After writing over 100 blog posts, I’ve almost never received any e-mails from readers. I guess nothing I’ve written about has intrigued anyone to inquire further! However, of the handful of e-mails I have received, almost all of them ask about the out-state-property that I bought back in 2015. I just realized that I’ve never written an update about how that investment has gone so here goes.

I’ve had some repair issues with that property which have really cut into my returns. The first major repair was about three months after buying the property and one month after the tenants moved in. The tenants reported some drainage issues and the plumber hired by the property manager determined that the drain line was drilled. Apparently this issue was somewhat common during that timeframe as Google’s contractors were laying fiber optics throughout Kansas City, MO. Google’s contractor paid for the repairs, but refused to pay the diagnostic fee as well as the initial temporary fix. That cost was about $750. I could have tried to take them to small claims court, but being a long distance investor, it didn’t make sense to go to that trouble.

The Numbers

After those repairs, there were also some issues with the flooring in the kitchen which cost $600 and the garage door opener which cost $350. All in all, I paid $2500 in repairs for 2016. Ouch! Total rents received were $10,203 with management fees of $918 and mortgage payments of $5736 (including tax and insurance). In 2017, that my repair costs went down to $1441. My total rents were $10,431 and management fees of $1320 with about the same in mortgage payments. So in 2016, I made just about $1000 and in 2017, just under $2000.

While I made a little bit of money, it was nothing to write home about. Taking into consideration that I’d have to put money aside for future capital expenditures like roof, furnace, and boiler, as well as possible vacancies, the numbers weren’t all that great. Of course, I wasn’t going to build wealth with just one house. I needed to add to my portfolio. There was a bright spot though. A very bright one. In my initial post about the investment I said that the property appraised for higher than what I paid due to the renovations. I always took solace in that fact when the numbers weren’t that pretty. Well another happened: appreciation. I will say I got pretty lucky here as relying solely on appreciation is speculation. One day when I was checking Zillow, I noticed that the “Zestimate” showed the property to be worth about $110,000. Since Zillow isn’t always accurate, I contacted the broker who I purchased the property through. He told me that the Zestimate was a pretty fair number.

This got me excited about investing again, though I know I shouldn’t count on that appreciation. I contacted the broker/turnkey provider to see if I could purchase another property. He basically told me that he had more investors than he had properties but he would let me know when he had inventory. I never heard back from him. Wow! I guess business is good when you turn down investors. Because the property appreciated, I would be able to do a cash-out refinance and take equity out to buy another property. I also had some money saved up and was looking to purchase more real estate nevertheless. But it’s always good to have more capital.

Change in Plans

As I didn’t hear back from the provider in Kansas City, MO, I turned my attention to Buffalo, NY. I had considered investing there a few years ago since I have some family there, but couldn’t find a good turnkey provider. This time around, I was thinking maybe I wouldn’t need one. I had just read the book Long-Distance Real Estate Investing: How to Buy, Rehab, and Manage Out-of-State Rental Properties and figured I could do it without a turnkey provider. After scouring the Biggerpockets forums relating to Buffalo, I happened to see a post from someone who said that short term rentals could earn two to three times more revenue than long term rentals. I was always fascinated about short term rentals but assumed that it would work only in hot tourist spots. However, after reading articles from AirDNA as well as Mashvisor which are sites geared towards real estate investors and have analytics and data to back up their articles, I started considering the possibilities. In one AirDNA article, it listed Kansas City as a top producing Airbnb location. It wasn’t necessarily because it had the most revenue. It took into account the costs to purchase property there. Sure, an Airbnb in Miami might generate more revenue but it would cost a lot more to purchase a property there compared to Kansas City.

Obviously, I was very intrigued to see KC so high on the list. I own a property there! However, after doing some research, it looked like the legislature was considering passing a law restricting short term rentals. So, back to Buffalo!

Shift in Strategy

At this point, I was reading and listening to everything I could about short term rentals. Many seemed to say that provided two to three times more revenue than traditional long term rentals. I used AirDna and Mashvisor to see how AirBnb properties were doing and it seemed to confirm this. I also spoke to a few short term property managers who said that there was demand in the areas I was targeting so I started looking for properties. Since I had decided to buy a property for the purposes of renting it short term, I knew I’d have the additional expense of furnishing it so I decided to take some equity out from my KC property. During the refinance process, the property appraised for $112,000 and I was about to take out about $24,000.

I found a two-family house in Buffalo which I closed on last week. The property manager and contractor will take a look at it to see what upgrades and repairs are needed to get it short term rent ready. During this time, my property manager in KC also told me my tenants were not planning to renew their lease at the end of June. As luck would have it, I also found out around this time about the short term rental legislation in KC. While some restrictions were passed, my property was just outside of the city limits and they do not apply to me. So guess what? I will be converting my KC property into a short term rental as well.

I don’t know how this will go but I’m will to take the risk and see how well these properties perform as short term rentals. Worse comes to worst, I can always convert it back to a long term rental. Stay tuned and I will try and update how my properties are doing.

Have you invested in a property for the purposes of using it as a short term rental? How did it go?