Month: April 2020

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Ol’ Faithful HOA Saga – Final Path Forward With HOA Dispute

It has been a wild journey with the Ol’ Faithful HOA Saga. I have finally determined the final path forward with the HOA Dispute. This real estate investing journey is fun and continues throwing some interesting curve balls. If something like this would break you down, I would definitely say real estate investing isn’t for you. I enjoy going through this process because it is a stepping stone and learning opportunity I am using to become a more experienced real estate investor. This isn’t a short term play. This is a long term play to continue learning from all the situations my real estate investing journey takes me.

It is amazing continuing to see my blog and IG page grow! If you have been following the journey for some time, thank you! And if you are new to the saga with Ol’ Faithful, get caught up on everything that has happened to this point. There has been a lot and many have reached out saying this saga has been better than some of the stuff on TV they have been watching lately 😂🤣

Ok, now time to jump in on the final path forward.

Where We Currently Stand

Ok, here is where we currently stand. I was awaiting a response from the Board and HOA president. They have been poor at best in responding in a timely fashion to my concerns with not being able to rent my place out. I believe this is mainly due to them knowing they are in the wrong, but more fun will continue below!

After waiting another 48 hours, here is the HOA’s response to my email:

Good Morning,

You had asked for a reason why the reservation request was denied. The request was denied in the spirit of the ban on new vacation rentals  by the Governor of Florida through the end of April.

I have attached a copy of the first amendment that covers the restriction of long-term rentals.

Thanks and stay safe.

Ok, how many times do I have to explain that I am not trying to rent my place as a vacation rental. Now I think this shit is just comical. I can’t and I won’t go away. It is pretty clear to see they know they are in the wrong, but are not wanting to admit it.

So here is another attempt to clearly explain to them what I mean by renting my place out long term.

The ban doesn’t ban me renting out my place long term. The ban you are referencing is speaking to short term vacation rentals.

I no longer have my property listed on any short term website and it isn’t being marketed as short term.
I have read the restrictions, and I have a right to rent from 3-6 months within the community with approval from the HOA.
For that request, why am I being denied to rent for 3-6 months as it state I am permitted to rent?
Thanks, YRB
Again, making my stance clear. I am not sure how many times I have to continue stating the same exact thing to the HOA. It is clear what I am trying to do with the property.
After waiting another 24 hours with no response, I decided to follow-up, again.

I will repeat the question again, as I guess I am not making myself clear enough. 

I would like to rent my place long term. 
 
This is in accordance to the HOA Bylaws and amendment made in April 2014 allowing 3-6 month rentals (pending HOA approval) which are considered long term rentals. 
 
Question
My request to rent this out long term was denied by the board with reference to banning short term rentals which I am not doing. Can you please provide an explanation of why I am not allowed to rent my home long term?
I hope this clears up continued point I am iterating of renting long term. Again, I want to rent long term.

If my previous 20 emails didn’t make it clear about long term rentals, hopefully this one did.

Another 24 hours go by…no response. So I will follow-up again. This time with a phone call. If you guessed the HOA president didn’t answer my call, you would absolutely be right. So back to email again. The importance of these pieces of communication is documenting the process. This will help me in a little bit when I explain the final path forward.

Here is follow-up number 3 with no response from the HOA/Board. I have waited 24 hours between each follow-up to give them time to respond.

HOA Board and GM,

I have responded to both the GM and the board (copied on almost all the emails) and even called this morning to speak with Conrad, yet I have not received a response.
It is going on 72+ hours since my email with a question asking to rent my place long term. Long term, not short term. Long term. Since that email, you (the board and HOA) have sent an email to all homeowners asking for forms of communication to run through Conrad or the board, depending on who makes sense.
I have done this, and I continue to be ignored. Is there a reason for selective responses to certain individuals over others?
Thanks for your time and I look forward to hearing from you in this time sensitive matter. 
 
Thanks again,
YRB33

I added the piece about them being selective with their responses because I had seen other owners in the Facebook group mention they had received responses from the HOA president.

Another 12 hours later, and finally a response from the HOA president.

Good Morning,

The board is preparing a response, they should have it completed soon.

Ok, a response, but no context. Three hours later their actual response.

Good afternoon YRB,

We note that you are still seeking a way to rent out your property at the resort in the midst of the Covid-19 emergency and rather than continue to go back and forth debating a series of fresh proposals, we felt it might be better to set out our position clearly, so that, armed with this information, you will be able to reach your own conclusion as to how best to proceed.

As you are aware, in 2014, after extensive owner consultation and legal advice, the  bylaws were amended to ban long term rentals i.e. rentals of more than 6 months and additionally to require owners to gain explicit written permission to rent for between 3 and 6 months, which although technically short-term, were also considered undesirable. There are currently no plans to review these arrangements.

Under the current Executive Order, all new short-term rentals are prohibited and whilst the HOA Board has the power to approve rentals for periods between 3 and 6 months, we have resolved to act in accordance with the Governor’s suspension and not do so. Effectively, therefore, only proposed rentals which fall under one of the exemptions under the Governor’s Order will be admitted.

Unfortunately, these are difficult times for us all and we appreciate that this is not the reply you were hoping for but given that the Governor’s Executive Order is very much at the heart of this matter, perhaps you might seek advice from his office regarding whether your proposed change to become a provider of exclusively long term rentals renders you exempt from the current Order. Section 1.A. of the Order suggests that it does not and so you may want to consider carefully before making any decisions re. the future rental of your property.

Please stay safe

For and on the behalf of Terra Verde Board

Finally a response with a bit of substance! They are still wrong, but I can definitely appreciate the time they final sent to put together a response.

Within 30 minutes of their response, went ahead and shot a response back.

This is what Section A states to qualify in that section:

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This is the clear definition of both Transient and Nontransient public lodging establishments per the
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Could you please help me understand how you are considering how I am trying to rent out my place as being a transient public lodging establishment?
It is clear, to me (and I am open to being wrong) that my place would fall under a Nontransient public lodging establishment. This would therefore mean the executive order does not apply to my rental as I intend to use it.
Thanks for your time, I look forward to hearing from you soon regarding this very important and time sensitive matter.
YRB

I had to again clearly explain what the executive order actually states. I don’t like to get into technical conversations about what things say and don’t say, but feel they still fundamentally don’t understand what is going on.

Final Path Forward

Here is the final response I received from the board after my explanation pointing out what I continue articulating to them.

Good Afternoon YRB,

I wanted to let you know that we have received your email. Our decision to deny entry to new vacation rentals  through the end of April has not changed.

Thank you and stay safe.

No reason to continue hearing them state the same thing over and over. If I am right, I have enough documented responses to do with what I need.

I gave one final response to the HOA and Board before being done with emails back and forth.

GM, I understand the reasoning and position that you guys are taking. I understand that you guys truly feel you are doing the correct thing. What you feel is giong to create “safety” in the resort for the people who live their full time.

It is very disappointing the way you and the Board have handled the entire situation. You fundamentally don’t understand how the virus spreads through human to human contact.
Myself and other investors bought in the resort believing it was a good community for investors. It is now clear that you (and the Board) don’t care about following the law. It is also clear that things need to change with the Board and HOA.
Thanks for continuing to make each of these things even more clear. I get this is unprecedented times, but this is very disappointing.
Will be in touch soon,
YRB
Now, for the final path forward.
I started to do a google search for attorneys in the area who specialize specifically in HOA disputes. Thought this would be a great spot to begin. Google found me exactly what I was looking for.
I created a list of 6 different law firms in the area who specialize in HOA cases. After reaching out to each, I received a free consultation with two of the firms.
During this consultation, the first person I spoke with mentioned it would be easier for me to go to a small claims court since the damages I would be wanting to recoup would be less than $8,000.
The second person I spoke with told me they charge a flat $1,500 to review all the details of the case to arrive at a path forward. Since I am not trying to spend a ton of money on this, I honestly feel like moving forward with going to a Smalls Claims Court would do.
After doing a bit of research, I would need to simply go the right location to file the proper paperwork and would then get a scheduled court date. So that is exactly what I am going to do.
For Small Claims Court I will represent myself and will be prepared to lay out the case for a judge to make the decision on damages incurred. I am fully okay with being wrong in this scenario. If I am wrong, then I learned a crap ton through the process.

Why I Feel This Is The Right Path

I have a feeling this is the right path because it will allow me my day “in court” without spending a ton of money for an attorney. I am more than  happy to bring all the evidence and communication printed out for the judge to see and then we can talk through.

I wish we had never gotten to this point in everything going on, but the HOA and Board have left me no other options. I am still almost 100% sure the HOA thinks nothing will come of this situation and that I will not seek going to small claims court. They would be wrong. I feel there are fundamental principles not being followed here.

Next Steps: Continue Learning How This Sh** Works

The next steps for me are pretty straightforward. It is now time to fill out the proper paperwork to get my day in court. Not only that, but I will also be putting together the information I will use for my date in court.

There will be a lot more I will learn through this entire process and I enjoy the learning part of the process. This was bound to happen at some point in my investing journey. I am glad it happened so early down my path. I am also glad I have set myself up financially to handle all my mortgages even if no income was coming in. It wouldn’t be ideal, but I would be able to do it.

If you aren’t already, don’t forget to follow me on Instagram!

Thanks again for all the support and continuing to come back each day for new updates in this saga!

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Reached $1.15 Million In Real Estate!

I just hit a huge milestone in my real estate investing journey of reaching $1.15 Million in real estate properties. What a wild and crazy journey it has been to this point. Things have continued to look more and more interesting in the real estate investing world with the current state of the US and world economies.

The Most Important Thing To Think About With Real Estate Investing

Before going into some details on my current portfolio, I want to make one thing clear on how I think about real estate investing. What the $$$ amount of my real estate investing portfolio isn’t the most important thing to me. The most important thing to me is cashflow. Owning millions of dollars in real estate isn’t beneficial if you aren’t able to produce a profit after all expenses are paid.

Even more important than cashflow is your cash on cash return. I won’t go into a lot of detail on what cash on cash return means, but feel free to check out this article that talks in great detail on this topic.

My Current Real Estate Investing Strategies

My current portfolio as of 4/24/2020 is made up of four properties. If you have followed my journey on IG, you can continue to get updates on everything I am doing!

I have three overall strategies for my rental property portfolio.

First, house hacking! One of my 3 core principles and something I think everyone should take a stab at in their life. To learn more about what house hacking is and why it is so important, checkout the full article I wrote on my house hacking strategy.

Second, short term rentals! That’s right, Airbnb! I feel the sharing economy will only continue to expand in future. The millennial generation enjoys having unique experiences and traveling with their friends. This has opened up a world where short term rentals are the main avenue for these guests. Providing awesome experiences for them and places to stay will continue growing. Even after this pandemic.

Third, long term rent by the room! At The OG, I rent out my place long term by the bedroom to young professionals. This has been an awesome way to increase my overall cashflow of the property and increase occupancy rates. Orlando is a great market for young professionals, and this strategy continues to pay dividends.

My Current Portfolio

Now to walk through my current portfolio.

House #1: The OG

Black and White Forest Minimalist Instagram Story (5)

This was the first home I ever purchased. I purchased this home in 2016 for $292,000. It is a 3 bedroom, 2 bathroom home with approximately 2,100 sqft of living space. The home was brand new when I purchased it. I turned the side walk in office space into a fourth bedroom and lived in the home for 3 years.

This was my first house hacking experience and I just moved out of the home a month ago. This home is now valued around $340,000 after the last appraisal I had done to remove PMI. It is cash flowing roughly $700 per month when all the bedrooms are rented.

House #2: Ol’ Faithful

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Ol’ Faithful was my first step into a dedicated unit for short term renal investing! This home is located near Disney World and is in a gated resort style community. The home is a 4 bedroom and 3 bathroom home with a private heated pool. If you haven’t been following along with some previous blog posts, this is the home where I am having all the HOA issues with. Go checkout the crazy story on this one at the link.

I purchased this home for $210,000 in August of 2019. The home is valued around $225,000 right now and cash flows between $500-1,000 a month depending on the time of the year. These numbers have definitely taken a hit since the vacation rental ban and not being able to rent the property out at all due to my HOA being a*****************.

House #3: Turquoise 

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Turquoise was my newest addition in the short term rental game. This home is a 3 bedroom and 2.5 bathroom home located in another short term rental style community near Disney World.

I purchased this home for $180,000 in February of 2020. The home more than likely remains around the same value as the date I purchased the property. I have yet to get this property fully performing as the COVID epidemic hit right after closing on the home and getting my first three 5 star reviews! More to come on this home in the near future and I expect this home to cash flow between $400-700 a month.

House #4: Trifecta

Introducing Trifecta

Trifecta is my first ever multi family property that I purchased! As I am sure you can tell from the name it is a triplex, meaning there are three units. Trifecta has a 2/1 unit and two 1/1 units for a total of four bedrooms and 3 bathrooms. I am doing a combination of house hacking, long term renting and Airbnb on this property. I am extremely interested to see how this unique property turns out from a numbers perspective.

I purchased the home for $405,000 in March of 2020. The goal for this property is to live for free! I am living in the upstairs 1/1 unit in the back of the home. Will be very interesting to see how the numbers end up playing out in the next two months.

 

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Tenant Backed Out Of Lease Three Weeks After Signing

Time for another learning opportunity for my real estate investing journey. This was the first time I had ever had someone sign a lease and proceed to back out prior to moving in. I am continuing to learn more and more about real estate investing as new situations continue coming up. I enjoy some of the ambiguity in how things are happening and always learning new things. So here is what happened.

Finally Closed On Trifecta!

I finally closed on Trifecta and it was time to begin executing on my game plan. If you have not seen Trifecta before, you can see the initial post I had of the before and after pictures here.

Trifecta will be my second go at house hacking, but this time, the strategy is a little different than house hack #1. This is the first multi-family property I have ever purchased. It is a small multi-family triplex with a 2/1 unit in the front and two 1/1 units stacked on top of each other in the back.

The Plan For Trifecta

The plan for Trifecta is to long term rent the 2/1 unit long term. I have never gone about finding a tenant for an entire unit. Most of my past experience has been with finding tenants to rent out a bedroom in a home or my Airbnb’s.

I believed renting out the 2/1 long term was going to be much easier to find potential tenants than renting out by the bedroom. I posted the home with pictures in the normal locations I post things for rent. I usually stick with Facebook Marketplace, Zillow, and Apartments.com. Those are the sites I have personally found the most luck with.

Finding A Tenant

I was getting interested tenants immediately after posting. This was a good sign. Not only was my listing standing out online, I also had it competitively priced for the market. I screened and showed the place to four different tenants and found someone who would fit well.

A Dream Tenant To Find

This tenant was going to be moving down from South Carolina in a month. She was a registered nurse and works remote so had a solid source of income. Perfect credit score and no debt. Essentially the dream tenant you could ask for. There was one catch with her though.

Around the time she reached out was when everything with COVID-19 started escalating. The start to the lease was going to be a month from when we connected. I was willing to wait a month to hold out for such a good tenant, especially in these times.

We went through and signed a 12 month lease. Two days after signing the lease the tenant calls me early in the morning. Ut oh…this can’t be good.

The Florida governor just decided to put up blockades on the border to prevent some people from driving into Florida from some of the more highly impacted areas of the virus. The tenant explained this in a little more detail to me and proceeded to ask if I could push out her move in date another two weeks with everything going on.

This is an extremely tough time in our economy and in the world in general. There is nothing either myself or her could do about the situation and there is a lot of uncertainty in general. Being the empathetic person I am, I agreed to put a clause in the lease allowing for the move in date to be pushed back another two weeks.

Current State Of Signed Lease

So I now have a signed 12 month lease for this tenant who isn’t moving in for another 6 weeks potentially! What did I get myself into?! I had agreed to wait for this tenant and it was time to just wait it out.

The tenant sent over the security deposit upon signing the lease and she was officially locked in. For my rentals, I require one month’s rent as a security deposit. This is the standard I use in all my long term rentals. This is a refundable deposit depending on damage upon moving out of the home.

Three Weeks Later…Another Call From The Tenant

Three weeks go by and I receive another call from the tenant. This time, with some worse news. Things with COVID-19 were continuing to escalate in the US. New cases per day were continuing to ramp up, social distancing was starting to become a commonly used term in daily conversation, and only essential businesses were allowed to be open.

What a weird time in our world’s history to be alive, but also a really interesting time to observe all the things that are going on.

We are three weeks away from the tenants move in date and I get another call from her. This time, with not so great news. She called to let me know that there is just no way she feels comfortable putting in her 30 day notice at the current place she is living to move down to Florida. She apologized for everything and we went our separate ways.

Sounds Bad Right? Well, Kind Of

Sounds like a pretty bad deal right? Yeah, it definitely is not the best. I thought I found a high quality tenant who I wasn’t going to have any issues with. Would more than likely pay rent on time every month, not cause damage to the property, and had great job security.

Here is the bright side from my end. I was able to keep the security deposit from the tenant based off the contract we signed and agreement we had. So now I get to keep a months worth of rent for someone who won’t be moving into the home and I can put the listing back up online!

Within two weeks back on the market, I found another tenant who was ready to immediately move in. Was an interesting story how all that worked out. Will post about it in the near future with some real numbers of how the lease is setup so I can continue to reduce my expenses even more!

Key Takeaways:

  • Finding a high quality tenant is extremely important. Waiting a few weeks for them to move in could be worth potentially placing a bad tenant in the property. 
  • Structure your lease agreements so you keep the security deposit if they for whatever reason don’t actually move in. I always recommend the security deposit to be one months rent. 
  • You always have a choice to view things as a positive or negative. I could have viewed her not being able to move in as a negative. Instead, I decided to view it as a positive, and it actually became a positive!