[00:00:00.170] – Jordan
I always train the agents in our office when we’re training people on how to work with buyers. I think our number one job as a Realtor is to find all of the reasons why our clients shouldn’t be buying a house.
[00:00:12.210] – Tony
Welcome to the Michigan Short Term Rentals Podcast. The show about buying, optimizing, and managing short term rentals in the state of Michigan. Get insights and recommendations from vacation rental operators to help take your property to the next level. Are you ready to profit from your short term rental? Let’s get started.
[00:00:34.090] – Tony
Welcome to the Michigan Short Term Rentals Podcast. My name is Tony Stancato, and I’m here with my co host, Jordan Painter. What’s up, Jordan?
[00:00:42.490] – Jordan
What’s up, Tony?
[00:00:43.940] – Tony
How’s it going? Just coming off the weekend here. Anything exciting?
[00:00:47.990] – Jordan
Yeah, we’ve been celebrating Christmas. We hosted the family of my house over the weekend, had a good time. I had some pretty unique gifts given, and the way that we passed them out was really cool. My mother in law did this thing where she spelled out Jesus, and then each little cup, it was spelled out with cuffs on this little cardboard. Each cup, you poked a hole in the little paper on top of it and pulled something out. And it had either something where you had to know what happened in the story of the birth of Jesus or one of it. Some of them were like, hey, what was Grandpa’s favorite buffet? Or just these kind of a cool little mix of the spirit of Christmas as well as family stuff. And it was a really good time.
[00:01:25.390] – Tony
Nice. And I think towards the end there, on Thursday, we went to the real estate meetup in Grand Rapids that went really well. They always have a fantastic turnout. Had to have been, what, 70, 80 people there, it seemed like.
[00:01:41.020] – Jordan
Yeah, it was a good turnout. Shout out to Dirty Young and TJ. Simmons for putting that on. It’s always a good time and a good group of people. Seems like. I always meet new people every time I go there, and it’s interesting to just hear what angle they’re attacking real estate from. There’s so many different ways to make money, whether it’s flips or land contracts or wholesaling or hard money or rentals, all that stuff. So everybody’s doing it different.
[00:02:08.670] – Tony
Absolutely. And one of the things I felt like I took away from that was the multi family space is still super hot. I think I heard that a couple of different times throughout the night. So, yeah, it’s just a great place to kind of keep a pulse on what’s going on in the market in different I mean, real estate is so unique that there’s so many different segments of it. You got self storage, you got multi family, single family, short term rentals, that kind of stuff. So it’s really a great place to kind of get together with everybody that’s actually involved in those spaces and bounce ideas off of each other and pick up a couple of things here and there. So, yeah, great event as always.
[00:02:46.980] – Jordan
Yeah, absolutely. Never know where that next opportunity is going to come from.
[00:02:50.710] – Tony
I’ll see if I can drop a link maybe in the show notes of just like, maybe a previous event, and then you can kind of get connected with that event. So if you’re in the Grand Rapids area and you want to surround yourself with people that are in the real estate space and just be around like minded people, it’s definitely an event that you’ll want to check out. So today Jordan and I are going to go over a property that we just walked through. So just kind of be a fly on the wall on a property that was really on the fence of, is it going to be a good short term rental? Is it not going to be a good short term rental? We just had a lot of discussion over the weekend as I walked through. I zoomed Jordan in and really we were on the fence about it. So we just wanted to kind of walk through some of the topics, the sticking points that we had as we were walking through this property. So what do you say we jumped in, Jordan?
[00:03:41.920] – Jordan
Let’s do it.
[00:03:42.650] – Tony
[00:03:42.870] – Jordan
So this was a really tough one. It had so many of the things that we really look for. It was a really cool property, one and a half acres, unfortunately not a ton of privacy. It’s not a busy road also, which for us, it’s not necessarily the end of the world because with shortterm rentals, as long as there’s some privacy along with that, it actually can deter some of the competition from the buyer pool. And it’s not a huge deal for us, but a couple of really unique features with the building as far as what the amenities potentially offered. But yeah, Tony, why don’t you talk about the house and then we’ll kind of talk about some of the other stuff.
[00:04:17.380] – Tony
Yeah, so three beds, one and a half baths in our favorite place to do short term rentals. Stevensville, Michigan and I think the part that we really got excited about was it had an apartment above the garage, so it looked like it was about 600 sqft. Had a kitchen, bathroom, and it was kind of like this nice little studio apartment. So that’s really kind of what got us excited about it. And the house itself is a good house. I mean, it definitely needs some paint. And other than that, I think it was pretty good to go when I got there. Walked into the house, walked into the back room, big back room space. We actually talked about potentially we’ve seen where there’s entry ways that you can actually convert into bedrooms to sleep more people. So it definitely had the option there. It was a big space they had it as kind of an exercise room, had a TV in there and would have been perfect. I mean it had been 300, 400 sqft maybe so would have been perfect for that. And then I think the big thing for me, I walked upstairs and all the bedrooms were upstairs and the full bath was upstairs but the bedrooms all had those angled ceilings on it, which isn’t the end of the world, but it’s definitely not the ideal for bedroom spaces.
[00:05:40.280] – Tony
So we took that into consideration. The main level of the house was really nice, kitchen was nice, hardwood floors, again just some paint in general. But I think one of the biggest things that detracted us from the property was the backyard. What were your thoughts on that? Backyard space?
[00:06:00.130] – Jordan
Yeah, so one of the ways that we write properties is how many neighbors are visible or close, even though it’s one and a half acres in the back. There’s a really cool fire pit actually already there, but it was right next to the lot line, next to where the neighbor’s house was on one side and on the back and then on the other side next to the house there was also another house. There was two houses in close proximity. Not going to be a great area necessarily to create privacy on that lot unfortunately. So that was a big negative. I think also just the layout on the main level and then the basement we’re always looking at where can we add value, where can we get more space for living and sleep? And so the basement, the house was 1915 so it was a little bit of an older house. The ceilings in the basement were a little bit lower and just didn’t really have a great feel that we could add on bedrooms or anything like that in the basement.
[00:06:54.690] – Tony
And I think there was like support beams basically scattered throughout the entire basement so you couldn’t even necessarily put a ping pong table up or a food ball table just because there was so many support beams in the basement.
[00:07:08.960] – Jordan
Chopped it up, not super usable. So interestingly, this one had a lot of similarities to the first property that we purchased. And so the first property in the area that we purchased has a really cool outbuilding as well, not as cool as this one but it does have plumbing and a bathroom and whatnot. And so when we were going through the purchase process on that one we had actually talked about seeing if it would be possible to add more living space and some bedrooms in that outbuilding that we have. And what we found, which is very common with a lot of these townships, is they do not allow for a second dwelling on a property. So if you have a primary residence on a property you can’t just build another building with livable space. And so with this particular one, the second building. The garage was a really cool three star garage and the unit was up above that and it was finished really nicely. As a matter of fact, I would say the finishes in the outbuilding were better than the house.
[00:08:07.420] – Tony
When you say Tony, I would definitely agree with that. But yes, super cool space. I mean, it looked like they might have just redone that within the last five years or something, but it was in really good shape, really good finishing, wide open space. A lot of different things you could have done with that in terms of short term rentals. But yeah, I think that was the big hesitation, like when we were on site talking about it, we’re just kind of going back and forth. And you thought that there was a good chance that there’s no way that we could actually include that in the listing and say, hey, this is usable space. Yes, people could end up using it, but legally we couldn’t necessarily say, hey, we got an extra bedroom with an extra bath based on kind of the township rules and regulations. Right? Yeah.
[00:08:53.310] – Jordan
My concern when we’re running our business, we want to stay on very good terms in the communities that we operate, and we don’t want to try to bend rules and break rules and potentially get ourselves and our clients in trouble. So we are very conservative when it comes to how we advise our clients to make a purchase like this. And based on what those rules are, there is a very high likelihood we didn’t even have a chance to actually get sold before we could even get back on Monday to call the township. But there’s a very high probability that all of the work that was done on that building was not permitted. It would not have been allowed if they had asked for permission to do that by the township. So it was really impossible for us to advise a client that was going to buy this house to do it and risk the potential. When we go and get the rental certificate, the home inspector in the community that we operate there, they come through the property, they examine everything and they give a permit based on the number of bedrooms. That particular community has rules where they will only allow two people per bedroom for the short term rentals.
[00:09:59.570] – Jordan
Technically, this is a three bedroom, and if they didn’t allow that outbuilding to be used, it would maintain a three bedroom instead of being able to use that one as the fourth. So the numbers on this one were really tight as far as what we could purchase it for versus the asking price and what the returns were going to be. And so what it really came down to with this one was, if this property doesn’t have another space in the garage that we can use legally with the township, is it going to be worth it? And I think the answer in this case was a hard no. There was just no way that we could make sense. It was on the fence with it being usable, and so best case, they would allow it to be used and it could end up being potentially a good one. Worst case, they could actually make you disconnect all of the plumbing and all of the things that were not permitted when that build was done and the permits weren’t pulled. And so when you start running that risk for people, it’s just too high of likelihood of getting in trouble and getting shut down.
[00:11:00.660] – Jordan
So it’s really what it came down to with this one.
[00:11:03.440] – Tony
Yeah, we could have probably got, again, a fourth bedroom on the entryway there and it wouldn’t be it’s not an ideal bedroom, but we’ve seen people that have done that well. So we could have ended up kind of in the four bedrooms and then potentially a fifth. But again, with this township and the regulations, it’s only, again, two per bedroom. So best case, we could get it to ten. And worst cases, it would kind of have to stay at that six for the three bedrooms and the half bath inside was super tight as well and just in a little bit of awkward space. But yeah, the main feature of this would have been the apartment above the garage and then just based off of our conversation, it’s likely that we wouldn’t be able to use that. And again, I think we really look for properties where there’s a lot of space from the neighbors and basically you walk out of your backyard in this one and you have one neighbor literally in the backyard and they’d be looking in at the group. We could do a fence, but fences only go so far. So yeah, we thought initially, I thought we were just going to say, hey, let’s wait a week.
[00:12:17.920] – Tony
We thought maybe the asking price was a little high. They were asking 320, let’s wait a week and see if they get an offer. If they don’t get an offer, would be a good time to potentially make an offer a little bit lower. But yeah, they text me last night and said, hey, did you guys want to make an offer? I got an offer in hand and sure enough, this morning it’s pending.
[00:12:37.490] – Jordan
Yeah, so that just kind of outlines. There’s just no two properties that are the same and there’s not necessarily ever going to be a perfect answer on whether or not you should buy. But for us, we really want to be conservative and make good buying decisions. It’s really expensive to get out of a house if it doesn’t work. It’s really important to have criteria and to really know what you’re looking at in order to advise your clients well, or if it’s buying for yourself to make sure that you’re not buying a dud. So it was a really close call on that one. It still kind of makes me a little bit sick that we weren’t able to lock that down for one of our clients. It’s few and far between that something comes up that has the unique factors that we look for, and so every opportunity, I feel like, to a certain extent, a missed opportunity.
[00:13:25.730] – Tony
Yeah, I think we got a couple of people that are anxiously wanting to buy, and, yeah, this one was definitely close, but just not something that we could recommend. And I guess I go say to you, like, hey, even if we’re not working together, I mean, obviously if you’re already working with a real estate agent, but if you come across a property that you’re not already in talks with your agent and you just want to bounce a couple of ideas off of myself or Jordan and get a second opinion, we’d love to help. Again, we can’t necessarily do that if you’re already have an agent and walk through it, but if you find something on the MLS. And you just want a second set of eyes before you kind of engage with another agent, we’d be happy to just take a look and give you our thoughts and opinions. But we thought this would be helpful to just get a little extra info, a little insight on, hey, these are the exact discussions that we had this saturday when I walked through that property, so that it just could be helpful to get a little insight on how our conversations go when we’re evaluating the property.
[00:14:31.590] – Jordan
Yeah, I always train the agents in our office when we’re training people on how to work with buyers. I think our number one job as a realtor is to find all of the reasons why our clients shouldn’t be buying a house, which could be the condition of it, could be the location, could be the layout. There’s all kinds of reasons why resale for people could be difficult. In this case, there’s a whole extra layer, obviously, with the short term rental aspect and everything else, but definitely got to make sure that you’ve got an agent that knows what you’re looking for and what these details are and how much they can impact the value of your investment.
[00:15:07.090] – Tony
Yeah, I feel like I don’t know the bearer of bad news most of the time, because, like I said, a lot of times, we have people that are anxiously wanting to buy and constantly telling them, yeah, this just isn’t going to be the one. This isn’t the one. Even if the numbers look great, then you go on site and the house just isn’t what you think, what it takes to be a good short term rental. So I always say it’s probably one out of 100 that make a good short term rental. But, yeah, we always kind of say no to a lot more than we say yes to, which is how it.
[00:15:38.830] – Jordan
Should be for sure.
[00:15:40.810] – Tony
All right. Yeah. If you have any questions, feel free to reach out, connect with us on LinkedIn. And if you’re not part of the Michigan short Term rentals.com email list, go ahead and sign up over there. You’ll get a four part email series. One will be 650 zip codes that we’ve already ran projections on. You’ll also get a furnishing calculator, so that will tell you how much it costs to furnish a three bed, two bath. That way, you can at least have a projection that you can include on your return sheet. And then if you haven’t got a chance to leave us a review over on the Apple podcast or Spotify, if you wouldn’t mind taking a minute to just head over there, leave us a review. It really helps out in people being able to find us on those platforms. We’d really appreciate it. And thank you to all those that already have done that. And until next time.