The 5 Steps to Making Short-Term Rental Millions

Your Comprehensive Guide to Short Term Rental Success

The short-term rental market, particularly through platforms like Airbnb, has become a lucrative avenue for property investors and managers.

However, achieving success in this competitive landscape requires more than just owning a property and listing it online. It demands a well-thought-out strategy, keen attention to detail, and a deep understanding of various aspects that contribute to a profitable rental business.

In this blog post, we will explore the five key steps to making millions in the short-term rental market. These steps serve as pillars that uphold the structure of a successful Airbnb venture, covering everything from customer service to property management strategy.

Whether you’re a seasoned investor looking to diversify your portfolio or a newcomer eager to make your mark, these five steps will provide you with the insights and tools you need to navigate the complexities of the short-term rental market successfully.

The Short Term Rental market has become a goldmine for property investors and managers, especially with platforms like Airbnb revolutionizing the way people travel and stay. However, striking gold in this market is not as simple as listing a property and waiting for bookings to roll in.

Success in Short Term Rental requires a multi-faceted approach, from impeccable customer service to savvy financial planning. In this blog post, we will delve into the five essential steps that can set you on the path to making millions in Short Term Rental.

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Step 1: The Importance of Customer Service

Customer service is the backbone of any successful Short Term Rental business. From the moment a potential guest lands on your listing to the time they check out, their experience should be nothing short of exceptional.

Quick responses, a smooth check-in process, and prompt resolution of any issues not only lead to positive reviews but also encourage repeat bookings. Remember, a happy guest is a returning guest.

Why Is Customer Service Crucial in Airbnb Property Management?

In the world of Airbnb property management, customer service is not just a buzzword; it’s a critical component that can make or break your business. With the rise of the sharing economy, guests are not just looking for a place to stay; they are looking for an experience.

And that experience starts and ends with how they are treated by their hosts. In this blog post, we will delve into why customer service is so vital in Airbnb property management and how it can significantly impact your business.

The First Impression Lasts

When a guest first contacts you or books your property, the clock starts ticking on the kind of impression you will make. A prompt, polite, and helpful response can set the tone for the entire stay. Remember, first impressions are often lasting ones, and you want to start on the right foot.

The Guest Experience

Customer service extends far beyond the initial contact. It encompasses everything from the ease of check-in to how quickly you respond to queries or issues during the guest’s stay. A host who is attentive and responsive can greatly enhance the guest’s overall experience, leading to positive reviews and, potentially, repeat bookings.

Handling Issues

No matter how perfect your property is, issues can and will arise. Whether it’s a minor complaint about amenities or a more significant issue like a plumbing problem, how you handle it can significantly impact your guest’s satisfaction. Quick and effective problem-solving not only resolves the issue at hand but also shows the guest that you care about their experience.

The Ripple Effect

Excellent customer service doesn’t just satisfy your current guests; it sets the stage for future business. Happy guests are more likely to leave positive reviews, recommend your property to friends and family, and become repeat customers. In a competitive market, this can give you a significant edge.

In summary, customer service is a cornerstone in the foundation of a successful Airbnb property management business. It affects everything from your first interaction with potential guests to the reviews that they leave after their stay. Investing time and effort into providing excellent customer service can yield significant returns, both in terms of immediate guest satisfaction and long-term business growth.

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Step 2: Cash Flow vs. Appreciation

Financial acumen is crucial in Short Term Rental investing. While property appreciation is a long-term benefit, your immediate focus should be on generating positive cash flow. This means setting rental rates that cover your expenses while still being competitive. Tools like AirDNA can help you analyze market trends and set appropriate pricing strategies.

Cash Flow vs. Appreciation: The Twin Pillars of Property Investment

So, you’re thinking about diving into the world of property investment. That’s great! But before you take the plunge, it’s crucial to understand the two main financial aspects that will shape your investment journey: cash flow and appreciation. These two elements are like the yin and yang of property investment, each with its unique benefits and challenges. In this blog post, we’ll break down what cash flow and appreciation mean, why they matter, and how to strike the right balance between the two.

What is Cash Flow?

Simply put, cash flow is the money that goes into your pocket each month after all expenses are paid. It’s the rent you collect from your tenants minus the mortgage, maintenance, and any other costs. Positive cash flow means you’re making money; negative cash flow means you’re losing money. In the world of property investment, cash is king. It’s the lifeblood that keeps your investment afloat and allows you to grow your portfolio.

What is Appreciation?

Appreciation is the increase in your property’s value over time. Unlike cash flow, you can’t spend appreciation—at least, not right away. It’s like a savings account that grows year by year, but you can only cash out when you sell the property or refinance. Appreciation is a long-term game, and it’s often subject to market conditions that are beyond your control.

The Balancing Act

Cash flow and appreciation are both important, but they often pull you in opposite directions. Properties with high cash flow potential may not appreciate quickly, and vice versa. The trick is to find a balance that aligns with your investment goals. Are you looking for immediate income, or are you willing to play the long game for a bigger payoff down the line?

Time and Energy Considerations

Managing multiple properties to maximize both cash flow and appreciation can be a time-consuming endeavor. It involves market research, property maintenance, tenant management, and financial planning. If you’re juggling a full-time job or other commitments, consider hiring a property manager to help you optimize your investments.

Cash flow and appreciation are the twin pillars that support a successful property investment strategy. While cash flow provides immediate income and financial stability, appreciation offers long-term growth potential. Striking the right balance between the two requires careful planning, a deep understanding of the market, and a willingness to adapt your strategy as conditions change. By focusing on both elements, you can build a robust property portfolio that not only generates income but also stands the test of time.

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Step 3: Emotional Aspects of Property Management

Managing a Short Term Rental property can be emotionally taxing. From dealing with difficult guests to facing the stress of vacancies, it’s essential to keep your emotions in check. Emotional intelligence can help you navigate tricky situations and make rational decisions that benefit your business in the long run.

The Emotional Rollercoaster of Property Management: How Resentment Can Make or Break Your Investment

Property management isn’t just about numbers and logistics; it’s also an emotional journey. While the financial rewards can be significant, the emotional toll can be just as impactful, especially when feelings like resentment creep in. In this blog post, we’ll explore the emotional aspects of property management, focusing on how resentment can affect both your personal relationships and your overall investment strategy.

The Emotional Weight of Property Management

Managing a property, especially a short-term rental, can be emotionally draining. From dealing with difficult tenants to the stress of maintaining a property, the emotional labor is often underestimated. And when emotions run high, resentment can easily take root, affecting your judgment and decision-making abilities.

The Ripple Effect of Resentment

Resentment is a tricky emotion. It starts small—a missed rent payment, perhaps, or a tenant complaint that seems unjustified. But if left unchecked, it can grow and fester, affecting not just your business decisions but also your personal relationships. You might find yourself snapping at loved ones or avoiding social gatherings, all because of the emotional baggage you’re carrying from your property management duties.

How Resentment Affects Your Investment

When resentment takes hold, it can cloud your judgment and lead to poor investment decisions. You might ignore red flags or make hasty choices that you later regret. In the worst-case scenario, resentment can even make you want to exit the property game altogether, causing you to miss out on potential long-term gains.

Navigating Emotions in Property Management

So, how do you keep your emotions in check? First, recognize that it’s normal to feel a range of emotions when managing properties. Second, don’t let resentment build up. Address issues head-on, whether it’s having a frank conversation with a tenant or reassessing your investment strategy. If needed, seek the counsel of trusted friends, family, or professionals who can provide a fresh perspective.

The emotional aspects of property management are often overlooked but are crucial to your success as an investor. By acknowledging and managing feelings like resentment, you can make more informed decisions and maintain healthier personal relationships. After all, property investment is not just a financial endeavor; it’s an emotional one too. And mastering your emotions can be just as rewarding as mastering the market.

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Step 4: Categories for Short Term Rentals

Not all Short Term Rentals are created equal. The location and type of property can significantly impact your earnings. Whether it’s a cozy apartment near a National Park or a luxurious villa in a popular vacation destination, understanding the different categories of Short Term Rentals can help you target the right audience and maximize your profits.

The Four Prime Categories for Short-Term Rentals: A Guide to Smart Investing

When it comes to investing in short-term rentals, location is everything. But with so many options out there, how do you decide where to invest? The answer lies in understanding the different categories of short-term rentals that attract various kinds of travelers. In this blog post, we’ll delve into four prime categories for short-term rentals: National Parks, State Parks, Eclectic Towns, and Vacation Destinations.

National Parks: The Nature Lover’s Paradise

National Parks offer a unique opportunity for short-term rental investors. These areas attract nature enthusiasts, hikers, and families looking for an escape from urban life. Properties near National Parks often command higher rental rates due to their unique location. However, it’s essential to consider factors like seasonal demand and park regulations when investing in these areas.

State Parks: A Close Second

Much like National Parks, State Parks are also a hotbed for short-term rentals. They attract a similar crowd but usually on a smaller scale. Investing near a State Park can be a bit easier on the wallet compared to National Parks, but they still offer a good return on investment, especially during peak seasons.

Eclectic Towns: For the Quirky and Curious

Eclectic towns offer a different kind of allure. These are places known for their unique culture, art scenes, or historical significance. Short-term rentals in these areas attract tourists interested in a more ‘local’ experience. Think of towns like Asheville, North Carolina, or Sedona, Arizona, where the vibe is as important as the view.

Vacation Destinations: The Evergreen Investment

Vacation destinations like beach towns or ski resorts are the most traditional categories for short-term rentals. These areas offer a steady stream of tourists year-round, providing a more predictable income. However, properties in these locations can be pricey, and competition is often stiff.

Understanding the different categories for short-term rentals can significantly impact your investment strategy. Whether you’re drawn to the natural beauty of National or State Parks, the unique charm of eclectic towns, or the steady demand of traditional vacation destinations, knowing what each category offers helps you make an informed decision. So, the next time you’re scouting for a short-term rental investment, remember to consider these four prime categories.

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Step 5: Property Management Strategy

Last but not least, a well-defined property management strategy is vital. This involves everything from regular maintenance and updates to your listing to optimizing your property for better visibility and bookings. Consider hiring a professional property manager if you have multiple listings, as this can free up your time and ensure that your properties are running smoothly.

Elevate Your Short Term Rental Management: Strategies for Profitable Properties

Short Term Rental Management is not just about owning properties; it’s about managing them effectively to maximize profitability. Whether you’re new to the game or a seasoned investor, having a robust property management strategy is crucial. In this blog post, we’ll delve into the key strategies for making your short-term rentals profitable, from turning around underperforming properties to maximizing the returns on your successful ones.

Identifying Underperforming Properties in Short Term Rental Management

The first step in an effective short-term rental management strategy is identifying which properties are not meeting your financial expectations. These underperforming properties can be a drain on your resources and hinder your portfolio’s overall performance. The sooner you identify them, the quicker you can take corrective action.

Turning Around Underperforming Properties

Once you’ve pinpointed the underperforming properties in your short-term rental management portfolio, the next step is to implement strategies to improve their performance. This could range from minor cosmetic upgrades to major renovations. Marketing adjustments, such as optimizing your online listings and leveraging social media, can also play a significant role in turning around an underperforming property.

Maximizing the Profitability of Successful Properties

If you’ve got properties that are already doing well, the focus shifts to maximizing their profitability. In the realm of short-term rental management, this could mean anything from seasonal pricing adjustments to offering value-added services like airport transfers or guided tours. The goal is to enhance the guest experience, thereby justifying higher rental rates.

Leveraging Data in Short Term Rental Management

In the age of big data, analytics are your best friend. Platforms like AirDNA offer invaluable insights into market trends, helping you make data-driven decisions. Whether you’re looking to adjust your pricing strategy or identify new investment opportunities, data analytics can provide the insights you need to make informed decisions.

Effective short-term rental management is an ongoing process that requires a well-thought-out strategy. By identifying underperforming properties and taking steps to improve them, while also maximizing the profitability of your successful properties, you can significantly improve your portfolio’s performance. Remember, in the world of short-term rentals, complacency is your biggest enemy. Continual improvement is the name of the game.

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Setting Realistic Property Expectations: The Cornerstone of Successful Short-Term Rental Management

One of the most critical aspects of short-term rental management is setting realistic property expectations. Whether you’re a first-time investor or have been in the game for a while, it’s easy to get carried away with idealistic visions of your perfect property. However, finding a property that ticks all your boxes can be a challenging task. In this blog post, we’ll discuss why setting realistic expectations is crucial and how to go about it.

The Pitfalls of Unrealistic Expectations

Having unrealistic expectations can set you up for disappointment and financial setbacks. For instance, you might hold out for a property with perfect aesthetics, location, and ROI, only to find that such a property is either out of your budget or simply doesn’t exist. The result? Wasted time and missed opportunities.

Balancing Your Criteria in Short-Term Rental Management

When it comes to short-term rental management, it’s essential to balance your criteria. You might not find a property that meets all your expectations, but that doesn’t mean you should settle for less. The key is to prioritize. Determine what aspects are non-negotiable for you and be willing to compromise on others.

The Role of Research and Due Diligence

Doing your homework can go a long way in setting realistic property expectations. Research the market trends, understand the average ROI in your desired location, and get a feel for what kind of properties are available within your budget. Due diligence isn’t just a buzzword; it’s a necessary step in short-term rental management.

Adjusting Expectations Over Time

As you gain more experience in short-term rental management, your property expectations may change. What seemed crucial in your first investment might become less important as you understand market dynamics better. Being flexible and willing to adjust your expectations can be a valuable trait in this ever-changing industry.

Setting realistic property expectations is a cornerstone of successful short-term rental management. By balancing your criteria, doing thorough research, and being willing to adjust your expectations, you can make more informed decisions and improve your chances of success in the competitive world of short-term rentals.

Navigating Market Competitiveness and Projections in Short-Term Rental Management

Understanding market competitiveness and projections is a vital component of successful short-term rental management. Whether you’re a seasoned investor or a newcomer, having a grasp of the market conditions can significantly impact your investment decisions. In this blog post, we’ll explore how to assess market competitiveness and use tools like AirDNA to make accurate year-over-year projections.

Why Market Competitiveness Matters

In the world of short-term rentals, market competitiveness is a key factor that can make or break your investment. A saturated market can drive down prices and occupancy rates, affecting your ROI. On the other hand, a less competitive market might offer better opportunities but could require more marketing efforts to attract guests.

Assessing Market Conditions

Before diving into an investment, it’s crucial to assess the market conditions. This involves looking at factors like average occupancy rates, seasonal trends, and the number of similar properties in the area. These indicators can give you a good idea of how competitive the market is and what you can expect in terms of returns.

The Role of Tools like AirDNA

When it comes to making year-over-year projections, tools like AirDNA can be invaluable. These platforms provide data-driven insights into market trends, allowing you to forecast future performance more accurately. Whether you’re looking to invest in a new property or optimize an existing one, using these tools can guide your decision-making process.

Making Year-Over-Year Projections

Year-over-year projections are essential for long-term planning in short-term rental management. These projections can help you set realistic goals and prepare for future market fluctuations. However, it’s important to remember that these are just projections. Always have a contingency plan in place to navigate unexpected market changes.

Understanding market competitiveness and projections is crucial for anyone involved in short-term rental management. By assessing market conditions and leveraging data-driven tools like AirDNA, you can make more informed decisions and set yourself up for long-term success. In a competitive industry like short-term rentals, staying ahead of the curve is not just an advantage; it’s a necessity.

Unlocking Profitability: Mastering Property Management Strategy in Short-Term Rentals

The key to a successful short-term rental business isn’t just about acquiring properties; it’s about managing them effectively to unlock their full profit potential. Whether you’re a seasoned investor or just starting, a robust property management strategy is essential. In this blog post, we’ll explore how to identify underperforming properties, improve them, and maximize the profitability of your successful ones.

The Challenge of Underperforming Properties

One of the most daunting challenges in short-term rental management is dealing with properties that aren’t meeting your financial expectations. These underperforming assets can be a significant drain on your resources and can negatively impact your portfolio’s overall performance. Identifying these properties is the first crucial step in turning things around.

Strategies to Revive Underperforming Properties

Once you’ve identified the underperforming properties in your portfolio, the next step is to breathe new life into them. This could involve a range of strategies, from minor cosmetic upgrades to major renovations. Effective marketing, such as optimizing your online listings and leveraging social media, can also play a significant role in turning around an underperforming property.

Maximizing Profits on Successful Properties

If you’ve got properties that are already performing well, the next step is to maximize their profitability. In the realm of short-term rentals, this could mean anything from seasonal pricing adjustments to offering value-added services like airport transfers or guided tours. The goal is to enhance the guest experience, thereby justifying higher rental rates.

Data-Driven Decision Making

In today’s digital age, making gut decisions won’t cut it. Platforms like AirDNA offer invaluable insights into market trends, helping you make data-driven decisions. Whether you’re looking to adjust your pricing strategy or identify new investment opportunities, data analytics can provide the insights you need to make informed decisions.

A robust property management strategy is the cornerstone of a successful short-term rental business. By identifying and improving underperforming properties and maximizing the profitability of your successful ones, you can significantly improve your portfolio’s performance. Remember, in the fast-paced world of short-term rentals, staying ahead requires continual adaptation and a solid strategy.

Conclusion

Success in Short Term Rental is not a matter of chance; it’s a result of careful planning, continuous learning, and impeccable execution. By focusing on these five key steps—customer service, financial planning, emotional intelligence, property categorization, and effective property management—you can build a Short Term Rental empire that not only generates significant income but also stands the test of time.

References

1. “AirDNA: Short-Term Rental Data & Analytics.” AirDNA. Website
2. “How to Identify and Improve Underperforming Properties.” BiggerPockets. Website
3. “Maximizing Profitability in Short-Term Rentals.” Investopedia. Website
4. “Data-Driven Decision Making: Why It Matters.” Forbes. Website

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About the Author: Federico Calderon

Federico Calderon is a seasoned professional in the realm of short-term rental management. With over a decade of experience, Federico has successfully managed a diverse portfolio of properties, ranging from urban apartments to luxurious villas. He has a proven track record of turning underperforming properties into profitable assets, boasting an impressive average ROI of 18% across his managed properties in Las Vegas. His expertise in leveraging data-driven strategies has made him a sought-after consultant in the industry.

For your convenience, we’ve provided a transcript of the video vlog below. We understand that sometimes it’s easier to read through the content at your own pace or you may want to quickly reference specific information. The transcript captures all the valuable insights shared by Rob Abasolo and David Greene on succeeding in the short-term rental market. Whether you prefer watching the video or reading the transcript, we’ve got you covered!

The 5 Steps to Making Short-Term Rental Millions (Part 1)

this is the biggerpockets podcast show 578. can i find a handyman can i find a

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contractor can i find a pool service a lawn service a cleaner to me this is so

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important because these are the people that are going to be managing your house like maintaining it making sure that it’s up to par and if

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you have a tough time finding a cleaner or a handy person it’s gonna be really tough for you to ever actually run a

0:25

business because what’s gonna happen whenever something breaks you can’t fly there right what’s going on everyone it

0:30

is david green your host of the bigger pockets podcast here with a very special episode for you today but before we get

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into that i want to let you know that if you are looking for a way to build financial freedom through real estate if

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you want to have more control and autonomy over your life if you value the time that has been given to you and you

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want to use it in ways that you feel are best for you and your family this is the place to be bigger pockets is a

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community of over 2 million members on a journey exactly like the one that you

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are on trying to accomplish the same things you are and our goal here is to bring you as many resources support and

1:04

assistance as we possibly can to help you meet that goal one way we do that is with this podcast where we bring in

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different guests where we bring in different speakers where we bring in different experts to share with you what they did

1:16

to accomplish exactly what you’re trying to do the niche the strategy the style that they use to get where they’re going

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we also have an amazing website with forums where you can ask questions that people will answer with blog articles where you can read and gain other

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people’s wisdom and with a lot of support like real estate agents or different support pieces that will help

1:34

you achieve your goal that you can find through the website now on today’s podcast episode i am here with my good

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friend and co-host rob olasolo he ate rob abasolo

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yeah yeah that was the thing when brandon did this show he always messed up people’s last names and i think that curse has

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been given to me i just messed that up but if you are looking for a way to build fight that that’s funny

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i wonder where abba solo i couldn’t get maybe because the band abba just feels wrong so today will be a solo show with

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abba solo himself we are going to be bringing you more episodes where we dive deep into a specific strategy property

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niche giving you more detailed and nuanced information so that you can follow in the footsteps and today

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i’m being joined by rob because he and i are actually partnering on buying short-term rentals and we are going to

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break down this would be the first of a three-part series the process that we are using to put

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them under contract and manage them so today we’re going to be focusing on choosing a location a strategy and a

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property type specifically for short-term rentals and i couldn’t think of a better person to join me than rob

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rob welcome to the show hello hello hello man i’m really excited to do this because you know i there are so many

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questions and you know apprehensions i think about getting into short-term rentals it’s kind of all the new rage for a lot of people

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right now and this episode we get into some pretty nitty-gritty stuff i mean we really talk about the concepts that that

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we abide by ourselves when choosing a market proximity to locations availability of

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vendors boots on the ground all that kind of stuff so i think people are going to have a pretty good understanding of where to get started

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after listening to today’s episode yeah and we should get into it right now basically what we’re going to be sharing with everybody is how to choose a

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location a strategy and a property type so this is where it starts when you’re trying to

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say hey i want to get into short-term rentals what do i do this is what rob and i believe is where you should start

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we have a five-step system that we’re going to be sharing with you today and step number one is going to be looking

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into the strengths of different markets so rob in your experience what is the

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way that you sort of categorize different markets like listen i’d love i’d love to tell you all about it my friend but first we gotta get to today’s

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sponsor thanks to our show sponsors as always and now we will get into today’s show rob as you were yeah so there are a

Step 1: Choosing a Short-Term Rental Market

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lot of things for me that i i really take into consideration when i’m starting to narrow down my markets

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um obviously there are certain markets that are very vacation uh vacationer friendly i suppose you could

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say and this would be places like national parks where people are always visiting a beach town ski towns all that

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kind of stuff but also one of the things that i like to consider is is it not necessarily an up up and coming

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market but is it a market that is getting a lot of appreciation kind of year over year and that’s kind

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of one of the happy accidents of a lot of my portfolio over the last couple of years for me personally is a lot of my my portfolio has really

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grown pretty significantly specifically in the last two years not really something that i had

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anticipated because i was really aiming for just having like high cash flowing units but you know that’s always like

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the the upside of real estate right the appreciation the the compounding interest as you were in the real estate

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industry very nice so if i’m hearing you right you’re looking at why are people visiting the area and is it likely to

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appreciate so what are some of the factors that you feel lead to markets appreciating well one of the things for me is like i i think for the most part

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right now we’re in a travel surge and so a lot of people are are traveling like never before you know if you look at a

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lot of the data if you look at even brian chesky the the ceo of airbnb

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he said that this year alone they were going to need millions of new hosts

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in the first uh in this upcoming year because they can’t keep up with demand so for me i’m starting to look at very

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specifically where are people starting to travel the most and honestly it’s like a tried and true method for me but

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i’m always looking at national parks because a lot of people have really been sleeping on national parks for for a

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long time i think and it wasn’t really up until the you know the whole pandemic and everything where people stopped really

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traveling to some of the more known places like you know the disney worlds right and they started hopping in their car and driving

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to the gatlinburg’s or you know the uh well what are the national parks the arches

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national park uh the grand canyon yosemite zion all joshua tree all of those different places now are seeing

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such a surge in visitation right now i think the smoky mountains specifically saw like one to two million more

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visitors in the last year than ever before which is like huge so just in general right there now that the the

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amount of traffic that’s going to those different places means that there’s way more demand and because there’s way more

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demand well now investors are starting to catch on and get into those markets and that right there starts driving up

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prices quite a bit that’s a really good point so we typically break it down into three types of places or three types of

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ways people will visit an area the first is they get in a plane and fly there that would probably be disney world

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you’re gonna go to disney world you gotta go to orlando to get there you’re gonna fly there you need a place to stay you look for a short-term rental the

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next would be a place you would drive for like a weekend vacation these would be national parks a lot of the time like

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what rob is mentioning if you live in tennessee you’re gonna go to the smoky mountains you live in southern california you’re gonna go to joshua

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tree so those are places where people also look to find a place to stay while they’re there the stays might be a

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little bit shorter but they’re typically frequented by people who live somewhat close to that at least within driving

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proximity and then the third would be like uh career related reasons or occupational related reasons where

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you’re traveling for work maybe you’re a traveling nurse or you’re going for a business meeting somewhere you’re going

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to attend a conference and you have to stay somewhere and you don’t want to stay in a hotel so just understanding that from

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a kind of a high level like which of these areas your tenants are going to be coming from will help we also look at is

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this a market that is stronger at cash flowing right now or is this a market that we think has

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future growth we think that there’s going to be equity that’s built in both the revenue that comes in in the future

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as well as the value of the property itself that you’re going to be buying so rob what are some of the things you look

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for in both of those two different strategies to try to maximize your efficiency well you know if i’m being honest like when i got started in

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short-term rentals in general like my mo was cash flow that’s really all i cared

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about right because you know a lot of the people getting started in short-term rentals they see this opportunity to

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well and just real estate in general we all want to leave that w-2 so that we can focus on being a real estate

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investor so for me my whole strategy was buying a place at a very fair price

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right and then having a huge cash on cash return that that was always the the gold standard but really it hasn’t been

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until recently where you know once you kind of settle that up and once you establish like a pretty good lifestyle

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and you you’ve got a good budget and you stick into it then that’s when appreciation really starts being a lot

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more important um so i’ve really kind of shifted my my mentality a little bit like it’s not

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that i don’t like cash flow obviously like we we all do but now i’m really starting to target places that i think

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have a little bit more appreciation and so you know obviously you want both there’s like a a balance right but for the most

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part i am looking for i’m trying to like look at like where people are going right so if you keep up with like a lot

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of the trends obviously one of the big ones right now a lot of people are are leaving california and they’re going to

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a bunch of different places they’re going to arizona they’re going to texas they’re going to florida and so many other places so for me i

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started asking myself questions like well where are they going uh and like you know what’s like what are the

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different locations that i can really start to capitalize and one of those for me was like arizona that’s where i’ve

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started putting a lot of emphasis on it because it’s really close to california right like that’s like the the one of

9:28

the logical steps but obviously texas is like a really big place too right now so

9:33

for me i’m looking at it not just travel trends but like overall trends in like where people are

9:40

migrating to you know in and around the us so what type of investor should be

9:46

looking for a more cash flow heavy opportunity and what type of investors should be looking a little bit more for

9:53

like future growth and appreciation the people that are starting out are like they’re going to be a lot more focused i

9:58

think on the cash flow side of things and i get it like i i have a couple students who they’re so focused on the

10:04

cash-on-cash metric you know and obviously that that’s the metric right but i’m like guys there’s a little bit

10:10

more to real estate investing than your cash on cash return there’s tax deductions there’s appreciation there’s

10:17

pay down and all that kind of stuff so and again as someone that that was there and like not too long ago like i

10:23

understand that cash flow is really important so i think it’s important when you’re first starting out for like a newbie investor to kind of aim for that

10:30

because it helps you just build up your amount of cash that you can then put into the next investment and obviously

10:37

there’s like an argument for focusing on appreciation first too but for me as someone that that kind of did

10:42

that at the very beginning of their portfolio career like i think that newbie investors

10:48

are a little bit more prone to take that cash flow side of things okay and probably also i would say people

10:54

that don’t have as much cash right cash flow is more important when you don’t have a lot of cash flow in other parts of your life but maybe if you’re

11:01

a little more financially successful or comfortable that isn’t as important to you and that’s typically why the wealthier

11:07

people tend to look at uh appreciation the last little i’ll leave a little cherry on top of the sundae of step

11:12

number one by saying that the thing that a lot of people don’t consider is the time they’re going to put into the

11:18

property and the energy they’re going to put into the property so that’s another thing if you have 90 cash flowing properties what you’ve done is created

11:24

another job you have to manage 90 properties and if you’re not managing it you’re managing the person who’s managing it so there is a point of

11:30

diminishing returns where if you just continue chasing after the same type of property it starts to have a negative

11:36

effect on your life and you lose the freedom that you’re trying to gain in the first place by getting these deals anything you want to add on that yeah so

Cash Flow vs. Appreciation

11:41

i kind of want to turn it back over to you because you know this is something you and i have talked about quite quite a bit in like this first deal and

11:47

obviously you are you’re a big fan of appreciation so i’m kind of curious just hearing it

11:52

from you when do you think an investor or what kind of investor should really be focusing on appreciation versus cash

11:59

flow the first thing i want to address is the belief that appreciation is not guaranteed it’s speculative but cash

12:05

flow is guaranteed if you’re looking at it from that prism no matter what i say you’re just going to throw it off to the

12:10

side and say that’s heresy cash flow is not guaranteed if you are a investor who owns a lot of

12:17

properties and you try to live off the cash flow you know how difficult it is how many things go wrong that make cash

12:22

flow wildly inconsiderate or inconsistent i should say and then the other thing i’ve noticed is my best cash

12:28

flowing properties got there through appreciation of the rent what i what it was renting for when i bought it is not

12:34

what it’s renting for now and that’s why i’m getting a lot more cash flow so you got to break yourself out of the

12:40

cycle of looking at an investment like it’s a one year decision it’s not it’s a many year decision and so if you look at

12:46

a property how it’s going to perform over a long period of time properties that appreciate more are going to make you more money now it’s

12:53

not the concept of appreciation that i’m saying that you chase it’s the area or the asset type that is going to increase

12:59

in demand if more people want the type of asset that you own it will naturally

13:04

appreciate and in that sense it’s not speculative like buying a very reliable thing that

13:10

everyone’s going to want is not a speculative move that you’re just i hope it appreciates because if it doesn’t i’m

13:16

going to lose it you make sure you can afford it you make sure it cash flows enough so that it can support you but

13:21

you don’t get rich off of cash flow making 100 or 200 bucks a unit is not going to make anybody wealthy it’s just

13:26

a lot of work so i started off chasing after properties only looking at roi just like everyone

13:32

else did because i was in a job and i wanted to have enough cash flow coming in that i could leave the job it wasn’t the cash flow to make me wealthy it was

13:39

a cash flow to support me breaking the sort of connection between needing that job and once i did and i became a real

13:46

estate agent i didn’t have a consistent income that i always knew would be the same i started to shift a little bit more

13:52

into more long-term investments delaying gratification and then as i became more successful as a real estate agent i

13:57

built a team and then i built a loan company and some of the other businesses i have i shifted even more into delaying

14:03

gratification so maybe a better way than saying appreciation which has a stigma of speculation is

14:09

how long can you delay gratification if you’re going to get cash flow right off the bat it’s going to stay that way for the rest of the time you own the

14:14

property you won’t do as well as if the property becomes a little more desirable every year than it was the year before

14:20

100 man you know for me the really the big light bulb moment here was like one of my first true airbnbs and short-term

14:27

rentals was the house that i bought in la i moved to la i bought this house it was

14:32

really expensive it was 624 000 and i really you know spread thin when i

14:37

bought that i probably shouldn’t have but i was taking a bit of a risk because i was like i think i think this is gonna

14:43

work out so this house had a little 279 square foot studio apartment under it and i was like if i

14:50

put this on airbnb i think i can make two to three thousand dollars a month and so it was like a house hack if you

14:55

will and then i was renting a guest room to to my best friend and i was making 800 bucks a month off of that and then i

15:01

built a tiny house in my backyard and i was you know making like now i make like 2 3 000 a month on airbnb

15:07

with that as well so i’ve added all that up and just in the past like since i’ve owned that house in the past three four

15:13

years the cash flow on it has been between 180 to 200 000

15:18

which is awesome like that’s nothing to complain about but when it hit me i was like whoa

15:24

i have actually that property has doubled in value it is now worth between

15:30

1.25 and 1.3 million dollars and so just that appreciation right there is three

15:36

times more than i’ve made in cash flow and that’s when i was like oh david you’re making a lot of sense now man

15:43

yeah and here’s the part that you start to see when you get deeper into investing when you take that appreciation that’s

15:49

three times more than the cash flow and you reinvest it into a different cash flowing property you increase your cash

15:55

flow by three times that is way way faster than if you were just to save up money and keep buying

16:01

cash flowing properties to try to build it up to where your cash would be three times as much so it’s not i don’t like people looking at

16:07

like cash flow or appreciation they work together right like they each bet as you get more appreciation you exchange it

16:13

for more cash flow when your cash flow starts to get stagnant because it’s gone up too much you can then sell it and you can upgrade

16:19

that’s kind of how real estate is designed so it typically when you start off you’re asking yourself am i gonna

16:25

buy a property that skews more towards cash flow or skewed more to more depreciation but your portfolio isn’t

16:31

shouldn’t be determined by only one thing so that being said let’s move on to number two which might be the most important

Step 2: Choosing Your Location

16:37

part of our entire process step two is choosing your location the location that’s right for you

16:42

individually we’ve got quite a few steps here so i’m gonna let you run with that rob and you can just tap me in for

16:48

backup when you think you need it when i need to breathe a little bit sure thing man um well i okay so obviously

16:54

the the world is your oyster when you want to get started in airbnb i’m genuinely a believer that pretty much

16:59

any market you’ll find success in the short-term rental industry but when you’re starting out obviously it’s a

17:05

little bit more daunting to to just like throw a dart at the us map right and just pick something that’s long distance

17:11

so for me you know what i what i typically preach to a lot of people is i want to see people starting out if it’s

17:17

possible in their backyard now i don’t necessarily mean literally in your backyard although i did actually

17:24

literally start in my backyard but what i mean by this is i want people to be like two to three hours away

17:31

from the actual place that they’re investing and there are a couple reasons for that two to three hours away when

17:37

you’re you know at home and you’re working a full-time job that’s still enough for you to get to that property

17:43

if something happens if there’s something major or catastrophic if there’s a fire if there’s a roof leak or

17:49

whatever there is you can feasibly get there in a night and then also like during the weekend

17:55

you can also just go and visit and you can go and spruce things up you can go and replace furniture you can go and

18:01

like do touch-up cleanups all that kind of stuff right so i think there’s a lot of benefits to starting in your backyard

18:07

because you’re you’re in close proximity so i think it makes you feel better it feels a little less risky that you can

18:13

actually go and get there whereas you know i think i still think it’s far enough to

18:18

where you’re not going to be dependent on having to go there and i’ll give you an example of what i mean by this

18:24

when i first started on airbnb i was doing what’s called the rental arbitrage and i lived 10 minutes away from the

18:30

apartment that i was you know rent subleasing on airbnb and every time something small happened

18:37

i would go i felt obliged to go i felt like i had to go and take care of it if it was battery it was by the way it was

18:43

always batteries but if it was batteries dying in the remote i would go and replace it if it was like the thermo the

18:48

thermostat wasn’t working i would go and like click it up or down for the guest or whatever it is and you just kind of feel this certain

18:54

obligation to say like well it’s not worth me hiring someone for 20 bucks off a tax cut skill and figure

19:00

this out but obviously that’s not going to be as feasible like you know my other

19:05

property in joshua tree two and a half hours away from la it’s not really feasible or realistic for me to go and

19:11

do that it forces me to take the the crutch away and let let my

19:16

team step in jordan peterson has a quote that at one point i thought was kind of offensive but then as i listened to it

19:22

more it made more sense and as a parent you might you might understand this he said never let your kids do something

19:28

that will make you dislike them so his argument was that when your children are acting in a certain way

19:34

that just really really bothers you and you start to despise them what we think we’re doing is loving our kids by just

19:40

like holding it inside but what happens is that resentment leaks out they sense it and then they’re damaged by the fact

19:47

that mom or dad does not like me there must be something wrong with me it’s a much more big problem than if you step

19:53

in and say stop banging that pot i’m taking it away from you right like that little momentary sting that the kid

19:59

feels from getting uh admonished is better than the resentment that it flows out of i just

20:05

can’t stand you because you keep doing this thing and i feel like that translates pretty nice into real estate because what i’ve

20:11

learned is that if i do any of the job that i don’t like i take it out passive aggressively on real estate i have a

20:17

relationship with real estate okay so if i have to do too many of the things that cause david to be burned out

20:24

take away my energy which for me would be driving to the house to change out the batteries or the thermostat or

20:29

dealing with like kind of like minutiae is what i would call them those are just challenging for me i will subconsciously

20:36

stop putting my time into real estate i will stop respecting it i will stop cherishing it i will not honor that

20:41

relationship like i should whereas if i say this is really bugging me i need to find someone else to do it my

20:47

relationship gets better i treat it better i’m happier with real estate and then i put more into it so i just want

20:52

to encourage everybody if you like doing those things keep doing them like brandon and i have gone back

20:58

and forth and the ultimate conclusion i came to is there’s certain things he likes doing in his house right he likes fixing stuff

21:04

if it energizes you do it because then you’re going to want to buy more real estate but if you don’t like doing that

21:09

stuff like me hire the person on taskrabbit and let them do it because that energizes me and then i will buy more real estate man that’s so true and

21:16

also let me just say i didn’t even have to tap you in man that was like very seamless that was that was a good back and forth right there but um that’s so

21:22

true man like that first apartment was really a life-changing apartment for me it really paved the way for financial

21:29

freedom but i’ve got ptsd i got ptsd from going there and you know my guest saying

21:34

the remote’s not working and i’m like are you sure and they were like yes i’m sure and then i went i was like well it

21:40

seems to be working and they said oh i was using the other remote and i was like yeah so there’s so many moments like that

21:46

that happened and it’s because i live so close to it that i just felt beholden to that apartment but the moment i started

21:52

really assembling my team and my airbnb avengers as we’ll call it and we’ll get to that later but the moment i started

21:59

doing that and not being so in the weeds of my business that was the moment that i was like oh okay so it’s not a grind

22:05

actually it’s actually really quite fun it’s a puzzle that you have to figure out so i think for me

22:10

being two to three hours away is is that distance where you’re like okay i’m not gonna drive after i’m not gonna drive

22:15

there after work um i’m not gonna go and fix that i’m gonna just find someone that can help me with that so that’s

Out-of-State Investing vs. Local Investing

22:20

sort of why i i really dive head first into uh like if you can be close that’s

22:26

great but obviously they’re gonna be instances where investing in long distance makes sense

22:31

so i know that you what are some of those instances let’s move on to number two there when would you see that as making sense yeah so this would be in an

22:38

instance where for example there are a lot of turnkey markets out there so um and what i mean

22:45

by turnkey is like you buy the property and it already comes fully furnished so a couple examples of this would be the

22:51

smoky mountains blue ridge uh destin a lot of beach places that are like very

22:56

popular str locations typically people are selling those airbnbs as a turnkey

23:03

rental and so really you do have to fly in to go and you know make sure that the place is

23:09

actually what you bought and like the furniture is nice and you’ll have to go and spruce the place up and replace

23:14

furniture here and there but it’s so much easier and i mean so much easier than buying an empty

23:20

house in the middle of you know wherever chattanooga tennessee driving out there

23:25

going finding all the furniture places setting it up i mean that’s a that’s a real hustle that’s a real grind to go

23:31

out and furnish a long distance unit because a like if you’re like me i buy

23:36

in areas where there are national parks there aren’t necessarily like you know furniture stores or anything like that

23:43

around so it’s like very tough to find furniture for different airbnb so i think if you’re looking to start

23:48

long distance and you don’t necessarily want to start close to you i would try to identify some of those turnkey

23:54

markets where short-term rentals are encouraged they’re welcome they feed the economy and like i said the smoky

24:00

mountains is like a really great one that would do that another instance in which i might consider

24:06

investing in a long distance place especially if i’m just starting out is if we have what we call boots on the

24:12

ground and that just would mean that you have some kind of connection or someone that you know in the city that you know

24:19

can help you out if stuff happens right and so like this would mean if you have an aunt or an uncle that lives in the

24:24

same city or a best friend or an old college roommate that you keep up with anything like that where you can say hey

24:29

i’m thinking about opening up this airbnb in akron ohio for example

24:35

you know i’ll need someone to help me occasionally i’ll try not to call you but would you be interested in helping

24:41

me out anytime that you know someone burns down my house or something like that and you know usually if i have some

24:47

kind of connection like that that immediately mitigates a lot of risk for me because i know that i can call on

24:53

someone if anything ever happens so i think that’s kind of when you should start maybe considering doing the long

24:59

distance thing although it’s not particularly necessary you know that’s actually in long-distance real estate investing that concept i call it a

25:05

competitive advantage or sometimes we call it an unfair advantage but it’s when you have a person local that has a

25:10

skill set or at least that you can trust that gives you an advantage over the other people that are trying to buy in that market uh when i wrote that book a

25:17

lot of people’s questions were how do i find the market that has the highest roi

25:22

i just want to know the best one and i’ll figure it out from there and what i what i learned at least from the way i

25:27

did it was that if you’re trying to find the best market you end up just following the crowd and you’re always in

25:32

a super competitive area that everybody else is trying to get into i could go back over the 10 years i’ve been investing and remember when

25:39

phoenix was the hot market and then it moved into memphis was the hot market and then atlanta became the hot market

25:46

and then it moved into tennessee and nashville was the hot like everyone just followed the same huntsville alabama had

25:51

its moment madison wisconsin had his moment austin texas had his moment now like south florida is kind of having its

25:57

moment uh it’s super challenging when you just throw yourself in the mix of every other investor that’s all

26:02

converging on these market like locusts at one time instead what i recommended people do is find the market that you

26:07

could be the most successful in and make it work there instead of following the crowd so that’s definitely something i’d

26:13

encourage people to do now i we also have four categories that we consider when looking into uh short-term rentals

The 4 Short-Term Rental Categories

26:19

you want to go over those you mentioned them briefly but we’ll cover them again before we move on yeah let’s officially state the the pov here so four

26:25

categories here and again there’s no right or wrong here but this is just a very concise way of explaining where in

26:31

the country i’m looking out of all that it helps me kind of locate like it sets some kind of beginning parameters right so number one is going

26:38

to be national parks number two is going to be state parks number three is going to be eclectic

26:44

towns and number four is going to be vacation destinations so what i mean by

26:49

all of this here would be national parks i think we know what that is that would be like your grand canyon smoky mountains zion yosemite all that kind of stuff

26:56

state parks would be smaller but they still receive a decent amount of visitation from the actual state itself

27:02

and then we get into eclectic towns and so what i mean by eclectic towns is like small towns that have some kind of draw

27:09

or some reason that people go to so if you think of places like outside of san diego uh there’s a there’s a area called

27:16

julian a lot of people love going there apple picking they’ve got good pies there’s just a draw people love it it’s

27:21

an adorable little town right waco in between uh austin and dallas

27:26

that’s in between two very big cities it’s been popularized by you know chip and joanna gaines yeah exactly so

27:33

everyone you know it’s a pit stop in between those two cities um there are a bunch of like eureka springs

27:39

there’s another one that’s like there’s a cute shops and everywhere and like one shop is like you know vintage italian

27:45

sodas and another one’s like vintage candy and you know that that kind of stuff yeah we’ve got a couple out here

27:50

in california like i think copperopolis is one that it’s they have this like old western like fake city where you can go

27:56

in through swinging doors and i remember as a kid we’d go there and they’d be like like rock candy and you they had

28:02

these like fake horses you could sit on so there are people that do like to visit those places i think like a little

28:08

bonus quick tip we should throw in here is look for places that kids want to go like if as i grow if i ever move out of

28:15

real estate what i will get into is either selling something involved with nostalgia or selling something that kids

28:21

want because i believe those are the two things that drive people to make decisions more than anything else like when the first transformers movie

28:28

was shown you might have been too young robbed even remember that but i remember seeing that big transformer leg come

28:34

down and be like oh my god they are doing transformers and i knew at that point i would pay anything to go see it

28:39

because of the nostalgia factor and then the other one is kids kids just beat down their parents will just asking for

28:45

the same thing over and over and over and when you finally let a kid have what they want everybody feels so good that finding properties in areas near

28:52

where kids want to visit that’s why disney world’s so popular disneyland some of these things so i definitely think those are

28:58

things to consider uh moving on the next thing you have is a place that you would want to visit occasionally tell me more

29:05

about why you think that’s a good factor so it’s very important to have some kind of like draw or something that you like

29:11

about a market hey because you have to go there you know like you’re gonna have to go there and actually visit it and

29:17

you know at least once or twice every couple of years right and so you want to have a reason to go there but ideally

29:24

for me like if you follow a lot of the trends and a lot of the investors in the space a lot of them aren’t necessarily

29:29

full-time investors they are just people that want a short-term rental maybe they can’t justify the expense of a second

29:36

home right and they’ll go through a second home or vacation home loan and put down 10 to get into a property and

29:42

they they’ll be there for maybe one or two months a year but they can’t justify paying for the other

29:47

10 10 months right and so these are the types of investors that are really getting into the game right now and so

29:52

if you’re buying a second home because you want to use it ideally like aside from the actual investment part of

29:59

it it is nice if you could actually go visit stay and enjoy it as a guest i

30:04

don’t do this enough admittedly when i built my tiny house in joshua tree i was like i’ve built the ultimate tiny house

30:10

i’m gonna go and stay there all the time and i’ve really only stayed there like once or twice it’s fully booked i love it it’s really

30:17

great if i could i have kids now so a tiny house makes it a little bit tougher but if i could i would i have probably

30:24

14 airbnbs or so there might be 15 right now but we have 14 i’ve visited seven of

30:31

them the other seven i still actually haven’t visited they are long distance but i have aspirations too i’ve picked

30:37

out locations that i was like i would like to go here one day because i genuinely just i hear good things and

30:42

like i want the option to go and enjoy my own property here’s another reason that i like that i feel like it

30:47

mitigates risk now hear me out if you’re buying a property solely for cash flow you are only buying a business

30:54

you’re putting a lot of pressure on that property and yourself to perform having maximum vacancy and then you’re going to

31:00

spend a lot of time trying to find the perfect property then when you find the right one you’re gonna have to spend a

31:06

lot of money to fix it up it’s just making your job hard the higher your expectations are what you expect of that

31:11

kind of like like i’m going back to the real estate relationships thing if you have very high expectations of what you need from

31:17

a partner it’s gonna be very difficult to find someone that can meet those needs if you’re a relatively stable person that just wants someone to share

31:22

life with it’s not that much pressure on your partner and they’re gonna perform better right like i don’t like putting a lot of

31:27

pressure on real estate to change our lives to meet all of our needs and that’s when people have the problem

31:34

where they’re saying i want a property the 40 cash on cash returns 70 percent of arv in grade a schools and they go

31:40

through this list that they’re never going to find if you’re finding a property that you want to use

31:45

and then the fact you can rent it out at the same time is sort of like uh i can’t

31:50

think of the word i’m trying to look at here but basically handle some of the responsibility for your mortgage there’s

31:56

a lot less pressure that’s on you right you’re gonna buy it because you want to use it and then you’re going to have the

32:02

mortgage offset by other people so it’s like a super cheap vacation home or maybe it even pays for itself

32:07

even if it just broke even over 30 years of it going up in value and you paying off that mortgage you’re gonna make a butt load of money even if it never cash

32:14

flowed and so i like maybe having at least one property or your first property sort of be in that vacation

32:20

home you can get 10 down if it’s a vacation home you’re gonna use it you can have family events there and then when you’re not using it you can rent it

32:27

out that’s my ultimate goal for what i’m doing for myself is to have probably 10 to 15 short-term rentals

32:33

throughout the country in all the places that i want to live and i will just bounce around from place to place wherever i want to go and when i’m not

32:39

using it i rent it out i mean that’s one of the most beautiful things about the short-term model is you have that flexibility

32:45

it’s hard when you try to take that model and force it to only be a cash-flowing cow that also gives you

32:51

passive income would you agree oh yeah 100 i mean when i when i built my tiny house i was like hey you know if i can

32:58

just build this cool tiny house and break even like hey all all good news over here right but then it actually

33:03

ended up being a cash cow and that was just a bonus for me you know and i was like this is great like i get this house

33:08

that i can enjoy or theoretically i can enjoy and it pays for itself and i make money on it but i agree i think that if you’re

33:15

getting into it and this is like you just want to step into it you want to de-risk it a bit you know buying it as a

33:21

second home where it breaks even it’s still a great investment over 30 years there’s no question about it you will develop the skills to get cash cows like

33:27

what rob and i are looking at now but dude you can’t do that on your very first try it just doesn’t make sense you have to lower the your own barrier to

Vendor Availability, Competition, and Market Growth

33:34

entry all right next one we have proximity to you we’ve kind of covered that i like this next one availability

33:39

of vendors can you briefly cover why having available vendors close to a short-term rental is so important yeah

33:45

so you’re not going to be the one that’s actually necessarily managing it i mean there’s

33:50

there’s a couple schools of thoughts here i’m big into self-managing so let me clarify what i mean

33:56

you’re the person that’s actually going to be managing your property for the most part is going to be your cleaner they’re going to be the ones that are

34:01

reporting back to you they’re going to say hey rob your toilet you know wax ring is not good it’s leaking your sink

34:07

is linking leaking uh your light bulbs are out whatever right so they are effectively like a pseudo property

34:13

manager but you still need to be in a market where there are cleaners available you know you need to be in a market that’s

34:19

relatively populated that’s something that i look at quite a bit is like can i find a handyman can i find a contractor

34:25

can i find a pool service a lawn service a cleaner to me this is so important

34:30

because these are the people that are going to be managing your house like maintaining it making sure that it’s up to par and if

34:37

you have a tough time finding a cleaner or a handy person it’s gonna be really tough for you to ever actually run a

34:43

business because what’s gonna happen whenever something breaks you can’t fly there right there’s two components that

34:48

i see to a business one is the customers and they have to be the focus you have and that would be that your tenants that

34:53

are going to rent it from you in this case the other would be your employees and and that would be your your handyman

34:58

your cleaners your boots on the ground people that are needed you gotta have both components did you agree to make a business work oh yeah especially in the

35:04

short-term rental space okay awesome so the next one we have is boots on the ground we’ve sort of covered a little bit earlier as to why that helps having

35:11

a competitive advantage so we’ve got five steps to go i’m trying to get through here i like your your statement here of how

35:17

competitive is the market rob you and i look at this very frequently that hey how competitive is this market we want

35:22

to try to go where other people aren’t i think i probably covered that a little bit earlier as well talking about how you don’t want to follow the flock

35:29

uh the next one would be year over year projections of the market can you share what you’re looking for and why we are

35:35

looking for those things so this kind of goes back to the uh to the cash flow versus appreciation conversation that we

35:41

had earlier but theoretically you know it’s kind of similar to what you’re saying with like long-term investing you want your rents to

35:47

theoretically follow appreciation right you want to raise rents slowly over 30 years same thing is really going to be

35:54

true for short-term rentals and i just want to make sure that year over year that i’m making more money now right now

36:02

in 2022 it’s going to be a little tough to follow up 2020 and 2021 because of

36:07

the covet spikes that we had and all the travel surging but theoretically that’s going to be that’s going to be the case

36:13

for us for the next couple years people are going to just be traveling more and more and more because we’ve just realized as a nation that oh we miss

36:21

traveling like let’s get back to the ancient art of of migrating across the country if you will

36:26

so i want to see that like a property that i buy is going to make more money like from a gross

36:32

revenue standpoint and there are a couple tools that you can use for this i use the like air dna has a little chart

36:38

in there that will show you year over year over the past i think over the past two years how much money a

36:44

certain property has made and how much it’s growing every single month and so that’s been a really helpful way for me

36:50

to analyze properties and we do look at that it actually is very helpful especially when we’re trying to take a way to take two

36:56

properties and make them apples to apples i find that in my investing career much of what i’m doing is that as

37:02

i’m saying all right we have all these options how do we find a way to reduce all the variables and try to draw them down to

37:08

where they have all these things in common and from that point see which one stands out as the best and that’s where

37:13

some of those tools help the last one that we have here under choosing your location is going to be seasonality can

Vacation Rental Seasonality

37:19

you tell me what you mean by that certain markets have highs and lows a really good example of this would be a

37:25

lot of like destination markets right when i say vacation destinations i was talking about things like beach towns

37:31

lake towns ski towns mountain towns everything in between those right and so if you look at a beach town for example

37:37

one of the markets i was recently looking at was destin destin is on fire basically from like

37:43

march to august but then you know it really slows down pretty significantly especially you know november through

37:50

march for the most part and so if you’re a new investor seasonality is something i really want you to keep in mind

37:55

because it happens all the time where i’ll have a student that buys a really great airbnb that comps out but they

38:01

close in january in the smoky mountains for example and then they’re like rob the bookings aren’t coming like did i

38:07

make a bad investment what do i do what do i do and i’m like no no it’s fine you just bought a place in the smoky mountains in january when no one is

38:14

traveling to the smoky mountains and so i really encourage people to look at what the seasonality is and really

38:20

predict how much they’re gonna make every single month and say okay if january and february are slow months

38:26

let’s take advantage of that let’s use that as an opportunity to renovate our cabin or whatever we have it we’re

38:31

actually doing that right now in gatlinburg we shut down our listing for january february and march and we’re

38:36

just going to do all of our renovations now i mean we we could have made some money in march but not as much as i said well hey since it’s going to be a dead

38:43

zone anyways why don’t we go ahead and get in there remodel the kitchen change out floors paint everything so my partners are like okay sounds good and

38:49

then that way once the hot season comes that’s basically you know every every month after that yeah exactly we’re

38:55

gonna make more money so i think that’s a important thing to keep in mind just so you’re not stressing out when you’re

39:00

not booking yes two things i’ll add on that it’s very similar in other businesses to have similar patterns so

39:06

in my real estate sales business spring and summer is what i call the hunger games especially the bay area it is

39:12

brutal you are people are sacrificing their grandmothers to get into a property it is so so hard to be able to

39:18

buy so we are all hands on deck every person that we have we’re trying to keep this thing going and go as far as we can

39:24

then winter time comes and it becomes much slower much more manageable we spend more time lead generating that’s

39:29

always where i work on improving the business that’s where we get better systems better training better curriculum i get most of my book writing

39:35

done at that time i pour into the employees at that time so that they are ready when springtime comes and

39:40

summertime comes to be better so that’s a great business tip that you just shared the other is when you’re buying a

39:46

property that will have fluctuations in seasonality it’s only a problem if you’re pulling out cash flow this is

39:52

actually a cash flow problem and when i say cash flow i’m not meaning the roi or your return i mean literally like a

39:57

business how cash flows in and out construction companies have this problem where they they have profitable businesses but

40:03

at any given time they might have all their cash out on a project and then they can’t pay their guys they can’t be payroll this happens all the time

40:10

learning to manage your cash flow money coming in and out of your bank account is crucial if you’re going to be in the

40:15

short term rental game because you will have seasons that are very slow in seasons that are red hot and what i find

40:21

humans tend to do is take a red hot time and say that’s normal that’s what i expect all the time and then when they

40:26

have a normal month they say well this is terrible things aren’t going well not so this is why when we evaluate

40:32

short-term rentals we always use the metric of yearly revenue not monthly revenue like a long-term rental where

40:37

the lease specifies the same amount as paid every single month so be aware of that and then seasonality won’t be a problem okay

Step 3: Short-Term Rental Strategies

40:44

moving on to step three here location is probably the most important one to start with and that’s why we

40:49

spent so much time covering that but this next one’s important too and this is strategy tell me when someone’s trying to come up

40:55

with a strength they’ve chosen their location now they want to find a strategy within that location what are some of the things they should be

41:00

looking at well when you’re starting out you really aren’t necessarily going to be the best manager of your money and so

41:07

i think this is where we need to really kind of get into the nitty gritty of cash flow and like how do we want to

41:13

spend that cash do we want to take a paycheck from this do we want to let it stack up do we want to reinvest

41:19

it and for a lot of new investors i really do encourage most airbnb investors not to spend their

41:25

money for the first year because it’s a learning process and it’s the ebbs and flows of seasonality and you’re still

41:31

figuring out how much a property is going to make and so if you’re for example seasonality if you’re not really

41:36

attuned to this kind of thing and you’re like oh hey man i just made 15 grand last month in destin and then you spend it all and

41:43

then the next month you don’t make any money then now you still have to pay all of your bills and everything like that so i think you need to really start

41:49

diving into how do you want to actually allot your money do you want to keep it invested

41:54

anywhere do you want to keep it in your bank account you want to have reserves but what about you dave are you usually putting any kind of reserves on any of

42:00

the types of properties that you’re acquiring i started that way then i got so many properties i just like literally

42:05

the bookkeeping of trying to keep up with that cost more money than it was worth to do so i moved from a specific

42:11

strategy of x amount of money for every property into a general principle so now

42:16

the way that i have things set up is that all the cash flow from every property is going to go into the same account and

42:23

out of that account is where i make repairs on specific properties and then throughout the year i track which properties are profitable and which ones

42:29

are not through the accounting and i trim off the ones that aren’t doing well and i and i 10 31 or i sell and move

42:35

into bigger areas and the ones that are doing well i asked myself how can i make it do better so

42:40

you and i have talked about this many many times like hey this property here would do this much money at this time if

42:47

we first buy it let’s look into pursuing this one make it profitable keep buying and then when

42:52

we hit a slow season like like this is that pattern we were talking about of fluxual fluctuations let’s say that

42:58

there’s just nothing to buy because everyone knows that’s going on kind of right now it’s hard to get deals right

43:03

that’s when we put our time towards well let’s take what we already have and make it work better where could we invest into it rehab it do the uh do the

43:11

backyard do some landscaping add some fun things to it we’ve talked about ideas of adding a car that someone can

43:17

rent on turo when they go there like that’s where the creative stuff comes out how do we make what we already have better that’s kind of how i run my

43:23

portfolio when it’s green light time to buy that’s the most important thing is you do everything you can to put stuff

43:29

in contract and grow and when you can’t do that just like with my real estate team that’s where i focus on improving

43:34

the efficiency of my agents i do the same thing with my properties yeah that makes sense because all of that

The Time Commitment of Running Vacation Rentals

43:40

basically comes to time right like it’s all time management to get into that which i think is actually our next point here and it’s

43:46

like how much time can you actually commit to your short-term rental and i think this is a question that you really have to decide

43:53

pretty early on because if you’re working a really busy job and let’s say that you’re like in my past career

43:58

advertising it’s like very very common to work 60 70 80 hour weeks if you’re doing that you probably don’t

44:05

want to go buy a farm on 40 acres that has a couple campsites right this is a

44:10

deal that you and i talked about that there was there was a house um that had eight different cabins on it it was

44:16

pumping out you know a net of 200 250 k and we you and i had to have a hard

44:22

conversation of can we actually give the time to this property even though it is a cash cow can we actually manage eight

44:29

units at once and i think we decided uh let’s let’s try to find an equally

44:34

expensive property maybe it’ll be a little bit less of a return but we’ll spend less time in the weeds of that

44:40

business that’s a really good example i thought about that earlier when you were talking on the same topic is if you’re only looking at roi how

44:46

much money will it generate what’s my return gonna be the decision becomes very easy you buy that eight cabin

44:53

property that’s way off in the middle of nowhere and it’s very hard to find vendors it’s very hard to get boots on

44:58

the ground the cleaners are gonna be really difficult getting someone to go out there and look at the septic tanks all of that stuff you don’t even think

45:03

about it you’re just like oh that’s the highest cash on cash return all systems go let’s do it and then you get married

45:09

to that property and you’re unhappy with your relationship with real estate because it’s not treating you very well it’s demanding it’s nagging constantly

45:15

fix me fix me fix me pay attention to me i need something and you’re like ah why did i ever do this i hate it that’s not

45:22

what you want right so we just had the wisdom to look at that and weigh all the factors and recognize hey if we spend

45:29

less time but get a smaller return somewhere else we’ll use that time to make much more money than it would have

45:34

been spent fixing all the issues that are gonna come from that one property yeah man i brought you that property and you you basically you shook me and

45:40

you’re like rob your time is worth more man and i was like you’re right yeah we did have a moment didn’t we like i sort

45:47

of spoken to you it was like with goodwill hunting remember that uh the matt damon and robin williams it’s not

45:52

your fault it’s not your fault you’re like i am worth more than that i really that was a good talk oh

45:59

and then we put it on uh put it on youtube and then recited it last night we rehearsed it man it was great um

46:06

so yeah i think um aside from that i mean that that’s kind of on the extreme side of it but i do want people to like really sit down and

46:12

say all right how much time am i willing to put into managing a property because if you say i don’t have any time it’s

46:18

really going to dictate your strategy because that means that you then have to go and give it to a property manager but if you have you know five to ten hours a

46:25

week then it’s very feasible for you to get in and manage it yourself and there was a time that people got used to 2010

46:32

through 2016 17 or so where you could just buy a property that was a long-term rental and one of the benefits of that

46:38

was they take less time property manager runs it you answer a couple emails there’s not much to do once it’s fixed

46:43

and so the returns were lower than what you could get but there wasn’t much time and now if you don’t have time it’s

46:49

harder to make money in real estate right now because many of the asset classes that still work will

46:54

will take more of your time okay next one up how much risk are you comfortable with stuff like regulations and hoas

How Much Risk (and Growth) Can You Handle?

47:01

what do you have to say about that you know this is gonna really depend person to person i i typically am a little bit

47:06

more of a risky fella if you will but there are things to consider you know hoas for me

47:12

aren’t necessarily deal breakers but they can be i mean ninety percent of the time they’re a deal breaker if i go onto

47:19

redfin or zillow and i see that it’s got a 15 per month hoa that’s not really going to scare me quite as much as an

47:25

hoa that’s like 150 or 300 a month because i know that probably if it’s 15

47:31

bucks a month you know it’s probably they’re maintaining like they don’t have as much control or power over the community if they’re only bringing in

47:37

that yeah so i that that’s kind of where i’m like placing my my focus is like what how active is this hoa are there

47:44

actual bylaws you know for the most part it does kill a deal for me but i’ve made exceptions to this many times and then

47:49

obviously regular regulatory risk is something that’s like i think the biggest risk in most short-term rentals

47:55

is the city friendly is it receptive to short-term rentals uh does it have outdated laws does it have laws that

48:02

outlaw short-term rentals that aren’t actually being enforced that’s something that i’ll look at too and say okay well

48:08

if they were written in the 90s they weren’t really thinking of airbnb and so i might still make that decision but for

48:14

the most part for people starting out like i have a very diversified portfolio and so that’s why when it comes to

48:19

seasonality or regulation i don’t really have too much risk because i have such a

48:25

well-balanced i have a little bit of everything whereas if you’re first starting out it’s your first deal you

48:30

don’t really want to get into anything risky like an hoa or regulation or seasonality because you don’t really

48:35

have a portfolio to back you up whenever stuff you know starts to dip very good point um okay how about the next thing how

48:42

fast should someone scale how does that factor into strategy that will mostly depend on how fast they want to quit

48:47

which all of us obviously always want to quit our nine to fives but i think i think it’s a marathon not a sprint um it

48:54

feels like a sprint for anyone getting into it i mean setting up your first airbnb it can be a lot of work right you

48:59

got to go you got to get it pre-approved you got to get an offer in you got to get it accepted inspections furnished

49:04

automations hire your team so you know it’s it’s very common for a lot of people to do that we get that adrenaline

49:11

rush and we’re like yeah let’s do it again and again and again hurt me uh but

49:17

you know for the most part i always tell people to like slow down a little bit because

49:22

because that was me man that was just like a bur phenom for a while there right it just was like every day was

49:29

cold just burned constantly and then one day i woke up and i was like i’ve adopted

49:35

55 problem cats from a shelter and i’m trying to control them all

49:41

i know i see them in your background there um but yeah so like i think you want to scale up according to how

49:47

quickly you can save up any kind of reserves you know i tell people six six months is a really

49:53

nice padding that you can have for reserves if you can have that then i think if you can do that and save up

49:58

your down payment it’s probably time to move on to the next one i have a video on my youtube where i talk about sort of portfolio risk management that would be

50:05

really good to check out here with what i do to scale fast but still be conservative okay last one would be remodel pros and

Remodeling Your STR

50:12

cons what do you have for us there well i pretty much go into any specific

50:17

airbnb purchase uh or short-term rental purchase hopefully not having to do too

50:22

much remodeling i’m very picky about this and this you know when i was first starting out i was all about the value

50:27

ads and it was all about like yeah let’s fix everything but now for the most part

50:33

unless it’s going to add significantly to the value like you and i have looked at a couple properties that would be a

50:38

burster right a burr into an str and that to me would make sense if it’s going to add significant amount of money

50:44

to the adr the average daily rate but for the most part when i’m looking at a property there are only a few things

50:50

that i’m actually willing to do and honestly i probably don’t even i would rather just move on but i’m willing to

50:57

paint the interior of a house and the exterior of a house i’m willing to paint uh well no i’m willing to do that i’m

51:04

willing to change the floors in the house and i’m willing to possibly paint the cabinets of a kitchen and put like new

51:10

hardware but for the most part that’s it and then maybe like doorknobs if i want to change doorknobs i might do something

51:15

like that but that’s all i really want to do on a short term rental because it’s already hard enough getting the

51:20

short rental set up and furnished and automated and all your teams hired out but to have to manage a remodel on top

51:27

of that is not something that i want to do as much these days although i do have a team that does assist me with that

51:32

kind of stuff so if it’s something that’s like sub five to ten thousand dollars as a remodel i’m willing to do it what’s your

51:38

logic or rationale behind why you don’t want a big remodel just just the time just the time needed because i’d rather

51:44

move on to a turnkey property that i can get like functioning as quickly as possible i’ll give you an example of how

51:49

this works out in real life because this is a good point i bought a place i’ve talked about it earlier in the east bay

51:55

almost 1.9 million and it’s a 5 000 square foot house that’s going to basically be broken into smaller units

52:01

and rent it out during the remodel it’s a little over ten thousand dollars a month that i have

52:07

to pay to carry that property um the permit process was not started when

52:13

i was told that it was going to be started so we’re three months behind so take thirty thousand dollars plus

52:19

whatever you know the four to five months of rehab is going to be plus the actual cost of rehab itself

52:25

it will be years before the cash flow ever recovers like many years for that initial money

52:32

that i spent up front now if this was a property bought as a short-term rental to be a cash-flowing cow that would be

52:38

stupid like it already just doesn’t work i made a mistake in this case i’m looking to refinance it after some of

52:44

the work is done and that’s how i’ll get my cash back out but if it’s not a burster like what we talked about this

52:50

is why rob is saying i don’t want to do a big rehab because the time it takes to do it as well as the money putting in

52:56

is going to steal money from you that you would have been generating when you were renting it out to different people

53:01

so very good point there if you’re going to add significant like if you’re at a tree house or some kind of feature like

53:06

a hot tub or a tree house or a process around a tree in my case i’m converting a garage into like 2 000 extra square

53:14

feet of living space that’s going to make the property worth quite a bit more right that would make a big difference on airbnb that’s extra rooms you can now

53:20

hold i don’t know how many people can fit in that like 10 people so it’ll be a ton but what i was more saying is when i

53:25

go to refinance that that extra 2 thousand square feet is gonna up the value of the property i will get that money back now i don’t have to wait

53:32

however many years it takes to make back the two hundred thousand two hundred fifty thousand i lost i’m going to get that back on the the

53:38

re refinance and now the time can start so like the clock can start from that point versus

53:44

if you’re not able to do that and you’re just making a house look prettier and it’s already at the top of its value

53:49

your fault you’re starting from way behind if you try to do a big remodel on a on a short-term rental and that’s one of

53:54

the reasons people can sell them for a premium if they’re already ready to go and it still makes sense for the buyer to pay that much money all right i hope

Outro

54:00

you have enjoyed this show so far on how to buy your first short-term rental property now rob and i got into so much

54:07

detail that we actually ran out of time and rather than trying to make you listen to a two-hour podcast we are

54:12

going to air part two a couple days from now now what we went into today was uh some pretty important

54:19

things that you want to start with if you’re looking at getting your property the strengths of different markets how to choose the location which is really

54:25

important and then what strategy you’re going to tackle going forward in the

54:31

next show we are going to talk about picking the property type choosing the timeline that you want to operate on

54:36

both if you’re going to be in a partnership or with the property itself and then a bonus step that we didn’t

54:42

know we were going to give you or you didn’t know we were going to give you i should say how to divvy up the work involved and

54:47

what work to expect now that’s not going to be the end of this series we’re actually going to have two more episodes

54:53

at least where we dive even deeper into how to analyze these properties once you’ve got an individual property in mind and then how to manage the

55:00

operations of a property once you got it so this is gonna be pretty close to a short term real estate

55:07

short-term this can be pretty close to a short-term rental workshop you’re getting a lot of

55:13

information it’s all free so i hope you’ve liked it please let me know in the comments what you think so far and keep an eye out for the next show to air

55:20

in a couple days rob anything you want to leave people with before we get out of here and you know that was fun that’s like the the river flow-a-thon when you

55:27

when you get me give me a mic and some topics on airbnb you know i’m going to talk a lot so hopefully it wasn’t too

55:33

rambly but man if people want to hear from you if they they want to be enlightened on the social medias when it

55:39

comes to anything airbnb how can people find you my friend they can find me at davidgreen24 i’m actually in the process

55:45

of hiring a social media manager because everyone has told me how bad it is so keep an eye out for that it’s going to

55:51

be better pretty soon once we find the person we’re going to take it i’ll i’ll take the job i’m going to do the range

55:57

that’s a great point but yeah that’s where they can find me and then keep an eye out because i’ve got some changes that are coming if they

56:03

want to know what i’m doing i actually have a text letter that we’re going to be putting out every single week that tells people so if they go to dgt live

56:10

text letter they can sign up for that just like brandon turner has one and you can kind of see what he’s up to what’s going on in his world they can follow me

56:16

there how about you if people want to learn more about this amazing insight you’ve shared where can they find out there’s always the the youtubes you know

56:23

i just actually released a video called this is exactly how much your short-term rental is going to make which will give

56:28

you a little bit of an insight of what we’re going to be talking about a couple episodes from now where we actually deep dive into the nuts and bolts of

56:34

analyzing a short-term rental you can always find me on instagram at rob built and tick tock at raw built out

56:41

all right well thank you very much for joining me i could not do this without you and let me just say i don’t think i could have picked a better partner i am

56:48

very happy and proud that you and i are going to be looking at this together and that we get to share our experience with

56:53

the masses so that they can learn from it too i won’t let you down cap appreciate that this is david green for

56:58

rob won’t let me down abasolo signing off [Music]

57:21

you