of them has $1,300 a year in HOA fees. Another one has around $1,600 a year in HOA fees, and the last one is around $1,700. So those are gated communities. This one's around $2,000. So it's still higher priced. that's once a year. Now you've also got registration fees that you have to pay. So in your registration fees with Arrowhead Lakes, there's the off-season and there's the summer season. In the summer season, your per person per day expense is $8.50. In the off-season, that's after Labor Day, it's $2 per person per day. But then you've also got the number of vehicles, because they want to charge $20 per vehicle. So If you've got like a six-bedroom house, you could have eight cars showing up. And I know that because I just had a reservation the other day that wanted to park eight cars in the driveway where there's only space for six. So that would have represented $160 in registration fees just because the guest wants to bring eight cars And then there's also the flat fee of $20. So each reservation is $20 plus another $20 per vehicle. plus another variable amount based on on-season off-season per person per day. So in the summer it's $8.50 per person per day. And I just finished a registration for guests the other day. It was $607.50. That's one reservation. There's no other communities that charge this much. So this is extreme sometimes just because of them being bigger houses. So if you buy a bigger home in Arrowhead, you have to make sure that that bigger home is able to command much larger rent because you're likely to have these fees going up. and that's if the registration comes in on time. See, you've got to get all of this information from your guests in order to submit it to the community. If the community doesn't get it on time, they're gonna charge you an extra. one hundred dollars for our late fee. And on time is three days prior to check-in. So what most hosts will do is they'll just, you know, set it on their calendar so that nobody can make a reservation with less than three days of notice. So back to the HOA. We want to talk about like real world situations. So in the off season, in the smaller homes, I sometimes see registration fees as low as like $68, which is in line with what other HOAs charge. But a large reservation, especially in the summer, can be over $700. That's an enormous range. So you might be wondering, how do I gauge for this? And my recommendation, Frank, is to have your rent, your nightly rent, be variable. So if it's $8.50 per person per day, then put in $9 as your variable rate so that the number of guests coincides with what the registration fee is going to be. I mean, technically, because Airbnb is charging 15.5%, you would want to upcharge that $8.50. To maybe like $10 per person per day. It just has to be close. You know, you want it to go up so that your larger reservations are at least covering their registration fees on top of the rent. And your smaller reservations are seeing an appropriate discount because there's fewer people coming. Now you can't really do that for the number of cars because the number of cars doesn't get put on the reservation. But I look at an average and I go like one car extra or like ten dollars extra. So in our registration fees, I'll put like $20. And if I'm expecting this house to have two cars for most reservations, I'll make the registration fees $60. That way it's a flat $60. Now, with the $15.5% that Airbnb is taking, I'll upcharge that by another 15 and a half percent. Now my registration fee is more like $80 My point is there's ways to price this in to your whole strategy. And overall, your guests are still paying their registration fees. one of the worst things that you can do is tell the guests that you're going to charge them extra. That once you have all of their information, like the number of guests and the number of cars, that you're going to send them a request on Airbnb to pay the extra. This is a terrible strategy. And there's people doing it. And if you are an Arrowhead homeowner and you are doing this, you are hurting your visibility. You're violating Airbnb's policies, and I recommend that you stop. I recommend that you just price it in the way I just described, because it's really not that hard. every software that I've worked with, whether it's Hostfully or Hostaway or just Airbnb directly, they all give you the option to increase the nightly rate by the number of people. And that nightly rate is charged for every night. And Arrowhead is charging you for every night. So that's how you make it happen. I know that there's still hosts that are doing this because I still have guests. Sending us inquiries asking if there's any other fees on top of what they see on their screen. We have it built in. So every single time we can say no, there's no extra fees, As long as your reservation numbers are correct and you do have five guests and one pet, there's nothing extra. You don't have to worry about any extra fees. Why are they asking this? They're asking this because they inquired with somebody else because it seemed too good to be true. And they found out that there was extra fees. When people think it's too good to be true, they oftentimes make the assumption. I'm just glad that they're sending the inquiry. So no, it doesn't say in our description, hey, after booking, we're gonna send you a request for other payments. we don't do that. that's how you get a high cancellation rate for those close up reservations. And Airbnb is gonna watch for that. You're gonna be knocked down on the visibility, and your property's not gonna do well. So, you know, good luck if you do wanna keep doing that. But I think I just gave you a way out. anyway, back to your question, Frank. So why are these HOA fees like so important? And it's really because Arrowhead Lakes is like a resort, They have a lot of amenities, they have a lot of options for people, and they want to be able to profit from investing in new options. They want to be able to profit from having new amenities. So they've got three in-ground pools, they've got like five sand beaches, two enormous lakes. And they have to maintain all of that. And they have to have lifeguards and they have to have pickleball courts and they have to get cleaned up. There's a big operation going on here. So they need to fund that. Now, you would think that they could just fund that without charging such extraordinary fees. And I think so too. You're not alone on that. but here's something to know is that years ago they were collecting so much in registration fees that they could no longer be classified as a nonprofit. So this HOA became a for-profit corporation, and now they can have retained earnings, but they have to pay taxes. They actually are doing this as a for profit corporation. So if they can raise rates a little bit more and make more money, that's something that they can do. Most HOAs are nonprofits. So another important thing to note is that guests are actually supposed to take all of their trash to the community compactors. And there are large community compactors and they have people working there that'll help you take these bags out of your car and put them into the compactor. And so they try to make this a little easier. A lot of people are just rolling around the community with trash in their golf carts in order to throw these things away. Whatever helps, you know. But it still becomes an issue for your guests. Now it wasn't an issue for you. I don't know exactly how your host handled it. Sometimes you just leave it in the garage and they pay the cleaner to take it over to the compactors. Whatever that situation is, you know, this is another thing that might seem bizarre to you, but like most of our guests are coming to Arrowhead from a place where they're accustomed to like curbside pickup or a dumpster at their apartment building. so instead our guests are actually being asked to put garbage bags into their personal vehicles and drive them to the compactors. So the reason this is a problem is because some of them have luxury cars. Some of the bags rip when they're coming out of the cans. And Oftentimes you don't want to be wasteful with bags, so you don't give the guests a whole bunch of extra bags. But if it gets ripped, they're not going to put that in their car. They're going to leave it there for you. And then, the cleaner has to transport it. And the cleaner might charge around $8 per bag for something like that. And so, like, it's nice that trash is not being kept at the property because even while I was recording this, a bear walked through the yard at the house where I'm recording, and it was sniffing a plastic bag on the street. And like, that's just part of the Poconos But what's nice about having a compactor instead of having curbside pickup is that you don't have trash, delicious, smelly trash attracting the wildlife. To knock that can over. Other communities you do, like Pocono Country Place, which you heard me talk about, they have trash collection at the curb. And it's another task that you and your team have to do, bringing the cans down, pulling the cans back up. But in this situation, there's no cans. There's no cans at the curb. So that's a benefit, but the drawback is now people have to take the trash with them. And you might have to pay your cleaner to pick it up. So yes, Arrowhead does cost money and it costs a lot, but there's a substantial return to consider as well. So what are you actually getting for those HOA fees and registration fees? Well, you're getting access to two very large lakes. As far as HOAs go in the area, very few lakes have this much space. probably the closest would be Stillwater Estates, but they only own half of that lake. But you can still boat over the whole thing. But in this situation, it's completely private. There's also multiple sand beaches. So it's not just one beach or two beaches. There's no HOAs in this region that have this many swimming opportunities. So there's those, I think, five sand beaches. There's also three in-ground community pools, two of which are heated. So there's a lot of options when it comes to swimming. You know, if you want to be able to see your toes when you swim. Then you've got the pool. And that also is unique to Pocono Lake. The town of Pocono Lake is the other community that's in demand doesn't have a pool. And if they did, then I think it would be awesome. Because in a lot of ways they're a better HOA. But you know, they don't have a pool. And so they just have beaches. But the beaches are nice, you know, in Arrowhead Lakes. You've also got boating opportunities. So If your guests come and they don't have a kayak or you don't have a kayak, they can just go over to the island complex and they can rent a rowboat, a kayak, or a canoe, and they don't have to drag it back and forth to your house. They don't have to put it in their vehicle and they don't have to have a trailer to bring it with them. Now, if you happen to purchase a lakefront property, then this is actually one of the few lakes where you can have a pontoon boat with an electric motor. those are rare. There's only a few lakes in the area that'll allow that. there's only maybe three that allow gasoline motors. But there's very, very few opportunities for motor boating. The next thing that you get is gated access. And we can debate the pros and cons of having a gated community. one of the pros is that the values are lower. So you get a better value on the house if you're willing to deal with the gate. One of the cons is that now you have to deal with the gate. I I hate dealing with the gate. You know, any gate really, having to ask permission to have a contractor come over and fix something. I have a contractor card, it's a permanent card. I pay $40 a year to have this card and I can go right into Arrowhead Lakes, but that doesn't work after seven o'clock at night, and it doesn't work until eight o'clock in the morning. So there's like half the day when an emergency could happen that I can't go. So if there is an emergency, have to talk to security and tell them what the emergency is. They'll log it and they'll do something about it, but like they'll let you through, but only after all these questions. And for our guests, like they're gonna get QR codes. As far as gates go, this is the best system I have found. Because now your guests, they have the code right there on their phone. when this becomes an issue and what nobody's been talking about is what happens if it's raining? Nobody likes getting their phone wet. I certainly don't like getting my phone wet. So if they have to use their phone and place it screen up underneath a QR reader, I just I think that's a terrible, way to get your phone wet. so what I would say instead is your guests could actually print it out. So they could print out the QR code when they're at home. but make sure you don't use an inkjet printer because although it'll work once it gets wet, the QR code is gonna smear. It's not gonna work after that. You have to use like a laser, laser jet printer. You know, with toner. Anyway, why are we getting into this? I don't know, maybe because I used to sell copiers, So I, know the difference, but back to the point, back to Arrowhead, right? So the gate is really not that bad. and there's not a ton of quality control on the gate. They're not looking at your license plate to make sure that the QR code that was scanned coordinates with the license plate that was used to register for the QR code. So at least they're not doing that right now. I feel like eventually they are gonna do that and the QR code just won't work. But then there'd be all these delays at the gate that they're not really prepared for. So now the next thing is they do have a lot of family oriented activities. So Arrowhead Lakes has a website and it'll say like tonight is face painting and tomorrow is the beef and beer to support the local fire department. And the next day is this, and every Wednesday at nine a.m. is a book club. So there's a lot of like retired people just living here year round or the snowbirds, and they like having something to do. They like that sense of community that they get from the reading club. So the ideal erahood guest is probably a family. Mm-hmm. It's people who want to create memories with their children, with their family. It's usually parents with young children, families that like being active or outdoors. It's guests who actually use the pools, the lakes, the beaches. It's guests looking for a vacation where the community itself provides the activities, and that you don't have to like just go a whole bunch of other places. And that's important. You know, and these amenities aren't just something listed under Zillow. And like after explaining these types of things, you kind of understand that this is not just a generic amenity. Like some of these are really, really nice amenities. So take a look on some of these listings that are for sale. And oftentimes you'll see an image of the island complex, or you'll see a closer-up image of a part of the island complex, and that's the arrowhead-shaped pool. It's incredible. It's very nice. It's really peaceful. You've got lake views all the way around. You can suntan, there's not too many trees. So it's actually a really nice place. They have a pavilion, they have a dock. Well, it's more of a pier. And you can go out on that pier and you can fish from there in deeper water. You can go all the way around that island complex and you can fish. And they have grills, so you can bring your own charcoal. It's just like at a park, like at a public park. You can bring charcoal and you can grill on the grill that's already there in this place. So there's a lot of opportunity for families. So Frank, you're starting to see here how I know you don't want to be the stereotypical buyer, but you are kind of the stereotypical buyer for Arrowhead. you've rented there a couple of times. It's time to just, you know, bite the bullet and buy something, right? So that's the down payment. It's the signing up for this responsibility. So why don't you just buy one? Well, there's gotta be reasons not to, right? Like, I mean, there's a down payment involved. If it's five hundred thousand dollars, I'm putting down at least fifty, you know, and it's a big responsibility. And now who's gonna clean it and who's gonna fix it? And I live two and a half hours away. And by the way, two and a half hours is probably like the average drive for a guest to get to Arrowhead. So the gates actually get really busy on check-in day, which is most commonly Friday. They get really, really busy around like seven o'clock at night because a lot of people are getting off work at four or five o'clock and they hop in the car and they're at Arrowhead, ready to check in around sunset really. So remoteness is one of the downsides. Arrowhead Lakes is just kind of up there on Locust Ridge Road in the middle of nowhere. there's not really anything that's nearby it except for like one little deli. And it feels like a tourist trap. When you're in there, the line is long, there's only one person working, the prices are high. You're like five dollars for a bag of chips, and it's not even a big bag, it's mostly air. But that's it. You know, if you want to get to a Dollar General or to a Walmart, you're gonna have to travel, you know, 10 to 20 minutes. where some other communities are much closer to those things. Like there's a Dollar General right outside of Indian Mountain Lakes, there's another Dollar General right outside of Pocono Country Place, there's an entire shopping center like within 10 minutes of Penn Estates. So like these other homeowners associations that are kind of geared towards short-term rentals, they have shopping nearby. And in this situation, there's not really even a convenience store. And there's no gas stations. And that's for sure. The closest gas station to this would be Wawa. And then if you go over to Pocono Pines, there's like one more gas station. They have a Dunkin' Donuts there. You'll probably pass it on your way. But like those are the closest things really. so there's also very limited shopping. This is not near the outlets. The outlets might be on your way back home if you're going through New York. but there's just really not much. Mount Pocono is roughly like 25 minutes, but another thing to factor in is if you're in the back of the community, like all the way the back edge of like Maxitawney Drive, it's gonna take you 12 minutes just to get to the gate. Because of all the stop signs and the twenty five mile per hour limits and it's a very large community. So twelve minutes to get to the gate and then another twenty minutes to get to the Walmart. So if your guests forgot to bring something, it's not exactly like a 10-minute drive. It's not exactly like, go down to the convenience store. There's not one. there's again, there's that deli and they stock a few things, I mean, the parking lot's usually full. So most people are just skipping that place and going somewhere else. Now, what I think would be an amazing idea is if Arrowhead decided to have their version of a hotel lobby. If they had a small little grocery store, not with anything fresh, just like a convenience store where everything has a shelf life, if they had like some basic medication, some drinks, snacks, toiletries, or those forgotten essentials inside of Arrowhead, I think that would be huge. Especially since they could advertise that and they have every guest's email. Part of every registration is an email address. So if that registration came in, they could send an email address about community amenities and activities to those guests. That would be amazing. And if they used that opportunity to advertise, then realtors and mostly just realtors would pay thousands of dollars to be included in those newsletters. And it's not even a newsletter. What is it? It's like it's an email blast. Every registration, can you imagine being part of every single registration? Property managers would pay for that. I would pay for that. Now you get in front of every Arrowhead guest and What they're presented with is an opportunity to save, you know, 10 to 15% by booking direct and by coming to one of your Arrowhead properties. Like that could be huge. And along the lines of that like convenience store mentality, I think it'd be great if they had just like couple vending machines even. You know, if I could just go to the lodge and outside I could just grab a couple Cokes or some like Sprite. Like I just think like that would be smart, you know, because there's just nothing open. There's nothing nearby and it's the middle of the woods. So having things like that I think could be really beneficial and also potentially very profitable. So now let's get into what I call the dartboard effect. So Arrowhead Lakes, remember I said it's like in the middle of nowhere. When guests are looking for a place to stay in the winter, particularly, they're looking for two different spots. And I call these the center of the dartboard. They're looking for Camelback or they're looking for Lake Harmony. And they're looking for Lake Harmony because that has two ski areas. It's got Jackfrost and Big Boulder. So they're looking for one of these two places. And now a smaller dartboard would be like Kalahari or Great Wolf Lodge or Camel Beach. Either way, they're going to be centered around those two locations. So outside of that, the next circle, which I call the second circle, is well, outside of Camelback is going to be Long Pond and Pocono Summit. Outside of that is going to be Pocono Lake, which is where Arrowhead is, and Toby Hanna. So Toby Hanna includes a Pocono Country Place, which you already heard the episode on. And Pocono Lake includes two large communities. One is Locust Lake Village, which I think is a strong competitor to Arrowhead Lakes. And the other one obviously is Arrowhead Lakes So this is a third circle community. But the other dartboard center is Lake Harmony. So Lake Harmony, where I'm located right now, is the center of the dartboard in the wintertime. So people are looking to stay in Lake Harmony, but if they don't find something in their price range or that's not nice enough, they can find a better value by going to the first circle out, the second circle. That would be Blakeslee and Albrightsville. If they don't find something in those two circles, they can go to the next circle out, which is Pocono Lake and Jim Thorpe. So Arrowhead happens to be in this overlapping Venn diagram of two different dartboards. It's a third circle, but it gets activity like a second circle because it's within range of both of these. And if somebody does want to just like ski like three different mountains, this is a great spot for them to stay for a couple of nights because they're, close enough to all three. They don't have to stay at one and then move all their stuff over to the other so that they're close to both. They could be. Splitting the difference. Now, the winter time, there's not really any activities in Arrowhead. Like we talk about this, like $2 per person per day as like covering the cost of amenities. There's not really any amenities for your guests, except for like maybe fishing in the lakes. And sometimes those lakes are frozen. And by the way, I have seen people ice fishing on the lake. it's not super common though, because the temperatures up here sometimes fluctuate. Sometimes we get a like a heat wave in the winter. So the third circle is where the crunch is felt. That's where the price is dropped the most if it's a warm winter. So the income potential in Arrowhead Lakes is a lot more variable. Your occupancy is a lot more variable than it is if you're in one of those dartboard centers like Camelback or Lake Harmony. So another thing that's interesting to note is that there are some really inexpensive homes in Arrowhead. so there's a broad range of values. And so you've got like $1.3 million lakefront properties that are newly built, and then you've got like little like $180,000 like chalets built in like 1961. You've got a broad range. Back in 2017, I sold a house in there for 60 grand. And then in 2018, I sold another house in there for 60 grand. And it used to be like the floor. And that's what you paid for an unrenovated 1960s vintage kind of chalet. So there's some things to know. there's not very many large homes, there's not very many unique properties, and they're kind of close to each other. So the average lot size here is a quarter of an acre. So you're near your neighbors. There's not a ton of like ground coverage. there's not many fir trees, there's not many rhododendron. So you get to see your neighbors, they're nearby. There's also like a very rocky soil. So like these big boulders end up being your entire yard, and that makes it unusable almost. So what a ton of people will do is they'll truck in a whole bunch of gravel and they'll level the space out, and now they've got a nice yard that they can use, but it's all just driveway gravel. Now There's no grass, which I'm sure you're thinking, but that's perfect. I don't want to have to cut the grass. Well, there's a problem with that. Covering your yard with gravel could stop you from getting a short-term rental permit. So the community is in two different townships. One is Tobyhanna Township, the other is Coolbough Township. Let me address Tobyhanna for a second. Tobyhanna Township was rife with controversy over short-term rentals for a long time, longer than necessary. And they ended up passing an ordinance that was unnecessarily restrictive. And then they were sued by homeowners, and then they changed their ordinance. Three times since then. So the first change that they made was the occupancy limit. So it used to be 10 person maximum, two person per bedroom. And then it became two people per bedroom plus two. But then they said they were going to only issue a certain number of permits, which was like a 12% number for the number of residential properties. And then they realized that they weren't hitting that 12%. And the number of residential permits for short-term rentals had gone down year over year. So they got rid of their limit. It's still two per bedroom plus two. the township doesn't do inspections. So the whole STR permitting process is just paper. You just submit all the proper paperwork, you put your listing online, you show them that it's done in compliance, and they'll issue you a permit. So relatively simple and not too bad. Now, on the other hand, we've talked about Coolbaugh Coolbaugh Township, they're going to do an inspection. And if they get to your house and they realize that you've filled in your whole backyard with gravel, they're going to look in the records to see if you have a permit for putting gravel in your backyard. And if you didn't do it with a permit, which most people don't, then they're not going to give you your short-term rental permit until you fix it. Now that fixing it doesn't necessarily mean asking for a permit. couple of years ago, I had to do a whole bunch of what I call a impermeability resolution, which for us meant renting equipment, digging up all the gravel, putting it in one giant pile in the yard, and then bringing in a truckload of fill dirt, spreading out the fill dirt in the yard, and then taking photos of the whole process and giving that to the township. I was charging like fifteen hundred dollars for each one of these. And I have a friend who has an excavation company and he was charging $6,000 for these for the same thing essentially. Now he was trucking away the gravel instead of just putting it in a pile, and he was bringing in two loads of fill dirt instead of just one. Either way, we both got the same permits after it was completed, See, Coolbaugh Township is, I think, unnecessarily strict when it comes to their inspections. They are looking for a reason to fail you. And they do it in the name of public safety, but I think there's something else at play. Either way, they'll make you pay for the $50 permit for the shed. The shed might have been there for 20 years. Nobody ever had a permit for it. You're applying for an STR permit, they're gonna make you pay $50 for the permit for the shed. They're not gonna make you take it off site, but they are gonna make you pay for it. So I know you heard the episode on Pocono Country Place, and I probably talked about Coolbaugh Township a little bit there too, Frank. But the thing to know is that like they'll make you get a building permit for a hot tub, and then they'll do their inspection and they'll still tell you you don't have the permit for it. You have to track down the paperwork. And once the permit was completed, it has to go over to the township. Now, this happened to me. There was a hot tub on a property that one of my investors purchased and We were getting the short-term rental permit and during the inspection, they said this hot tub's not permitted. So we contacted the homeowner. They said it is permitted. We passed the inspections and everything. They said we don't have a record of it. We have a record of you applying for it, but we never got the final confirmation from Bureau Veritas, which is who does the field inspections. And so we had to go all the way back to Bureau Veritas and have them dig through their files for this thing. And then they sent it over to the township. This was a two-week process. That was a delay, unnecessary delay, until the township was like, okay, we have it now. We can issue your permit. Did they apologize? No. Did they care? Not at all. So the township's just like that sometimes. When you're used to dealing with local governments, like they seem kind of average, but Tobyhanna Township's not as bad. And there's other townships for sure that are much better than both of them. Now, one of the issues with that little chalet is what they're selling for today is like $200,000 in unrenovated condition to maybe $350,000 in completely renovated. It also depends on square footage and if it's a raised chalet and you have a basement, The value is not really that important. the point that I'm trying to bring up is the ones that were built in the 60s, sometimes you have to remember. They're just built for summer use. They weren't really built for the winter. so they don't really have efficient heating systems. They just usually have baseboard electric. Most of the time they have insulation, but it's not good insulation. So, these are very inefficient homes sometimes. So you've got to think about your electric bills, you've got to think about your utilities and what you're gonna do about that. Now you could just convert to mini splits, but even then. You got to think about the insulation quality. So there's definitely downsides to these smaller, less expensive units, and the ones that are a little bit older. Another big issue that we run into in Arrowhead is crawl spaces. Now, this is true in Pocono Country Place as well. It's kind of like a whole Poconos thing. There's a lot of water running around here. There's a lot of large rocks near the surface. So you get a lot of groundwater. And especially when there's a slope outside, sometimes you've even got a natural spring. Springing up underneath the house. I've seen that too. So these crawl spaces can be very damp. And usually people don't pay attention to their crawl spaces. They just have the vents open year round. Sometimes they got freezing, they closed the vents. A lot of people don't pay attention to their crawl space until it's inspected. And it's only inspected when it's going to be sold. Like the township isn't looking in the crawl space. That's not an inspection. A home inspection is what happens when you purchase or sell. So these crawl spaces, that's something to look out for, Frank. If you're going to buy a property in in Arrowhead Lakes you gotta watch their crawl space and you've got to maintain your crawl space because that's the overall health of your house. It's like the cholesterol, right? You don't really notice it unless you look. And then once you look, you're like, whoa, I'm really unhealthy. Do something about it. Okay. Eat some Cheerios. I don't know. something that there's a lot of in Arrowhead is chalets, And I don't hide it. I like chalets. I like big chalets. And I cannot lie. I I think they're fantastic. And Arrowhead has a lot of them. So I think that there's a lot, there's a big supply of what you're looking for when it comes to a short-term rental in Arrowhead. There's a bunch outside of Arrowhead and other parts of Pocono Lake and in Albrightsville as well. Not quite as many in Albrightsville, by the way. I just think that when Arrowhead was being built, there was a couple builders that were selling the style of house and that it did really well. Now, one that I'm not particularly fond of is what I call the contemporary. sometimes people call this a salt box. It's where you've got a staircase and a loft, like a half-loft kind of thing, you'll know it when you see it. And there's a ton of them. I don't like them. I'm not a big fan. I think it's definitely better than a ranch. I think it's definitely better than a Colonial style house, but these like contemporary style houses. I'm just I don't know. I've never really been a fan. I like the chalet, I like the A-frame. I even think a chalet is cool if you've got like only half of a great room and you've got a loft on the other side. those are cool too. It definitely increases your square footage, but like there's just something about that, style of chalet these big open ceilings and the Exposed beams anyway. Arrowhead has those in abundance and you can usually find them at a fairly good price. But remember, if you're going to be purchasing property in the Poconos, either go really small or really big. So if you're going to succeed in short-term rentals and cover your expenses every month and actually make money, then I recommend going six bedrooms or bigger. And right now on the market, I think there's only like one house in Arrowhead that's six bedrooms or more. So, that's one way to stand out for sure. And You wanna have those amenities, you wanna be fixed up, but the size of the house makes a big difference. So I want to get into like the stereotype, like the stereotypical buyer, So, Frank, you kind of are falling into it. somebody rents in Arrowhead their kids absolutely love it. They say, Why am I going to keep paying $2,000 for just a weekend? I could buy one of these things. Then they buy a three-bedroom house that's in their price range, usually $300,000 or less. Their family uses it constantly. The kids are getting older. They're getting involved in sports and other activities. And then the house just sits empty. They realize it's empty and they either sell it or they put it on Airbnb. So putting it on Airbnb, though, they're not really in this position where they're going to like invest into the place. This is just a family vacation home that they've used for a couple of years. I'm thinking of like a Winnebago. Like it's just good enough. It's really about the outdoor experience and amenities. They're not thinking about the competition. It wasn't purchased for that. It was purchased because it fit the budget and it meant that they can make family memories. So they put this on Airbnb and they get like barely any reservations. And that is the stereotypical turnover point. This is where we get people buying and then selling within seven years. It's because the kids were, between five years old and 10 years old when we bought it. And now seven years later, this one's graduating from high school, this one's going into high school. We're just not getting up there as much. I heard one guy telling me, I'm gonna go do Airbnb because I'm the only one who comes up here anymore. My wife doesn't come with me, my kids don't come with me. Nobody spends time up here. I've been trying to give away the cabin to my friends, and none of them make time to come up here either. And so why don't you just rent it out on Airbnb? And it's like, sure, you know, I can. And that's how property managers make money. That's how we find more of these things. But nobody ever asked. Is this something that people are going to want to rent? They just said, let's put it on Airbnb, because I don't want to sell it yet. Or this is not a good time to sell it. So let me just put it on Airbnb. So it's not necessarily a winning proposition. My recommendation for you, Frank, is if you plan to rent this house out, buy something that's ideal for renting and allow your family to use it too. This might mean putting a sauna in, even though your family doesn't use a sauna. This might mean putting a hot tub in, even though your family doesn't want to use the hot tub. This might mean putting in accent walls and changing up the lighting and all the stuff, even though it's already good enough. Think first like an investor. that way you can be successful as an investor. And think second for the personal use. Because I mean even in a worst case scenario, at least you've got the house renting and you can use the income So then what kind of house would I buy in Arrowhead? I would buy anything that's lakefront. lakefront properties can do incredibly well. I would buy anything in front of a stream. So there's properties on Trout Creek and one other street that have a very nice creek behind them. there's a couple other like drainage ditches in the community I would not buy next to those. But that one on Trout Creek, I like that location. It's also really close to the island complex. but anything lakefront, there's humongous lakes here, and almost every single foot around those lakes is developed. So there's a lot of lakefront properties in here, and sometimes they're like only six hundred thousand dollars, and that might get you maybe a three thousand dollar mortgage payment. But hey, if you're gonna make that much extra money by having it. then it's worth paying the extra money for it. Now, with that said, lake view properties make you more money per dollar of value. So anything that's lake view, I might get, especially if it's a big house. Something that's really like peaceful, interesting, marketable, or difficult to replicate. So another thing to look for is privacy because it's rare in Pocono Lake to feel private. right now there's a listing at 32 Mountain View Drive. Now I know this is not in Arrowhead. it's in Locust Lake Village, but it's in Pocono Lake. This property feels like it has privacy. even though there's like very mature trees nearby, there's a vacant lot on one side, it's at the end of a cul-de-sac, there's no houses behind it. Like that's extremely rare in Pocono Lake. So I would purchase a property like that, even though it's in like tear-down condition. It's a chalet. It's really, really dated. they want $217 for it. I think it's really worth more like $180. so Frank, if that's something you're interested in, let me know. But it seems like you're interested in something that you and your brother in law can share. Like, so it has to be a bigger house, maybe four or five bedrooms or more. And again, go really big. Get a six bedroom house, get it to be lakefront, get it to be lake view. You know, if you can't, then just make it incredible. there's a six bedroom house in Arrowhead. Over on Choctaw which is like one block from the pool. that property earned $130,000 a year for a couple of years until it was sold. It was sold for $770,000. So, like, that might not necessarily be in your price range because of its rental history, but it doesn't mean that you can't replicate it. It doesn't mean that you can't build your own house that's six bedrooms A seven bedroom would do incredibly well. A seven bedroom lakefront would just be amazing, really. if you can get a house with a private pool. Now these are extremely rare. I'm only aware of one private pool in Arrowhead. there might be another. I did talk to a homeowner one time who checked with the community, and they said that he can put it in his own private pool. So that would mean that it's allowed. So if you can find a property. And you can put a pool in it, or you can find that property that's big and you can put in your own pool. That could be an incredible income producer. Going really big, like I said, there's a high demand for these really large houses, but there's a very low supply. So it's kind of the cheat code to rentals to become something that is so unique and so in demand that nobody else has. my next thing I would look for is going really small. Now, if I'm going really small, I'm looking at How ugly of a place can I get? How low priced can I get? Because I'm gonna fix this whole place up and it's gonna look immaculate. I might put log siding on the outside, TNG, that's tongue and group boards on the inside, make it look and feel like a log house. Even though it's small, it's now cozy and warm and it feels like a log home. Your after-renovated value goes up because it's a log home. I'm talking about there's a ton of things that you can do, right? So you can take a little house and you can make it extraordinary with a small budget. And that's something that I really like. I also really like those small groups, meaning two people, not like three, not four, not five. I really like couples that are staying at a house or a rental. another thing that I've not seen out here is like a walden pond theme. I'd love to see something that appeals to like college professors, that they can just come out here and they can write and it's peaceful and it's quiet and there's no distractions except for the bear. And the deer and the birds and the things that were going to like inspire them for poetry and philosophy and whatever. Like I've not seen that done yet, but I think it could be incredible. And then lastly, like avoid the middle. And if you want to be successful in vacation rentals, if you want your property to cover its expenses, avoid the three bedroom houses, avoid the four bedrooms. and to a great extent, avoid the five bedrooms because there's enough five bedrooms for the people who are looking for them. There's not enough sixes or sevens or eights. There's not enough like really nice twos. So it's that middle ground. Where everybody's competing, especially in Arrowhead. So, Frank, your question was: can I rent here twice a month and basically have this place for free? And it's like, yeah, maybe, you know, even with all these expenses involved, you could potentially get there, but you know, not if you're gonna have a mortgage. You know, your mortgage is gonna eat up a lot of that profit margin. It's gonna use up a lot of that rent. It's like you have to choose something that your rental guests are going to want. you're gonna have to think through the registration process and dealing with the HOA, your utilities. You're gonna have to buy a house that's healthy underneath. You're going to need, to think about what improvements it needs. And when you only have a quarter-acre lot, you don't exactly have space for an addition, Sometimes you do. But all these things need to be taken into consideration. So my recommendation is. Don't just buy something because it works for your family and then rent it out as a secondary. That's a way to like cover some of your expenses, but you're still going to have a lot of expenses. If you think like an investor and you make a good investment decision and a good investment purchase, you can do really well in here. It's just there's a lot of parameters. There's a lot of things to consider when you're looking at a house like this. And so what I guess what I'm really trying to say is don't buy the vacation home that happens to become a rental. That's this like stereotypical cycle where the failure just becomes something that you decide, you know what, it's time to sell. I'm tired of failing. Instead, buy a vacation rental that your family also gets to enjoy. Don't buy it for your family. Buy it for profit and do really well because of that, and then rent it to yourself. You know, like Use it for personal use. That's one of the biggest benefits of buying a vacation rental is the personal use. So if you are listening to this and you're not Frank, or you're thinking about buying in Arrowhead Lakes, or you live in Arrowhead Lakes, then my recommendation for you would be to run for the board. This was true for Pocono Country Place as well. And I'll say it again: the board. That was running the homeowners association, changed the fee structure for guests, they raised those expenses and they put it all on the homeowners, and it threw everybody for a loop. They were replaced with a couple people who are more STR friendly, but this community was built around vacation rentals. It should stay made for vacation rentals. I think they need more active property owners that have a vested interest in the success of short-term rentals. I really would like to see the registration fees go down because they're not bringing in the value that you need. There's a lot of home buyers who are purchasing outside of Arrowhead because they're not going to have to, split a large piece of the pie with the community. I understand that the community needs to make money and it's a for-profit corporation. so it needs to make money, but it'd be nice if they went back to like a nonprofit status. And if those profits actually got shared with the property owners. Or they put it into other projects instead. Like that, I think, would be good. So if you get involved there, then you can actually make a big difference. And some of those things I'd love to see is if we give the guests the opportunity to fill out the registration themselves and to pay those fees, that would be amazing. The fact that you're making the homeowners fill this form out and that you're making the homeowners pay these registration fees, I think is kind of ridiculous. regardless of who has to end up paying it. Filling it out itself is an administrative headache and you're forcing the homeowners and the hosts to do this and that's I think a little unreasonable. Other HOAs do that too, which I also think is ridiculous. But it'd be nice if we didn't have to. You know, that's kind of my point. And then that last thing that I would recommend is before buying anything in Arrowhead Lakes make sure you check the crawl space. Because that's like the number one area for issues. Check if you can. you pull off a cover for the outlet. You can actually look into the wall and see what kind of insulation is in there. Sometimes it's just paneling and then nothing before you get to the sheathing outside. Usually there's insulation, it's fiberglass. you can do an energy audit if it's winter time, those are valuable. And it's also a really good tool to tell you about like the windows and all these different things. Think about the energy efficiency of it because that can end up eating up a lot of your profit as well. So I talk about these things, I know about the community. I like selling in Arrowhead, but there's again, there's all these pros and cons. And I just had an offer accepted yesterday for one of my investors to purchase a property in Arrowhead Lakes. So I don't say it's a bad community. It's not a bad place to buy, but there are expenses that have to be considered. And not the best HOA can be a good investment when it's a good property. Like I put the property first. when I'm focused on returns, when I'm focused on a property earning income, I look first at the property. I find a property that's a good deal. And then even with all those fees and headaches. If it still pencils out, it pencils out. If it makes dollars, then it makes sense. So I genuinely enjoy sharing messages like this and talking about and teaching about these things that are sometimes a challenge if you don't understand them. And stuff like this is something that a lot of people just don't talk about when they share this dream of easy passive income. If you're a property manager, an owner, operator, a co-host, or an investor, I'd love for you to email me at info@galvanized management.com. love to connect and learn more about your approach. And if you have a question, go ahead and ask it. I might end up making my next episode about that. This is where we break those things down. If this episode helped you, great. I'd appreciate a good rating and a share, too, so that we can keep growing organically. Together is how I believe 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 Short Term Rental Problems and Solutions.