Ep 22: What You Need to Know Before Investing in Vacation Rental Property
Today is going to be one of those episodes that just hit a nerve.
It's a topic that so many people have been asking me about in the real estate world. But the reality is, I don't have a ton of experience.
The topic? Vacation rentals or short-term rentals.
Some people call it Airbnb, other people call it VRBO. Whatever you call it, we want to start a deep dive into this form of investing to give you something to execute on right now because this is the quickest, and easiest way to make a buck as a real estate investor.
Enjoy!
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From the Episode
In This Episode
4:20 Tim's first experience with a vacation rental -- the good and bad
11:20 What you need to think about as you consider a short-term rental investment
14:29 Using the House Hacking method to break out of your 9 to 5
22:42 Things to consider -- location
29:30 How to stick out in a saturated market
35:50 How to start finding guests when your property is newly listed
38:57 Tips on watching your numbers
45:56 When you find out someone famous is staying at your VRBO
Miss an episode? Catch up!
Full Transcript
Tim Murphy 0:00
Welcome back to the value driven investor podcast where we forge value driven investors on a mission to live life on their terms. No matter where you have come from, or where you are going, becoming a value driven investor is in all our best interests. Because becoming financially free allows us to focus on what matters most fulfilling our purpose, our community of value driven investors is committed to showing you the way with the support of this community, you are sure to reach your goals for all of us in the value of an investor community, there is no greater gift than the gift of giving because together, anything is possible. We're back at another value of an investor podcast episode today. And I think today is going to be one of those episodes that just hits a nerve. And the reason why is it's a topic that so many people have been asking me about in the real estate world. But reality is, I don't have a ton of experience. Well, what is that topic? vacation rentals, short term rentals. Some people call it Airbnb, other people call it verbo, which is vacation rental by owner.com. There's a whole bunch of different acronyms and different statements or whatever you want to call it that people call vacation rentals, or short term rentals, which is what we're gonna talk about today because Bob and I were talking, you know what, we got to give our audience something that they can execute on right now. Something that they can say, you know, what, I understand how to do real estate investing because I do this. And the thing that we realized was gonna be the quickest. The easiest way to make a buck as a real estate investor is short term rentals, vacation rentals, Airbnb, vacation rental by owner, whatever you want to call it. That is the kicker. And we're excited to tell you guys some strategies and some things that Bob is actually executing on right now. Today, Grant Oh, how you doing, buddy?
Bob Grand 2:10
Hey, how's it going? Man? I'm doing great Just got off from 48 hours. The fire department slept for three hours each night. Maybe? I'm feeling good. You look
Tim Murphy 2:20
good. You might only have two hours of sleep but you always
Bob Grand 2:23
my whoop says that I got decent sleep. I was like how could I get decent sleep or says I'm recovered well, but it's like how could that be if I've only slept for like three hours but apparently I slept hard when I slept for the
Tim Murphy 2:34
man you're just in the
Bob Grand 2:36
body just learns. Gonna he's gonna go regardless, he better just give him give him the rest he needs.
Tim Murphy 2:42
Alright, so I'm gonna kick it off. grando I'm gonna tell my story of having a vacation rental property which was several years back Gosh, I think it was probably eight years ago, at least eight years back when it was just kind of a new thing that came out. But then after that, man, you're gonna kind of take the reins today because you are the wily veteran. You and Shelly and, and your brother Ricky are kind of the wily veterans compared to me, when it comes to the short term rentals vacation rentals, Airbnb, whatever you want to call it. So here's what my story was. I was flipping houses like I told you guys a million times, buying bank property and I actually was able to grab a bank owned property in my Honey Hole, which was South Minneapolis and this neighborhood was called the Lyndhurst neighborhood. Rarely, when I was buying bank owned property was able to find good deals or great deals in this awesome location of South Minneapolis, Southwest Minneapolis to be technical. So when this deal popped up, my partner and I at the time, we jumped on it, because we knew it was great. The one thing I didn't like about it was on a little bit of a busier street not a super busy street, but it was a main artery through the neighborhoods. And in South Minneapolis, everything runs north and south, east and west. It's a big grid. And this was one of the main arteries in to get in or through the Southwest Minneapolis neighborhood. And I was like ah you know, okay, whatever but the price was so good that we had to grab it and it was actually a
Tim Murphy 4:20
what was it a HUD I think it was a HUD property. So we were buying it from HUD we stole this property it's one of the best stories I'll have to tell it down the road but we stole a property so bad that the listing agent literally called us both up and said How in the hell did you know that they would say yes to that price. And it was awesome because the listing agents like man I wish I would have bought that sucker. But anyways, we got it at such a great price and we knew location was fantastic when you've been hearing about this thing called vacation rental, or short term rentals or whatever you want to call it Airbnb. I actually never heard about Airbnb back then. It was more of this thing called vacation rental by Via verbo.com. Yeah, that's what I was first introduced to. And I had actually rented a verbal. And I was like, you know what this is I like this thing. But we live in Minneapolis, like who's going to rent, like have a vacation rental in Minneapolis? Like this? Is this really even going to work? And my partner at the time, Jason was just like, you know what, man, let's just give it a shot. Like, we got this so well. And we had all this staging furniture, and we're like, you know what, instead of like, paying for storage, let's just, like try to do this vacation rental by owner and we had our design team, and he's like, we'll just hire a design team. And we'll take the staging furniture, and we'll design out the house, like we're gonna flip it, but then we'll put this furniture in there, and let's just see what happens. And I was like, okay, but what about the management? Like, who's gonna take care of the management and the cleaning? And like, what about the accounting and like, what about like, collections? And what about reservations? And what about and what about, what about and what about, what about? And he's like, well, gosh, man, You're overthinking it. And that was always his philosophy is like, you're always overthinking it, Murph, and I'm like, Well, yeah, cuz I like to.my. i's and cross my T's. That's my name. My name is Tim, right? And he was like, do just quit overthinking it. Let's just give it a shot. And I was like, You know what, that's why I love you, man. Let's just give it a shot. And we'll learn and we'll learn something. And he goes, Yeah, so you and your wife are really good at all that that system stuff. So why don't you just kind of manage that, and I'll just do whatever you tell me. I'm like, Oh, that's how it's gonna work. Okay, I get it, I get it. And he's right. I mean, I was a numbers guy, I was a systems guy. I was, you know, I was a good business guy. He was a hell of a good sales guy, and a hell of a good, you know, bird dog when it came to finding properties. I mean, the guy was amazing. And that's why we made a great team. So I said, Okay, you know, I will do it, we'll do it. Well, we put that property on the market. And it took longer than I thought, and it was a lot more work than I thought, because you have to get it on other websites. You have to put the marketing gather the photos together, you have to, you know, figure out who's going to be the cleaning person on the on the job, where else are you going to clean it, who's going to do the laundry, there was a lot of different things that we had to figure out, we did figure it out. What was amazing is that after we kind of got the the marketing up there, we didn't know why we didn't have a strategy for how to price the house. When we wanted to rent it out. We just were doing this like we were just doing this on a whim we were just taking action and learning one step at a time. I think what was the one of the biggest mistakes we made was is that we priced it too high. So it took us a while and then eventually we had to bring that price down and then all sudden, boom, we hit a sweet spot, and people started renting it. And it was amazing because the people that rented it, I just would have never thought would have rented it like you know, you would think like if it's a if it's a short term rental or vacation rental, I was like, Oh, well it's just gonna be somebody that's flying in that, you know, maybe wants to enjoy the City of Minneapolis or maybe they're coming in to see family. Or maybe they're maybe they're coming in and like they're having a family get together. I wasn't really sure who was gonna rent it. The crazy thing is, we rented that sucker out and we had it we had it at about 250 bucks at night. We rent that sucker out pretty consistently. We had parents coming down and rented now because they're seeing their parent their kids at the U of M. We had people coming down to go to events down in downtown Minneapolis, which has always has a ton of events. We had people we had a couple rented out so that they could have their one was I think their groom's dinner or something or the end they could and then they would leave after the groom's dinner. And then the guys that came from out of town would stay there. We had a bachelorette party there, which was it turned out okay, I was kind of nervous about that one. But it turned out okay, he
Bob Grand 8:43
said yes to that.
Tim Murphy 8:44
Yeah, we had a women's group that met there multiple times where all they wanted to do was just have the house to meet and then they would break off into these rooms because the place could sleep 12 so I mean, it was a big one and a half. Yeah, it was a pretty good size and we had a bunch of beds in there and whatever. So we had all these different people using it after a year and we said hey, we're going to give the sucker a year and then we're going to reevaluate after a year we sat down my wife who is just amazing at running the numbers had spreadsheets and everything broken down. And it basically came down to Hey you guys you know how awesome that deal was? I said well how awesome Was it because it seemed like man it was always full and we were excited about it and like you know people always want it in I think we're all set up and next year it's you know, we're gonna kill it. She's like, you guys, we actually didn't make any money. You know, like we actually probably maybe lost some money because there's probably some things that we did that we didn't really totally calculate like maybe on the laundry or maybe on the cleaning or maybe on the miscellaneous supplies that we put into the house that you know, I didn't totally calculate every single thing because it was all part of our staging. You know, she's like, I guys, it's not like we're making a ton of money here and we we look back and my partner and I looked at each other and like God, we could sell this and make a killing. Do we really want to do this? And like, kind of make nickels and dimes and try to figure this out? Or do we just want to sell it and make our killing and just move on? And the reality was, is that we ended up selling it because we bought this property. So right and we were gonna make so much money on the flip. It was like, you know, Good try, but like, let's move on to something else. This isn't our thing. I can tell you this. When I walked away from it, I was I was left with an edge. I was like, I really like this though. Like, I really can see an opportunity in it. But I just didn't execute it well enough or for long enough to figure out the science of it. Did it work? I will tell you for me, it didn't work that great. But is it worth looking into? Hell yes. And I've been looking into it ever since I have not executed another vacation rental property or short term property, short term rental property. But I've been always thinking about how can I do it? And how can I do it better. And today, Bob grand is going to walk us through the introduction to vacation rentals, short term rentals, Airbnb, or vacation rental by owner calm, he's gonna walk us through it. So grando take it from here. Let's get this party started and tell us like, from a 30,000 foot view, what is it like and what do I need to think about when I want to do a short term rental?
Bob Grand 11:20
What is it like? What do you need to think about when you do want to do a short term rental? So a really good question, you know, so my experience with them has been I guess the opposite of yours like and I think I was listening to you sit there and talk. And I was thinking about eight years ago when you're doing it it was such like I would say that thing was just starting to crawl vrb O's have always been there right when you go to Florida you go to Hawaii or any of those places. You know me personally, I've always rented them doing that I'd never stayed a hotel when I go to why I always rented a condo that was true. vrb Oh, that was the only way I knew how to do it. And I learned about that long long time ago from my aunt who owned a condo there so this is kind of like I was just like yeah, it's on brb oh whatever you can book it there and right do that so I was like okay, so just thinking about that you know, Airbnb came along and pretty much opened up the market right? kind of grew it, you know, and then it even blew up for VR vo and now there's just like you said it's it's Vacation Rentals or short term rentals because there's so many other sites so many other Expedia even allows you to like have them on there
Tim Murphy 12:22
so many strategies now it's like everyone's got this little niches strategy it's just branched off into so many different opportunities
Bob Grand 12:29
yeah so why you know it's like To me it's it's a great market that it's it's it's in its infancy still you know, real estate investing has been around forever so the latest thing in real estate investing the biggest twist you know has come out in the last few years is house hacking, short term rentals Vacation Rentals you know all that stuff so that's like the next thing that's really growing and they're actually it's really taking a giant slice out of the hotel market so you see like these committees where they're trying to push regulation they're getting so many Airbnb ease that it's crunching to help hotel market why is that an issue it's a big issue because the local cities get lodging tax off that now they're starting to force Airbnb everybody to pay lodging tax which totally makes sense it should be but it should be a market where you have to do that and you know still allow for competition everything like that. So why
Tim Murphy 13:23
Well, one of the things that I think is really interesting that you've brought up is that and this has really gotten me thinking more and more because yeah, I'm not yeah I don't like sure what I like to have a second home and what I like to turn into Airbnb so basically I can either make money or even break even on a second home yeah, that's what's probably in my head and planted into my brain right now. But do I want to own a bunch of vacation rental owners? No, because I'd rather focus on on things that I'm doing. But every time I talk to you, you're always so stoked about this. But one of the things that you mentioned that I think is really important when you're thinking through like is this worth it or not is like considering a short term rental as a hybrid approach to real estate investing I think that's something that you've you've mentioned to me I'm like whoa, that's cool. So like maybe we start with with that and then also maybe transition into one of the other things you said is like and I think that's where our audience is gonna get the biggest value is like you and Shelly literally. Airbnb your personal house. So like, we talked about those two things and how they kind of interconnect
Bob Grand 14:29
Yeah, well I consider it a hybrid approach because it is real estate investing you do get passive income from it but there's an active aspect to it isn't as active as you going out there and working a nine to five job No, and my best advice for people who go out and want to get out of their job is to say, you know, how can you do this? Well, if you own your house, or even maybe even if you rent your house because there's a way to do that you can Airbnb it out and replace your income, maybe not replace all of it, but maybe replace enough of it to go back to part time. Maybe then you opt out. Is it over time get your bookings up, get it up to 80 or 90% occupancy that it pays you enough to leave there and then pays you enough to go rent another place or go buy another house to actually live in. So that to me like when I was sitting there and we're talking about what's the best way for people to get started I was like, I think it's short term rentals because it's such a growing market so many people really want to do it that that you can really get there and just start figure it out house hack your way right into it and then move into the next one so
Tim Murphy 15:29
you know this house hacking term I guess I don't know I mean, maybe I'm too old but what when you say house hacking like what exactly like how do you define house hacking because I feel like people use it as this is broad stroke but like how do you define that
Bob Grand 15:44
right so house hacking to me is like anybody that takes like a single family residence duplex or anything and to me for house hacking it's typically you own it as your primary residence and I could be wrong but that's kind of my feeling is you own is your primary residence you live in it you may be rent out bedrooms, you may be short term rent it you live in one half of the duplex you rent out the other half to cover your payments so that way your mortgage free which frees up your your cash for other things to invest so that to me, is what house hacking is and I'm sure there's a lot of stuff that goes into that and there's a lot of different ways because I'm like you I focus on one niche right now and and Airbnb is just kind of one of the parts. But you know, I don't really house hack. It's what I do house hack. Actually, I do house hack my own house. Damn house. Hacker. Yeah, so here's a good here's a good example. So you know, we bought a really nice Spyglass house a few years ago, we fixed it up. The mortgage payment, we're just married and we had the money right to take care of it. But Shelly ended up selling one of her other houses that she had is an Airbnb. And she got into that back in like 2015. She was like, Hey, I'm gonna try this Airbnb thing. I was like, okay, whatever you want to do, you know, I was like, Yeah, it sounds like it could be I was like, would that even work in Eugene, Oregon, and she just starts crushing it and then like, covered, you know, all of her payments, and she was kind of living with me and not really living there. So it was like, we're getting together. So she covered all of her expenses on it and made like an extra $30,000. And I was like, this is crazy, like, you covered and I was like, break these numbers down for me. I was like, She's like, Okay, my out of pockets. You know, we're, you know, and she, it was a smaller mortgage, she goes out of pockets were like, everything, including utilities, you know, internet, all this stuff was about 29,000 a year, and I gross now just say, you know, 55,000 a year and then boom, I made like, 30 $32,000 off and I was like, that is a lot of money to pull out of one property. You know, I was like, Huh, that's crazy. I go cuz a single family home. You know, right now in our market. If you buy it, maybe you're gonna probably net 100 150 bucks a month if you rent it. I was like, Can net 2500 $3,000 a month? Yeah, I'm one of these things. Yeah. So then, you know, we fix up our Spyglass house and it's beautiful, looks awesome. And she's like, Hey, what do you think about, you know, renting this out on Airbnb, I was like, This house is huge. It's 3300 square feet. I'm like, Who's gonna rent this house, to Eugene, Oregon, who is going to rent this place. And she's like, I think it'll work because I really think it'll work. I was like, Okay, I go, I'll only do it. If we can get at least $750 per night, I go, I will be willing to leave my house and go do something else if I'm paid $750 a night and I think that's one important thing to realize when you are kind of house hacking and saying like, what is that cost that would get you up and moving and get you out of your house to allow somebody to come in and read it.
Tim Murphy 18:43
When I tell you this Bob, my wife doesn't matter how much money somebody gives us she would never do that. Like that's part of the strategy too. It's like sleeping in her bed. It's like well do I want to have a happy wife and a happy life? Or do I want to make a couple extra bucks and that's part of the thing to where I admire that you guys are both like and I got younger kids too and your kids you know your kids a little bit older. I think that's proud of this thing to maybe in the future I would do that. But that's part of the also thinking like is a short term rental property the right strategy for me is this house hacking thing the right strategy for me now I would say this if you are in if you are trying to make a transition from a W two job and you're trying to find additional revenue streams and you're willing to make the sacrifice of whatever it takes to get out of this w two world and create this true life on your terms and using as many different income streams as you can to create that life on your terms. The short term sacrifice for the longer term gain I think it's worth it. But everybody has to be on the same page like you know, Bob and Shelly they're on the same page. And and Bob, I think he nailed it. Like Bob doesn't love leaving his house. But Bob will leave his house and be inconvenienced at a price. Yeah,
Bob Grand 20:06
that is exactly it. Like when you say we're on the same page, I'll say this that is Shelley's form of investing that she freakin loves. Do I love it as much as her? No, not at all. Like, I like the other form of investing that I do with my brother flipping houses doing all this stuff. I don't like the inconvenience. That's why I set the price to it. And that's why we agreed on to be able to make it happen. The sad news is, she's been able to get those prices every single time including on one house up to 15 $100 per night, just these crazy amounts. So you know, our other house that we've had to move back into when we sold that she's got that thing. So booked out, I feel like half the time that I'm homeless, and I've complained about all the time to my brother, because and we keep increasing the rates, I think and people keep booking it like we put our little tiny bungalow house to $400 per night. I'm like 400 bucks per night, I'll leave on that one. No problem, just like it booked out for this weekend here. I'm like, Oh, really, it's a beautiful house. It's got amazing reviews, but it's like, you know, I'm just like, what is the price here, people that you will not pay so I can stay at my house. So I can focus on some other stuff. But it is good. And I do love it. And it does generate a lot of money. But it does come with those issues. And that's why I say if you're starting out as a real estate investor, and you want to figure out how to make some money quick, or you need to get out of a job, so you can focus more on it. And you're willing to make that sacrifice, just like you said, and your partner is on the same page with you is probably the last point there, then it's probably really, really worth it and can be very advantageous. Well, let's
Tim Murphy 21:36
move on to this because I think a big thing that we want to bring value for our audience, the big way we want to bring value to our audience is how do I even start thinking about this? Like, how do I even start thinking about, you know, should I, you know, house hack my house and turn it into a vacation rental or short term rental? Should I go out if I have the funds and and you know, buy a property and turn it into a vacation rental? What I mean, how do I even start thinking through this? And what questions should I be asking myself to make sure that you know, and this is the big thing that I go through for myself when I'm thinking about buying a second home and then turning it into a vacation rental. It's like, I don't want to lie to myself because I want that second home so bad that it's gonna be awesome. But yet, I don't want to convince myself that it's gonna suck because my first experience wasn't amazing. So like, I'm having this battle in my head of like, be yourself, but yet don't sell the opportunity short, like, work work through that with me.
Bob Grand 22:42
Yeah, so, I mean, so I get what you're saying not all locations are probably great for an Airbnb, if you live out in the middle of nowhere in the desert, you love living out in the desert, you have to ask yourself this question is who's coming to visit the desert, right? So if you're in a town of 500 people and you think you're gonna make $100,000 a year house hacking on Airbnb, you better have some amazing like retreat property where people are going to venture out there out in the middle of nowhere and find it but
Tim Murphy 23:10
I mean, honestly, let's talk, Eugene, because I think you nailed it, right? Like, you were like, Oh my gosh, nobody's paying 400 a night for this bungalow house. Like there's no way nobody's gonna pay for 3300 square foot house. What are you seeing? Because I mean, you gene is the first thing I wouldn't put a pin on my map and say, Oh, I'm going to Eugene, this year that I love Eugene,
Bob Grand 23:29
Oregon. So what Eugene Oregon has going for it. So you know the locations one of the second biggest cities in Oregon, but it only has about 300,000 people here, right? So it wouldn't be a population base that people will travel for. It's not one of those great outdoor things. It has the University of Oregon. So for me, that's one of the main draws to Eugene is the college so the college has a lot of stuff going for it right? It's one of the biggest but probably it's the biggest College in Oregon. It's the University of Oregon Ducks so we have the ducks football games, Autzen Stadium houses 55,000 people roughly. We have Matt night arena, which is the basketball stadium houses like six 8000 how many students go there? I think about 30,000 students go there. So proximity is key in an Airbnb right proximity to attractions proximity to colleges and I were even like when we've been chatting about is another kicker and there's like transient populations with military bases. So and things like that where people be coming to visit for specific reasons like you would go to a college town to go watch the games right? You would go to the beach, you know to run an Airbnb because it's the beach you know, or a lake or there's some sort of a venue or draw to that area, the outdoors. You know, things like that. Bend Oregon, where we're at is they've had to put like really put the clamp down on Airbnb as you go in certain places because everything in that town Don't be an Airbnb because it's the great outdoors, you know, it's an amazing place for that. So not all locations are great for an Airbnb. So it might not work for you to actually house hack or, you know, do kind of that quasi approach, you know, with your Airbnb. But you know, in that circumstance, you would want to go and look and figure out, is there a place near me? Is there a place, you know, that I would love to go? That kind of matches some of that criteria? And the more of those factors you have, the better off you're going to be right? Like if you've got a college town that also has a military base, like for example, my daughter lives in Savannah, Georgia. So when I'm there, we naturally start thinking Airbnb is it's like, okay, so Savannah, Georgia has an amazing design school. And it has a military base, Fort Benning, right by it. Plus, it also has the additional attraction, which I think it's an attraction, the beaches on the East Coast are pretty good, but it's kind of a little bit further away, but you got some really close proximity, you know, locations that you can actually get to sounds like, that's those are some good factors in there that you can do, and that you can kind of look at. So location, location, location, you know, I think is probably the key there and really looking at it and see if it will work.
Tim Murphy 26:06
If I'm thinking about, okay, let's do this. Number one, if I'm thinking about house hacking my house and I want to make an additional income stream. And if that means that using my current home to do that, which will allow me to get to life on my terms, I'm willing to do it. So if I live anywhere, should I just give it a shot? Like, what do I think is probably
Bob Grand 26:27
worth it? Yeah, what are you going to lose? I mean, so say, even if you, you know, rent it out 10 or 15 times your major mortgage payment? What would that do to your life? You know, like, what's the biggest problem people have in their life paying that monthly mortgage payment? So if you can break even, or cut that down by 50%, regardless of where you live? Why wouldn't you do that, you know, put it on at a higher price. You never know who's coming to your town to do that. And what what I'm thinking is like, I'm starting to feel like there's this generational shift, like in the marketplace, right? Where my mom and dad went to the beach, rented hotels, my generation would probably consider renting a hotel, but also is a little bit more focused on like comfort and thinking. If more people are together, I want to be with him. I want to be in community. So we can be around each other. So I would be kind of a hybrid type person who's looking for maybe a hotel if, if I have to do it, but I kind of want a short term rental on pretty much all the time, the newer generation, they don't really even think maybe think about a hotel. But they've been brought up in a culture where short term rentals or vacation rentals are the normal thing. You know, right down to the ride sharing evolution, like Uber is a very normal thing for them. Like I'll catch an Uber or, you know, like all used Turo to rent a car online, which is like that, the car renting version of Airbnb, it's a very normal process for them. So I think generationally now, there's going to be a fundamental shift, and the hotel industry is feeling it. So that's why I think like, in almost any location, people will probably consider doing that. It's just a matter of how much you know how many people are actually coming here. Okay,
Tim Murphy 28:05
well, then I think this solves the problem of like, if you're going to house hack, and you really want the quickest, easiest way to become a real estate investor, and you want to try something new and you want to add an income stream, then you know what house hack your house, who cares where it is, and tell us how it goes? Because I want someone to house hack a house in the desert and tell Bob, you know, Bob, you didn't think I can house hack my house? Well, guess what, I just got $4,000 a month. And Bob would be like what? I mean, you know, I want you guys to go on our Facebook page and a house, hack a house and tell us where it was and what you're able to pull off because I think Bob nailed it. Like it's a generational thing. And I think people will rent a house just about anywhere. And why not see if they'll rent your house, if it means that you can pay your mortgage, or they will pay your mortgage for you. And it will help you get to that life that you're after. Now, the next thing is is like okay, if you're like myself, and you're looking for like a second property, like a vacation property, do you think that it matters? Like, do you think it matters if I buy one in Arizona? Or if I buy one in Florida? If I buy one in California or if I buy one in Cabo? Or if I buy one in, you know, you can provide a Canada right? Like if I buy one in Canada, and I want to go skiing, you know over in British Columbia, like right you think it matters? Like where I am II I'll be good. I mean, like it's a vacation place. Like Of course I'm going to make money.
Bob Grand 29:30
Well, I think so that's the interesting thing that I've seen because I've looked at like, you know, specific like I love Hawaii, right? You know, I go there all the time. So I'm looking all the time and we're thinking like, gosh, could this be a great place? Where do the numbers work? A saturated market is you know, one of those things means it's a competitive market, right? So then somebody might come and bring something very similar to your house on the market and try to try to crush the market and charge half the price right? So So there's those things so but you know, styling and features and amenities and the experience completely change that's why we get a really high price for our house compared to most houses where people might bare bones looks matter the design we know that right? I mean, it's just like when you're selling a house, we staged everything you stage everything, be experience is the key to that to beating out that market. So you know, my wife says, I don't care what the market is, like, I'll go in there and I'll crush it because I've seen everything on the market. She goes my styling this and that, and I agree with her. She's probably right. But the numbers show kind of like in Hawaii like a flooded market, right? because everything's a short term rental there. Why wouldn't it be condos are all short term rentals. So it's a huge market and see start breaking down the data. You're like, Okay, what is the one bedroom get me what is a two bedroom get me and what's a three bedroom Give me the interesting thing that I found out and the website I'd love to crunch data with is err DNA calm. Yeah, it's an amazing website for crunching that stuff. I'll go into a market when we're staying there, just buy that market while I'm there and start breaking down the data. What I found out in Hawaii is that a two bedroom condo does not pay a one bedroom pays and you can actually make some money and do a pretty good jobs. And it's because the cost of a one bedroom is a lot cheaper than a two bedroom you're paying about $75,000 more for that second bedroom. But that breakover doesn't get you that much more per night. So a one bedroom and two bedroom get you about the same cost per night, the three bedroom, nothing is like double what the one and two bedroom are. So you can pay for that. So because families obviously it makes sense, right? Either either a couple is going to Hawaii, husband, wife, or family's going to Hawaii. And if you're a family, you typically have two kids, you probably want him and maybe you have somebody else coming with you and you want maybe a three bedroom. So when I started running the numbers like this is interesting. The fact that a two bedroom does about as good as a one bedroom. But the three bedroom does really good. But the cost of a three bedroom is also maybe, you know twice as much as the one by numbers, you know. Yeah, so I mean getting back to the point trying to crack that down. I think probably all locations, you know, for like, vacation spots probably do really well. It just depends on how are you going to optimize it? How are you going to crush it? How are you going to design it, which is the skills that we have and that we know you know, as real estate agents and real estate investors how to make something attractive to people more than just providing them like I've run an Airbnb in California on the beach. And like I had to go buy salt for the house. I'm just like, this sucks. They charged me a sheet fee and I was like, do you want bedding? I was like do I want bedding in an Airbnb? Like Of course I want bedding they're like yeah, it's a $200 and this was after I rent it he charged me $200 but they're like well it's a bedding service otherwise you have to bring your own betting I go I'm coming from Oregon How am I going to pack my own betting to California guaranteed that ever going by there is not making money you know it's like they're they're probably making money when the market when they're all rented out but they're not making as much as it could so
Tim Murphy 32:56
let's go on to the next thing you know grand no because I think we've nailed like location location we've nailed the house hack strategy we've nailed the fact that if you're gonna buy it as a second property you know you have to dig a little bit deeper you can't just go out and buy anything because if you're buying it as a second property you're probably going to be in a saturated market because they're you know a lot of these like Florida Arizona you know out in Colorado there's multiple different Vail Beaver Creek or whatever they call it those ski towns I mean those are all probably second homes majority of them are probably second homes. So you have to have a strategy and I've actually been looking in the area for a second home and that I want to turn into vacation rental in Cape Coral, Florida. I love that area. And that's super saturated as well and it's funny that you brought up the one bedroom two bedroom three bedroom oh wait four bedrooms because now all sudden four bedrooms is it's like whoa the numbers just get they change it's like oh my gosh you can actually make money on this and I think it's also economies of scale like you now all of a sudden can maybe if you have four bedrooms you can bring two families well now two families renting a place at you know call it 1500 bucks a night or even 2000 bucks a night you know it's more doable 500 bucks a night it's like it's more doable because you know you have eight people in the house it's like oh my gosh, I think we can actually make this work so I'm glad he talked on that but still still I'm gonna be like man is his short term rental vacation rental Airbnb vacation rental by owner calm whenever you want to call it is it what are the benefits? Like really what are the benefits? I mean, obviously additional income I will own my own vacation property so I'll be able to use it when I want to use it. But what other benefits are there and like what are the other drawbacks you know, get let's get real here like this isn't everything isn't roses you know there's gonna be some drawbacks. There's gonna be some inconveniences I think we on the house hack we all know the inconvenience of leaving your own property which Bob talked about, but go over a couple of the benefits and couple of the drawbacks Bob that people really need to think about maybe the ones that aren't so obvious.
Bob Grand 35:03
Right? So Good question. So the drawbacks, it is work it's not it's not passive income, you know coming in, there's there's the active component to it. And if you are not good at building systems or you know, figuring out how to use the right websites, because there's a gazillion out there to help you kind of optimize, get zillion of them to help you optimize it, you can fail miserably right? You can feel overrun, you can feel overworked. And, and starting out is the hardest part trying to figure those things out. It's scary, because it's it's investing. Right? So it's it's a newer industry. There's the fear factor stories are read online, where people have parties, your house have all these crazy things and stuff like that damage to your house. Good. Those are all kind of drawback things that I
Tim Murphy 35:50
think we're finding guests. I mean, okay, everybody's like, oh, there's an app for that. Do guests just come streaming in? Or is it? I mean, is there some strategy around this marketing that you're doing?
Bob Grand 35:59
Yeah, so there's some strategy like to start, you start out with a lower cost per night, right? So initially, until you start getting bookings, until you start getting reviews, you're gonna it's gonna be harder to book. And there's a lot of, like I said, sites that can help you get that better and make things better. How do you do that? How do you work on that, but initially, that's probably the hardest thing is getting it ready getting it going. It's like, you can't just you're not going to put it on there and be like, well, I want it 450 bucks per night, you might do that. If you're living in the house, and you're like, this is my price point. But if you're like, Hey, I really want to make this a go. You're really gonna have to figure out okay, I'm going to reduce my price here. I'm going to be diligent with it. And then as I guess, reviews come in, I'm going to make sure they're all positive reviews. And I'm going to slowly increase my night for that, like my Harris house it in Eugene close to campus, it started off at like 175 at night. Now we have at it, you know, 300 a night it'll book out all the time. You know, so
Tim Murphy 36:58
you would say that's because of the reviews.
Bob Grand 37:01
I would say that's because of the photos. You know, the styling the amenities in the backyard right down to having cornhole right down, you can have a Jenga setup. So it's a fun experience having a fire pit, having a TV outside the watch games and do stuff like that having a pergola all those amenities you know, like, like what you want in a house because it's an experience and that's the number one thing that Shelly actually taught me she goes in she goes I consider like an Airbnb like an event. Like you just like an event. I'm creating this experience for people like when she was doing wedding she's like, I'm creating this amazing experience with an Airbnb you have to think of it like What experience do I want this person to have when they come to my property? That's when our latest thing is we finished up our backyard and now the reviews are just like this backyards amazing this is awesome this is so we're getting huge amounts you know people reading it because they're going to read that and they go it's got Jenga, it's got cornhole. Oh, my God has got a fire pit, all this stuff. So those are like that the things that you have to go through like the beginning, just get people going to the fact of, Okay, now, I'm going raising my price I'm optimizing, I'm putting money back in I'm trying to deliver value
Tim Murphy 38:11
like really, you're delivering value when you give an experience?
Bob Grand 38:15
Exactly, dude, what about
Tim Murphy 38:16
Okay, I mean, the other thing that I think you need to touch on is you need to pay attention to the numbers you need to track every dime you spend otherwise, you can just be lying to yourself on what you're really making, because that's easier because it when we had our property we were we were penciling every single dime we were spending and that's what's beautiful about my wife because she does not miss a penny. But there's a lot of people that aren't good at that there's a lot of people that don't put in the work and don't aren't that detail. They're kind of like all over the place. And they're just like, ah, whatever. As long as the money is coming in, we're good. Where can you get lost and confused in that whole process?
Bob Grand 38:57
So segmenting out those costs, right? So when you you mentioned that earlier, and I wrote down treat it as a business and that's what you have to do so and we put everything with our Airbnb, it's it's all in one account, you know, one credit card, everything rolls through that. So we can track that and know that and know those exact costs, because it gets expensive, right? Like when you say like, Oh, you know, I want to have YouTube TV, I want to have Hulu, I want to have Netflix. You had all those costs there in there. The benefit to that is in your personal life, you get those things for free, right? Because that business or that Airbnb, which you should treat as a business pays for those things. So you're right. I mean, if you have a leaky boat, and you're just losing money everywhere, you might not make money, you might be working for the Airbnb. And that would be unfortunate if you do that, but you have to go back and ask yourself, why is this happening? Am I treating this as a business a? And then B? What is the experience that people are having when they come to my property? And yeah, if you're not doing it right, you'll find out there's a problem with one of those two things. Yeah.
Tim Murphy 40:00
And I really want to harp on this point because if you're not really paying attention to every red cent that goes through that property comes in and goes out you could be looking at it saying wow look at all this money coming in and I kind of was looking at it that way like look at all this money coming in Look at all these bookings coming in we have to be making money but we ended up not really be making much money and you don't want to fool yourself because at the end of the day what will happen is your two or three down the road you'll be you're actually dwindling your income you're dwindling your reserves you're taking away from that life on your terms you're taking away from that retirement that you're going after and you don't even know it so you have to track your expenses I The more we talk about this the more I'm going to harp on that because that was one of the things I really learned in my experience Bob if I'm going to buy a vacation rental by owner what is there different financing things that I got to worry about is there different insurance things I got to worry about because to me that's how my brain kind of works like there's got to be something up with like the financing if I'm going to be renting this thing out all the time you have to treat it like a rental property or can I get a normal conventional mortgage as if it's an owner occupied property you know the insurance like well yeah I got a boat here I got a place in Cape Coral I got a boat yeah just jump on my boat and take it no problem like I got a pool a pool you got kids no problem. Like how do I how does that work?
Bob Grand 41:27
I don't think it's that easy. Yes. No, there's some challenges there so one one lesson when you know when Shelley's back and working on her first one she called up her insurance company it's like yeah I want to add like make sure I have coverage for like Airbnb and they're like no way no how we don't do that if you do that we'll drop you and so I was like wow, I was like no way like yeah, so then she figured out you know the platforms offer insurance rates when the people are staying there they all they offer a level of insurance with that so there's always a complex you'd like that and that was probably like 2016 things are moving in the right direction where people well now you can actually have those insurance and those additional writers you know I guess they call that an insurance right or something like that. So they have that we can do that and get that insurance but I'm with you like I get got wrenched a little bit when I think about swimming pools and boats like I I don't think I would have a house the boat and be like yeah use this boat and like their kid takes out and drowns or they've crashed into somebody I feel like there's a huge liability there you know it comes down to having good business liability insurance also which we carry a ton of that so I'm thinking about that personally but financing that is probably one of the biggest challenges right so you know when you're financing something as your primary residence obviously get the best rates you know, if you're financing something as investment What do you have to do typically put 25% down but if you tell them you're gonna use it in a short term rental, they might not want to finance you for that which is interesting to me because it makes so much more money or it can potentially make more money than what rental property can but it just lets me know that you know the the market is so new and that they're not going to trust it for another 10 years right for normal financing there are a lot of alternative financing places that you can go to my brother found one that were refinancing kimbro properties and they actually say that they do short term rentals that's like a thing but they're more of a private so you take a higher rate you know with that so that could offset your cash flow right so i think their rates are like four and a quarter compared to like your typical investment rate right now might be what three and a half if you could buy an investment property it's not you know, primary mortgage rates but it's a little bit higher and then that's even higher than that so yeah, you know, that's there's some challenges there but I think as time goes on, and as people see it or lenders see it and insurance companies see it as a viable market and then there are some other fail safes in there with the platforms I think that people will really start to see it another
Tim Murphy 43:52
one I think it's all about supply and demand. I mean if the people want it they're going to give it to him if the people want insurance for rental short term rental properties the insurance companies are going to give it because if they don't their competitor will or a new competitor will yeah and that's not going to happen so same with banks and financing I think that the longer this is around the more it's viable and the more there's a demand for it then you're going to be able to find easier simpler solutions. Bob Let's end it off with one of your best stories about what your short term rental property success story because I started off because I want people to realize like isn't just roses like there is some there is some sweat and there's some thinking and there's some strategy behind this and if you don't do it, you know it could end up you could end up failing. I would say that I kind of failed at it. But Bob you've been crushing it so tell us one of your crushing stories that we can end this podcast where they're like, man, he did that?
Bob Grand 44:50
Yeah, so like, you know, like I said our primary residence that I wouldn't leave I was you know, unless I made 750 a night you know. So it last couple years in Eugene. We Have you know Hayward field which is that now is the best track and field facility in the world right so we have with the Olympic Trials all the time we have the worlds that come like every couple of years and this is at the University of Oregon yeah University of Oregon so so there's you know our house so we had like in one month we had like $30,000 or $25,000 coming in you know from from all that stuff from all that revenue plus it was graduations rate graduation college graduation that we had that goes right into track and field and all this crazy stuff. So it was like gonna be like a 25 or $30,000 month well then COVID hits of course right so this is still a good story. So all that stuff just gets wiped off the map right? And I'm like, this is the downside to a short term rental.
Tim Murphy 45:51
Yeah, I remember that you're like yeah maarif wobei short term rentals are dying right now.
Bob Grand 45:56
Yeah, yeah and then the other house you know it's like all that got wiped out but it wasn't that big of a deal because we can make it work with that one so I was like so there was that big boom right in the market. But then I was like what's how's this gonna shake out you know what's gonna happen is this the into short term rules? I said every second like this market could be dead airbnbs bleeding cash or face bleeding cash, they're like, cruises, the sky is falling. Then all of a sudden, that was like March and so all my March, April, May, June, July stuffs gone, right. So then I think people just start getting restless, you know, and then the house just starts booking out immediately again, we're like, well, we're getting a booking we're getting booking at these higher rates even higher than like, people like, hey, I need to get out of my house. Can I rent your house? For two weeks? I can work from anywhere. I was like, Whoa, this remote working thing is starting to really pop off here. And then like somebody was like, I've got a week what's your internet speed at your house? I need to be able to work remotely. I got to get my family out of where we're at. We got to get somewhere else so we can still work and I was like, all this starts happening. So it goes from you know, where we had nothing, right? Where we thought we're gonna get like $30,000 a month I'm like, this is the most amazing thing to 02 then it comes back and we get like $20,000 but the best thing ever about this one was one night we're sitting there eating dinner. And Shelley's like hey, we just got a booking request from somebody and I was like no no no no cuz this is very personal house right? Yeah, this for our personal house like we got a booking request. And his name is john Dre and he wants to he's he's flying in and he wants to be able to rent the house tonight. I was like we're eating dinner. Like she's like, man, I was like sitting there thinking I go who would fly in Eugene Oregon. And she said he goes he's coming for like health rehab or rehab there's still the UFO complex and all that stuff. I was like huh I got the Andre de Andre I was like okay, I go Let me see that little tiny picture. I'm so I'm looking there with like, glasses like, that looks. I think I know that person. And I go I think that could be DeAndre Hopkins that. I would say he's probably one of the number one two or three wide receivers in the NFL. And I was like, and he just got moved from the Texans to Arizona, which is at jersey right behind me right there passing on that, but I've got the jersey behind me. So DeAndre Hopkins. So I tell her, I go, Hey, just go out and press the button. I go, if it's DeAndre Hopkins flying in, I go, I will leave my house. He's like, oh, you'll leave your house because some professional athletes rolling it down ago. He's paying me the price. And he's a professional athlete. I'm guaranteed I'll leave the house. I'll clean this thing myself tonight, and make this thing happen for him. And so she pressed the thing and it comes back. He accepted like it's DeAndre Hopkins. I'm coming into town for this and this and this and I was just like, Are you kidding me? DeAndre Hopkins, I'm gonna now stay in my house. I'm like, What is he doing in Eugene, Oregon. restlessness. You know, he's just like, want to get away. He comes stays at the house. He's only going to be there three days. So it's like no big deal is like a Friday, Saturday, Sunday type thing. I was like, that's no big deal. So then he ends up you know, saying, Hey, can I extend? And we're like, we're out in our travel trailer. But the lake you know, it's July, or late, late June, early July. With the travel. They're like, yeah, we just stay up here. A couple more days. We're sitting Lakeside. Like, I'm like, in fact, invite him up to the lake. He's like, we're not doing that. Please invite him to the lake. So she's like, no, it's like, Okay, then he texts back. He's like, Hey, I lost your house key because that house we just had a keypad you know where you've done it and open the keys like I lost your house key. Like I promise I would replace the locks this whatever it is. And then Shelley's like, Well, my husband's pretty handy. We can take care of the house keys like but would you do my favorite would you sign you know, a couple of footballs and a couple of jerseys for him. We'll just drop them at the front door. He's like, Yeah, no problem, you know, and so, so the best part about it is within Airbnb is you never know who you're going to get, I guess is my point. And we create an amazing experience to where he got to our house, stay there. And then Extending extended for three more nights we made great money and we had a you know professional football player staying there I got to sign jerseys two footballs I gave a jersey and a football to my brother. We're both big football fans, so it's just a really cool experience. So does that stuff happen all the time? No, but it can happen. Yeah. Can you lose money in Airbnb? Yes, market considered things can happen in the market. But there's always something else that can make you money. It's just being willing to do that and being willing to be open to figuring it out and strategizing. So that's kind of the cool thing. That's my cool story about it. I tell people that story all the time and it blows people's mind like their professional football player came and stayed in my house there's this one guy staying at 3300 square foot house Yeah, like that's why you need that
Tim Murphy 50:45
because he can't man because he can't
Bob Grand 50:49
because he can you know pay that price and and he flew in on a private jet and I was like, I was because I looked he's like Yep, I go there's a jet coming from Colorado to Eugene, Oregon. It's a private jet. That's definitely his I looked up the tail. I was like, that's a net jet he's using that jets to get here like makes total sense. That's cool,
Tim Murphy 51:03
man. That's that's a great story. grando and you know what, I think that's a great place to end on this. Introduction to Airbnb is short term rentals, vacation rentals. If you want to know more, I think we're gonna keep talking about this topic, because there's a lot to learn, and it's not as easy as you think. And I think we can go deeper in it. So we'll catch you on the next episode of the value of an investor podcast. Take care. Thanks for listening to the value driven investor podcast where we lead by giving for more information about our community and what's new visit value driven investor.com. The value driven investor podcast was produced by digital legend media in Minneapolis build your legend, digital legend media.com
