Welcome to another episode of Rikki Reply. If you've ever wondered about tapping into your retirement funds for a deal or wondered how to scale your portfolio faster, this is the episode for you. We're going to help you weigh the pros and cons of using a Roth
IRA to accelerate a deal and to walk you through other options you may be able to take advantage of if you feel backed into a corner financially. And not only that, but in today's episode, we'll also get into how to handle a messy tenant situation where they just signed a lease, but they want to back out before they even move in. And then we'll break down the best apps to manage your short-term rental so you can maximize your cash flow.
This is the Real Estate Rookie Podcast, and I'm Ashley Kerr. And I'm Tony J. Robinson. Okay, so today our first question is pulled from the Real Estate Rookie Facebook group. If you're not already, make sure you're following our page, BiggerPocketsRealEstateRookie, or our Facebook group, Real Estate Rookie. So this question is from Elizabeth Galloway, and it says, Tenants signed a year lease yesterday and paid a security deposit and remaining month of rent.
Today, he has a family emergency and doesn't want the house now. He's asked for a full refund, but our lease states a 60-day cancellation notice. I feel like he shouldn't get a refund. It was a lot of time and effort to get him into the house.
Ooh, so this is a good question because I always have this fear of like, okay, I've taken my listing down. I've got someone, but their moving day is, you know, 30 days plus away. What if they decide to back out?
So Tony, in your little bit of experience with long-term rentals, did this happen at all when you were leasing it? No, we've never had this issue. When I was working as a leasing agent, again, I did this very, very briefly. I always forget about that. Yeah, it was a very short, it was like two months that I did it. But during that time, we had someone who, very similar situation, they paid their deposit and they,
they actually, I think it was three days later, came back and said like, "Hey, we changed our mind." And my manager, I was the one who leased the apartments, they were like talking to me and I was like,
sorry guys, like we signed it. Like, I don't know what to do here. And once my manager and she, she stood by what the, the lease stated that they signed, um, they claimed to, you know, they threatened to take us like to small claims to get it back. I don't really know what happened, but in that situation, they said by what the signed contract said. Um, so Asha, I would assume that maybe this varies state to state on like what the legalities of it are, or like, does it just fall back on the lease? You, you know, better than I do. Yeah. And if you want to find out what your state, uh,
rules are, laws are, go to biggerpockets.com slash resources. And there's a section that says property management and landlord. And there is a resource you can click on that says like state laws and
You can actually click on your state and it will bring up all of your state laws. And it's kind of like a summarized version of what each of the laws are and see, you know, if there is a specific law around this. One thing like New York state does have that would kind of go through with this is like you need to give so much notice depending on how much time you've lived in the property, especially on the landlord side of things. So just, yeah,
take a couple minutes, go and look at what your state law is before you take any action on this. But I would agree. I would go along with what the lease says. So even though they haven't moved in to the property, if they have signed the lease. So when I used to work as a property manager before I even had my own rentals, we actually had a document that was, they had to give a $200 deposit. And they would sign a document saying this is non-refundable
And if you end up moving into the property, this $200 was applied to your security deposit. Because most people didn't pay their security deposit until the day that they got their keys. They were paying the security deposit and they were paying the first month's rent. So it also depends on how you're collecting that. Are you collecting at the lease signing? Are you collecting at the move-in?
Now I collect the security deposit at the lease signing, and then they can pay their first month's rent before they get the keys. So either they're bringing a money order, cashier's check to the actual move-in and handing that in, or they're paying online ahead of time and just letting them know like,
you have to pay a couple days ahead to make sure it clears your bank account before we'll actually hand over the keys to the property. But I would go along with the lease, and if the lease states a 60-day cancellation notice...
then that's 60 days. So that also means they are on the hook and liable for two full months of rent. And then you might actually be the one that has to take them to small claims court. Some states do require that you proactively take
lease the property or list the property for rent and try to get someone in there sooner. And I've seen this language in a lot of lease agreements where it says that if you do move out, you are liable. But if somebody else does move into the property during that, so say within these 60 days, you get someone into the property, they no longer have to pay. Um, they can stop paying once you get someone else into the property. Um,
So in my opinion, I would, if your lease agreement says 60-day cancellation notice, I would stick to that and I would actively start looking for somebody else to get them into the property. Circumstances will probably play out that most likely they're going to refuse to pay you that first month's rent and then it's up to you if you want to take them to small claims court for that. But I would just, at that point, I would apply their security deposit if that's allowed to
the monthly rent that they owe you and issue a full disposition letter that states what their security deposit was and why you're retaining some of it. And in this case, because they didn't pay the first month's rent. That's kind of the plan of action I would go towards, I guess. I think the other thing to call out here too, I see this a lot on the short-term rental side, on the Airbnb side, where someone books a reservation online
Day before they want to cancel because of a quote unquote family emergency and
And we say, hey, we're so sorry to hear that you're experiencing some, you know, some family emergency. We hope all works out. Unfortunately, we have to stick to our cancellation policy. And with your check-in date being so close, we're not able to offer a refund. And then magically the quote-unquote family emergency disappears, right? So I think maybe a little bit of pushback. Maybe the quote-unquote emergency isn't as big of an emergency as they kind of made it out to be initially. So-
Ashley's approach is great. And I think just sometimes pushing back, they might just fall in line. Which also I think that leads to like already friction at the beginning of your lease of like, okay, now this person feels like they're forced to live there. Yeah.
And I guess, too, like looking at it as, OK, this person's like, fine, I have to live there for 60 days. I'll live there for 60 days. Is it worth turning over the apartment twice, too? So now putting them into the apartment, they're going to live there for 60 days. Then you have to turn it over again.
How much destruction, damage, wear and tear can they do in 60 days? Do they have a bunch of dogs? So I think that's also another factor to consider is knowing you're only going to have that person for those 60 days that they do decide to comply with the lease and move in and then move out after 60 days too. All right, guys, we're going to talk a little bit about Roth IRAs and whether they're a good tool to help fund your real estate deal. But we're going to take a quick break before that.
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All right, guys, welcome back. So our question today, our second question today is also from the Real Estate Rookie Facebook group. And this question is from an anonymous user, but it says, do I pull from my Roth IRA and pay a penalty, but be able to finish my multifamily property sooner and use that equity to keep burying?
We purchased an abandoned flip in our neighborhood in California. It's a multifamily with three separate homes on one property and the ability to make a fourth if we decide to. We purchased it for $500,000, which is actually the average cost of one very small house. My husband is a contractor and the first home was almost done at purchase and has been renting for two years covering three fourths of the mortgage.
Second home is partially done, but we're running short on funds to get it done faster. I'm thinking of withdrawing about $50,000 from my Roth IRA. I'm 44, so there will be a penalty to complete the other two homes just to get them done and then hopefully recoup some of that loss later.
Our mortgage right now is about $4,000 per month. With the other two homes done, the property will bring in about $7,500 a month in rental fees and more if we add another studio. Yes, we are spending money to eventually make money. This is not a quick, straightforward deal. We're aware of that. It was a unique opportunity in a highly desirable area. We then are thinking we would do a cash-out refinance to continue with another property and so on.
Can experienced folks offer some pointers? This is our first investment property, and we are learning as we go. I know the penalty will suck, but we want to get this rolling faster than this. I'm still working and contributing to my retirement accounts. Thanks so much. Maybe the first thing we should do, Ashley, is just define a Roth IRA. And you are our resident IRA.
a personal finance expert, uh, the index fund queen. Uh, so what, what is a, what's a Roth IRA? You know, I did go to FinCon two years, so I do feel like I am entitled to that title. But, uh, so a Roth IRA is a retirement account. I think right now the don't hold me to this. I think it's at $7,000 per year is the max you can contribute. Um,
And this is an after-tax contribution. So after you get paid from your W-2 job or if you're self-employed, you pay taxes on your income. You are then contributing to your Roth IRA.
But then when it's time to retire, you do not pay taxes on the money that you withdraw from the Roth IRA. So this is where Roth IRAs are really beneficial to people who think they will have a higher income level when they are older and in retirement that they won't want to pay taxes because they're on a higher income bracket. Anyways, my answer to this is no.
I don't think you should do this. And not because I love Roth IRAs or I love index funds or retirement accounts. It is because of the math. So when you pull out of your Roth IRA early, you are paying a 10% penalty, plus you are paying income taxes on that amount.
So let's just say you're even in a 20% income tax bracket or 22%, whatever, you know, it's at now, plus the 10%. That is a good chunk of money. So above and beyond that $50,000, you're going to have to pull out more to pay that 10% and to pay your income tax on that. I think there are a lot of other ways to get cheaper money.
So your primary residence, can you put a line of credit? I got an email from my small local bank the other day saying, get a personal loan for 8.5%. Like you may not be able to get up to $50,000 on a personal loan, but maybe between you and your wife each getting one, maybe you could get $20,000 and you're only paying 8.5% on that.
So I think there's other ways to find cheaper money than to go and tap into your Roth IRA. Totally agree. I think the HELOC on a primary is a great example. Sounds like they live in California, which is a market that tends to appreciate pretty well. So depending on when they bought, maybe they've got a good chunk of equity there. I think another path forward is
private money is, are there any, cause if the plan is to refinance anyway, if you only need 50,000 bucks, could you go out and get a private money note for that 50,000? And then when you're done with everything, you refinance, pay off the original debt and you pay off your private money lender that we don't have to worry about, um, about tapping into your, um,
and to your retirement accounts as well. Um, I actually don't, I don't have a Roth, but do you know, Ashley, can you, can you take a loan out against a Roth IRA the same way that you can with like a standard brokerage account? I don't think so. No, the only retirement accounts I know is like, Oh, you can take a loan against your 401k. I do not think unless like your Roth IRA is like maybe through your employer, maybe you can, because they'd pull it out of your paycheck each month. But I am not aware of that. Uh,
Did I just lose my title now as the personal personal finance queen? I think so. I'm very, very disappointed you don't have the answer to that question. But I think you're right. I know the 401k loans are pretty common, but I haven't heard it on like the Roth side. But I think that's something important to touch on as to what those terms kind of look like and the advantages for that. I think this person also has a unique skill set or maybe a unique advantage because they're the husband's a contractor, right?
And it's like, that's a really strong resume as you approach potential private money lenders to say, hey, look, we've already got this property. Here are the numbers on it. Here's our experience level. That breeds a lot of confidence for someone to say, yeah, cool, here's $50,000 to finish this thing off. So I think, like you, Ashley, probably not doing this. Lots of other options around ways to tap into that equity. Yeah, I really like the private money idea as to like,
You know, we'll pay you 10%, 12%, which is still less than paying income tax and the 10% on taking it out of your Roth IRA, but to a private money lender and say, Hey, I've got this property, show them the numbers on it and what you're doing and what the timeline is and borrow from them directly.
instead of um you know and then you can either do payments to them or you could do it like my private money lender right now for my live and flip i don't make any payments once i refinance into my new loan i pay all the interest when i pay off the balance of the loan so that i feel like would be a great uh strategy to use if you can find someone who would be willing to do that um
And look at it that way. We're going to take a quick break before our last question, but while we're gone, be sure to subscribe to the Real Estate Rookie YouTube channel and make sure you're following us on your favorite podcast platform. We'll be right back with more after this.
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Okay, let's jump back in. Today's third question is from Christine Brown in the BiggerPockets forums. What's the best way to manage listing my property on multiple short-term rental sites such as Airbnb and VRBO? Is there an overarching management platform I can use to ensure I am not double booked and such?
Also, what are your recommendations for the best platform or site to list my property as a short-term rental? Are there other sites than Airbnb and VRBO?
I am so glad Christine asked this question because Tony, I have a follow-up to this for my own personal Airbnb listings to ask you. So let's do a Christine's question first. Tony, what are some of the best management software to use for your short-term rental? Yeah, I guess let me, let me ask, answer the second part of her question first. I feel like that ties into the first part, but she says like,
What are the recommendations for the best platform? Like, ideally, you want to be on as many as you can. But at a baseline, at the very minimum, you should be on both Airbnb and Vrbo. I get questions from folks sometimes where it's like, hey, should I listen on Airbnb or should I listen on Vrbo? And the answer is always both.
Those are the two biggest players in the single family short term rental space. And there's no downside to being on both of those platforms. Booking.com, I think it's probably like a close third to consider on the single family short term rental side. But Airbnb and Verbal are definitely non-negotiables there. But going back to the first part of the question in terms of like, how do you manage your listing on multiple sites?
It's a pretty simple solution. You just need good property management software. And there are a few big players in the PMS space for Airbnbs. You've got Guesty, you've got Hospitable, HostAway, Hostfully, OwnerRes. There's a lot of them out there.
I think it's about finding the one that aligns best with your specific kind of level of tech know-how and savviness and how big your portfolio is and what aligns best. But all of those software give you the ability to connect your Airbnb, your Vrbo, your booking.com listings to the PMS to make sure that if someone books on one website, they're
it automatically blocks it on all the other websites. So it's a very simple kind of couple of click step process you have to go through to connect all those things. I guess for my follow-up question, Tony, is Hostfully is the platform that we use. And my manager just let me know that they made a change with how they're notifying the cleaners
that there is a new booking or when they need to scheduling. So it's something with the scheduling of the cleaners. I'm very hands-off with the use of hostfully, but she said they made a change and it's getting really frustrating for our cleaner because it's not as clear, not as good as it was before to schedule her. And we had talked about this a couple of
episodes ago or a while ago where she actually didn't show up to a cleaning for the first time ever. And it was like my worst nightmare. But so I guess the question my manager has for me that I don't know the answer to is like,
Are there other software we can use to schedule the cleaner? An idea she had was to actually make the cleaner a part of as a co-host on Airbnb, which I'm very cautious of actually doing that.
So what's your opinion and advice for me? Yeah. You know, so I'm not as familiar with hostfully with their property management software. We do use them for our digital guidebooks, but I think what I would, what I would look into is instead of adding them as a co-host to Airbnb, can you actually add them as a user within your hostfully account? So for example, my PMS is,
i have different roles that i can assign to people like my role is admin right i can control everything um but we also add our cleaners and their role is specifically cleaner so that way they can actually log into the our pms's app and they can open up the calendar and they can see all of the reservations and all of the bookings but they can't see things like the financial information they can't see um you know they can't message the guests like all they can see is the calendar with the information that they need
And then the other thing that we do that I would check and see if your PMS can do is can you send any sort of notifications when bookings happen? I think that's where the changes is that they change that. So that's where it's not as clear of a notification. I'm not really sure, but it was something in the notification part of when there's cleaning that has changed significantly.
Um, and it's not as clear or something, but I would just triple check your ability to like time those notifications. Uh, because what we do right now is we do it when they book our cleaners, get a text and an email, and then 24 hours before checkout, they get a reminder, text and email saying, Hey, Ashley, don't forget Tony's checking out tomorrow at 10 a.m.
So if you can set it up that way, so there's multiple, that always works. But if not, just defaulting back to just giving them direct access to your actual PMS and restricting their role, then it'll just be on the cleaner to make sure they're going in on a daily basis to review the calendar to make sure everything's like aligning with what they were expecting. Okay. Yeah. I'm definitely going to try to add as a user and I'll look at those notifications too. Yeah.
Um, the, the last question I had on that was the, I think it's breezeway when you've mentioned to me many, many times, is there anything that can be done inside of that? Because we've talked about implementing that and we just never have yet. It's like literally one of my favorite tools. Don't look at me that way. Tony, you've told me I need to know. It's, it's truly like one of my favorite tools we have in our business is
because it just provides so much sense of like nothing's going to slip through the cracks. And we use it for scheduling. We use it for inspections. We use it for cleaning. We use it for maintenance. We use it for checklists. We use it for photo documentation. It solves a lot of the kind of operational constraints that we had when we were trying to manage everything just through the PMS. So if
If it, you know, it isn't obviously an additional cost because it's software. But it's to me, it's very much worth the additional investment to give you that peace of mind. Well, as always, thank you so much, Tony, for your guidance and expertise. I'm sorry I let you down on the personal finance side today, but I'll be back on another episode and try to be the queen of something else. Thank you guys so much for listening to this episode of Rookie Report.
apply. I'm Ashley and he's Tony and we'll see you guys next time. Let's be honest, everyone. Real estate investing feels kind of weird right now. Rates are up, deals are thin, and every expert on social media has a different take. So where do real investors go to figure out what's actually working? BP Con 2025 is your answer. It is the biggest real estate investing conference in the country and the only one powered by BiggerPockets.
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