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Septic Systems and Crawlspaces · Short Term Rental Problems and Solutions

• Jeremiah: It's not all sunshine and five-star reviews. If you've realized that being an STR investor isn't glamorous, you're in the right place. Today we're diving into an issue most people don't know enough about. But it comes up when they're buying rental properties in remote areas all the time. Most agents say buyer beware. I say, let's be an educated buyer who takes calculated risks. We'll get into it because this is the community where we talk about the gross, the 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, but you can also ignore education and you can quit. My name is Jeremiah. I'm an investor with over a decade of experience, and I'm also a property manager with over 140 units under management. I talk about what rental investing looks like from the inside. We have a few questions for today, so let's get into the first. Hi Jeremiah, I just got an offer accepted and the seller told me that the drain field is saturated, but we should be fine because there's a lot next door that comes with the purchase of the house. I don't know what questions to ask or how to assess my risk level. We're about to get our inspections completed. What should I know? Thanks, Trisha. First question I have for you, Trisha, is why was this not disclosed to you prior to the offer being made? this kind of stinks. Right, because I think the seller was trying to get some sort of a basis of what the property's worth before they actually disclosed that this was an issue. This should have been disclosed beforehand because at this point, I think they're kind of just wasting their time by going under contract with people and then disclosing this material defect. this is not just a small deal. This could be a $35,000 septic system, or this could be an eighty thousand dollar solution that takes five years to implement and no matter what you do there's a risk that you can't do anything. So I think it's important that this sort of thing gets disclosed. for you, Trisha, and for all of my other listeners, I'll just explain some of how that works. A lot of people are buying in the Poconos, they're buying in these rural marketplaces, and they don't understand septic systems. So let's get into that. basically all the waste flows downhill into a holding tank. That holding tank is sized based on the size of the house, the number of bedrooms, not the number of bathrooms, the septic system it's got this big holding tank. It's a thousand gallons to fifteen hundred gallons. I've not really seen one that's bigger than fifteen hundred gallons, but that holding tank, all the solid waste either goes to the top or the bottom. It's full of water. So the center is just going to be water. Now there's also naturally occurring bacteria in the septic system. And that's what those little pellets are that you see at like Home Depot or Lowe's. You can actually flush things in there for those bacteria To actually grow a little bit more. It like it feeds them the right kind of stuff for them to multiply. Anyway, so your solids break down due to this naturally occurring bacteria into just gray water. That gray water goes through a baffle, meaning there's a pipe that goes just to the center of the tank. So water, just because of gravity, goes into that pipe and it goes out somewhere. Now where it's going out. Depends on the type of system. If you have an above-ground system, it goes into a dosing tank. It's also called a pump tank. if you have a gravity fed system, then it just goes downhill into your drain field. Sometimes people call that a leech field. So water just leeches out with a gravity fed system, meaning it's going downhill under the ground. when they build these systems, they just dig trenches, like three or four, sometimes two, sometimes one trench. And the bottom of that trench gets like sand and gravel, just like stuff that water can permeate and go down through. Usually it's just gravel. But above that is these perforated pipes. So think of a pipe that's got like holes in it the size of a pencil. So the water just goes down there and it leeches out into the earth. And then it's supposed to go downhill or sideways, until it hits the water table. And at that point, it's already filtered and it's clean. So the thing is, if you have a saturated drain field, think of like a sponge that's already full of water, It's going to not take any more water. That is a saturated sponge. What you need is for the sponge to be relatively dry so that it can accept more water. Because people use water in bursts. They take a shower, there's like you know, 20 gallons or 50 gallons there. And then they might do the laundry, and that's like another 10 gallons right there, maybe more. so water goes through your property, goes through your house, and it goes into that drain field. And whether it's solid or liquid, it needs to be able to escape into that sponge. So if you have a saturated drain field, that's a problem. And it's usually associated with below ground system, a gravity fed system. But if it was an above ground system, then that gray water goes into the dosing tank. The dosing tank has a pump in it. That pump pushes it under pressure through a series of pipes up into the drain field, which is elevated. There's sand in that drain field, there's gravel, there's various layers of things to clean that water until it gets back down to the earth. And then it goes through the same pathway that we were talking about before. So the earth that's there has roots in it, it's got organic material, it's got things that'll accept the water, and it's again like a sponge. Now, if there's a water table that's a high water table in your area, then that could be one reason why water is not seeping down into the earth. Is because there's so much water getting to that part of your yard from just rain or ditches or whatever, that would cause that whole area to be saturated. And it's not even because the septic system is being used. It's just because now maybe. your neighbor next door built a parking lot and the water that used to seep into their earth is now rolling across their parking lot into the ditch. And that ditch is releasing its water either downhill or into your yard. So there could be a lot of things involved here. another thing that could be involved is if you don't know where your drain field is, it's usually near that tank and it's usually in the area where there's no trees. There's a couple things to know about the trees is one is they have roots and they're looking for water. So they're going to go to the wet areas in your yard. And if you have a septic system that's active, then it's going to go there. And if those roots get into those perforations in the pipes, they'll actually grow and plug your pipes. Now a tree taking all your gray water is not necessarily a problem until that tree dies. Or if it falls over and pulls the roots with it, it could actually pull some of those pipes up. So you're not supposed to have trees in your drain field. Does that stop people from growing trees in the drain field? No, it's just like a ticking time bomb. At some point, it's going to be a big problem. So with the gravity-fed system, you have to look out for roots, you have to look out for trees. And then with the above-ground system, it's the same thing for the same reason. But generally, it's not somewhere where trees grow. just because people obviously know where it is. They're more likely to maintain it, cut the grass and stuff like that. but I have seen it happen where an above-ground drain field, was actually built into the side of a hill. Anyway, that's how a septic system works. So when you're purchasing a property, you want to look for roots in the drain field. You want to look at the baffles. There's an inlet and an outlet baffle. Make sure they're not deteriorated because sometimes they're steel, And they'll rust over time. another thing you want to look for is the level of the solids. You want to look at the level of the water too, and then you want to run water into it and make sure that level doesn't go up too high. If it goes up a couple of inches, that's not abnormal. It means that water's going out through into the drain field, but it should go back down. So over the course of a couple of hours, you can run water into it. You should see water coming out of it. So the next thing I've got for you, Tricia, is how saturated is it? So when somebody says it's a saturated drain field, that doesn't necessarily mean it's a big problem. It just means it could be a small problem. It might be something that you can deal with. Cause here's the thing is with short-term rentals, oftentimes you just have people there every weekend. You have breaks in between. And that septic system, it can actually reset. If you've got a small house, it's only getting one to five people there, then they're not going to use a ton of water while they're there. So you have to know basically how saturated it is. Now you're going into the inspection phase. So my recommendation for you would actually be to have a hydraulic load test done. Now, a hydraulic load test is designed to cause your system to fail, but it's not like a pass fail thing, right? this is like testing your blood pressure. it's not like it's a pass fail. This is testing to see what amount of water that system can take given, whatever the weather conditions are that you're experiencing. So basically what they're gonna do is they're gonna run the sink for 45 minutes or whatever, whatever they calculate to be about 400 gallons. Now that all goes into that tank and they're gonna monitor the water level in the tank to see how it rises. A very saturated drain field that'll go up by all 400 gallons. And again, it's like a thousand gallon tank. So it's already pretty close to the edge. Now, if it goes up, you know, six inches and then it goes back down. Once the water stops, that is, you know, not necessarily a big problem. But you want to be able to gauge how bad it is. So a two-day hydraulic load test, they fill it with 400 gallons on day one and they come back on day two and they do another 400 gallons. So that's to simulate day after day usage because now that they've put 400 gallons into the drain field, they're going to come back the next day and see can it take more? All right. This is especially important if the property is not being used actively. If there's people already renting it, they're they were living there the day before the inspection, stuff like that, then it's already getting a lot of use. So that is a hydraulic load test. And what it'll tell you is that the property can take 400 gallons, in which case I wouldn't say the drain field is saturated, or it would say it can take 200 gallons or maybe 300 gallons. If it doesn't take much to cause it to overflow, If it only takes 50 gallons or 100 gallons, I would be very concerned. And then the next day, if that water level is still high, then you've got a failed system for sure because it can't take any more water. So what some people will do in that situation is they'll treat their holding tank like it's just a holding tank. Like there's no way for water to get out of it, in which case they'll have it pumped. Now, when you have a thousand gallons pumped out, you can now put a thousand gallons into it. And that time period also might be good for the drain field to reset, for that water to drain out, for it to go back to being relatively dry, like a sponge, you can put more water into it. So an alternative septic system would actually be putting a much larger tank there to just hold it and then you have it pumped out. Now you're probably asking, well, how expensive is it to have it pumped out? Depends on the number of gallons. Usually a thousand gallons is around $325 to get pumped out. And a 1,500 gallon tank would be like more like $375 or $400 to get pumped out. Now those prices are local. That's for contractors around here, like the ones I use. but nevertheless, it's based on the number of gallons. So once they pump it out, they give you an invoice for it. Obviously, you pay that and you move on. Now you can take another 1,500 gallons if it's $1,500. Hundred, right? So your next two or three reservations will be perfectly fine because all of that waste is just going right into this tank, even though it can't go out, So there's some calculations, and I would recommend talking to a contractor specifically about your issue. But that's what to know and how to know how saturated your drain field actually is. Now the last thing is the lot next door. you cannot just assume. That you can build a septic system there. That is a risk. So the first question I would ask is do they already have a permit to build a septic system here? Because the phrasing in your email, so we should be okay. should be doesn't sound like you will be, right? If you already had permits for this thing to be built, then you'd probably also have an estimate for what it's gonna cost to get rebuilt and you wouldn't be asking this question. It sounds like it hasn't been tested. I would hope that before the person who owns this house purchased the lot next door, they had some testing done. Because the lot next door is worthless if you can't build anything on it. And in an area where there's no sewers available, if you can't build a septic system, you can't build a house. So it's not buildable and it's just costing you money in taxes and HOA fees if you purchase a lot that's not buildable. So then it becomes, well, how buildable is it? Right. So if it's not been tested, then you're going to get a test done. there's a couple steps to this. We call it a perk test. So you'll actually do some testing. And that first step is the probe, meaning that they're just going to dig a hole and then they're going to look at how much topsoil you have. Basically, in this region, they're just looking for topsoil. What type is it? Is it clay? Because usually below the topsoil is clay. So clay doesn't accept water very good. It's not really like a porous sponge. It's going to be an issue. So they want to look at that soil to make sure you have the right kind. Now that's step one. Step two is if you do have enough topsoil, they're going to dig holes. with an auger about the size of a bucket usually sometimes bigger they're gonna pour water into it. Let's say they they pour in five gallons, they measure the depth with a stick, and then they measure it again at 15 minutes, measure it again 15 minutes later. What they're looking for is a hole that slowly drains out. Now if it drains out real fast, that's a problem because that means you just have like lots of rocks below they're gonna be gone real fast. If it drains out slow, but not too slow, that's a good thing. If it drains out really, really slow, or it doesn't drain out at all, then that also factors into the calculations. Because if it's able to take water, but it doesn't take it out very fast, then you need a larger drain field, basically. So this is what they call a perk test. It's water literally percolating down into the earth. And they're just testing that to see how well it's going to work. Now, we didn't talk about what happens if you don't have the right kind of soil, because it's possible that you don't. And I've seen probes done in four different spots, and one is six inches of depth before you hit clay, one is one inch, one is 12 inches. You need 20 inches of good soil if you're going to build a septic system there. So one thing that you can do is you can actually bring in the good soil, meaning that you can buy like topsoil, buy the truckload. And you can level it all off so that someday you can put a septic system there. But that requires a four-year waiting period, meaning it's called a four-year fill. They're filling this lot with about 30 inches of good soil to make sure that you can build a septic system on it later on. Not only that, they're making you wait to make sure it doesn't erode, to make sure that those levels of dirt actually combine into one homogeneous type of layer. So those are the things that are important there. And you're also going to have grass growing on top of it and everything. So it kind of, you know, becomes part of nature. It just has a lot less rocks, fewer boulders. It's more like topsoil, So a four year fill means that in four years you can have it tested. So they're going to do a probe. They're going to make sure you have the right type of soil there. And then they're going to do the perk test. So the perk is going to require those like six holes and they're going to Pour water into it and watch it percolate down. Now, hopefully you'll pass. Most of the time you do. As long as everything was followed to the letter of the plan you should pass. But there's no guarantee that you'll pass. It's actually happened where people have done a four-year fill and then it didn't pass later on because it's not guaranteed. So I have done this fill before. I worked with a contractor and he brought in the soil and he leveled it off with his skid steer. And then he put straw and seed on top of it. just has to wait four years now. Actually, at that point, I put it up for sale and I sold it to somebody. But this four-year fill it's a way it can be done. So Trisha, but what you might be looking at is, you know, requiring a four-year fill before you can apply for your septic permit to have that built. And in the meantime, your holding tank, if it's a thousand gallons, you might have to empty that out every two weeks or every two months, depending on how saturated your drain field is. And it could get worse. It could become completely saturated. And that might be, I don't know, because somebody crushed the pipes or because there's roots in the pipes or whatever. like I can't really evaluate based on the just an email. But depending on how much water you can put into it, you might have to get this pumped out every couple of weeks or every month. So you have to think about all right, $325 once a month for the foreseeable future is $12 times $300, and it's $3,600 a year that I'm gonna have to pay for the next four years while this fill is being done. Add on about six months potentially to get it done and then to get the new system built and the testing and the permitting and everything. So for five years, I'm spending three thousand six hundred dollars a year. Well, actually more because it's $325 per occurance But now we're spending four times, you know, almost four thousand dollars, sixteen grand, plus the cost of the new system plus the cost of the four-year fill. So you could easily be looking at eighty thousand dollars between pumps and a four-year fill and a septic system. So this is something that definitely should have been disclosed to you. If it's already been tested, if it's already been approved, meaning like the permits have been approved. Then you might be able to just move forward and build a septic system, but there's no guarantees. There's no guarantees that you can. So going into this inspection, I would recommend asking the home inspector if they can do a hydraulic load test. Because not only do you want to know that the system is saturated, you want to know how saturated, because that's going to factor into what it's going to cost for pumping it out more frequently until your new septic system is built. And then The second thing you need to ask is was that lot tested? Because if it was tested, then we can make a reasonable assumption that you can build a septic system there. But if it's not been tested, then you can't make that assumption. And I would recommend making that testing part of your inspections on the property is because the lot next door comes with it, you should be able to test for that. In fact, I would recommend right now that you separate the lot from the house, not as two different sales. But if you have a contract for just one, that one contract for a vacant lot actually addresses this whole septic system thing a lot better. And then, you know, tie them together and everything. You can ask your agent about how to do that right. But hopefully, this is not a big problem for you. Hopefully it's saturated, but not really bad. You know, because if you only have to have it pumped out every quarter, it doesn't cost nearly as much. And if you do have a lot next door where you can definitely build a septic system. Then it's just a matter of applying for those permits and going through the testing and everything else. That's maybe a six-month process, maybe a three, if you have a good contractor who's responsive. And the cost of a new septic system for a three-bedroom house is probably $25,000. For a five-bedroom house, maybe $35. It actually depends on the amount of material and how high and how wide it's gotta be. But that's determined when they watch the water percolate down into the earth. is if it goes down, you know, fast, but not too fast, then you don't need as much space. that's the idea. so hopefully that helps, Tricia. getting on to the next question. This one's about crawl spaces. Hey Jeremiah, I just had a home inspected. And the inspector suggested I have a qualified contractor come to evaluate the crawl space. Conditions noted include wood rot in seven joists, a rotted rim joist, and organic growth near the crawlspace door, which may be mold. I had a mold specialist come over and it's $8,000 for remediation. The crawlspace specialist will be there tomorrow to evaluate it, and I'm not sure what to do next. The mold quote seems like overkill, and I think it'll kill the deal with the seller if I ask for too much. My agent has never dealt with crawl spaces. Where we are both from, everything either has a full basement or is on a slab. Regards, Karen. Karen, my number one concern is why would you use an agent who's from your area instead of the area where you're purchasing a property? You can find loyal agents anywhere in any marketplace. You're going to find somebody who's going to work with you honestly, it's going to deal with you fairly. And they're more familiar with that area's issues, like the one that you just described. Like if I was buying a house in Philadelphia, I wouldn't use my agent from the Poconos. And I wouldn't represent myself if I don't know Philadelphia well. you're going to be paying a commission. Why would you pay for something that's not like good? for the value that it's presenting. I don't know, maybe it's your cousin or something like that, but recognize that, you know, you might end up suing your cousin over this. so moving on. the second issue here is that the mold industry has more crybabies than any other industry I've ever found. mold doesn't want direct sunlight and it needs something organic to grow on. And it needs moisture. So if you solve the moisture problem, even with active mold growth, I believe, and again, guys, this whole podcast is my opinion. You're coming here for my opinion. You're not coming here for an expert opinion, and I'm not a mold specialist, and I'm not giving Karen advice on what to do for her specific situation either. So back off a little bit in the comments. but I believe that if my crawl space has mold. I need to dry up my crawl space. If I can keep that area conditioned and dry, even if I could just put some light on it or something. I believe if I can keep that can area conditioned and dry, that that mold will stop growing, which is not a problem. If it stops growing, I'm good. I don't have to get rid of it. I don't have to scrape it. I don't have to paint it. I could just let it be. But the mold specialists aren't going to hear that because their entire industry makes tens of thousands of dollars per property from insurance companies. And if they don't perpetuate the story that mold is toxic, that black mold or blue mold or green or whatever is a health hazard that's gonna cause people like and I don't know if you are or not, Karen, but like sometimes you find people that just kind of subscribe to this, like, I'm allergic to mold. This is gonna kill me. It's in the crawl space. Just don't go in the crawl space, but remediate it. Definitely do remediate it. There's a couple things I recommend to actually solve the problem. number one is a spray that'll kill it. So there's various ways to kill it. Some people use bleach that'll definitely kill it, kill anything that's organic, but it's also really difficult to work in a crawl space where you're spraying bleach all over the place. The second one is like chromium. These products will kill the mold and they'll leave an antifungal layer on it. that doesn't work all that great on wood because it kind of soaks in. But if you can saturate the area with chromium, that's supposed to kill it and it's supposed to keep it from growing again in the future. You still need to dry the area. So in crawl spaces, I close up the vents, I insulate the walls of the crawl space, I put a vapor barrier down, and I add a dehumidifier. I don't use an expensive like industrial grade dehumidifier either. I use a normal dehumidifier that is replaceable and cheap. Like 150 bucks is my max budget. I don't want one with the pump because the pump can fail. I want individual components because they're more bulletproof. So I actually put a fitting on the tank. It's a plastic tank. I drill a hole in it, put a fitting there that goes to a garden hose. That garden hose drains water down into a pump that is like a condensate pump, which is literally what this is. But that condensate pump has a float. Once it goes up, it pumps the water under pressure out of the crawl space. So that's what I do. In order to not have to deal with a commercial dehumidifier. Because here's the thing: every dehumidifier is going to die eventually, especially since they're like constantly running. Even though it'll last longer, you're still going to have like a $750 dehumidifier you got to replace one day. I would rather replace the single components, like $150 for the dehumidifier I think it's $75 for a common condensate pump. Maybe it's $50. They're cheap and they're easy to find new ones. And they're in the hardware stores, and you don't have to go like wait for something to be ordered either. So, anyway, you do have to get the area dry and you have to kill the mold, or I would kill the mold anyway. do you need to paint it? Do you need to maybe? It just depends on your appearances. Do you expect people to go into your crawl space? In most cases, that's no. Do you expect anybody to go in there when you're selling? The answer is yes. So if you want to hide that you had mold in the past from a future buyer. Then you would actually have that whole crawl space painted. Another thing that painting does is it leaves a layer on there that's not supposed to grow mold. And that's because you would use a product like a primer, something that has a gloss finish to it, that would actually stop it from growing in the future because that gloss finish is not really organic. So the idea is, you know, good, but I mean, in practice, most people don't go for that. It's expensive to paint crawlspace. and it's kind of pointless. So I would just disclose that this was professionally remediated, that you put into dehumidifier, and then you make sure that the humidifier continues working through the life of your ownership. Otherwise, you're gonna have issues with your crawlspace. And then the last thing is like the crawlspace specialist, they're gonna be worse than the mold guy. not that they're like telling you a bunch of issues or making it out like they're crybabies, they're actually doing a legitimate amount of work for what they're doing. But the crawlspace specialists that I found, they have the same solution for every single crawlspace and it's full encapsulation. Now, I feel like that's kind of the Cadillac plan. I would rather just put a vapor barrier all the way around and insulate the walls and call it a day with the dehumidifier. Why? Because it's good enough. A dehumidifier doesn't have to have a wrapped envelope with no air getting in or out. Will it be a little more energy efficient to have it encapsulated? Yeah, a little. But it's not going to improve the value of your house. It's not going to help you long term. And you're going to have just as healthy of a crawl space if you do my way versus their way. The difference though is they're gonna charge you $18,000 for this. And my way, it's probably gonna cost you two grand. So you decide what else could you do with that sixteen thousand dollars? Probably a lot of things, right? So I would just remediate the mold for sure, but I wouldn't remediate it the way that the mold specialist is suggesting it gets remediated. And if you talk to them about it, they're gonna trash me because I'm breaking down their industry. It's not necessary. we're in a wet environment, we have high water tables, we have issues like this. Crawl spaces are a problem for sure. I'm not doubting that. I'm not saying it's not true. But you don't necessarily need a full-blown like what they're gonna do is they're gonna set up with respirators and full hazmat suits. They're gonna create a negative pressure by putting a fan in the entrance. So the fan's pulling everything out, then they're gonna brush things with vacuums. The vacuums have HEPA filtration in them. They're gonna brush everything off and then they're gonna clean it off. And sometimes they're even going to sand it down, but that's going to pull everything out. And then everything that goes out has to go through HEPA filtration because God forbid we have mold outside. Here's the thing: they're just going way too far with all of this. Is it going to remediate the mold? Yes. But it's way too much work. And the benefit later on, just keep it dry. I've seen people go through a full-blown mold remediation and then they allow the water. issue to persist. Instead of replacing the leaking water heater upstairs, they just get the mold remediated and then they still have the issue with the water. So like dry out the space, fix the mold issue, and then just maintain it in a dry state and make sure there's no water dripping down into it. I would actually recommend long-term ownership that you actually check your crawl space for moisture once a year because new leaks do develop. And you don't always know that there's a leak until you get under there where it's leaking too. Now, if you have a vapor barrier down across the whole thing, then you should be able to see water on top of the vapor barrier if you've got a significant leak. so Karen, about this too, like you've got some conditions in here that need to be fixed. your rotted rim joist that should definitely be repaired. You're gonna need a carpenter for that. the other seven joists that have wood rot in them, it just depends on how significant that rot is. If you should put another joist next to it, that's called sistering or not. To sister a joist can be easy, but sometimes it's very complicated. And that's usually because of penetrations with plumbing or electrical that goes through the joist sometimes. So, you know. Evaluate your options and see what is best. definitely consult with a qualified contractor what it's going to cost to deal with the joist. I usually see around $400 per joist. So this can be expensive, but it shouldn't be like a thousand dollars per joist. Okay. just to give you some sort of an idea what that's going to cost. The rim joist itself, that's on the edge of the house. So that's right below your siding on the outside, above the concrete or the block foundation wall. So That joist is actually kind of important and it holds up your walls in the house. So it does take a fair amount of engineering to keep everything from settling while you're replacing this. So, that's probably going to be expensive, probably around $2,000, depending on how long it is, If it's 25 feet versus a five-foot section, that's going to be, you know, more expensive. and then keep everything dry. Make sure that when they close that back up that everything's waterproofed, painted and caulked and sealed and everything like that. That's important. All right, third question for today. Dear Jeremiah, my house has five bedrooms and was listed that way when I bought it. Now that I'm applying for my STR permit, I have the township telling me it's a legal three bedroom. I feel like the agent and seller misled me into purchasing something I would not have purchased if I knew it wasn't a legal five bedroom. It looks like I need to spend forty thousand dollars to get a new septic if I want to make it a Legal five bedroom. I'm close to getting an attorney to force the seller to buy the property back. My attorney said I would be better off suing for the forty thousand dollars plus the difference in rents between a three bedroom and a five bedroom for the period of time that it'll take to get the repairs made. Can you help me estimate the rental potential of this property as a three and as a five? And then she gives me her address and a listing. Warmly, Josephina. So, Josefina, my primary concern is actually that you didn't figure this out before you bought it. Because there's tax records that are public records. And if it says it's a three-bedroom house, then that should inform your decision about whether to buy or not. And the chances are you bought a property that seemed like it was a good deal. And It was a good deal because of an issue that wasn't disclosed to you. But did the seller really have an obligation to disclose something that's a public record? that's a question for your attorney, actually. So when I list a property, I have to follow the rules for where I'm listing the property for sale. So if I'm listing it in the Pocono multi-listing service, the MLS, then I have to follow their rules. If a house has five bedrooms in it, I list it as a five-bedroom house. Why is that? It's because it having five bedrooms is only an issue for your STR permit. It's not an issue for long-term rentals. It's not an issue for primary home. It's not an issue for a vacation home. So because the multi-list service is not only going to investors, it's kind of the rule is if it has five bedrooms, I have to list it as five bedrooms. Now I can talk to the seller. About trying to save them a little headache later on and say we should list this as a three-bedroom. But the better route is actually for me to just disclose this: that you know it has a septic system sized for three bedrooms and then allow the buyer's agent to inform the buyer about what that means. Now, as an agent who works with a lot of buyers, I'm researching these things when we make offers. It's also part of the inspections. So I always recommend getting inspections done and making your offer contingent upon inspections. One of those inspections is deeds, restrictions, and zoning. And so during that period of time, most people only do the home inspection. Sometimes they also do a water or a septic inspection or radon inspection, which is a good idea. But most people don't actually go to the township or call the township to ask about those restrictions. It's zoning. Zoning has certain permitted uses. And if you plan on putting like, I don't know, a tent city on your lawn, it's not zoned for that. You can't just put a whole bunch of tents in a residential zoning in most townships. some townships have no problem with it, but others are gonna call it a campground. And it's not zoned for a campground. In fact, campgrounds are generally like spot zoned. when you purchase a property. Your agent can just look at the public records. So can you. You can look at the public records to see how many bedrooms are there. The second thing that you can do is you can have that be part of your inspections. So you do the home inspection, your general home inspection, and then you actually need to Find out from the township what size your septic system is, because when the house was built, there were permits for this, or they were just records, right? So a lot of times you'll find like a raised ranch and then somebody finished the basement. And out here, you don't really need permits to finish the basement. But if you get those permits, that's going to change the number of bedrooms in the house. But it might not change the number of bedrooms for the septic system. So all of these different things are things that you can easily find out, and it is a matter of record. That you should be able to figure this stuff out before you purchase. Now, the fact that you didn't do that indicates to me that either you didn't have a real estate agent or you had a real estate agent that didn't know these things. Where I normally find that that's the case is when your agent comes from not your area, like what we were talking about with Karen earlier, because her agent is only used to slabs and basements. And knows, what to do about both of those situations, but doesn't really know what to do with a crawl space. So again, how important it is to use an agent who knows your marketplace is because every geographical location has its own little nuances, right? What's the most important things about real estate? It's location, location, location. So those little nuances are important to know and they're they're going to inform your buying decisions. And like you said, if you knew that this was a legal three-bedroom, you would not have purchased it. So yeah, there you go. Now, as far as like estimating the difference in what the three-bedroom versus the five-bedroom is going to earn, obviously we're going to expect the three-bedroom to be less because you can't put as many people there. a good example that I can give you without pulling myself into your lawsuit is 113 Aaron Drive. Now. In 2022, that property earned gross $134K. Now, back then, it was marketed as a five-bedroom house for 10 people to sleep there. In the next year, in 2023, the township of Toby Hanna decided that they were going to enact a short-term rental ordinance. And that would limit people to two people per bedroom on the occupancy. And that the occupancy limit based on the bedrooms was based on the legal number of bedrooms and the septic system. So this has a septic system for a three-bedroom house. So they had to now change their same exact listing, same photos, same description, but they had to change it to a three-bedroom house and put their maximum number of people at six. During that year, as a three-bedroom house. with a limit an occupancy of six people, they made a gross of eighty-two thousand one hundred and seventy-one dollars. So they went from one hundred and thirty-four thousand dollars to eighty-two thousand dollars. Let's figure out what the average is. So the average is $108,000. So you would think that as a four-bedroom house with eight people max, that it would make around $108,000. So there's a lot of other factors involved. 2022 was a banner year for a lot of short-term rental investors because, you know, obviously a lot of money came in during that period of time. So I would actually tell you to estimate it a little bit differently. 2022 revenue probably would have been like $120. or one ten just because of how incomes dropped off from twenty two to twenty three. you're still estimating how big of a difference is that? That's thirty-five and eighteen. Big difference. It's a really big difference. But even if it was like $120 down to $80, you're still talking about a $40,000 spread for going from a six-person occupancy to going a 10-person occupancy. And your occupancy is also going to depend on, you know, your township. Most townships are not two per bedroom. They're usually two per bedroom plus two or two per bedroom plus four, or they don't give you an occupancy limit. Like out here, Kidder Township doesn't have a limit. they technically do, but they don't enforce it at all and never have. So, you know, there's other variables involved. And for your specific property, I don't want to comment on purpose. I don't want to be pulled into, you know, into a lawsuit where you're trying to sue the seller who sold the property to you. You get it. But that kind of gives you an idea of this whole like legal bedrooms and not legal bedrooms thing. And it's not like the person who built the bedrooms is gonna get arrested, you gotta follow the advice of your attorney here. I can't really give you any legal advice. I can just say this is actually really common up here because there were no real permits or no permitting situations until like 2002. Prior to that, everybody just kind of built what they thought was right. And it didn't really have any impact. But in 2020, 2019, 2022, different townships all enacted their short-term rental ordinance, which put a max on the occupancy because they don't want like a little one-bedroom cabin with 15 people in it. So they felt like there should be some sort of reasonable limitation. And you know, we focus on those limits all the time. I've got houses that can sleep, you know, 14 people. And they're usually occupied by groups of eight. 10, 12, sometimes there's a 14, but it's rare. So like the amount that you can charge, it doesn't really have the biggest impact that you think. And it's very abnormal for a three-bedroom house to make $82,000 like Aaron Drive did. That is not normal. So what's driving that revenue is actually more the aesthetic. it's what the area and the marketing holds, right? Because compared to other three bedroom houses, this one was better. And that is really where you should be focusing. You can make your three-bedroom house successful, but your five-bedroom house could actually earn less because you don't have the same aesthetic, don't have the same marketing, three-bedroom houses constantly are out earning five bedrooms. It's not like you're making money based on the number of bedrooms. You're making it based on the total package, on how marketable your property is and how good of a job you do marketing it and managing the revenue. So there's a lot involved here. but what I would say, Josefina, is that you can probably put your house up for sale and you can market it correctly. And if you lose money between the purchase and the sale, that's probably what I would sue on, or you can upgrade the septic system and you can sell it that way. Now with 113 Aaron Drive, we disclosed that this is a three-bedroom septic. And people adjusted their values based on that. So I also told everybody that I spoke to about it, if you just put in a new septic system, it's like a $35,000 cost, then you can get this property back up around $40,000 a year. So by changing it from a three to a five, you're going to go from an estimated $80,000 in gross income to an estimated $120,000 of gross income. And it's only going to cost you $35 to make an extra $40 per year. It makes sense to do it. I actually was trying to talk to the seller about potentially doing this. And he said, Jeremiah, if I did that, I wouldn't be selling it. Which, you know, made me a little bit nervous because I'm his listing agent. You know, like I don't want my seller to have a reason not to sell the property. So I sold a property and we just disclosed so that we didn't end up being liable. If we hadn't disclosed it, we would have been liable. I feel like we could have been misleading people if that was the case. But obviously we didn't. So Josefina, I don't know exactly what to tell you. I do know, and this is a little tip, is that lawyers get paid on billable hours. And the more time that you are talking, consulting, and you know, getting advice on all this stuff, the more those hours are building up. And attorneys, some of them, they just want to keep this going. Until you run out of money. And there's a big asset over here, and there's somebody they can sue. So just be careful. You know, make your mind up what you want to do. See if you can resolve this issue outside of court, outside of an attorney. if you can't, then I think that I might have already given you too much legal advice as it is. just saying, don't sue me. attorneys are really the only ones who win in cases like this. The seller doesn't win, you don't end up winning either, because it just builds and builds. And then everything that you would have gotten is lost in lawyer fees. And besides that, Pennsylvania is I forget the Latin phrase for it, but it's buyer beware. Like you're purchasing a property as it is, and you had your opportunity to research all of these things. And because the number of legal bedrooms is a public record, I don't know that you have much of a case. So you can sue, but then you know, you're probably gonna still end up paying your attorney's fees when you get nothing for it. They could settle, who knows? So to all my listeners, I genuinely enjoy sharing messages like this. And it's why this is the show where we discuss the challenges as well as the stuff that no one else talks about when they sell the dream of easy passive income. If you're a property manager, an owner operator, a co-host, or an investor, then email me, info@galvanizedmanagement.com. I'd love to connect and learn more about your approach. And if you have any questions, go ahead and ask it through that email. Your question might be the next one that we break down, and chances are you'll help a lot of other hosts in the process too. We win or we lose together. If this episode helped you, great. I'd appreciate a good rating and a share too, so we can keep growing organically. Together is how I believe we make this industry better. Until next time, stay steady, keep learning, and keep building something real. This is Short-Term Rental Problems and Solutions.