\n<\/p>\n
Avery Carl<\/strong><\/a> is the go-to contact for short-term rental investing<\/strong>. Her business, The Short Term Shop<\/a> and The Mortgage Shop<\/a> not only helps find properties and secure loans for prospective short-term rental investors but also helps guide investors through their first <\/strong>vacation property purchase<\/strong><\/a>. While this type of property can be a cash flow king, it also takes more management and a bit more time upfront to get the system oiled and operating smoothly.<\/p>\n Since we last talked to Avery, she\u2019s quadrupled her portfolio from twenty-something short-term units to ninety-six units<\/strong>, sixty-one of which are large multifamily properties<\/a>. Avery gives an in-depth analysis on why short-term rentals should hold a place in every investor\u2019s asset collection, and the common pitfalls investors go through when purchasing their first <\/strong>short-term rental<\/strong><\/a>.<\/p>\n If you\u2019d like to learn more about building wealth through short-term rental investing, grab Avery\u2019s brand new book <\/strong>Short-Term Rental, Long-Term Wealth<\/em><\/strong><\/a>!<\/em><\/p>\n Brandon: Avery: Speaker 4: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Speaker 5: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Avery: David: Speaker 4: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n
This is the BiggerPockets Podcast, show 517.<\/p>\n
To give you guys a little perspective into that, in July, I had seven short-term rentals online. We grossed $145,000 on short-term rentals alone just for July. Now, you\u2019re not going to gross that much every month because seasons change and things are a little bit different, they\u2019re a little more fluid than in long-term. But that is like a CEO level salary that I would be paying a manager if I had my properties with a manager.<\/p>\n
You\u2019re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you are here looking to learn about real estate investing without all the hype, you\u2019re in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online.<\/p>\n
What\u2019s going on, everybody. I will be your host today, David Green. Brandon won\u2019t be joining us, so I actually get a chance to talk on the microphone. Pretty cool. Today, we have an amazing guest. We\u2019ve had her before. Her name is Avery Carl. She is a real estate investor that specializes in short-term rentals, but also has, I believe, three or four different apartment complexes that range between 12 and 25 units out of Tennessee. Avery runs a real estate team that helps people like you to actually buy properties. That is very near and dear to my heart because it\u2019s similar to what I do. I own a bunch of real estate. I learned how to make it work. I started a real estate team. I started helping clients to do the same thing that I did. Our paths are very similar, and today we get into some fantastic advice about what to avoid when you want to get into short-term rentals.
We\u2019re going to talk about some of the common pitfalls that investors fall into and things that you might realize you should look out for, as well as the really simple answers to a lot of the questions people ask that get them stuck and not move forward. Make sure you stick around for the full show because it\u2019s very good. Before we get to that, let\u2019s get to today\u2019s quick tip. Today\u2019s quick tip is very simple. Stop trying to figure everything else out on your own. The reason you have loan officers and real estate agents and property managers is because they know this stuff better than you do. In my book, Long?Distance Real Estate Investing, I talk about this a lot. Lean on the experienced people for knowledge. I would bet good money that you\u2019re listening to this and you\u2019re wanting to buy real estate and you have things in your head that are stopping you from moving forward that could very easily be answered by me or somebody like me. If you know which market you want to invest in, find the agent, if that\u2019s my market or Avery\u2019s market, talk to us.
If not, find an agent on BiggerPockets that does know that area and tell them, \u201cHere is what my concern is. Here\u2019s why I\u2019m worried.\u201d This applies to lending, it applies to property management and it applies to representation from your agent. Don\u2019t let that stop you. Let the experts do what they do. All right. One last thing, Avery has actually written a book for BiggerPockets through Biggerpockets Publishing about how to buy a short-term rental. The book is called Short Term Rental, Long Term Wealth. Very cool title. If you\u2019d like today\u2019s episode and want to pick up a copy of the book, you can find it at biggerpockets.com\/store. Go there, check it out, support Avery, then let her know what you think about it. Just when you write a book, you\u2019re always really, really nervous about if it was any good. It\u2019s kind of your baby. If you guys like this book, please reach out and let Avery know she did a great job. Avery is somebody that I turn to when I\u2019m looking to buy short-term rentals.
She has more experience in this space than even I do, so I use her and her team and she\u2019s very generous with dispensing advice. I just got done talking with her at the end of the show and I said, \u201cHey, I\u2019m going to be looking to buy some properties in the Orlando, Tampa area.\u201d She\u2019s going to be connecting me with her team. I\u2019m taking my own advice. I go to the experts, I go to the people that know it and I let them speed up my process of learning instead of trying to figure it out myself. I would encourage you to do the same. Without further ado, let\u2019s get to our interview with Avery. Ms. Avery Carl, welcome to the BiggerPockets Podcast. How are you today?<\/p>\n
I am fine. How are you, David?<\/p>\n
I\u2019m doing great. I\u2019m excited that we get to talk again. You and I first met when we did episode, I believe, 375 on the podcast. We had you on and you kind of blew everybody away with how short-term rentals can work at scale, and your story was very impressive. I believe you joined the mastermind I run and you kind of counseled me on how I can get my first couple rentals. Now we\u2019re back and you\u2019ve written a book for BiggerPockets that comes out today. Congratulations on that.<\/p>\n
Thank you so much.<\/p>\n
Yeah. I\u2019m excited to read it and I mean, you\u2019re my go-to when it comes to anything short-term rental related. Everybody listening, this is the person that you want to learn from and BiggerPockets obviously believes the same because they gave you a book deal. Let\u2019s start a off by having you tell us what has changed with your own business and in your own life, both your real estate business and the properties that you own in your own portfolio since the last time we talked.<\/p>\n
I would love to. But first I would really like to give a very humble thank you to you and Brandon and everyone at BiggerPockets because I bought my first rental in 2016 and then here I am with 96 doors. I\u2019ll get into that in just a second. But without this podcast and devouring every single episode starting back then, my family is now 100,000% financially free and I definitely owe all of that to BiggerPockets. Definitely a big thank you to you guys. What has changed with me and with my business? I had 20 something doors that we recorded that or that came out January 2020. Now we have 96. The Short Term Shop, my real estate business, we have expanded. We are in six markets now. We can get into that later. Also, have a real estate investment focus mortgage company called The Mortgage Shop.
Short Term Shop has sold just under half a billion dollars worth of short-term rentals this year. We do a lot of work. We only work with investors who are buying short-term rentals. As things have expanded, my real estate portfolio has also expanded. Having invested in short-term rentals towards the beginning of my real estate career, is really what\u2019s kind of turbocharged it to where I have been able to scale to 96 this quickly.<\/p>\n
Okay.where did you start buying and what has grown since the last time you were on the show?<\/p>\n
Since the last time, I have 1031 exchanged. I had two properties that we owned with a partner. Everything else we own on our own, my husband and myself. We 1031 exchanged those into two larger properties, short-term rentals in the Smokies. We\u2019ve bought a few more in the Destin 38 area where we live. Then we also just recently closed on a short-term rental in the Forgotten Coast. Cape San Blas is the area that it\u2019s called. We\u2019ve also bought \u2026 We have four multis now, three 12 unit and a 25 unit. Then we\u2019ve also got just a little town in the Southeast where we\u2019re steadily just picking up a couple single families a month that we just kind of don\u2019t even notice that you\u2019re doing it. That\u2019s where we\u2019re at.<\/p>\n
That\u2019s pretty impressive. I know a lot of people are wondering why is the short-term rental person buying multifamily long-term rentals. Can you describe what your sort of philosophy is with how you\u2019ve structured your portfolio?<\/p>\n
Yes, absolutely. It\u2019s not my philosophy that everyone should only invest in short-term rentals and nothing else makes sense. Short-term rentals are a valuable asset to have in any real estate portfolio, just because the cash flow is so much heavier than a traditional long-term rental. That you can scale your portfolio much more quickly, the same way I did than if you\u2019re just starting off with single family long-term rentals or multis. But our goal from the beginning, before we even bought our first short-term rental was passive income. While short-terms, it\u2019s not hard work to manage them remotely, which we do and what we teach our clients to do, but it is a little bit of work. It was our goal to scale into a more passive form of income, but we\u2019ll never sell our short-terms. We\u2019ll probably never put them under management either just because they make so much money and give us the ability to buy more things.<\/p>\n
This is such an important concept to highlight for those that are stuck in analysis paralysis or they\u2019re trying to figure out how to get started. I\u2019m going to ask you what your take is on this, but I think because we both represent clients who are coming to us to buy real estate, we have a very unique perspective on what stops people from moving forward. Which is really the majority of the audience in BiggerPockets, is trying to figure out, \u201cWell, what do I need to do to move forward?\u201d The first thing I like to explain to people is that everything works on a spectrum. That phrase, you can\u2019t have your cake and eat it too, absolutely applies to real estate. Let\u2019s talk about short-term rentals. On one end of a spectrum, you have really seriously good cash flow. Probably the best you could possibly get is going to come from the short-term rental space. On the other end of the spectrum, you would have ease of ownership. You have to pick one or the other.
You can\u2019t find both. You can\u2019t find a short-term rental that crushes, it makes a ton of money and there\u2019s no work. The reason it makes more money is because there\u2019s more work involved. Every investment asset class has its own little spectrum. Like the multifamily properties tend to not have as much cashflow right off the bat, but they are less work. They\u2019re easier to leverage. It\u2019s much easier to leverage an apartment complex to somebody that knows how to run that and can do it at a low percentage of the rent than it is to leverage a short-term rental where somebody wants 20, sometimes 30% of the rent to do it. Is that similar to what you\u2019ve sort of found in your experience with your own investment portfolio?<\/p>\n
Yes. 100%. Our long-terms, we don\u2019t really have to mess with as much, but 10% of the long-term rent is not that much money. Whereas the typical average that a property manager takes in short-term is 25% of your gross. To give you guys a little perspective into that, in July, I had seven short-term rentals online. We grossed $145,000 on short-term rentals alone just for July. Now, you\u2019re not going to gross that much every month because seasons change and things are a little bit different. They\u2019re a little more fluid than in long-term. But that is like a CEO level salary that I would be paying a manager if I had my properties with a manager. In short-term, it makes a little less sense than with long-terms where it\u2019s much less money that you\u2019re paying a property manager.<\/p>\n
Yeah. It\u2019s also probably easier to find a person that can manage an apartment complex, because there\u2019s more of those out there. The short-term rental space is kind of new. You don\u2019t find people that have experience doing it. If they do have experience doing it, they want to do it for their own. It\u2019s harder to find someone to do it for yours. That\u2019s just one thing that right off the bat, it scares people when they get into the short-term space. The numbers look great and then they realize how much work is involved. I think it\u2019s interesting that you are sort of taking a balanced approach. You\u2019re still buying short-term rentals, but you\u2019re also maybe balancing that sort of pH out with some more long-term stuff that is less work and more consistent income. Do you have a vision for how you want your portfolio to look in the future?<\/p>\n
Not necessarily. I think we have enough doors now to where we can kind of just do a little bit of whatever we want. But we have our systems built in our different areas that we do our different types of investing. In the few markets that The Short Term Shop operates in, we kind of keep an eye on that. If something looks like it\u2019s going to make sense, we might pick it up. Then we have our machine rolling on our single family market and then we kind of have our machine rolling in our multifamily market. I don\u2019t think there\u2019s necessarily a correct number or percentage of your portfolio that short-term rentals should be. But I do think that they do act as little or big cash flow turbo chargers in any portfolio, just to kind of help you again, give you the freedom to invest in whatever you want.<\/p>\n
That\u2019s a great point. It\u2019s very similar to kind of what I do with my portfolio. I look at it like I\u2019m running a sports team. If I was building the perfect basketball team, I wouldn\u2019t want five three-point shooters and that\u2019s all they do. That might be like having nothing but short-term rentals. You can put a lot of points on the board, but what if they can\u2019t get a shot? Who\u2019s going to rebound when they miss? Who\u2019s playing defense? You might get to a point where it\u2019s just your portfolio is managing your life, you\u2019re not managing the portfolio. You\u2019re just responding constantly to all the fires that pop up. Conversely, if you have five great defenders that don\u2019t take any of your work, it\u2019s going to take a long time to put points on the board and maybe you want to hit financial freedom faster. The key is to get that balance in where I\u2019ve got \u2026 Like I bought property earlier this year in Minneapolis or just outside of it, that is not a incredibly strong cash flow.
It\u2019s probably a 10 to 12% return right now. But it\u2019s triple net, it takes zero work. It\u2019s very consistent income. It allows me to take risks with other parts of my portfolio because it sort of keeps me safe. It\u2019s like having a shot blocker near the rim where you can gamble to get a steal if you got a big guy in there that can block shots. There\u2019s a lot of investors that ask the wrong questions, I think. They ask questions like, \u201cHow can I make the most money? Where can I get the best return? Where can I pay under asking price the lowest to get the best deal?\u201d They find themselves just never getting anywhere. I know you and I have talked about that. Can you share a little bit about your experience when it comes to what are the wrong questions to ask and what are the right questions to ask?<\/p>\n
Sure. The number one wrong question to ask when it comes to short-term rentals is, what is the rental history? Because the rental history is 100% a variable. In the markets that I\u2019m in, they\u2019re true vacation rental markets. There\u2019s a lot of local property managers do this that have been around for a long time. When things are on the MLS, the only way that the rental history would not be a variable is if every single property in a market were managed by the same manager. Even then, it may not be indicative of future performance because the performance of short-term rentals is so dependent on how they\u2019re managed even more so than the attributes that they have and the amenities, that it\u2019s just really hard to measure by that. I think that\u2019s the number one wrong question to ask.
There are lots of data sources out there that will give you market wide data on what things should be doing. AirDNA, not perfect, but it\u2019s a good source. PriceLabs, which is a pricing tool that you use when you\u2019re managing, also has a tool called the Market Dashboards, I think it\u2019s called. You can get good market wide data by number of bedrooms on what things should be doing rather than what one random property did with one random property manager.<\/p>\n
Let\u2019s say somebody wants to know what the rental history was. What\u2019s the advice you\u2019d give a potential investor looking into a deal that wants to get that information?<\/p>\n
I would say definitely get it. It\u2019s not a bad data point to have, and you can see what the property has done. There have been times \u2026 My second unit that I bought, the property manager had done, I believe it was $27,000 the previous year. Our first year, we didn\u2019t even have internet. We had terrible iPhone pictures. This was before we got really good at this and had any systems. We got it to 45 with minimal effort. You just kind of have to take it with a grain of salt. I\u2019m not saying don\u2019t look at it, don\u2019t ask for it. But as you\u2019re looking at it, make sure that you\u2019re taking a few steps further in your analysis and ask, \u201cHow was it managed?\u201d A lot of local property managers don\u2019t use Airbnb and Vrbo because it\u2019s taking market share away from them. Because of that, they\u2019re missing 100% of the market and so their rental numbers will reflect that. Look at it, but take it with a grain of salt.<\/p>\n
Is it something as simple as asking your real estate agent if they can provide that for you?<\/p>\n
Yeah, absolutely. A lot of times it\u2019ll be listed right on the MLS if it\u2019s an on MLS property.<\/p>\n
Now, what about if the seller didn\u2019t keep very good books and they don\u2019t have that information? What do you recommend in those circumstances?<\/p>\n
I would recommend getting as many data points as possible, like using the PriceLabs Market Dashboards and AirDNA and things like that. Also, there are lots of Facebook groups out there full of short-term rental owners, even market specific ones. Just go out there and ask other investors what they\u2019ve been able to do and what they think. That\u2019s a really good way to figure things out. But you want to get as many data points as possible and not just go off of one.<\/p>\n
Yeah. When I was buying my Maui properties, my team was communicating with you. You were sort of guiding us through that, which, thank you very much for doing so. This is what it\u2019s like when you have a rockstar helping you. Rockstars, they\u2019re rockstars. One of the things I found is that, I was looking at data from 2020, which was very skewed because COVID had shut down travel to Maui. The numbers for 2020 were worse significantly than they were in 2019 or even 2018, even though we\u2019ve been having inflation. A lot of other investors were just seeing that information and saying, \u201cNo, thanks. I don\u2019t want to own these properties.\u201d A lot of these properties, because they weren\u2019t being rented out as fast, were sitting on the market for a lot longer. That\u2019s one of the reasons I was actually drawn to Maui, was because the market was soft. It wasn\u2019t a gray area.
There wasn\u2019t a ton of other people that were vacationing there and the properties weren\u2019t performing really well, but I was betting on, and this is something I\u2019ll get into in a minute, the fact that would turn around. One of the things that people need to understand about investing in real estate, is you\u2019ll hear a lot of people say, \u201cWell, I don\u2019t like to bet. I don\u2019t like to gamble.\u201d It\u2019s a way that they can justify not taking action. Here\u2019s the problem. When you don\u2019t buy something, that is also a bet or a gamble. You are betting and gambling that prices are coming down or it doesn\u2019t make sense to buy it or you shouldn\u2019t buy it at all. There isn\u2019t an option where you could avoid this. You got to pick a side. You either believe in what the market\u2019s doing or you believe that it\u2019s going to turn around. I was just talking about this at a meetup that we held in Sacramento yesterday, that everybody here is gambling.
You\u2019re kidding yourself if you think you\u2019re not. One example where I see this show up, is I\u2019ll hear people say, \u201cWell, I buy on the cash flow for right now. I want to know what the rent is and I\u2019m not assuming it\u2019s going to go up. I\u2019m not going to work that into my numbers.\u201d I never quite understood why you believe that it\u2019s irresponsible to believe the rent won\u2019t go up, but it\u2019s not irresponsible to believe it won\u2019t go down. Why do we not assume that just because I\u2019m getting $2,000 a month right now, that it wouldn\u2019t turn into 1,800 a month next year? It shows that we are comfortable with making assumptions. It\u2019s just safer to assume it\u2019s not going to get better and that it won\u2019t get worse. I was curious what your take is because you\u2019ve owned properties for a while. I\u2019m sure you\u2019ve seen how they performed in year one is very different than how they perform in year five.
It\u2019s often way, way better. What advice do you have for the investor that\u2019s just hung up on, \u201cThis isn\u2019t the return that I wanted to get right out the gate.\u201d<\/p>\n
When I\u2019m looking at something, I\u2019m more looking at not what it\u2019s doing now, but what can I make it do? Whether it\u2019s multi or short-term or what have you. If I\u2019m looking at a multi even, if the CAP rate is not where you want it to be, but if you update the kitchens, then it will be X higher, then that\u2019s what I\u2019m looking at to analyze. At some point, you do have to just get comfortable enough and close your eyes and pull the trigger. There are always things you can do to \u2026 Or not always. But in most cases, if there are things you can do to improve the property, you are going to be able to improve the rent. I\u2019ve got a two bedroom right now that when we first bought it in 2016, this is a short-term, we were struggling to get \u2026 I mean, we would get 150 average, and that just booked last weekend for 400 a night. It\u2019s gone up quite a bit. I think that travel has changed because of COVID.
I think that short-term rentals, especially in vacation markets, are only going to be more lucrative. When COVID happened last year, when the big shutdowns were \u2026 We thought, \u201cCrap. There goes short-terms.\u201d Good thing we had all our long-terms. It turned out that, exactly the opposite, we needed to worry about the opposite. The short-term were shut down for two weeks, and then our doors got blown down and we were getting higher prices per night than we\u2019ve ever seen and we still are. Whereas, we actually had to worry about the eviction moratoriums. We didn\u2019t end up \u2026 We only had one or two that were problems before all that started, but it just goes to show you we thought the short-terms were over in that two week period and it actually caused a boom and the markets that we were in. You can always improve.<\/p>\n
That is exactly right. When I bought those Maui properties, my assumptions were, I\u2019m going to rent them for anywhere between 150 and $200 a night. It was a long-term play and I knew owning Maui real estate made sense. It\u2019s one of the few areas that\u2019s zoned for short-term rentals. There\u2019s not a lot there. Man, six to nine months after buying them, we were north of 450 a night. It happened fast. Now, it doesn\u2019t always work out that way. As you and I know, you do hit periods where things don\u2019t work out. But if someone were to pass on these deals because they were just too worried that rents weren\u2019t going to go up, they would\u2019ve missed out on what ends up happening. A lot of that, in my opinion, is because of decisions the Fed makes as far as how much money it prints. All of this money has to find a home. It\u2019s one of the best times ever, in my opinion, to invest in real estate because people are traveling, technology is making it much easier to find another property.
Like Airbnb, the website makes it very easy to do this. Renting cars is incredibly easy when you can use Turo. There\u2019s all these headwinds that are just making it much easier for people to travel. That\u2019s a good reason to be in the space. BiggerPockets has partnered with you and the publishing is going to be releasing a book that you\u2019ve written about short-term rentals. I think this is the perfect time for this book to be coming out because of all those factors I mentioned. Can you tell people a little bit about what they can expect if they get this book?<\/p>\n
Yes. The book, the first half is about choosing your market, how to choose a market, how to analyze a property, how to build your team in that property in that market. Like choosing a real estate agent, things like that. Then the second half is about the self-management and the automation tools and all that stuff.<\/p>\n
Okay. What is your favorite part about this book?<\/p>\n
Gosh, I don\u2019t know. It\u2019s like hearing your own voice. It\u2019s cringy. I think my favorite part is really just, I want people to realize that I was making $37,000 a year five years ago and I was able to get from there to here. If I can do it, anybody else can do it. You\u2019re probably making more money than I was making when I started. I just want other people to realize that like, yes, you can. Anyone can. Why not you?<\/p>\n
Now, what I really like about the advice you give, specifically, you Avery in this space, is that you\u2019re sort of the female version of me as far as how our businesses are set up. You just went full Taylor Swift mode on us, by the way. You look exactly like her when you put those glasses on. I think that that\u2019s very funny. But what you do is you buy these for yourself. You have all of the insight that comes from the market itself and knowing how this asset class works, and your gut has basically been oriented to \u2026 You have the right gut feeling when something comes your way, because you\u2019ve seen enough of it. Which is very important. You also run a real estate team that represents other people buying them. Not only do you know the way to the goal, because you do it for yourself, like the Sherpa that can take you to the top of the mountain, but you also have led others as a guide many, many times. You\u2019ve seen the things that stop people from getting to the top of Mount Everest.
Now, obviously you\u2019ve seen what the fruits of your labor are like once you do this right and you have performing properties and how life changing they can be and the right way to do this. But just like with everything, there\u2019s people that are amazing at jujitsu and they can just tap out everyone, and then there\u2019s people that are amazing at teaching jujitsu and they can help you to tap out everyone. You, Avery, are one of the few people that has both sides. What I\u2019d like to do is to get into the five things that people need to avoid, the biggest pitfalls when it comes to short-term rentals, based on your experience both owning them yourself and helping other people to buy them. Number one, let\u2019s go into what probably is the biggest hurdle and therefore the most important thing that we should talk about on this show. What stops investors from going into contract?<\/p>\n
Overanalysis is the biggest one. People can really get in their own heads when they\u2019re looking at spreadsheets and, \u201cIf I tweak this, then I can make it this. I tweak this and I can make it that.\u201d You can analyze yourself into and out of things 100 times. I mean, this has been mentioned thousands, millions of times on BiggerPockets. Another thing is kind of the shiny object syndrome of, people will come to me and say, \u201cHey, I want to buy \u2026 I\u2019m looking all over the country and I want you to find me the market with the best returns on short-term rentals in the country.\u201d Well, my company operates in most of those, but I\u2019m not here to help you decide which market. I\u2019m here to help you buy one and learn how to manage it once you\u2019ve decided. You need to focus on three markets tops when you start investing and don\u2019t have 100 different markets.
Because if you\u2019re trying to look at 100 different markets and analyze 100 different things, all these markets are going to be different and you\u2019re just never going to buy anything because you\u2019re going to be just stuck looking at markets. Get rid of that shiny object syndrome also.<\/p>\n
Let\u2019s unpack that one because I think that\u2019s huge. This affected me when I was investing. What I used to do was save up a bunch of money, put a down payment on a house, go save up a bunch more money. In order to save up that money, it was basically six months of my life because I was getting hammered in taxes and I didn\u2019t make a ton of money as a cop working seven days a week. 12 hour days, 14 hour days, up to 20 hour days, a [inaudible 00:24:44] period of time. Buying a property meant a huge sacrifice for me. My subconscious understood, this much money, 30 grand, 40 grand, 50 grand, kicks my butt to have to save. It\u2019s very difficult. There\u2019s a lot of people listening that are software engineers and they\u2019re blue collar workers in some cases that that means a lot of overtime driving a truck or something just difficult. Time away from family. What happens is, you tend to look at that money that you are going to have to invest in real estate and you have a strong emotional tie to it.
It is not just capital. It\u2019s not just numbers on a spreadsheet. It\u2019s your baby. You\u2019ve worked very hard for that. I got to the point where I knew if I\u2019m going to put this money in a deal, it has to be the best freaking deal that I could find. Then on top of that, I\u2019m listening to Brandon Turner and David Green telling me this is the deal they bought. Their deal sounds incredible, so I want to do it like them and I want to do it like Avery. Now you put extra pressure on yourself and then you\u2019re worried about worst case scenarios. There has to be all this extra meat on the bone, and all these things combine to create a perfect cocktail of being afraid to move forward. What it happens is, my brain started thinking about what is the best deal I could possibly get. There\u2019s always something you can find wrong with the deal that would make it better. I didn\u2019t get out of that place and start making significant progress until I started using the BRRRR method.
The reason is, it wasn\u2019t a decision about, should I buy house A or house B? It turned into, I will buy house A then house B. When I was recycling my capital, I didn\u2019t have to choose between two options. I was just, \u201cWhich order am I going to buy them?\u201d That unlocked the part of me that was afraid to put that money into deals. It\u2019s where I really sort of took off with my skills as a real estate investor. I feel like this is something people get into when they\u2019re trying to pick the perfect market. They want the incredible cash flow of the Midwest, with amazing appreciation of the coastal markets, with the ease of ownership, and it needs to be in MSNBC\u2019s top five markets to invest in. They\u2019re trying to make all of that intersect at the same time and they end up getting nothing. Is that similar to what you find with a lot of the clients you work with?<\/p>\n
Yes. What I say to them is, don\u2019t let the perfect be the enemy of the good. We can find you a great deal and you\u2019re getting a 45% cash on cash return. \u201cWell, I really wanted 50.\u201d But you can get 45 right here or your alternative is to get nothing and hope that something as good as this comes back along. Don\u2019t let the perfect be the enemy of the good. Then also trying to mix too many real estate strategies together at once, I see a lot of that. People are like, \u201cHey, I want to buy a BRRRR, buy and hold, fix and flip, mobile home park that I\u2019m going to short-term rent three of them and then I\u2019m going to house hack \u2026\u201d [crosstalk 00:27:22]-<\/p>\n
with seller financing and subject to deal. Yeah.<\/p>\n
Yeah. Pick one thing and focus on that. The thing about short-terms, at least in the markets that I buy in, I stick to regional drivable vacation rental markets. a lot of the properties that are being traded in these markets are already short-term rentals. They\u2019re already going to come furnished. A lot of them, it\u2019s really easy to buy fairly turnkey stuff. You don\u2019t have to go nuts with the rehab. Have I rehabbed them? Yes. But you don\u2019t have to. A lot of people, they listen to a lot of inspirational stories on podcasts like this one and they try to apply something that they heard that they found inspirational from an investor who told stories about buying in a completely different market, in a completely different part of the country, at different asset class, at a different time in maybe 2012, and then try to apply that to what\u2019s happening in the market now on this asset class. It\u2019s just not going to work.<\/p>\n
Where that comes up a lot, is people listening to podcasts from nine years ago where Brandon Turner said, \u201cYou got to write 50 offers and eventually one of them is going to stick. Keep going after that low, low price.\u201d What people don\u2019t realize is that at the time you were competing with the seller. You were trying to get a seller who was very motivated to take your offer and hit a home run. But today, you are competing with the 12 other buyers that want that same asset class and want it more than you do. That stress strategy can actually shoot you in the foot. It\u2019s one of the things that I\u2019ve noticed, people listening to data that made sense when we were telling people six years ago, here\u2019s a strategy, is not the same as where we are now. I\u2019m continually saying, the rules have changed. What are some of the ways that you see buyers other than looking for the perfect area that are shooting themselves in the foot when they\u2019re close to being able to put something in contract?<\/p>\n
I would say that I mean, just really, it\u2019s just as simple as not making aggressive enough offers. At the end of the day, five years from now, when you\u2019ve had a 30% cash on cash return for the last five years, you are not going to remember that you put $5,000 extra on top of that purchase price. Or whatever other little term in there you had to improve to win, you\u2019re not really going to remember that. You\u2019re going to say, \u201cWow, look at this great cashflow that I\u2019ve built.\u201d My husband and I, we look at each other all the time and we\u2019re like, \u201cMan, we shouldn\u2019t have sold that one property. We shouldn\u2019t have sold that other property.\u201d But we\u2019ve never looked at each other and said, \u201cMan, we really shouldn\u2019t have bought this place.\u201d<\/p>\n
We shouldn\u2019t have bought it. That\u2019s exactly right. Just to kind of put a cherry on your point there, I\u2019m looking to buy properties myself. Right now I\u2019m looking in the East Bay area and I\u2019m looking for a property that has a lot of square footage that I can make a home and turn it into a two bedroom, one bathroom unit. Several of those within that house. It\u2019s very good dirt. It\u2019s going to appreciate a lot. I\u2019m going to turn it into more units, rent those out individually and take a portion of them and set them aside for Airbnb. Now, there\u2019s a lot of things that I got to get right to make this plan work. The house has to have square footage. The floor plan has to be conducive to what I want to do. It has to have enough bathrooms that I can \u2026 Those are very expensive to add if they\u2019re not already there. I could go on and on. But a huge piece is parking. You forget that if you\u2019re going to have four families living in a house, they all got to have a place to put their cars.
Very few of these properties have big parking. I found one yesterday and I told the agent Johnny on my team who\u2019s representing me, he\u2019s awesome, that this is the house I want to buy. He said, \u201cOkay, we have to come in this high above asking price.\u201d I\u2019m like, \u201cI don\u2019t care. Yes.\u201d He was sort of surprised, like, \u201cDavid, aren\u2019t you going to try to go in low?\u201d I was like, \u201cAbsolutely not. I don\u2019t care what the asking price is. I care what it\u2019s worth to me. I can\u2019t find another property like this, and it\u2019s going to cash flow probably at the end, somewhere between three to 5,000 and dollars after all the renovations are done. Every year, that\u2019s going to go up. If every unit goes up 200 bucks, you\u2019re like, that\u2019s a significant increase in how much money it\u2019s going to make every single year.\u201d He was surprised to hear me say that just because he assumed you\u2019re going to try to come in low like everybody comes in low. But it doesn\u2019t matter to me what they\u2019re asking. It matters what the property\u2019s worth to me.
That\u2019s one of the thing that I just learned with real estate. 10 years later, it\u2019s going to be worth so much, do I care if I got it under the asking price? I was curious if that\u2019s a similar experience to what you see in the Smoky Mountains or some of the other places that you\u2019re selling houses.<\/p>\n
Yeah. I do see that a lot. I mean, there\u2019s a lot to be said with the agent that you use to make offers, especially in a market as fast as we\u2019re in right now with as much competition. Because when there are a lot of offers coming in and they\u2019re all over asking and they\u2019re all pretty similar, if I\u2019m the listing agent I\u2019m going to choose the offer from the agent that I know, like and trust if everything else is pretty similar and makes sense for my seller. An agent that does a lot of deals, an agent that does a lot of volume, it can sound like, \u201cOkay, I don\u2019t necessarily want to use that agent because they may be too busy for me.\u201d But even though they\u2019re busy, they\u2019re probably going to be better at getting you deals because they have done so much business with all the other agents in the market. Then in terms of off market deals too, they\u2019re going to have the most past clients that they can out to, to see if they want to sell to find the thing that you\u2019re looking for.
Also, for example, I\u2019ll use an example for me and my husband early, I\u2019d say, last November. This is kind of a glimpse into the world of investing with your spouse. My husband is the ninja of The Short Term Shop and teaching people how to manage their properties. I am really good at sourcing them, but he\u2019s the nuts and bolts of that. He\u2019s always kind of keeping an eye on the market too, and he is a marathoner and he does his long runs on Saturday mornings. At 6:30 in the morning, I\u2019m trying to get our two kids under two into the car to go get donuts. He\u2019s on his run and he calls me, he\u2019s all excited, he\u2019s like, \u201cThis property just hit the market. It\u2019s already on realtor.com. We have to get it. I want it.\u201d I was like, \u201cOh my God, you\u2019re going to make me work on a Saturday morning. I don\u2019t want to do this. I\u2019m trying to get the kids. Stop, leave me alone.\u201d
Then I looked at it and I knew that it had been underpriced by about $150,000 because I had just recently sold an almost identical property on the same street for about $150,000 more recently. I was looking at the agent and that agent was not a member of our MLS. She was a member of an adjacent MLS that\u2019s about 45 minutes away. I looked at that MLS, which I\u2019m also a member of, and saw that she doesn\u2019t really do much volume. She\u2019d sold one house that year, and I thought, \u201cThis woman doesn\u2019t know what she\u2019s doing.\u201d Not that she doesn\u2019t know what she\u2019s doing, that\u2019s mean, she\u2019s not experienced in this cabin market right now. I thought, \u201cAll right, if this had been one of the high volume agents in the market, they would\u2019ve said screw you. We\u2019re not going to take any offers. We\u2019re not looking at anything for three days.\u201d
But this one, since I knew she didn\u2019t do much business in this market of this type, I said, \u201cWell, let\u2019s put a short turnaround time on it and I bet she will instruct her buyers to take it because she\u2019s not used to the speed of this market.\u201d We offered 40,000 over asking right out of the gate and a three hour turnaround time. An agent who does more business in our market would have never agreed to that, but they took it. Things never, in the markets that I\u2019m in, they never really appraise higher than what you\u2019re asking because appraisers \u2026 I\u2019m not going to pretend to know how that works. But it appraised for 60,000 over the 40,000 over asking that we got it for it.<\/p>\n
That happens all the time with us in the Bay Area. You get the client, let\u2019s say they\u2019re just asking for a million, and we\u2019re like, \u201cHey, you got to be at 1.15. There\u2019s so many other offers that that\u2019s where it has to be.\u201d They fight, they claw, they\u2019re so angry. Then they put it under contract with that price and then it praises at 1.22. They go from, \u201cI hate everything about this.\u201d To, \u201cOh my God, you\u2019re the best person ever.\u201d It happens all the time. This is just to punctuate your point that the agent you choose really matters. They\u2019re not all the same. If you pick an agent who\u2019s done this, sells two to three houses a year, that\u2019s how good they\u2019re going to be. What are you good at if you do it two to three times a year? If you pick an agent like Avery, who\u2019s doing this constantly, who sees what\u2019s going on, who knows how to price homes, and who can guide you through who you want to use to do each piece, you have have a massive advantage over those other 10 buyers that have inexperienced real estate agents.
That\u2019s one of the reasons that I want people to know, if they want to buy in your area, they need to be contacting you because you do it yourself and you work with a lot of clients. You want a realtor that sells a lot of homes. That\u2019s exactly why. Anything else that you can think of before we move on that stops people from going into contract?<\/p>\n
I think we\u2019ve covered that one. Onto the next one.<\/p>\n
Okay. Let\u2019s talk about why people overanalyze deals. The pitfalls that stop somebody from getting a short-term rental, overanalysis is a huge one. Where do you think that comes from and how do people overcome it?<\/p>\n
I think it mostly comes of emotion, like you said earlier. That, that money that you\u2019ve been saving for six months is your baby and it is very, very, very comfortable \u2026 I still struggle with this, money is very comfortable in the bank. It\u2019s very comfortable there, and parting with it is scary. Especially, I remember how scared I was our first even five deals. That was all we had. We spent money we didn\u2019t have on real estate hoping and praying that it would do what we\u2019d already analyzed 100 times to know it would do. But there\u2019s just that little bit of doubt in the back of your mind that\u2019s like, but what if it doesn\u2019t? But what if it doesn\u2019t? You just kind of have to get past that. I think it really does come from a place of being comfortable and in your comfort zone. Yeah.<\/p>\n
Yeah. It feels secure when it\u2019s in the bank and it\u2019s yours. The problem is, that\u2019s the worst place for it right now because inflation is eating it up. A, your money is losing value as inflation erodes it. B, when you do go buy it, whatever you go buy is going to be more expensive later than it would\u2019ve been right now. C, you\u2019re losing out on the equity you would\u2019ve created if you\u2019d bought it six months ago. Logically, we know investing money is a smarter option, but emotionally it is very hard. I imagine it feels like when you\u2019re a parent and you have a kid who\u2019s ready to move off to college or ready to move out and you\u2019re like, \u201cNo, I want to keep him in the house where I can control him and I can keep him safe.\u201d But you keep a kid in the house and they become 45 years old, it actually was worse for that person than if you had let them go. I think money works in a similar way.<\/p>\n
I agree.<\/p>\n
As far as the clients that work with you guys, what are some other areas where you see them just overanalyzing when they should be taking action?<\/p>\n
We have offices in six different markets. I\u2019ll just list them to kind of give some context. So Smoky Mountains in Tennessee, Blue Ridge, Georgia, the Emerald Coast of Florida, so Destin 38, Panama City Beach, the Disney market outside Orlando, the Forgotten Coast market, which is just east of the Emerald Coast in Florida. Cape San Blas, Port St. Joe, Mexico Beach, St. George Island and then Gulf Shores, Alabama. What we\u2019ve seen, they want me to tell them, I want to know which market of yours is the best market to invest in, period. Which is the highest returns? Period. Well, it\u2019s really hard to answer because it\u2019s a case by case basis. It\u2019s property by property. In 2016 or 2015 even, there were 20 great deals just laying around in every market just waiting for you to get a 20% discount on them. Now, you have to kind of wait for the right one to come on the market in any market. It\u2019s really hard to say anything is definitively better than anything else.
It\u2019s more, what is available at the time and what you\u2019re ready to jump on. I think people, especially in our beach markets, they get really hung up about potential hurricanes. That\u2019s the thing, weather. In any market that you\u2019re in, it\u2019s going to have something like that that can happen. I mean, basically being a worrywart like, is weather going to happen? Are guests going to tear up my house? Is somebody going to sue me because they fell off my deck or whatever? There\u2019s a lot of different little things that you can worry about. I\u2019m a worrywart. When we\u2019re doing something and we\u2019re about to invest in something, my brain has to go to every dark place first to then come back and be, \u201cOkay, we\u2019re doing it.\u201d<\/p>\n
I\u2019m very similar to that. People don\u2019t think it, because I\u2019m constantly telling you to buy real estate, but emotionally I go through the same things. It\u2019s not just real estate, everything in life. It could have been the cop background I have, I don\u2019t know, but I tend to see what could go wrong as the first thing that my mind thinks of. I have to have an answer for the worst case scenario. But once I\u2019ve got it and I know I\u2019ve got a plan in place for everything that could go wrong, then I feel comfortable pushing forward and those things never happen. It hardly ever happens where it\u2019s a terrible thing. Because if that was common, everybody else would be talking about it, and their investments wouldn\u2019t be going well and you wouldn\u2019t be interested in doing it. Just recognize that your brain will always tell you what could go wrong and it doesn\u2019t usually tell you what could go right.
That brings us to our third point of pitfalls to avoid. When it comes to actually choosing what market someone should invest in, what are some things they should be aware of and what are some things they should look for?<\/p>\n
Okay. I talk about this in the book quite a bit, but there are three main types of markets you can invest in short-term rentals. None of them are wrong. I have my methods. Other people have their methods, but this is kind of a brief primer on that. There\u2019s metro markets, your Nashville, New York, San Diego, places like that. There are your big fly to vacation markets like Hawaii, Aspen. Then there are regional drivable vacation rental markets, which is what I focus on. It just kind of depends on what you want to do. I try to stay away, or I don\u2019t try to, I do stay away from metro markets for my short-terms. Because a lot of them, short-term rentals are a new thing as of the past 15 years as of the inception of Airbnb. Because of that, the cities and counties and regulatory bodies are trying to figure out how to monetize it. What\u2019s going to be allowed? What\u2019s not going to be allowed? It\u2019s ruining these people\u2019s neighborhoods. It\u2019s pissing off the hotels, whatever. That makes me nervous and I don\u2019t do that.
But I do have plenty of friends and clients who invest in metro markets and they do very well. That\u2019s not a risk that I like, that I feel comfortable with. The fly to markets, kind of similar to vacation rental markets, except they are typically more expensive vacations. When something like COVID happens or when a financial crisis like 2008 happens, people can\u2019t necessarily afford to do those or COVID, people didn\u2019t really want to get on flights to go to those places. Why I stick to the regional vacation markets. I also stick to mature vacation rental markets. These are areas that people have been going and renting properties on a night by night basis that are owned by someone rather than hotels. Like beach markets, people go to the beach. They rent a house or a condo. Mountain markets, they rent a cabin. These are the places that I live with my investments. Because in 2008, people couldn\u2019t afford to go places. They couldn\u2019t afford to fly to Aspen, but they could drive to Blue Ridge and have a mountain vacation without spending all that money.
Then last year, people were dying to get out of their houses, but they didn\u2019t want to go to metro markets or really get on planes yet. But they would drive to Panama City Beach instead of flying to Mexico. I really like those markets not only of that, but because the municipalities figured out how to monetize short-term rentals decades ago. The rules are very established. There\u2019s not a lot of churn or push and pull about what the regulations are going to be because they figured that out a long time ago. Again, there\u2019s no wrong way to do it, but that\u2019s where my comfort zone is. Is those regional drivable vacation rental markets.<\/p>\n
I love that analysis. That\u2019s exactly what I like to do. You took a complicated thing and you made it simple. To sum that up, you\u2019ve got your metro markets. That\u2019s, in my mind, this is what I picture, when I\u2019m traveling to speak at a conference or an event and it\u2019s in a big city, I\u2019m going to Dallas or Nashville or Austin and I don\u2019t want to stay in a hotel, I look up Airbnbs in that city. You\u2019re probably going to get more professionals traveling for business trips, corporate housing, maybe traveling nurses working at a big hospital. That\u2019s your market there. Then you\u2019ve got your fly to destination. That would be like my Maui properties. These are your big areas that a lot of people travel to frequently. Like people that are going to be going on vacation to a cool spot, Orlando, you mentioned that. The place outside of Disney. They\u2019re going to fly there from anywhere in the country. Those places might have the highest appreciation most likely. As I\u2019m picturing in my head, that\u2019s going to be the most demand.
However, they probably have the most fickle vacancy rates. You probably, depending on how the economy\u2019s doing, they\u2019re very sensitive to that. Then you\u2019ve got the places you mentioned that are your drive to vacation spots. Where I am in California, that might be like Monterey or Carmel, the Central Coast, where somebody from the Bay Area that wants to get away from the crazy city can make a two hour drive and they can be by the beach and everything\u2019s calm. To me, maybe those places don\u2019t appreciate as much as your major metro areas, but they\u2019re probably a lot more solid as far as how consistently they\u2019re going to be rented out because they\u2019re not as expensive and it\u2019s not a huge ordeal to get on a plane and fly across the country. Is that a fair assessment?<\/p>\n
Totally.<\/p>\n
Yeah, that\u2019s really good. When someone\u2019s trying to pick which of those three would be best for them, can you maybe give me the right avatar for an investor that should pick each of those?<\/p>\n
It\u2019s really hard not to throw my bias in here on this. I mean, a downside for the type of market that I\u2019m in is that there are more short-term rentals than there are people who live there in those types of vacation rental markets. If something came along and wiped out all of the short-term rentals, which, like last year, it would be really hard to do. If anything was going to do it, it was going to be a global pandemic, and it didn\u2019t. But I would never be able to convert to long-term. If you\u2019re someone who needs to have that, who needs to really feel like they can and do that, then a metro market might be better for you because you can convert to a long-term. But for me, I prefer these areas that the tourism has been there for decades and decades and decades. It\u2019s not going to stop being there. They\u2019re not going to stop coming. It just kind of depends. People have different comfort levels.
I\u2019m comfortable with this while somebody else might be comfortable knowing in the back of their mind that if they had to, they could convert it to a long-term. But I\u2019m more comfortable knowing my grandmother has been coming to Destin, Florida since the \u201940s and people are still coming to Destin, Florida today. Nothing probably in our lifetimes is going to just switch that off.<\/p>\n
Okay. Number four. This is probably where I think the best information in this whole show is going to come from. People that don\u2019t move forward because they don\u2019t know how to analyze or they don\u2019t know what to analyze. What advice can you give us on as much of a step by step procedure as possible for the right way to analyze the short-term rental?<\/p>\n
Once you\u2019ve chosen your market, then have to pick your rental and start analyzing actual properties. The best way to do that is, like I said earlier, get as many data points as possible on what a property of the size you are looking for should be able to do. I guess we should back up and determine what your price range is first. Make sure you talk to a lender before you start running around. But figure out what your price range is, how much you can afford, and then start analyzing, well, what will this property make? What will it gross? Also, a big thing to remember is that different property managers and different sources, some of them will say gross includes cleaning fees. Some of them say gross does not include cleaning fees. I include cleaning fees in my gross numbers because there is income in those cleaning fees. You charge your guests or you should be charging your guests more than what your cleaner charges you.
That\u2019s just a little side note. Then work back from there and figure out what your expenses look like. At the end of the month or the end of the year \u2026 I like to analyze these on a yearly basis and not monthly because seasonality. That it just changes so much. But back in your expenses and figure out what your cashflow looks like. But you definitely want to \u2026 Other than PriceLabs and AirDNA, a lot of the big national property managers that are venture capital funded have a lot of access to a lot of data that us as regular people that we can\u2019t really get to. Call those the Vacasas, the Evolves. Call them and get their data on the area that you\u2019re looking at and just put all of that together to kind of figure out what something should be able to make. As far as expenses in terms of utilities and things, you can call \u2026 Again, the easiest thing to do is just go on Facebook and go into the owners groups and just ask people because everyone is really happy to help usually.
But you can call the electric company and ask. You can even go into, in some markets anyway, you can even ask them about certain addresses what the highest electricity bill they\u2019ve ever had is. There\u2019s lots of ways to do it, but just know that don\u2019t get bogged down in that stuff either. Just get yourself a range. That\u2019s the thing with short-term rentals too that really trips people up, is everything is a range. It doesn\u2019t fit nicely into a spreadsheet like an apartment building does.<\/p>\n
Yes. That\u2019s really good to acknowledge. There\u2019s people that may be just put off by the fact that, in August you crushed it, but in October, nothing happened. That looks inconsistent. But it doesn\u2019t look inconsistent if you just look at it by the year. Just change your mind from month to month to year to year. Obviously expenses are pretty easy to figure out. You\u2019ve got your mortgage, you have your property taxes, you have your home owners insurance, you have a property management fee if somebody is going to do that. I was thinking like, well, there\u2019s cleaning fees and all this stuff. But you made a good point. You charge that to the renter. A lot of the fees that are associated with it, you\u2019re going to push back to the client. Is there any other expenses that I haven\u2019t mentioned that people need to consider?<\/p>\n
Depending on where you buy, you\u2019re going to have to furnish it. I stick to markets where almost everything comes furnished so you really only have to budget maybe a few thousand bucks if you don\u2019t like something. But typically if you\u2019re going to buy an unfurnished property, the rule of thumb is about 10,000 per bedroom to furnish it. Don\u2019t finance it before you close on the house. If you\u2019re financing the furniture, wait until after. But-<\/p>\n
It screws up your loan if you do that. That\u2019s why we\u2019re saying that.<\/p>\n
Yeah. Don\u2019t finance anything before you close because it will change your DTI, which is your debt to income ratio. It could make it to where you no longer qualify for the loan because you\u2019ve opened up so much credit. Don\u2019t do it until after you close. But there are lots of different ways you can finance the furniture if you don\u2019t have that big chunk of money up front.<\/p>\n
That\u2019s a good point though. We typically know it\u2019s a budget for the rehab, but if you\u2019re buying a short for rental, part of that budget needs to be the furniture that you\u2019re going to be buying. I didn\u2019t think about it because when I bought properties, they came furnished as well. What about this AirDNA website that you\u2019ve managed? Can you explain what that is and how somebody can use it responsibly?<\/p>\n
Yes. There are a few other options, but AirDNA is my favorite. Their data\u2019s not perfect, just like any data is not necessarily perfect. But it is a company that specializes in measuring the performance of short-term rentals that are listed on Airbnb and Vrbo. You can get a subscription for any market in the country or you can get an entire country subscription. It gets a little expensive. You can go in and kind of see. If you\u2019re looking for a two bedroom in Gulf Shores, you can look at the Gulf Shores data and toggle it down to two bedrooms and see the 25th, 50th, 75th and 90th percentile of two bedroom properties and what they\u2019re doing. But the thing that people need to kind of realize when they\u2019re looking at these is, when you\u2019re looking at data, it\u2019s not necessarily the amenities of the house. Although they do have an impact, it is not necessarily the amenities of the house that makes a property be in those 50th or 75th percentile.
It\u2019s the way that it\u2019s managed. One of my highest performers up until a few months ago was really dated. It was a cabin, or it is still a cabin, and it had bright blue laminate countertops and these horrible peel and stick linoleum floors. It was the first one we bought. We couldn\u2019t afford to rehab it, so we just rented it as it was for five years. Then we finally got around to rehabbing it. But it stayed one of our highest performers for a long time. It\u2019s not because it was the nicest place on the block, but it\u2019s because it was the best managed.<\/p>\n
Yeah. That comes down to like the reviews that someone\u2019s getting. Can you maybe break down a little bit of your insight into how companies like Airbnb and Vrbo determine which properties hit the top of the list and how reviews can get you more bookings?<\/p>\n
Reviews definitely help, your response time too, the first message that people send you also helps with the algorithm. Which that\u2019s very easy to automate so that you\u2019re not having to stare at your phone all nervous all day waiting for somebody to message you. But your reviews do make a big difference. If you have a certain number of four stars or under reviews, then you can lose your super host status or it will knock you down in the algorithm. You want to have \u2026 Four star reviews are not good. Even though they sound good, they\u2019re not good. You need five stars. The way to get those is obviously not only by providing a clean and nice experience for your guests, but by not taking every single guest. You weed the bad ones out at the front. They\u2019re typically more than willing to tell on themselves if you just ask a question or two. But a lot of people get tripped up and, \u201cI have to take every guest. I have to take every guest.\u201d
You don\u2019t. If you\u2019re buying in the right market, you don\u2019t anyway, ask a few questions. You can weed out the bad ones. I\u2019m not even talking about trying figure out if somebody\u2019s going to party, but you can tell if they\u2019re going to be really high maintenance and if they\u2019re going to be the people that are walking around looking under beds, looking for dirt that they\u2019re going to complain about. You can weed those out too. You can tell by the questions they\u2019re asking you upfront. Don\u2019t get caught up thinking you have to take all the bookings.<\/p>\n
What you\u2019re saying is, tenant screening still applies in the short-term rental market too.<\/p>\n
It does. Yes, it does.<\/p>\n
You can\u2019t really get away from that principle. I\u2019m really glad you mentioned that though because I think a lot of people wouldn\u2019t consider that that could be a problem. Was it you that we had on that talked about getting a bad review because it wasn\u2019t a safe enough house to protect from bear attacks?<\/p>\n
Yeah. Yeah, that was us.<\/p>\n
Can you share that story of how someone gave a bad review?<\/p>\n
Okay. It\u2019s a cabin in the Smoky Mountains. Totally cute, really easy to get to. About five minutes from town. It\u2019s in a community, but you can\u2019t really see the other cabins around you. But you can hear somebody shut their door. They\u2019re 100 yards away at the most, at the absolute most. It\u2019s a A-frame with a big wall of windows. They asked us when they first got there about bears and do we ever see bears? We said, \u201cWell, it\u2019s the mountains. They\u2019re around.\u201d They were petrified the entire time of bears. Then eventually they left early and, Luke, my husband who manages the properties, the guy said, \u201cHey, we\u2019ve had to leave early.\u201d Luke said, \u201cNo, was it a bear.\u201d The guy did not think he was funny and left us a bad review because the way the cabin is set up, which is just a one bedroom with a open loft bedroom upstairs, that if a bear were to happen upon it and decide it wanted to break in, that you would have little to no chance of survival. One star.<\/p>\n
Not enough escape routes. Yeah. I think I made a comment like, that\u2019s a Dwight Schrute thing to come up with from The Office. A very Dwight ish. But it does highlight that certain things are ridiculous and outside of your control. But if someone gives a one star review because of it, it will significantly impact your ability to run that business and generate revenue well. Screening tenants is very, very important.<\/p>\n
Yes.<\/p>\n
All right. Number five. The last on our list of things that people \u2026 Pitfalls that investors should avoid when buying a short-term rental is making mistakes when building their listing. Is this a set it and forget it type thing, or is this a required maintenance when you actually put your listing up on the websites people look to book them?<\/p>\n
It\u2019s definitely not set it and forget it. I would call my long-term set it and forget it, but the short-term are very set it and tinker with it continually. You\u2019re going to find that there are different things that might be confusing to guest. For example, I\u2019ll use this, I just bought a house on Cape San Blas, which is in the Forgotten Coast of Florida. I sent the listing to a few of my close friends that are also agents on my team. It does have a downstairs refrigerator for taking your beers to the beach. In one of the first pictures, you can kind of see it from an angle and you\u2019re looking at the entryway. She said, she thought that was the kitchen at first and she would\u2019ve stopped at that picture because it looked like the kitchen was really narrow. Even though the kitchen\u2019s upstairs, it\u2019s huge, we had to go tweak that.
Then you kind of learn as you go what questions people are going to continually ask, and then you can just put that in your listing so you\u2019re not having to answer it a bunch of times about what people are finding desirable. Like in the Smokies, it\u2019s, how far is Dollywood? Put that right in the listing. It\u2019s X amount of miles and X amount of drive time. It\u2019s just constantly tinkering and if you\u2019re not getting bookings, you might want to lower that price a little bit. It\u2019s definitely a mess around thing. You got to keep messing around with it.<\/p>\n
It kind of reminds me of when Craigslist was new and you\u2019d put your posting on Craigslist, and then three days later it was so far at the bottom, no one would find it. You would have to go put it back on and get it up to the top. Is it a similar approach that you think people need to take when it comes to managing their listings?<\/p>\n
Yeah. You definitely want to change it up sometimes because what catches one renter\u2019s eye might not catch another renter\u2019s eye and you want to move it around. The platforms don\u2019t say this, but for some reason it seems to be true, we used to before we had a lot of things as automated as we have them now, if we hadn\u2019t gotten a booking in a few days, we would go in and just tinker with something on the listing. Make a change, rearrange the pictures, and then magically we would get a booking. The platforms don\u2019t actually say that you are rewarded for paying attention to your listings, but it does mysteriously seem to be the case.<\/p>\n
Very good to know. Other than the five things we\u2019ve mentioned, is there any last words that you want to going to leave for those who want to get into the short-term mental markets to help them avoid making a big mistake?<\/p>\n
Don\u2019t be afraid to ask for help, no matter what your experience level. A lot of newbies are totally great with asking for help because they acknowledge that they\u2019re new. But where I see experienced investors get in trouble is not asking for help in a new asset class. If you\u2019re buying multis in the Midwest, but you want to buy a mountain property in the Smokies, it\u2019s a different market. It requires a different approach. There are differences in the way real estate is done in different markets, regardless of the asset class. Don\u2019t be afraid to ask for help. I\u2019m a super experienced investor, but when I started buying multis, we straight up told our agents like, \u201cListen, we are very experienced in other areas, but we are newbies here. We\u2019re going to really try not to be annoying, but I am going to need your help on some things.\u201d They\u2019re more than happy to help you. That\u2019s going to get you a lot further in your investment career than saying, \u201cI know what I\u2019m doing. I own 27 properties and I don\u2019t need your help.\u201d It\u2019s okay to ask for help.<\/p>\n
Yeah. I want to second that at a huge way. Because when I wanted to buy properties, I didn\u2019t have a hard time asking for help, and I own a lot of properties. In fact, I\u2019d say the more experienced and better investor you are, the faster you\u2019re going to ask for help. You value that help. You want people to tell you what to do. We hosted a meetup last night that I mentioned, and we were talking about the velocity of money and how important it is to be putting your capital back out there to earn a return. Getting it back and then putting it out again. That\u2019s literally what you\u2019re doing with your portfolio. My loan team was there and I mentioned to people like, \u201cYeah, go talk to those guys. Tell them what your questions are.\u201d There was seven people that said, \u201cI\u2019m trying to get my credit fixed before I come talk to you. I don\u2019t want to waste your time.\u201d
All seven of them, we said, \u201cWe have a loan program for really bad credit. It\u2019s a little bit higher interest rate, but it\u2019s like a couple hundred bucks a month. Barely anything. Why on earth would you not come tell us that? Prices have gone up in the last year by so much. Why are you trying to fix \u2026\u201d It\u2019s like, \u201cI don\u2019t want to go to the gym until I get in good shape.\u201d It\u2019s the worst approach to take. I highly recommend, if you\u2019re in California, come talk to us. Message me and say, \u201cHere\u2019s my problem. I don\u2019t know if I can buy a house for this reason.\u201d If you\u2019re in Avery\u2019s area or you want to buy a short-term rental, if you have objections or concerns, go ask Avery\u2019s team, \u201cWould this stop me?\u201d Because odds are, they\u2019ve seen 100 other people that have that same problem and they know the path around it. Just like trying to get up Mount Everest with that Sherpa. This person can\u2019t handle this way, well, we have another way that we can get there.
Please, if you\u2019re in that position and you want to buy something, don\u2019t let those reasons that are in your own head stop you from at least talking to the expert or consulting with them to figure out if they know a way around it. Do you have a story that you can think of off the top of your head of a person who thought they couldn\u2019t buy that it turns out they could?<\/p>\n
Yes. We had a client last year who was going through a divorce, had a 1031 exchange and could not buy a property without a partner. He didn\u2019t know anyone who he could convince. He came to us probably six times saying, \u201cI\u2019m going to do this. I\u2019m going to do this.\u201d We sent him to the right places to try and find a partner, and eventually he found one. Got a property under contract. I mean, I think he had all kinds of financial issues that were keeping him from getting a conventional loan because of the way his income was, not because he couldn\u2019t do it. We got him a new construction and six months through the deal, his partner bailed on him. Leaving him unable to get the loan.
Then he tried so hard. This guy\u2019s persistence was really impressive. Was able to get another partner in at the 11th hour to make sure that they closed on it, and they closed on it and they have a really great property now. I think he had probably 10 banks, maybe more than that, tell him no. He found his way around it and got that pre-qual before he got under contract, by the way, and did it. You never know.<\/p>\n
How much money do you think they made on that deal?<\/p>\n
Last year collectively, they probably netted $60,000.<\/p>\n
Okay. What about the appreciation of the property?<\/p>\n
It\u2019s probably pretty close to double.<\/p>\n
Yeah. That\u2019s insane. They\u2019ve doubled what the property was worth and they\u2019ve netted 60,000 in cash flow because they just didn\u2019t take no for an answer. That\u2019s a great story.<\/p>\n
Yeah.<\/p>\n
All right. Well, I think it\u2019s time to get to wrapping this thing up. Avery, you\u2019ve been fantastic. As far as who should buy the book or why they should buy it, can you tell us a little bit about who this book is written for and what people can expect if they go get it?<\/p>\n
It is written for anyone, whether you are a newbie wanting to get into real estate investing or you\u2019re an experienced real estate investor who just wants to get into short-term rentals. It\u2019s for everyone. It\u2019s for the people who want to add an extra income to their family, because you can do that with one or two short-term rentals. You can add an extra income. Really, it can be life changing in fewer transactions than long-term. I mean, it was for me. I mean, it\u2019s really, there\u2019s no investor that it\u2019s not for honestly.<\/p>\n
Where can people find it?<\/p>\n
You can find it on the BiggerPockets bookstore. It\u2019ll be on Amazon as well. I think those are the only \u2026 I don\u2019t know. You tell me. You\u2019ve got more books out on BiggerPockets than I do.<\/p>\n
If you go to biggerpockets.com\/store, you\u2019ll see the books that are for sale there, and yours will be at the top. Guys, if you\u2019re interested in this, and gals, please go check out Avery\u2019s book. She is speaking from experience and doing this herself as well as helping a lot of other people build wealth. Like I said before, I just want to highlight, prices are not coming down anytime soon from what I can see. I think, Avery, you would second that, that we\u2019re seeing a lot more people. As information makes its way to the masses, they\u2019re seeing how profitable this can be and it\u2019s only going to be more competitive. Reach out, talk to an agent, find a lender, get yourself preapproved, get your questions answered. Don\u2019t wait until everything falls in place before you take action. With that being said, let\u2019s get to the \u2026<\/p>\n
Famous four.<\/p>\n
All right. The first question, Avery, what is your favorite real estate related book?<\/p>\n
Well, last time I said Long?Distance Real Estate Investing. This time I\u2019m going to go with Cashflow Quadrant, not to be redundant, by Robert Kiyosaki who also wrote Rich Dad Poor Dad.<\/p>\n
I really appreciate that you\u2019ve got a plug for my book in while not plugging my book. This is a savvy business woman right here. Thank you for that. Question number two. What is your favorite business book?<\/p>\n
Right now, my favorite business book is Clockwork by Mike Michalowicz who did Profit First. I love that one.<\/p>\n
Okay, cool. When you\u2019re not helping make other people wealthy, what are some of your hobbies?<\/p>\n
Hanging out with my kids. That\u2019s the whole reason we do this, is to have time to be present for the family. I\u2019m coaching my three year old soccer team, we got really good at swimming over the summer. Hanging out with the kids and hanging out with the husband is the most important. That\u2019s the hobby.<\/p>\n
In your opinion, what sets apart successful investors from those who give up, fail or never get started?<\/p>\n
Analysis paralysis is a big one, but I\u2019m going to go with being afraid to ask for help. Even though we already talked about that.<\/p>\n
Yeah. That\u2019s a great point. I mean, the reason we\u2019re here is to help people. We\u2019re personal trainers that want to get you in shape. Don\u2019t try to get in shape before you go to the personal trainer. It doesn\u2019t make any sense. The last question of the day. We know we can find your book at biggerpockets.com\/store, but where can people find out more about you?<\/p>\n
You can hit me up on my website, theshorttermshop.com or our mortgage website, which is mortgageshop.co. Instagram @theshorttermshop.<\/p>\n
Awesome stuff. Anything else that you want to share before we get out of here?<\/p>\n
I would say I do have one more point that I want to make. While you can make a bunch of money on short-term rentals relatively quickly, don\u2019t run off and quit your job too quickly. You want to stay in that job and leverage that income for as long as possible to grow your portfolio as quickly as possible. Get those 10 conventional loans that you\u2019re allowed to have while you still have your 1099. Because what I see a lot of people do when it comes to short-term rentals, is they will buy two or three and before they\u2019ve even owned them for a year, they\u2019re quitting their job. They\u2019re selling YouTube stuff about how to manage your short-term rental and they haven\u2019t even owned anything for even a year. Stay the course, don\u2019t go nuts, keep investing, but leverage all of the income that you can for as long as you can before you quit that job.<\/p>\n
That is great advice. Also, what I would add to it is, right now, the market\u2019s hot, it\u2019s healthy, vacancy rates are very low, people are making good money. Don\u2019t just go spend your profits right off the bat. Put those aside for a rainy day. Know that it won\u2019t always be this way. As long as you take the money you made and you set it aside in reserves, you don\u2019t have to worry about what\u2019s going to happen if the economy fails or all the things that stop people from taking action. Just the way you manage your money itself can become a very strong hedge against failing when it comes to real estate. I think you\u2019re giving very good advice. Thank you for going in overtime. Thank you for sharing a lot of the strategies that you have, Avery. This has been a fantastic episode, as Brandon would say. I want to thank you. I will let you get out of here. This is David Green for the BiggerPockets Podcast, signing off.<\/p>\n
You\u2019re listening to a BiggerPockets Radio. Simplifying real estate for investors, large and small. If you are here looking to learn about real estate investing without all the hype, you\u2019re in the right place. Be sure to join the millions of others who have benefited from biggerPockets.com. Your home for real estate investing online.<\/p>\n