Episode 217: The Secrets to Short Term Rental Success - Strategies, Tips, and Insights Unveiled

Invest in Sqft

Are you ready to unlock the secrets of the booming short-term rental market? Look no further than this captivating podcast with, Kirby Atwell. Join Kirby as he takes you on a journey into the world of investing and running short-term rental units, providing you with invaluable insights, tips, and strategies to maximize your profits and achieve financial freedom.

We cover both novice and experienced investors' questions with the knowledge and tools necessary to thrive in the short-term rental business. Kirby's expertise shines through as he shares his proven methods for selecting the right properties, optimizing listings, attracting guests, managing operations, and ultimately maximizing returns.

Whether you're looking to start your short-term rental empire or seeking to enhance your existing portfolio, this episode is your go-to resource for valuable advice and practical strategies that deliver results.

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Today, I'm afraid I don't have very much insightful wisdom for you. I've been covering a property management position at a large property, 275 units here in Shaker Heights during a transition period between our property managers. So essentially we have our own property management company, but the.

Person, the individual who is managing this particular property decided to move on. A few weeks ago we found a replacement and he's gonna be starting in about a week and a half, and I'm covering during that period. So it's been a little bit busy and haven't had too much time to learn that much, but I hope you enjoy today's episode nonetheless.

 Invest in square feet, we unlock the secrets of wealthy entrepreneurship. I'm Matt Shields and my mission is to help business owners just like you, protect your wealth so that you can invest passively in multi-family real estate. Today we're gonna learn all about short-term rental units. And why? One of the biggest misconceptions about short-term rental units is that you have to be in a vacation area in order to make it work.

The fact of the matter is, is that short-term rentals can be done in every city and everywhere in the country, and we get into some of that reasoning on today's episode.

 Yeah. Uh, so I think there's probably two main things that I can point to back then. Number one was I was not clear on the outcome that I was after. So I, I got out of the military and I sort of, Envision just business success is making a bunch of money. And I started self-educating, going to a lot of different conferences and stuff, and you'd see the, the gurus on stage and they'd have, you know, uh, all the flashy things that they'd, they'd point to as success.

And that was kind of like, I guess my, my. Version of success at that time. And I, I was sort of chasing this, this idealistic version of success. And then it wasn't until till years later that I got really specific on what's my version of success. And I realized none of that material stuff even matters to me.

Um, and it was really, freedom is what I was after and cre and to get there, I needed to create cash flow. And so, So what I was doing in the beginning wasn't matching with the outcome that I really wanted, and so I, I could never get there because I wasn't very specific on, on what that outcome looked like for me.

Once I got real specific, then I could backwards plan and create the steps and then just follow the steps. Mm-hmm. Um, and then the other thing was I wasn't, um, I, I don't know if it's realistic or just I, I wasn't educated enough to understand the numbers and what it would take. To create a business and where to spend the money in the right place, that's actually gonna matter in the beginning, you know, and everyone telling you you need to do all these different things.

There's a million things you can spend your money on, and 90% of it is just bs. It, it doesn't, it doesn't matter. It's you. If you didn't do any of it, you didn't set up your website if you didn't go out and get business cards and didn't do any of that stuff in the beginning, that people tell you you need to do.

I mean, that's just a few examples of a laundry list. Um, it, it doesn't, and you just focused on creating a product that people. Want and, and need, um, and then figured out how to sell that, uh, you'd be so much better off. But in the beginning it feels better to, to market yourself and spend money on all this stuff.

That's just nonsense.

So if you, if you had to look back and do things over again and, you know, not invest in the website, not do the business cards, not do you know what, whatever, like the trade shows, the, you know, the, the various different marketing, um, How would you approach, how would you approach starting the business or, or, you know, getting in and figuring that out?

What would be your approach there?

Yeah, uh, great question. I, so I, what I did in the beginning, I, I, I got out of the military and I started flipping houses. Cause I thought well make these big chunks of money. And it seemed like that's a way to start building wealth. Um, instead, what would've been much smarter is to figure out.

How can I create streams of income as quickly as possible and create the largest streams of income, the most cash flow possible. And by doing that, it, it allows you, it starts to free up capacity. You know, because I was in this constant. Um, this constant like treadmill that I was never gonna get off of with flipping where it's like you're constantly looking for that next deal.

You have no capacity in your life. You just add more and more deals, which take up more and more of your time. But by adding cash flow, That's totally different. The more cash flow you add, the more capacity it frees up, and the more ability you have to go out and add more cash flow then, um, so it's like this perpetual cycle.

And I didn't, I didn't get that in the beginning, so I would've focused purely on. What I'm doing now, if I, if I had the knowledge that I have now, um, which is high cash flowing, short-term rentals, um, and things were different back then. I mean, this was 2011 when I first started. So, uh, you know, Airbnb was different.

The, the market was different, but, um, the, the potential was still there. Maybe I would've done it slightly differently, but, um, to create these, these. Streams of income using these sort of non-traditional short-term rentals that really just cash flow phenomenally well. And it's, and that's what's gotten us to a point of financial freedom and, and not having to, um, to rely on a nine to five job.

Yeah.

So obviously focusing in on the cash flow and, and your. Your method of creating that cash flow is through short-term rentals. So I, I'm, I'm assuming you're taking the assets that you, maybe you already had. Um, and rather than renting them out on a monthly basis, you, you're doing short-term rentals instead.

Is that, is that the approach?

Um, somewhat so. So we had. Initially I flipped for five years and then realized that that was getting me nowhere. Uh, and so then I transitioned into long-term rentals and we built up a portfolio of 24 of those, which, which were good, but, um, very unreliable. You know, you'd have a tenant move out and you'd have to rere rehab the whole place and it would eat up all your cash flow.

Um, and then we transitioned into, we tested out on our basement actually. We were moving and we tried. We, we created our basement. Uh, In, in our unfinished basement, we created a one bedroom walkout apartment, you know, um, that we rented on Airbnb and it worked phenomenally well. And so we kind of took the thesis behind that and started buying in this affordable town right next door where, you know, the properties would work really well as long-term rentals, but we could convert 'em into short-term rentals.

And by these small multi-family properties and the cash flow is just off the charts compared to long-term rentals and the properties stay in tiptop shape because you're cleaning 'em constantly and repairing any little things that come up. Um, so, so we sold off all the long-term rentals cuz they were in areas that we really didn't want to be in.

I didn't, we, we had been in Illinois where, You know, I, I'm not super bullish on the future of, uh, of that state. We moved over to Indiana where the taxes are much lower. The, uh, bureaucracy is lower, the crime's lower, um, and things are heading in a positive direction, in my opinion. So, um, so now all of our properties all around northwest Indiana in these, in these utilitarian markets that are, most people would say, Nobody goes on vacation there.

How can you buy a short term rental there? But that's the perfect place to buy. There's still local draws. It's affordable enough for people to rent for all kinds of purposes, not just vacation. And people come to vacation cuz we're right near Lake Michigan as well.

So that's something that I've always wondered, you know, with short term rentals, do you need, obviously vacation?

That makes perfect sense. Um, If you, if you, uh, I feel like this goes back to location, location, location, but is location as important with the short term rental is what it is? You know, with, with other things, like if you, I don't wanna say if you, if you have a, an undesirable location, um, but. Do you find like these homes can still be leased out on a short term basis, even if there isn't like this, you know, major attraction, major draw, major reason for people to come to the area?

Is it, is it still, um, You know, feasible to be able to rent that out.

Yeah. Have you, have you ever read the book, um, thinking Fast and Slow by Daniel Kahneman? I feel like

I have, and I don't, I, it's been a long time since I have, but I, I, yeah, that sounds very familiar.

Yeah, it's a great book. Um, and it's, it's super insightful.

He basically, he's a psychologist that basically goes through all the biases that we have and how yeah. Illogical we are as human beings, uh, to assess different situations. Um, and I feel like it applies so much to short-term rentals. Some of the biases that he outlines in the book apply to short-term rentals because, uh, I think with most people that I talk to when it comes to short-term rentals, They think about the vacation, they think in terms of vacation, and they think about the main vacation rental areas, and they're like, well, that's where everyone wants to go.

And they categorize everyone into that when in reality, Airbnb has blown up. The whole short term rental space. It used to be that it was just mom and pop little, uh, rental companies that would rent out in these vacation rental areas. Now with Airbnb, that's just the way that people travel in general now.

So there's millions upon millions of people that use Airbnb, whether they're going to. These main vacation rental places or just anywhere, going to a wedding, going to a funeral, traveling for work, all the reasons. And it, they can get a house in a lot of cases just as cheap as a hotel room. So, so because of that, I think people default to these vacation rental areas thinking that's where everyone goes.

But then they, they discount the fact that there's millions upon millions of people traveling to non vacation, more people traveling to non vacation rental areas than these. Few top vacation rental areas. So what you get is you get all the competition, especially with new people coming into this market, all going to the Gatlinburg and the, you know, uh, Florida Panhandle and Phoenix and, you know, the, the markets where you think people are gonna vacation to those markets, um, particularly warm weather markets.

Um, and they leave. All the low hanging fruit on the table and, and you have tons of people who will book in these, in, in, in, and I don't wanna say it works everywhere, but my strategy is focusing on just outside of the biggest, the bigger cities. So there's still. Population concentration and lots of reasons people are traveling.

There's still local draws there, whether it's a museum or a, a beach or a casino or whatever, you know. And, um, there's draws there. Uh, but then the cost perspective is substantially lower than traditional vacation rental markets or buying in that city. So you're just outside of the city. Maybe you can get it for a fourth, but the nightly rate, Is almost just as high as being in the city.

So it's almost like you get the best of every world. You get less picky guests as well. Um, and uh, and yeah, it can so it, it absolutely works in, in areas outside of the. The traditional markets. Yeah,

yeah. Interesting. Now, does this work with, um, I'll say any type of asset as well? So, uh, you know, thinking about like typical multi-family apartments, you know, maybe there's 50 other apartments in the building.

Have you tried that on those types of, those types of structures, those types of buildings? Or does this work primarily with. Um, you know, single family, maybe duplexes where, you know, people are just in and out, you know, right next door. Right. Does that, does that make sense?

Oh, absolutely. Yeah. And it's really interesting to kind of think about scale, because if you can take a.

A single family home that as a long-term rental, makes a fourth of what it makes as a short-term rental in terms of cash flow. So you're making four times as much, and then you think about scaling that across 50 units. If that's possible, the numbers and the value of that asset, then if you could actually bring in that much more cash flow would be phenomenal.

So, I think it does, it, it does scale. We, so we buy, um, we primarily focus now on two to four unit properties, um, because there's a lot of 'em in our market. And, and, uh, it just, The cash flow is just so much better, uh mm-hmm. Several times better than it, that same property as a single family home. So, um, so it does scale to that level.

And I, I have a few friends who are buying, uh, sort of like defunct, um, Motels that they're turning into more like boutique Airbnb experiences and making 'em really nice. And those have worked really well. Also, I don't know, the scaling potential on like a, a typical apartment building. Um, you know, there's different things to think about when it comes to that.

I, I think. Potentially a hybrid mix might be the best of having some long-term, some short-term in there so that every property isn't a, isn't a short-term rental, or every unit isn't a short-term rental. But, um, I think a lot of it, it's gonna depend on the market, the demand. Um, and there, there absolutely is some scaling capability.

I just don't know when you hit that inflection point where all of a sudden, um, it drops off and you start losing the, um, The benefits, I guess. Yeah. Of, uh, with, with too much scale. Yep. No, that

makes, that makes sense. Uh, I, I'm curious, this is something that I've always, I've always wondered, and I don't know, How it, it's been a long time since I've had any property, um, you know, like single families and, and you know, duplexes, quads.

Um, I'm curious on the larger properties the bank will be involved with, essentially the, the occupancy, right? Monthly, bimonthly. They're always asking for, uh, occupancy reports. What's your occupancy? All of this, right? So I'm just curious from your. From your experience, has the bank ever looked at these, uh, these assets, these, these spaces as being, you know, unoccupied?

Or is that not something that you've had, um, you know, any, any exposure, you know, to that with, with the types of lenders that you're using? I'm just curious because Yeah. Um, you know, from, from, from a, a multi-family perspective. Um, I feel like the, even if it was bringing in cash flow, it's only, you know, occupied.

Which actually that's another question. I'm curious what the, what the average occupancy actually is. Is it 50%? Is it like, you know, occupied 15 days outta the month? Um, so from a bank's perspective, they would see that as a vacant unit, but it's producing more cash flow that than as if it was when it was, when it was occupied.

So it makes sense. But I'm just curious, you know, kind of an old school way of looking at things. How, how have you seen the banks. Um, you know, looking at that, that particular situation.

Yeah, I think you're absolutely right. Like the, the. The older school banks, especially in the commercial space, you know, they wanna monitor that really closely.

They ask for at least annual reports on operations and all of that. Um, the lenders that I work with, uh, are. Typically not as involved. You know, they're, they're doing a 30 year D S C R fixed rate loan. It's, there's no balloon payment or anything like that. Um, and it's, um, they're underwriting it up front and then it's like Gods speed, basically.

They write the loan and that's it. Um, and I think it's just cuz it's smaller loan amounts and, um, They just, a lot of 'em probably don't have the capacity to, to stay as involved and collect reports and, and monitor it that closely. But, um, but I think also a lot of lenders are coming around to the idea of short-term rentals.

I mean, it's, it's really a tough thing to ignore in today's market with how many users there are, how many operators there are, and just the numbers. I mean, it just makes sense. People who were dead set that they'd never. Dip their toe into this, or like, I just can't ignore it anymore based on the return.

So, um, so what the most of the lenders I work with, they're DS c r lenders. They're, they're, um, They're open to the fact that it's being used as a short-term rental. Now, some of 'em will underwrite it as a long-term rental, so it has to, they, they'll pull the, the rent rates, even if it's not rented out.

When they do their appraisal, they pull what the market rent is, and then it still has to meet the D S C R criteria. Basically, the income has to cover. Your, um, p i t at your principal, interest, taxes, and insurance payment. Um, and so as long as it does that, then they're comfortable with it, even though you're gonna use it as a, as a short-term rental and probably make a lot more than the long-term rental income.

Others are actually underwriting it purely as a short-term rental. Now, um, there's, there's a handful of 'em that I, I work with now that, um, They've gotten beyond the fact that it has to work as a sh as a long-term rental. Um, they have different rules sometimes. Sometimes it needs to be in a more traditional vacation rental area or be an established vacation rental for a year or two before they'll underwrite it using those numbers.

But some will just. Pull the air d n a data, which is the, you know, um, the, the big data site that, that tells you what they, you should anticipate making on properties, uh, on short-term rental properties. And they just underwrite it based on that income. And as long as the D S C R checks the box using that income, They'll do the, yeah.

Interesting. Wh what types of things do you need to have in place for, uh, you know, being able to convert a, a, a space into a short term rental? Obviously it needs to be furnished. Um, you know, and I, I don't think you need to go all out on the furnishings, but I'm, I'm curious from your perspective, does it help, uh, yield more revenue if you do invest in higher quality?

Things to fill the space with more decoration or is it, you know, best if it's more minimalistic, uh, less expensive things, uh, you know, so you don't have that initial capital outlay. I'm just, just curious on your perspective from, you know, uh, uh, you know, a, a tangible filling this space perspective. Like how, what have you found to be the best recipe there?

Yeah, I think, uh, that. Real estate investors are a little bit handicapped when it comes to this. Uh, I certainly was when I was first getting started with short-term rentals because I was so used to the fact that a two bedroom house makes what a two bedroom house makes like it, it doesn't matter if it's in the same market, you can put in the fanciest amenities and, and it's gonna rent for essentially the same.

Um, and so my wife. Who is not a real estate investor, doesn't have a real estate investor background. She hasn't really ever been really interested in real estate investing. Is now very interested in in working side by side with me in the short term rental space, which I've seen a lot with other people I've worked with.

Um, Because of the whole design aspect. Um, the, the, the, the customer facing aspect, you know, the guest, um, components, like she enjoys that stuff. I enjoy the spreadsheets and the investment and finding deals and, and that sort of thing. So we kind of compliment each other. But she had to really work over the first couple of years to get me to come around to the f you know, the fact that I need to.

Spring a little bit more for, um, the furnishings and creating the experience. So she's really good at thinking through. Who the ideal guest is going to be and what is the feeling that we want to create. And you are absolutely outsized, rewarded for doing that, as opposed to just, I'm going to put a couch, a bed, a tv, um, some pots and pans and it's a furnished space, you know, that's, um, the exact same space.

Can rent for totally different amounts there. A good example is we went to a place called the Fields of Michigan, which is in South Haven, Michigan. It's a, a blueberry field on 10 acres, and they initially built nine sites for these canvas tents. It's just a big canvas tent with a bathroom on the back, but it's like a pretty rustic bathroom.

Uh, they've expanded to 19 now, which is their capacity, uh, because they were doing so well. And they rent for three 50 a night to sleep in a tent. Um, and. I initially was like, this is insane. How is this possible? And that's why we went and stayed there because we just wanted to see how they were charging this and we would actually go back because it was just an amazing experience.

They think through every detail. It's like you're in nature, but you don't have to think about anything. Um, and then right down the street somebody tried sort of like a copycat model, but it's not marketed nearly as well. It's, it's just like a campsite basically. Exact same tents, and they, they struggle to get a hundred bucks a night.

Mm-hmm. So three 50 to a hundred, like, that's a massive, massive difference, um, in terms of, of the performance, but the exact same asset. It's just all in the marketing and the experience you create.

Yeah. Interesting. I, I remember I read a story about, uh, uh, a, a short-term rental, uh, company who would decorate their spaces.

Uh, in various different themes, and I can't remember what they all were, but I remember the one was Harry Potter and, and they might have had multiple Harry Potter themes. Have you done any like themes, you know, ho homes like that or, or situations like that? I'm curious what type of premium, uh, if you have any experience with this, what type of premium you might be able to expect, um, you know, going that route versus another route.

Yeah. Yeah. So we, we actually, interestingly, we, we just finished a triplex, um, which is right downtown Michigan City. It's a few blocks, walk to the beach, right next to outlet mall, right next to all the bars and restaurants. It's just a great, uh, perfect location. Um, and. We gutted the whole building. It was, it was nasty when we bought it, so we gutted the whole thing, painted it yellow, and my wife again stepped in and she, she was the impetus.

I, I wouldn't have painted it yellow. I would've been much more, um, neutral in terms of colors. Um, but we have it, we call it the Sunshine House, and then one of the units is a Breezy Beach unit. One is the wild woodlands and one is scenic skies. So cool. Scenic skies is like yellow. Everything's like sunshine and uh, real light, uh, wild woodlands is green and like forest theme.

Um, and then Breezy beach is blue and, and all the beach type theme. Um, so it's a way to differentiate, you know, if you have an apartment building, Everything's neutral because it's easy to maintain that way. Um, and if we did that, we'd have three of the same listings on Airbnb and it wouldn't stand out.

Um, but because they're unique and they each have sort of a different theme, it's not as extreme as Harry Potter, but, um, but they stand out and, and the bookings have been great. And so, so it's, it's tough to. Um, identify the exact premium that you get as a result of that. But I think the occupancy is the main thing that you, you really get, you know, people are drawn to it, the reviews are great.

Um, people like the experience, um, of, of having something a bit different outside the box. That's why people use Airbnb. So, um, so I think we can charge a little bit more, but then we stay pretty solidly booked up. So I think you, you asked about occupancy earlier. Um, We are at, you know, we're in northwest Indiana, so obviously in the winter it's, it's hell on earth here, um, right by the, the Great Lakes, uh, but.

It still stays at 50% occupancy because of these utilitarian purposes. So, um, we have nurses, we have workers come in, stay there for several weeks at a time. Um, and then we have people coming for the casino and coming to go shopping at the outlet mall and going to the wineries and all those things. But it's primarily weekends or long weekend bookings, and it's smaller groups.

Um, and then in the summertime we're at. Pretty much a hundred percent occupancy. We'll have a few day gap here and there, but, um, but it's almost booked up completely across all 21 listings. So it, it's just, there's nowhere near enough properties in the summertime for the amount of people that want to visit this area.

Um, and so, so we stay booked up. So, so it averages to about 70%, which works out really well in terms of, of our numbers. I initially went into it thinking if we stay vacant all winter, The numbers still work better than using the properties as long-term rentals. Um, but I was pleasantly surprised with the winter.

Yeah, that's, that's really, really interesting. Um, how do you go about identifying the, the opportunities, right? I mean, is there, is there. A certain focus on, you know, this is the number of, call it transient people or, or you know, these are the numbers of people that are coming into town for various events.

Do you look at all that, like that type of data to make sure that you've qualified, that there's going to be enough people coming in, um, prior to making any type of investment, um, decisions or, again, just curious how you go through and, and qualify. That as being a legitimate, viable option for a particular Yeah.

Opportunity.

Yeah. It's, it's a, a bit of a process and it's evolved over time. Um, but the, the. I don't like to reinvent the wheel, you know? Um, so as I'm looking at, at markets to invest in, I'm doing research. I narrow it down. First, I look at big data to see where is the potential, because you can go on air DNA and see any city what the averages are.

So if you're starting with an average occupancy of 30% and a nightly rate of $90, probably not. You know, an area you wanna explore deeper. Um, so you can just pass on that. But I start with areas in the Midwest or southeast typically, because those are areas where it's extremely affordable. And I go just outside of the larger cities in those areas.

Um, and then I look for local draws. And so, so you can really narrow down to a short list. And then you dive into the metrics and see, okay, how are properties doing? And I'll, I'll go to neighborhoods and, and look at if I'm interested in buying in a certain area. I'll look at where the properties are performing the best.

I read through every review on Airbnb, see when they were left to see are there gaps. And when people are staying, see what their calendars look like. Are they booked up? Um, what their price points are. So you can do a ton of market data to see this is working. In this area. And then on top of that, a huge thing that we've done over the years that, or that we've realized over the years and where we concentrate now, that's really helped optimize our, our properties because of what I just shared previously about, um, the differences in travel in the slow season and high season.

So, so we buy primarily two to four unit properties because of this, this. Amazing versatility that it gives us. So in the high season, typically what you find is there's nowhere near enough, uh, lodging and you have grandparents, their adult kids and their grandkids that all want to travel together for a summer trip.

And, uh, and so you see a lot of that. And so if you look at on air dna, it'll show you in a market how many. Two bedroom, three bedroom, four bedrooms. There are, you'll see, and typically there's a huge drop off after three bedroom. Um, there's just not that many of 'em. So if you buy a three unit like we just bought and we have it listed as 16, it 16 people can sleep there.

There's nowhere near enough 16 P people. 16 occupant houses in that market for the amount of large groups that want to travel. And if there are, usually it's a big mansion that you're paying a massive premium for, but we can charge a premium above all the, the price point that we charge for the three individual units, for people who wanna stay there.

Because if 16 people are traveling together, typically they're dividing it up. And a thousand dollars a night isn't insane. You know, in terms of cost, when you divide it up between that many people, but a thousand dollars a night for a. Relatively affordable three unit, um, adds up pretty quickly. Yeah. In terms of income.

Um, so that's what we get booked out most of the summer is the, the super listing we call it, which is the whole building. And then in the winter, if you had a 16 unit house, or I'm sorry, a house that slept 16 people, you would really have to drop the price way down because you just don't have large groups traveling in the, in the wintertime or in the off season.

And so you have to price it in line with smaller properties. Well, We can drop our pricing, but we have three different streams of income for these smaller units and, and they each get booked up individually. So, so you've got the best of both worlds with multiple streams of income coming in and then the premium on the large property in these relatively affordable areas.

Yeah, that's really, that's really, really interesting. I never, never thought of combining them together like that. Um, What are some of the, what are some of the drawbacks or some of the things that you have realized after being in this business? Like the learning things like, well, I didn't realize that was going to happen.

Um, you know, from, from a negative standpoint. Like, you know, you thought this was gonna be the way, but it ended up being this way, um, for a, for a negative result.

Yeah. Um, I mean, I think we have small challenges that come up all the time. I mean, you're always learning, like the, the way we do things now is so different than the way we did in the beginning in terms of just, um, uh, the, the way like we thought we'd just set up a nice property and we'll get five star reviews, and we realized, All of a sudden we're getting four star reviews from people who are raving about the property.

And we're like, what? What's going on? If you're raving about the property, why are you not giving us five stars? And we realize there's this disconnect that people are like, well, they, they think in terms of hotel ratings. And they're like, well, this isn't the Waldorf Astoria. It's just a unbelievably nice house.

So it's four stars not understanding that that's actually killing us in, in. Uh, in the search algorithms on Airbnb and V R B O. Um, so now we have this whole process of like touchpoints with the guest from the time they request a book all the way to checkout day, where we're setting the expectation that we pride ourselves on five stars, where're going above and beyond to deliver that.

We personalize the experience as much as possible and, and do all these extra things. Um, And as a result, we get almost all five star reviews on all our properties now. Um, but those are things that we just didn't know in the beginning, you know? And so it's, they're kind of painful to learn. Um, and, and that's just one example.

Pricing is another one. It's a total art and science together every single day. It changes based on the inventory levels and the distance from your high season to low season. Um, and so there's a lot to understand with pricing. So I think. I mean, overall this, this type of investing where you can make, I mean, on some of our properties we have over a hundred percent cash and cash return.

Wow. Which is pretty unheard of, you know, on relatively turnkey properties. Um, but I. The so, so overall it, it works. It's worked really well. It's worked better than we expected, but there's a lot of little things that you need to learn along the way and optimize because all of the, you can buy the best property in the world and make no money.

It's all in the operations of how, how you, you operate it going forward. Um, and now we have a great team too that helps us. Um, so it's. It's scaled with time. Um, and we, as we've learned things, we've implemented things and it's sort of organically grown, um, as we've. Figured it out. Mm-hmm.

Uh, and are you able to do this remotely as well?

Or is this something that you would say you want to be located in the same city? Obviously, you know, you're gonna need a team, you're gonna need cleaners, you're gonna need, you know, handymen fix-it, people, um, that will all need to be on site. But do you feel like this is something that you would be able to set up and manage remotely as

well?

It's actually, so it's really ironic, um, cuz uh, my wife and I run this program called the First Vacation Rental Investment Blueprint. And uh, it's where we teach people how to buy their first high cash flowing. Short-term rental using this model. And we, we specifically set it up based so that it would, the step-by-step process works whether you're down the street or across the country.

Because the whole first year that we operated, I was my own worst enemy. I mean, I would drive over there when guests couldn't figure out wifi or get into the property or, you know, issues would come up. Uh, and I realized I was just wasting so much time and opportunity. Um, so. Then we really focused on setting up systems that would work, whether we're right next door or across the country.

And, and so now there's properties I haven't visited in over a year, um, even though they're 20 minutes away because we have a really good team in place. And so of the people that we've, we've worked with 144 people now in this vacation rental investment blueprint program. And the top most successful people are the ones that are remote.

Um, and. And you, the intuitive thing is to think, well, they did it despite being remote, but it's actually, I think after thinking through this a lot, it's because they're remote, because of the compound effect of not being able to do all these little things that waste so much time. You're, you're forced to find good people to do the steps and you just don't realize.

If you're local and you insert yourself into these systems, how much time that that wastes. Mm-hmm. Um, and so, so being forced to do it remote, There's people in the program who, who went from zero to 10 in one year, um, where others right down the street, you'd think they'd have an advantage and they're, you know, they were just getting their first one after six months because they were driving out to every property and do there for every inspection.

And, you know, they're like manually hiring cleaners and all these different things that you can automate so much easier. Yeah. Yeah,

that's, that's interesting. And I, I feel like that is one of those things that you need to go through as an entrepreneur to be able to learn that. Right. And, and I remember, so I used to have an electoral contracting company, and I remember when I was making a shift into the technology side of things, being conscious.

Making a conscious decision of not wanting to learn how to code, because if I was the one who learning how to code, then I'm going to be in there figuring things out, you know, like nobody else could do it, right? So, mm-hmm. It's kind of it. It's one of those things that you almost don't want to. B, knowing every little step of the way, every little step of everything that's going on, you need, like you said, to find that team, have the right systems in place, uh, and be able to hand that off and let you know, know that somebody else is going to be able to take care of that.

Particular situation for you, you know? Absolutely. If, if someone wanted to get involved in this, you, you mentioned your, your, uh, your program, um, what type of capital do they need to start in this? What are some of the things that they should, um, you know, think about in order to be able to start doing something like this?

Yeah. Um, so the, the great thing about it is that you can al in almost any financial situation, you could make it work. You could, you could go out and buy one of these. Um, the way that we buy most of ours now is we get the D S C R loan, which covers 75% of the purchase price. And so then everyone says, well, then you gotta raise the other 25%.

Well, We're buying in relatively affordable markets, like I talked about. So the other 25% isn't a massive amount, not like we're buying a million dollar property. You have to raise 250,000. It's a couple hundred thousand dollars property. So it's a much smaller amount. And then we'll go out to private investors, you know, friends, family, anyone you know that might have a a retirement account and say, Hey, you know, we'll give you a fixed double digit return.

If you'll make up the second loan on this property and make up the equity. And so in a lot of cases, they're extremely happy with the, the income on that loan. It's still secured by. By a second, um, mortgage on the property. Um, and we don't have any money out of pocket in these deals. So, so you could replicate this over and over.

D S C R lenders will give you as many D S C R loans as you want, as long as they, they check the box of the income covering the, the monthly expenses. Um, and then, you know, I think everyone would be really surprised at how many people they know that would be willing to do a, a, uh, double digit fixed interest rate return, um, on, on a, a loan that's backed by a property that's bought really well and cash flows phenomenally well.

Mm-hmm. Um, so even with those two loans in place, we still cash flow really, really well. Yeah.

Interesting. Is there anything that I haven't asked that you feel that people should know about this industry?

Um,

I think you've covered a lot. The, the, the main, just the main thing is, is trying to wrap your head around the fact that, uh, where you think about where you want to travel personally is maybe not the best, uh, investment. From, from a, from a financial standpoint, um, you know, it, it's, it's so counterintuitive and it, it happens over and over with people I work with where they come into the, the, the, um, program and they think, well, I need to buy in the Blue Ridge Mountains because that's where I want to.

Wanna visit. And so I'm looking at $700,000 cabins in the Blue Ridge Mountains, and the numbers don't make sense. And they're like, well, this doesn't work. And I'm like, well, why don't you look in, um, You know, Ohio, uh, on Lake Erie where you can buy a a $200,000 two unit, the cash flow is several thousand dollars per month.

Um, and they're like, well, nobody's gonna travel there. And I show 'em examples and it's just like this, this mindset shift that has to take place of getting beyond your preconceived notions around what you personally, um, think of as a short-term rental. So I think that's the. It's the hardest thing for people.

Um, once you get past that, the rest of the steps kind of can fall into place, but, uh, a lot of people kind of stand in their own way, I think.

Yeah, that's interesting. And I don't know if you knew this or not, but I I live in Cleveland, Ohio too, so, uh Oh yeah, that's right. Yeah. So I'm, I'm trying to, I'm trying to think of different areas, like where, where could we maybe try this at?

So

I bet if you looked around you, I know there's several markets that, uh, I've got somebody who, uh, has a. A property in, in Akron that's doing really well and a couple other people, uh, in, in Ohio,

 All right, so we learned a lot in this episode today. We learned how important it is to be clear about the outcome that you're specifically looking for, and what happened when Kirby was not. That clear on that outcome, we learned that we need to focus on cash flow as the priority rather than the thousand of other things that people will typically focus in on.

We learned how Kirby actually tested the short-term market simply by renting out his basement. So he went small first and tested out this idea before he committed to launching short-term rentals in some of his other assets that he owned. So that's a tip. You can start small. Use a small space, whether this be in your own home or maybe this is another property that you may be renting out.

Start small first and then see how it grows from there. We learned that with short-term, with the short-term rental market, you don't need to be located in some type of vacation area or very, very desirable area because there's always people traveling. There's always business people and people traveling to every city, every day, and those people.

Typically we'll be looking for better accommodations rather than just settling in a hotel. So this is a great opportunity to be able to serve some of those people with your spaces. So don't think that you are not in a desirable location because again, people are traveling everywhere throughout the country every single day.

One of the hacks that Kirby has mastered is applying this short-term rental opportunity to a a, a triplex unit, because what he has found is that if you have a triplex, you're able to rent that to three different parties or. There is a lot of competition or a lot less competition, I should say, for the larger accommodations, right?

So if you're a group of 16 people and you are all splitting this cost to be able to, to lodge in a a place, Typically the places, the locations that can accommodate that many people are incredibly expensive. So if you have a facility, again, say a triplex, where 16 people can fit inside of each one of those units, you are able to offer your space to that larger group of people for a better price.

Or you can also, obviously, again, rent them out for the individual. Members as well, the in individual guests as well.

We also talked about how if you create special themes, it can be a way to stand out in the competition, right? So this is a way to be able to maybe offer a, a different experience or a themed experience to your homes, making them a little bit more desirable than having just the, the normal everyday experience when someone.

Stays in a short term rental, and this also can create a premium factor as well where you're able to charge a little bit more for that space as well.

And one of the last surprising things that we talked about was how Kirby realized when he is an owner operator, he actually found that it, it is better to not be the person who's always there fixing things. And the way that he found this was he, he had homes that were available. Or that it was close to his home, so he would always feel the need to be the one to go out and fix things or try to, uh, try to repair whatever the item might be.

And the problem was, is that that was taking away from a lot of his productivity time on the business. So he actually found that when he. Started purchasing assets that were a little bit further away where he wasn't able to work on them. It actually worked out better for him in the long run. So keep that in mind.

Don't be so quick to jump in to fix or repair things, or purposely purchase assets that are a little bit too far away, or maybe even across the country. So that you need to hire a team and you need to go down that path of being able to have other people work on these projects rather than you feeling the need to jump in and solve these specific projects.

And if you're looking to learn more from Kirby, head over to living off rentals.com/start and he has a masterclass put together that you can learn some of these techniques and if you wanted to learn more from him, there is a link to his calendar where you can schedule some time to talk directly to Kirby.

And as always, if you want to understand what the wealthy do, head over to invest in square feet and sign up for our newsletter. We are going to be releasing special excerpts from each of our guests that you can only get from that newsletter, and that is also where we. Advertise the various different opportunities that we may have to invest in various real estate opportunities.

And we also even have some software opportunities that are, are gonna be coming up very, very soon as well. We drop every Wednesday on whatever podcast platform it is that you use.