Snowballing 6-Figure Short-Term Rental Profits Into Passive Investments with Avery Carl | BP 364

this is the bigger pockets podcast show 364 you're listening to bigger pockets radio simplifying real estate for investors large and small if you're here looking to learn about real estate investing without all the hype you're in the right place stay tuned and be sure to join the millions of others who have benefited from bigger pockets calm your home for real estate investing online what's going on everyone this is Brandon Turner host of the BiggerPockets podcast here with my co-host David Greene David what's up man not much dude it's a really good day I got to see Switchfoot in concert the other night that was pretty cool fancy I saw them in concert once two years ago Wow Wow we're besties this is great oh man yeah we also got a cool interruption today on the show which will be on the recording but of your daughter Rosie with the reindeer she just bought was pretty fun very nice to see her again yeah she's cute man and uh yeah she's she is a talker now which is a lot of fun so anyway well let's speaking of talking today we have a phenomenal interview with a a really really great communicator a woman named Avery Karl Avery is a short-term rental specialist does a lot of vacation rental stuff but also some traditional rental stuff as well but well she's got this phenomenal strategy where she's buying short-term rentals and vacation areas like Airbnb stuff and then generating tons of profit then what what did you say earlier when your cash flow when your when your real houses buy you houses and yeah that makes you cash flow yeah that's exactly what she's doing and so she's building this Empire was able to quit her job I just on earth I think was our third deal with a been a quit her job just from three deals you're gonna love this stuff everybody somebody she listened through this whole interview really really good stuff without further ado it's time for thee go in there usually the ado line goes later on in the intro but that's how we know who are loyal podcast listeners are cuz they would have thought the same thing as me yeah quick tip out there is a quick tip yeah alright okay quick tip is when you feel afraid when you're having a hard time taking action when you get caught up even the what if blues what if this happens what if that happens here's your way out of it don't focus on what could go wrong only you have to think about what could go wrong and how you're going to spread that risk minimize that risk diversify that risk because that's what smart business people do so today's guest you're going to hear about how she buys short-term rentals to make more profit and she buys long-term rentals that are that are typically public housing that reduces her risk a lot but also lowers her profit margin she has diversified the way she invests in real estate so she makes money in big chunks from short-term rentals and she gets safety in big chunks from long-term rentals and what I found is that people who do this well tend to take action more often and as you know from Brandon talking all the time people who take action are the ones who usually win so rather than thinking I'm afraid I can't take action shift your thinking into what can I do so I will feel less afraid find yourself taking action and then you'll be building wealth wow that's good it was good in deep thank you that's my nickname all right all right David Gooding deep green it's time to get to today's show are you ready for this let's do it bring her in all right let's get to the interview with Avery Carl our Avery welcome to the BiggerPockets podcast good to have you here thank you yes so let's talk about your real estate investing and how you got into that because I heard you were you were born and raised what Mississippi is that what I heard yes I'm actually here now visiting family no nice all right well how did you get from Mississippi and something about playing in a punk rock band I got I got unlimited time awesome so I grew up in Mississippi uh went to University of Texas on a soccer scholarship lived in LA for a little bit lived in New York for a little bit in Nashville now which is where we got started in real estate investing had no idea absolutely nothing had not found bigger pockets when we bought our first deal luckily that has been our highest performing long-term rental yet so but we started listening to the podcast religiously after that first deal we decided okay this is something that we want to get into heavily we want to scale this thing so okay that's cool by the way what what punk rock band did you play for Oh nobody nobody's nobody famous hoping you're gonna say like I don't know blink-182 but that's the only punk-rock band that could think of I'm short notice okay so when you're not playing for blink-182 you decided I'm gonna get into real estate investing you started listening to the podcast and then what happened next would you you mean you bought that one that you was kind of you didn't know what you're doing but okay what happened after that so I was working in the music business in Nashville and had my real estate license for us to do our own deals because my husband is a terrible client I felt sorry for everyone who worked for us so I we start kind of started there started listening the podcast like I said started reading the forum's and we realized that Nashville is gonna be really hard to cash flow for us because as everyone knows it's started getting really really expensive and so we had to think of a way that we could rather than scraping together another 20% down payment scaling really slowly with you know a few hundred dollars per deal per month so we decided we wanted to buy something that we could Airbnb and Nashville was kind of scary because the laws change all the time it's kind of unfavorable for short-term rentals so we said well why don't you go down the street to the Smoky Mountains Gatlinburg Pigeon Forge those that's a market where people have been renting overnight for in regular residences not hotels for decades let's try that so we did that again not knowing anyone who had ever done that before kind of just on our own research and a little bit of luck got the first one scaled that into five pretty quickly and now we take the cash flow from all of those which short-term rentals cash flow harder than long terms but you know they require a little more work so we scaled that in to buy more long-term rentals so now we've got just under 20 doors hoping to have 20 by the end of the year and all that is because we've used this short-term rental cash flow to go buy more long-term that's cool so you're basically cash flowing off of this business of renting on like Airbnb or something like that and you're using that to buy more more rental so it's kind of a snowball effect is that right exactly exactly so we we use Airbnb in VR Bo and we just take all that cash flow and go put it into more rentals that's cool okay so let's go back to then to the beginning kind of dig into into your kind of journey as you got into this first of all are all of them in Gatlinburg did you did you start buying outside of that they're all in Gatlinburg as of right now we'll probably buy one in Panama City Beach in the next few months now I run a real estate team that connects investors with short-term rentals in true vacation rental markets we chose Gatlinburg and Pigeon Forge because you don't have to worry about their will there's to backup a little bit there's two kinds of markets when it comes to short-term rentals there's metro markets like you're Austin's you're Nashville's and then there's vacation rental markets which if you think about it anybody can name a place that they've gone on vacation since they were a kid no matter where they live in the country where they where people have rented overnight on an overnight basis in condos and single families and not hotels for decades so that's why we felt really good about scaling in these true vacation rental markets because they're what I would call a mature market for that so these cities and municipalities have figured out how to monetize that decades ago whereas in the Metro markets now all of a sudden all these people are renting Airbnb s instead of hotels and the City Council's are like whoa whoa wait a minute we can't be having this so now it's just a safer investment from from my perspective to do a true vacation rental market because you just want to worry about that yeah because this terrifies me about some some people get into the vacation rental a short-term rental market right you like they they they're like wow this is making a lot of money right now so they jump in they start buying these properties in in Denver Austin Seattle Nashville whatever and it does it works really really well right now but because it's so early in that I mean one eventually it's gonna level out at some point where enough people get into the game and the big corporations get in which is what you're seeing in Nashville I know that right now like a lot of these bigger companies are coming in and so they drop rates and things end up just leveling out to a more normal amount but also yeah the laws changed constantly and so I hear people like getting into the Airbnb thing like they buy a property that would never cashflow otherwise and they're like yeah it's gonna it's gonna make a thousand dollars a month in cash flow and I'm just gonna rent it you know 2 bachelor parties on the weekends and that sounds awesome until you realize well what if the market does change I mean like not the market about that the laws change so that's why you're saying you focus on you focus on areas that have already had already been through that they've already established what it can do and what it can't do there's a lot more stability there right right so places where there so take Gatlinburg kitchen words for example there are about 10,000 short-term rentals on the market there there those have been there since the 70s when it became a destination or is really been a destination since the 30s but everything that's been built in these markets for the most part has been specifically to be a short-term rental so you don't really have to worry about that saturation like you would in a metro market people aren't buying what used to be a primary home or a long-term rental and converting it they're just maybe taking one that was already a short-term rental it off of a local property manager and putting it on Airbnb yeah that makes sense all right but a lot of people don't live I mean I live in a vacation area or I live in Maui but like most people don't live in a vacation area so that means there's out right they can't invest in in that is that you're saying wait I I know I set you up for that one how do you how do people invest in real estate at a long-distance enak tight because I mean I I've done I've done the vacation rental thing once and it was the worst thing I've ever done because I was getting middle and I phone calls and like it was it was it was hell and so I quit it because having one was a lot of work how do i how do you do that at a distance absolutely so you do it roughly the same way you would if the property was down the street from you so if I have a property down the street from me and the toilet breaks in the middle of the night I'm not going over to fix it I'm making a phone call same thing when it's far away from you so when you have a vacation rental that's some distance away not drivable you really just need a good cleaner a good handyman and a smart phone and that's about it the rest of it is kind of like answering text messages you get a notification you handle it you move on that's cool that's cool how do you find I mean you need a cleaner you need a handyman your that's really about it how do you find those people if you don't live in the area I need suggestions yes what we did which worked out in some instances and didn't work out in others we went on the platforms on Airbnb and VRBO and went to other owners and said hey who do you know would you be willing to share with me and some of them are gonna tell you to buzz off and some of them are gonna be nice and help you so that's how we started and then it's great yeah the more that we had once you know one person you have a little bit more of a network like if our cleaner didn't work out or handyman knew somebody else so it just kind of grew from there to where you eventually have enough of a network that you know enough people that you can call and ask and and find people that way okay yeah that's cool and I are you doing mostly I know I'm just like drilling you with these questions I'm super interested in this that's a quick background of why I'm I'm so interested in this is cuz I've got these two condos that I bought recently to flip here on Maui but I'm starting to look at this thinking you know they're both zoned like this is these are both in areas that have been you know 20 30 50 years ago already figured out the vacation rental thing because it's been happening for years here so I'm thinking maybe I should turn these into instead of flipping them like maybe I should just turn them into vacation rentals so that's why I'm super interested this is good timing today so I was going somewhere with that and not a member I was going well can you give us an idea of what an average profit would look like on one of these deals it really depends on the market and we're gonna kind of get into some tangents here with rental history and things like that but uh for a two bedroom two bedroom property in my market you're looking at a purchase price of 275 to 300 and you will probably gross forty-five to fifty thousand dollars a year gross we kind of have to go with short-term rentals you kind of have to base everything on yearly measurements rather than monthly because it's not going to be the same every month because seasonality does play a part so you know it's just gonna look different every month so you kind of have to measure it annually okay well when you're when you're analyzing a deal and you're trying to figure out if you should buy it give me the idea what kind of numbers you're looking for okay so a 20% cash on cash return would be I it's this is where short-term rental investing kind of differs or significantly differs from long-term rental investing because a lot of those numbers are going to be a little fuzzy depending on a number of factors there's a lot of variables that go into investing in short terms that don't with long terms management is a big one rental history is going to be a big one if you're going to buy an apartment building the rent is is going to be the same the market rents the market rent right but with these two people could have the exact same property and one person could be self managing or in one person using a property manager or they could both be using two different property managers they could be doing wildly different numbers and that's why there's a lot of opportunity in these three vacation rental markets because at the end of the day when all the tourists leave a lot of them are still kind of small towns with mom-and-pop businesses and I know at least in my market a lot of the property managers you know back in the 80s and 90s before there was the internet and Airbnb anyone who owned a vacation rental in these markets of which there were still tons of vacation rentals it just wasn't necessarily an investment vehicle at that time they were forced to use these local property managers and they didn't have to use these platforms like Airbnb and VRBO but now most at least in markets that I'm in the local property managers the vast majority don't use those platforms because they didn't have to do that 20 years ago why should they have to do that now and they're kind of sticking to that so their numbers are significantly less than what you'd be able to do if you are putting these properties on Airbnb and VRBO because tourists aren't going and googling property manager and gather or I can write they're just going on Airbnb and clicking so your variables when you're there's like I said there's a lot of variables when you're looking at these things your control group cannot be what the rental history is your control group has to be how it's going to be managed so for example I was looking at three different properties that were the exact same floor plan in the exact same neighborhood last month and an investor said well I want to buy the one with the best rental history and I said okay and they'd all been managed by three different rental companies and one was self-managed and the self-managed one was making seventy-five thousand a year and the two other ones were making one was making fifty five year one was making sixty-five a year and he said well that I want the one with the best rental history but the one with the best rental history was the last one that I probably would have bought because it had a really steep driveway like tariff that's what you deal with in mountain towns as the driver yeah but this one normally that doesn't bother me but this particular one I have a Jeep Wrangler and going up that driveway with the top off I was worried I was gonna fall out of my roof so that all that to say you can't assume that all the properties have been managed the same all you can control is how you will manage them so rental rental history is not indicative of future potential as what I'm trying to say it's funny how Realtors can make those driveways look so much less steep in the pictures short-term rentals in the mountains just like you said his area called Pine Mountain Lake and when I got there I was shocked at how steep that driveway was like I don't know if I could walk up it without slipping if it was like snow yes I'm like rolling all the way down in the pictures it was like a gentle little slope they do a really good job that's funny that you mentioned that just reminded me so how are you managing yours are you self managing or are you using an assistant to kind of help you self manage we are currently self managing all of ours and there's definitely a time and place for property managers for the investor who's really trying to to get started and to scale quickly like we bought these at the beginning of our investment career so we're really trying to bootstrap and save every penny to scale and scale and scale so it's you're gonna maximize your cash flow by self managing and we're self managing still maybe one day when we get to a point where we feel like okay we're happy with the number of investments we have we're just gonna chill maybe we'll put ours with a property manager but for now we're we're still bootstrapping so that's what we do I want to hear some crazy stories you've had of the self managing and short-term rentals that you probably never thought was gonna happen I had we had a guest not that long ago who one of our properties it's it's in the neighborhood it's not you're not looking into other people's windows you can hear other people's cars start and stuff so it's not that remote but he was from Miami I think and he was terrified it's got a wall of windows cathedral windows like a lot of cabins have and he was terrified that a bear was going to decide just sign up and walk over and bust through these windows and get them and he left us a horrible one-star review because he said you would have no chance of survival if a bear beside so if a bear broke through a closed window and got into the house at that point his chances of survival were slim because of the layout of your property yeah because it was it's so remote but it's five minutes from town so did you put some like oh that like bear pepper spray or something in the house since corrected this right that review was able to be taken down because it did violate the VRBO who policies because profanity in it that's funny like break in case of bear with like a glass yes and like a ax or something I feel like if a bear breaks into the property you're staying in the last thing you need the layout of the house and where it is is not your concern that's not right I just think that's funny as I picture him laying there next to his wife like you know I just don't really feel safe here the floor plan is not conducive to an escape in case of a bear attack and we're really exposed with windows that are at ground don't they sound like you're writing to Dwight Schrute from the office sounds like a Dwight thing and a 1/4 bear safety yes that's funny actually thought goes to like Liam Neeson member there would be the gray I think mentioned that a couple weeks ago David yeah like I want to see the gray part too and it's Liam Neeson just fighting bears that come into his vacation rental and glad they mixed the gray with the purge yeah all these fares are converging on one cabin I have no idea how this conversation really well I think I do have a question on this end how do you deal with these negative because that how do you do negative reviews cuz in vacation rentals like negative use and kill your business that's one thing I didn't like about vacation rentals is that I didn't have all the power anymore that the power was shared and I was like no I like to be in control so how do you deal with those negative that's definitely something that you have to deal with we manage our negative reviews by up front we turn people away if we feel like they're gonna be obnoxious about things for example you can tell by things that are clearly listed in the listing clearly described in the listing Hey no steep roads what we have to deal with here and if somebody's asking really nitpicky questions upfront before they even book you can kind of tell okay this is gonna be a high maintenance guest this is gonna be the kind of person that's like moving furniture to look for dust so maybe we'll just tell them that they'll be more comfortable elsewhere or tell them yeah the the road is really steep you're probably not gonna like it so we we manage out negative reviews before they happen by kind of reading people being a mind reader a little bit like Paul sand who on the short-term rental forum says you uh just the you can tell if somebody's gonna be high maintenance by the questions they ask upfront and we just tell them yeah you're not gonna be comfortable so that that's smart I guess I never did that when I had my short-term rental I just kind of let anybody who came in come in let's talk about how you're attracting people then I mean marketing wise I mean yeah you're not doing anything you do anything crazy like Facebook ads or anything like that or is are you really just relying on the on the platforms and which platforms do rely on we really just use the platforms there's a big movement in short-term rental investors to try to get direct bookings but we stay so books on just air B&B and VRBO that we don't bother with the other platforms are doing anything extra and that's another perk of it being a true vacation rental market is that there's documental tourism for decades people are coming they're gonna book you it's it's something where you don't really have to work too hard to get booked that makes sense okay and then what about like specifically like on the listings got any tips or tricks for people and make the listings stand out make em pop get more people wanting to book well photos are everything you would think that that would be common knowledge but I see a lot of a lot of owners who just have iPhone pictures they're dark or grainy or just you know spend the extra a couple hundred bucks and get some nice photos some nice descriptions make sure everything's spelled correctly you would think that would go without saying and that's really that's really it okay that's cool there's no secret sauce really yeah are you typically looking for let's go to some again today's I hope you don't mind just these fire you know question-answer stuff but you obviously know what you're doing here what about like the property type you're gonna go in and buy a property you're like I'm in the market I got a little bit cash saved up now what are you looking for a house with tons of bedrooms or something that's unique or what catches your eye so depending on which market you're in you're gonna want to go for what historically rents well Beach markets obviously condos and big single families with pools mountain towns cabins are the way to go so it just really you'll have to do a little research on your market about what has historically been successful but past that it's sleeping capacity is always gonna be the biggest driver of cash flow in amenities you don't have to go crazy a lot of investors say oh like you know I want my place to be an experience I want it to be so special that everyone wants to come back don't worry about that nobody cares nobody's gonna thank you for your gift basket they're just gonna stay there they're gonna do what they're gonna do and they're gonna leave as long as it's a nice cute place to stay and it fits the description of what people normally rent there then you're gonna be fine you don't want to go into a place where people normally want to stay in cabins and try to make a brick ranch home work it might get rid of here and there but just you don't have to reinvent the wheel here okay so you you don't are you think you don't go the whole like I'm gonna get person a gift basket and you know chocolates when they come in or do you and and and what do you do then and a related question how do you get positive how do you get people excited to leave you a review is there any tricks you know for that like we talked about the negative ones but how do you get the positive ones yeah so I think every investor when they get their first short-term rental goes through that phase of wanting to really go above and beyond and do the gift best and not saying don't do gift baskets I'm not anti gift basket but it's an extra step in your process from and if you end up with you know if you're not using your vacation rentals to go buy more long terms if you just want to build a big rental empire that can really put a bottleneck in your process with having all these extras so and they're always gonna complain if you put the wrong type of cookie or whatever they don't like that kind so we just make sure our places are really nice and clean that they smell good we check in on guests and its really its automated we use an app called IG m/s that sends them an email on the platform and email during their stay that says hey it's Luke and Avery how's your stay do you need anything our favorite hike is Andrews ball go check it out so as long as they feel like you're you care then you're gonna be in good shape but you don't have to go crazy with that that's cool what do i GS is that what you said i GM s i GM s I'm look that up that's cool i GM s and that's having an automation tool then yeah yeah so we have it set up to where it checks in on them after they check in it automatically sends them their door code in their directions and the address of the property the day before they check in since I've check out instructions a day before they check out so you can really automate a lot of this process to where people feel like they're talking directly to you but the only time you actually have to get on your phone and respond is if they ask something specific like where your crock-pot is or something so for us it takes maybe thirty minutes a week to manage all five with all the automation yeah it's it's so what are what are some other systems other than the i GMS that you're using to make that efficient i GM s is awesome there's an app called turnover B&B that helps manage your cleaners so when somebody books on either app it will send you both a notification one - you won - your cleaner that says you need to clean this day then your cleaner will acknowledge the clean and it will send you a notification saying hey the cleaner saw this so that way you don't have to go back and we're cool with a cleaner yeah and there's a lot of pricing tools too that you can use but we found that that's easy it's better at least for us not to use the automated pricing because we found that we can get more money if we kind of autumn or if we kind of work on that ourselves interesting why it's that I mean because yeah I've heard some people talk really good about the automated pricing you're one of the you know I don't talk about it that often but why does it not seem to work as well just cuz you don't they don't know the market well in some it's in some instances it probably does work better than doing it yourself but with us it just it's I don't know all the algorithms but I know it's a lot of averages and one of our properties is the studio and one is a one-bedroom and so there are some it just averages properties that might not be the same caliber as our so it ends up our price ends up being lower than what we probably could get because we have so many reviews okay no that makes sense you've kind of figured out the algorithm and how it works so here's a question I like what you're describing here let's say that a guest books walk us through what will happen automatically and what you have to do to ensure that everything goes smoothly all the way up to the end okay sure so it depends on if the guest is a big question asker upfront some people will just book they'll check in they'll check out and you never hear from them they never respond to you and those are awesome guests usually but say somebody books and says hey I see that you say the property has a little bit of a steep road how steep is it we'll need to respond to that automatically I mean not automatically so we'll say oh you know you might need four-wheel-drive in the winter time and the summer you'll be fine you could do it in a Prius and then so they booked then it'll automatically send them their check-in instructions two days before it'll automatically check in on them two days later and then it'll automatically send them their checkout instructions the day before checkout and if the only time we have to respond is maybe once or twice during their stay they'll ask something specific that we'll need to respond to we'll just get a notification on our smart phones Airbnb so-and-so has sent you a message we just answer it and move on it's it's pretty it's a pretty streamlined process I think there are a lot of limiting beliefs with investors out there who who just feel like it's gonna be too much work or it's and it is it's more work than than long terms it like is it gonna interrupt your dinner at some point probably but to me that extra cash flow is is well worth it what what I kind of liken it to and again you a lot more experienced than I am with this but what I've found it's like t-shirt printing now you go get a t-shirt printed it costs you $20 to get a t-shirt printed if you want to get a hundred t-shirts printed it's like $22 or vallavan t-shirts it's like $23 it's like there's a certain base price and then from there gets a lot cheaper because it's the set-up time and the hassle and all the things but the actual printing of a t-shirt is pretty low that's why I mean I yeah and that was extreme example but yeah to print ten thousand t-shirts not that much different price than printing a thousand t-shirts it's the setup that costs a lot the same seems to be true with time involved with vacation when I had one it was a lot of work and I didn't have the systems in the process and there was just a headache but I probably could have managed ten of them easier than managing the one if that makes sense because I'd have been forced to have the systems in place that I didn't right right it's not twice as much work to manage two properties yeah so that's a good indication of like hey if I'm gonna jump into this and I'm gonna jump into this and somebody can say hey I want financial freedom I'm gonna do it this way I'm gonna go and buy a bunch of you know a dozen or whatever you know if you were making five hundred bucks a month or a thousand dollars a month in cash flow on a property and you had ten of them I mean that's like life-changing quit your job kind of money for a lot of people and if they can take a hundred units like it does maybe with traditional long term rentals right we I was actually able to quit my corporate gig after our second that's awesome I know David asked earlier about like the kind of profit you said you're shooting for a 20 percent cash on cash is there like a dollar amount you know like profit per year you want to make on a prat like this shouldn't like I have to pay the mortgage and taxes and insurance and all the everything here's how much we want to walk away with at the end of the year in profit from one from one single property sure yeah so it a lot of that is gonna depend on the size of the property like in my market a five-bedroom can easily gross a hundred thousand it just a regular Plain Jane but nice place to stay so a lot of its going to depend on your financing and what you're doing for management so with us we use a 10% vacation home loan on our first two we did one in my husband's name and then one on my name after that separately so it's that's a really good way to not have to come up with a full 20% like you would on a normal long-term rental the stipulations for that are you just can't put a lease on it so if you're self managing on those platforms then you're gonna be in good shape but that being said so we put 10% down on our first two and then 15 to 20 on the last three I don't love to give out net numbers just because like I've said two people can have the exact same property and you're probably different different grosses and people who have this exact same gross can have wildly different nets depending on a number of factors but self-managing we net typically forty percent of our gross after paying mortgages and everything that's all of it so and that's you know with a fairly Lane streamlined system if you've got a property manager it's gonna be less if you but if you pay cash or you finance you leverage a little less then you're gonna make more so just the truth okay now that makes sense and just to recap on that that's so cool I never thought about you can do it you can get a 10% down vacation house loan so that's I didn't like I didn't know that was even a thing yeah and that's really that's a cool thing about short-term rental investing because that's really the only area that you can utilize that if you're gonna use a property manager it's it gets a little hairy because then you're putting a contract similar to a lease on the property but the 10% is a really good way to kind of get the ball rolling which is what we did we didn't have a lot of capital to invest at the time so we did a 10% in my husband's name at a 10% in my name and then we're out of 10% we actually on the third one you're only allowed to get one vacation home loan per market otherwise it won't make him through underwriting they're gonna say you want a vacation home loan on this but you have income from another property in this market this is clearly not a vacation home you can have an investment loan but on our third one my husband wrote a letter to underwriting and said hey there had actually been a fire in the area and he said hey you know I think I would like to convert my second home to a rental and we did have some of the fire evacuees or lost their homes actually we're in our place for a little while but they allowed us to do a third 10% down vacation home loan because we converted one of ours to a traditional rental okay yeah there's it's some gray areas and you definitely I'm I'm not a lender but there's some definite ways where you can get away with putting down less than you would a traditional rental let's go and just to throw this out there to people listening like one of the strategies I'm a big fan of I talk about a lot of is they do partner with people so I think there's a lot of opportunity for somebody who maybe has some cash but they don't want to deal with the management and the bookkeeping and the the smartphone stuff and response they don't to deal with that stuff so if you're somebody who's like yeah I want to deal with that stuff I like that but honor the cash go find a partner somebody like you know who's got a little bit of money that they can go get the 20% down payment loan or the 25% whatever the bank requires and then you just manage the thing and just split it JV it until you have enough money to do it on your own like if you have you seen that work it all in your yeah we did that on two of ours to start awesome yeah I did I don't know why more people don't think that way and I think I think it's funny on both sides you have people who are like well I'm never gonna find that person who's got money and just wants to split a deal you know even like I'm not putting anything up and then other side you have people were like man I got all this capital right now I don't know what to do with it I sure wish I had somebody I could trust I could do put you know put it to work and so like I talked to those people all the time on both sides of that so I'm telling everybody out there like connect network talk to each other because both sides exist in mass right now in this market like in a tremendous way so get out there start talking with people and provide your value hey I'm gonna you're gonna get awesome at vacation rentals in vacation rental areas and that's what you do so when you might meet that person who's got an extra 30 or 40 grand lying around you can beg hey let's work together and we'll just put your profits 5050 and boom now you're in the game with no money down so I love that idea we met our our partner on two of ours on an 80s rock cruise know everywhere partners are everywhere what about if a recession happens I mean one thing that worries me a little bit is when when a recession hits again less people are traveling to Maui less people are traveling to Gatlinburg do you worry about that I do you do anything to prevent against that or is that not a concern that's a great question and there is quantifiable data that you can look at on most vacation rental market so Gatlinburg for example our big draw is the Smoky Mountain National Park we get 12 million visitors a year for that you can go on the national park website and see the data over time and actually if you look at the recession in 2008 our tourism continued on an upward trend it didn't it with the home prices so any vacation rental market is gonna have a department of tourism maybe you don't have a national park where you can go look but they're gonna have a department of tourism where you can kind of look into that and that's another another thing to think about is you don't have to go by the biggest most expensive vacation home there is you want to buy just a nice place with a little bit of class a nice clean place to stay but you don't have to buy the biggest and nicest and I run into this with investors a lot that they get caught up in wanting to be impressive with their vacation home rather than making the decision based on what is going to make them be the best financial choice that that happens in all areas the real thing and it's almost always the person doing it for the first time being the first house that wants to put courts and chandeliers and just yeah the person buying their hotel for the first time that wants it to be the best hotel that's ever been done yeah it's dangerous you mentioned earlier the sleeping capacity is one of the big metrics that will determine how profitable you are have you found a sweet spot with about how many people you should look for something that can how many you should be able to sleep it's gonna depend on the short-term rental laws in each market on what the sleeping capacity rules are with the big vacation rule markets there's not as many rules and they're kind of loose I would go with from what I've seen the four and five bedrooms and up tend to be the best return on investment that being said the smaller ones are still a great investment - they still make great money we have owned all smaller ones and that's not because we did that on purpose that's because we just had very little cash to start so we bought what we could afford as soon as we could afford it to get the cash flow rolling but if I had it to do over knowing what I know now I would have gone with to five bedrooms rather than five one and two bedrooms but five bedrooms and up in most in the data that I've looked at in most markets and then the experience that I have in the market said I'm in five bedrooms and up seems to be the best return on investment that's cool so where do you see yourself heading in the future I mean you're looking at you know you're buying these short-term rentals you mentioned that you're doing it to make cash flow so you can buy more and some of those are long-term rentals right that that's the plan to get into those yes so we have we've got the five vacation rentals and then we have twelve long-term doors and we're under contract on two maybe three I don't know if we fill out a contract on one actually right now so uh the goal is you know with real estate investing the goal is to not have to touch it not have to deal with it our short-term rental goal is to get more long terms and we've gotten nine doors in the past year because of that and on long terms and another market so yeah that's it's been awesome and those we don't have to touch so what this perfectly illustrates is this point that I've been making it a lot later I need to make a video for bigger pockets or something about this but like this idea of like in a crazy good economy like we find ourselves in today where like unemployment slow and people have money they're spending it like make money in business right now like that could be flipping houses that could be Holson and it could be owning short-term rentals it doesn't matter make money now as much as you can possibly make cuz now is you could run a dog-walking business I don't care like make money doing something that fires you up and you could generate a lot of income keep your expenses low so you can take all of that good profit now and dump it into real estate so you take an active income at the best time in human history to make active income we've ever seen and dumping that in the passive income so one you can whether through a next recession when it does come but to you'll be prepared when the next recession comes to be able to jump in even more and do even more because you'll have all the experience that you're building up right now so that's why David here's building his mortgage business and his real estate agent thing so we can generate lots of cash that's why I'm doing the same thing I'm flipping houses in Maui so I can generate cash to jump into investments long term so that's there's nothing exactly what you're doing as well right yeah make hay while the Sun shines yeah yeah and then our long terms are there all low income so somebody's always gonna need a five hundred they can earn dollar place to rent so yes that's what our long terms are so yeah you've diversified your risk really good I think you you've got okay these are my not gonna make as much money but I'm always gonna have a tenant and then you've got your short terms your like gonna be a little bit more work maybe a little riskier but I'm gonna make a lot more money and you've put them together and really that the secret to what successful people do to be able to take action when they're afraid that you don't you don't need to wait for your emotions to fall in line with what you're doing because you're diversifying the risk you're spreading it out and like what Brandon said is the same thing if you're making really good money in a good economy and you're investing that money when the economy's bad and it goes further you're never afraid you're not worried when the economy goes bad cuz you've got a bunch of cash to play and you're not worried when there's no deals to be found because the economy's good because you make it a bunch of money in that economy and you're really kind of handling thing from every perspective so I think you guys both make very good arguments for why playing the cards that you're given is how you get ahead in wealth building and real estate and life in general it's not waiting for the perfect pair of cards and then saying okay now I'm gonna play the game yeah I have one last question for you Avery was something I've been wondering with a short-term rental specifically can you give me a list of expenses that I should be aware of other than just property tax insurance in the mortgage okay yeah so you're gonna have you're obviously with a short-term rental you're paying your own utilities and not your tenant because you don't have a tenant so you've got utilities you've got your cable and Internet gas water things like that my market we don't have a lot of city water properties most of ours are on wells so you kind of have to budget for that kind of maintenance but it it evens out to roughly what a water bill would be and then your cleaning fee cleaning fees are a big one they're passed through to the guests and a lot of people when they're analyzing short-term rental deals they they say Oh are these gross numbers including cleaning fees they get really hung up on what gross numbers are and a lot of people say that when you're quoting your gross you should say not including cleaning fees but I don't agree with that because the definition of gross is all money's coming in yeah and there is actually income in the cleaning fees so you don't if your cleaner charged you a hundred bucks a clean charge your gas 120 there's income there so you don't need to throw that away as a pass-through expense there is a little income in there all right so that's great great all right well with that I want to head over the next segment of our show it's the deal hi this is the part of the show where we dive deep into one of your deals that you've done Avery do you got something in mind that we can pick apart I do alright so the first question I have is what kind of property is this and where's it located it is a short-term rental in Gatlinburg and how did you find this property it was on the MLS and I we just found it on the MLS we were looking for it this one was really important to me because it was the woman that would determine if I could quit my short term meet my short term help if I could quit my job or not so this one is the one that really makes a difference for me in my mind I what were they asking how much was it this is not a realistic number for the market now but they were asking a hundred fifty nine thousand for is a one-bedroom with a second loft bedroom and what price did you end up paying for it well we were under contract on it for 165 because we wanted some closing costs and there had just been a really big fire in the area and the inventory was really low and actually while we were standing there doing our inspection a guy came up in a truck and offered us cash he thought we were the owners already so a really good deal ended up only appraising for 155 and we got the owner down 2 to 155 using the appraisal that was good I was English and how do you negotiate the price that's cool all right how did you fund it then we used a HELOC from our primary for the down payment on that one and we did 10% so okay basically had no money down thing because you use the HELOC for the down payment and then got the loan on the rest pretty much it's beautiful when your houses buy you houses and your cash flow buys you cash flow and yeah just like the best part of real estate okay so I already know what you did with it was a short-term rental tell us what the outcome of this deal was so this property it's a really cute property it had terrible rental history it was doing 27,000 a year on the local property manager it does 54,000 a year for us now and I was very nervous about it and this is a really good lesson for future short-term rental investors as well so this property the way that it is positioned on the mountain with trees it can only get satellite and it cannot get internet whatsoever not even satellite internet and I was really nervous about it because I was worried that it wasn't gonna rent it is on a little bit of a steep road it's not terrible but it is something that needs to be mentioned to guests and and it doesn't have internet so to me I felt like this was a really big risk even though it's a really cute property I was very worried about I lost a lot of sleep over the no internet my husband is the non analysis paralysis guy and he convinced me that it was going to be a good investment cuz it really was just such a good deal that's such a low price for a nice property with a view like that and we went through with it and we found that when something isn't perfect about a property if the rest of the property makes sense then it can be okay like the no internet thing we just make sure everybody is very aware that it doesn't have internet well before they book same thing with the steep road hey the roads kind of steep you're gonna be scared the first time but the second time you're gonna be a total pro as long as everybody's aware of that several times before booking we have not had one bad review on it not having internet it's our highest for a while yeah that's cool that's a good lesson too is yeah there's a lot of gay stuff in there but it's interesting sometimes I think that you you're most afraid of as long as you you know well it's time to expectations problem that's what it I found that as an agent when we need to avoid difficult conversations we almost guarantee that people would be upset and when you do the thing you don't want to do which feels wrong I don't want to make this person think there's a problem by telling about the steep road three times because what if they weren't gonna think about it it's the opposite the more you explain it to them the more they're prepared for it so when the steep road comes they're not ticked they're not cursing you out on the way up there thinking they got duped like oh yeah this is what she told us and this is how she said we should navigate it okay that worked that was fun now they're happy the exact same scenario if their expectations were that it was gonna be not that bad and then they felt some fear and some anxiety going up that road they're cursing you out the whole time they're there planning that really bad online review the gift basket is exactly what you said oh of course they put oatmeal raisin they couldn't give us chocolate chip good there because they're steep right like that's exactly like a good lesson just to learn in business is to have the very hard conversation upfront be clear be direct let people know what they're getting into and nine times out of ten it will go smooth so good so good all right well any other final lessons you learn from this deal anything that you want to that you want to pull out or is that kind of the gist as long as the numbers make sense it's it's a good deal as long as there's gonna be some things that you like better than other things but there's no way you can make everyone happy all the time there you can have the most beautiful property in the world and somebody is going to have a complaint so as long as you're not trying to please everybody all the time your mental Health's gonna be good and you're gonna be making money all right all right perfect all right well that is the end of the deal deep dive now let's head over to the world-famous fire round all right this is a part of the show we're gonna fire questions that you that come direct from the BiggerPockets forums so let's see what people got to ask and most of these are related to short-term rentals and vacation rentals so Daniella from Oak Park Illinois Illinois's if you don't know how to pronounce right I said have you compared the Airbnb earning estimate for your area with your actual I do you earn significantly more or less than what they estimate estimate if the Airbnb estimate is true I would not be making any money which doesn't make sense as I know some house in the area is clearly are thank you I don't look at that there's a lot of ways when you're analyzing a deal that you can figure out what it might be able to make air DNA and master Pfizer are both really good tools their data is not perfect but it's getting better all the time and it is actually measuring properties that are on VRBO and Airbnb so when you're looking at what you can make those can be really good tools to to utilize also a lot of the big national property managers like vacasa and evolve will give you estimates of what they think you can make on it so all that to say it's not even I totally not even answering the question I don't look at that but I'm pretty I know what I can make on a property now it's not really a quantifiable thing I can kind of just look at it so I don't even look at that stuff anymore you know I just thought have one more point to bring up here this is another reason why I like your strategy a lot this idea of you know picking a market that's an actual vacation rental market and then go all in that market so you like have a you know a number of them in that market because now like there's a lot less risk of like you know well what if you know I don't know what that can rent for I mean if I go and do a vacation rental and you know some random city like I don't really know what the rental rates are but when you've been rent they've been renting there for the last 80 years houses like you have a lot of history to go off and a lot of averages because there's just a lot of people go in there so yeah that makes a lot of sense alright number two next question from Tasso Corcoran for those of you who operate Airbnb s I'm curious what your cancellation policy is is it strict or do you try to keep it moderate super strict alright especially if you have a smaller property the larger properties where you have 20 people coming it's a lot that takes a lot more for them to coordinate to get everybody together to go on a vacation so you have less of a chance of them cancelling but especially with the smaller properties we were pretty strict on it we'll let them if we can rebook their dates then we'll give them a refund but if we can't and it's not a truly extenuating circumstance which air B&B and VRBO have just come out with all these new things about extenuating circumstances that we don't need to get into but if if they have a really legitimate reason then we'll let them out but our what it says on our our policies on both platforms is that we're super strict all right number three what do you think of the whole Airbnb arbitrage thing where you like leaf from a landlord pay them that set rent and then with their permission you rented out short term and make the money on the difference what do you think of that I think that's kind of to your point of making money while there's money to be made and a great economy I don't think that's real estate investing I think that's creating a job for yourself and it's not creating long-term wealth but it can be a good way to get some cash flow going in the meantime yeah totally great I love it okay from Joe Kim in my hood the bay area what do you think about niche marketing appealing to specific groups like couples retirees bachelor parties etc I think that's overthinking it a little bit there's gonna be if you're in a market where there's tons of tourists there's gonna be a lot of different kind of people who need the size property that you have so there's no need to in this instance there's no need to too neat to mark it that way all right good answers and now it is time for the famous these are the same four questions we ask every guest every week and Avery we're gonna throw my to number one what's your favorite real estate related book the one that has has the most bearing on my business and then my business as an agent is the long-distance real estate investing book ah that might be the first time we've had that one David Green Zone book this is great wait you are talking about my book right there isn't another person they wrote another book you can see hedges growing now he feels really good I mean you can't always live in the best place to invest in in in in my agent business know one of my clients live yeah in the market they're investing in so it's funny you say that I've heard a lot of agents in a similar position as you who are servicing clients like in my market in California but they're in the market with the properties that are buying that book and giving it to their clients to say like hey look this isn't crazy people actually do this now the client knows what questions asking what they should do the agent knows what's in the book that the person is reading so they say well the book says to do this so you should do it this way and it makes the whole relationship go lot smoother have you found that to be the case at all well I recommend it to my clients I don't maybe I should buy it for them and send yeah yeah yeah there's a lot of a lot of the fa Q's definitely help there's a all almost everyone's gonna have roughly the same questions about doing things remotely when they don't live there so it's definitely been a help awesome well you made my day thank you I finally got one for one of my books branding it was like every three gasps what is bestsellers I don't know I don't think I've had one in like a year so what else because you're just humble it trust me you weekend that's not true he's so used to it he doesn't even recognize it anymore yes yes I know best-selling music move on on what is your favorite business book uh I am a Ryan holiday super fan I really love obstacle is the way it's not necessarily a business book but I apply it to my business quite often and then on the other end of that spectrum way on the other end I'm also a grant cardone superfan all right that's yeah those are about as opposite of personalities that's hilarious okay so when you're not playing in a punk rock band yeah being a goalkeeper for a was it a big 12 championship team oh yeah how does it Texas we did win the big 12 championship or buying a bunch of properties what are some of your hobbies I like Qatar's I've got a lot of Gibson's so I don't play so much anymore I'm that those days are done but uh play guitar and then I'm a runner as well I'm trying to get I was a marathoner before I had a baby last year so I'm trying to get back into the swing of that cool you're gonna get a lot of follows after today's show there's a whole lot of people that are like this Jake is awesome that's a cool all right well before we ask people where they can connect you with you at I want to know what do you think separates successful real estate investors from those who give up they fail or they never get started I am I know for a fact I'm not the first person that has said this but analysis paralysis is a big one especially I mean I deal with hundreds of investors a year and getting caught up in what the other side of the transaction is doing or not doing can really can kill people I've seen people walk away from fantastic deals because they are too caught up in what the seller paid for the property or what the seller what they feel like the seller is doing to them psychologically or what games they're playing you really just have to keep the emotions out of it and just look at the numbers and the same thing goes for I've seen people walk away from stuff because they didn't like the condition of the couch which is not even real estate but just look at the numbers stay in the numbers area and not in the emotions area and not worry about what everybody else is doing and then then that's really what separates people is the analysis paralysis that's a good a good throw back to another write a holiday book ego is the enemy because you're exactly right I see this as a real estate agent you probably do too constantly where this deal is twenty five thousand dollars less than anything else that they could possibly by its gonna rent for more than anything else they could get and there hung up on well the seller isn't gonna change the door locks and I think that they should change the door locks and they're willing to let it go on principle with ending all those people every time they step back later and they say why did I do that that was so dumb but when you're in the moment yeah it feels feels real okay last question this has been a fascinating interview and I think you for doing such a good job I love the amount of content you actually gave us in a short period of time for those that want to use you as an agent or find out more about you where can they find out more about you so the name of my team is the short-term shop and you can find me at the short-term shop calm I'm also on BiggerPockets several times throughout the day sit on the forum so you can find me there too awesome well it's been fantastic Avery thank you so much for joining us today and yeah this is cool I'm gonna definitely reach back to you if I if I decide to go with this short term rental thing here in Maui so I appreciate you letting me pick your brain today thank you guys thanks so much for having me thank you great job all right now was that interview with Avery Carl awesome show came at such a great time for me and I know a lot of people who have been thinking should I should I try the whole short-term rental thing should I try some vacation rentals well I think she has some phenomenal strategies I think that's the most straightforward meat potatoes information we've ever got from someone about short-term rentals yeah I mean I was just fascinated with how much content she gave us and how clear it was I really feel like I could go start a business right now just I know what Avery shared let's do it David forget mobile home parks and mortgage companies and let's just go start a short-term rental business okay there it is you guys have heard it if you have experience dealing with short-term rentals message Brandon or me tell us that you want to start the business for us we will take care of all of your needs will supply everything you need you do the work and we'll see how that goes that sounds like a great option right there good job David David David likes to start businesses it's great I like to start businesses and Brandon likes to buy t-shirts at Target he's well that's just a dollar t-shirt on the recording today and we were joking about how that's how you know he's married doesn't look like a dad shirt this looks like a I just got back from the gym and if you see my biro when you're home cost less than your coffee that's a dad shirt don't breathe don't bring the gym into this I don't know where to go from that let's get out of here all right before we do before we do this is where I want to go with that I want to give a shout out to scott pearson from hun Lick Creek I don't if I said that right hon LOC Creek Pennsylvania he's a bigger pockets Pro member recently out his first deal done it is a duplex that's all a DS he got a deal done he's the duplex bought it for about 60 K he makes like 500 bucks a month in cash flow off this deal you know we love love to see how far all of our members doing deals and entering into their profiles over on bigger pockets it also helps other bigger pockets members see that you are like a local expert and it motivates all of us attentions so make sure you do that enter it into your profile and nice job Scott so and if everybody else if you are a bigger pockets Pro member and you want your deal featured here email us podcast at BiggerPockets com put the word Pro deal in the subject line tell us about one of your recent deals and we might be talking about you next week and with that now David would you like to get us out of here yeah cuz I got a gym to get to and I'm gonna wear my $6 shirt to the gym right now thank you very much they're like disposable shirts like disposable diapers you wear it to the gym and it gets sweaty throw it away on your way out you have another one out of like the 20 pack that you bought no target so true story I actually bought a several of these shirts the six dollar ones the target uh but I wore one the other day and the reason you brought sweaty so this remind me the story I want to brag about myself for a minute and pat myself on the back so for the last few years for a long time not like a year I built this shed I live in I'm in the shed I had it built a year ago so on Saturday I was gonna go to the gym because like I got to work out today a little bit and then I was like you know what I'm gonna do instead I have not yet drywalled the ceiling to my shed I need a drywall on the ceiling so now if you're not watching YouTube right now you can't see this but look who's got a drywalled ceiling now and I wore my six dollar target shirt and it was like sopping wet I mean it was like wet from sweat it was disgusting but I single-handedly by myself drywalled in my entire ceiling and I was pretty proud of myself and I know let's see that's your dating yeah $200 to try wahala shed what you couldn't video that would have enriched the masses you know what lives no it's not about it's not about the saving money it's about the sense of accomplishment now every time I'm in this room I look up and I go I did that and I worked out for basically three hours I mean you should have seen me I was like on a stool with one leg with one hand holding a piece of eight-foot drywall my head hold another piece and a screw gun and the other one screwing it up into studs and missing it took me three hours to get four sheets of drywall up there but it was a was it a stool that you put together yourself and a gun that you drove to by yourself and screws that you that you like hand-forged thank you very much I love it Jesus was a carpenter there we go - so other people too but he didn't thank you very much you know why because there is value in working with your hands David Greene there it is alright this is David Greene for branded the humble Holy Roller Koerner signing off you're listening to BiggerPockets radio simplifying real estate for investors large and small if you're here looking to learn about real estate investing without all the hype you're in the right place stay tuned and be sure to join the millions of others who have benefited from BiggerPockets calm your home for real estate investing online you

Channel: BiggerPockets

Views: 66,988

Keywords: biggerpockets, real estate, real estate investing, investing, rentals, rental property, investing in real estate, income property, bigger pockets, passive income, short term rental, passive investing, passive investment income, passive investment strategy, bp podcast, biggerpockets podcast, real estate podcast

Id: 47gkUfccgN4

Length: 61min 40sec (3700 seconds)

Published: Thu Jan 09 2020