Starting an STR Business in a Foreign Country

0:00We started off with an Arbitrage model for sure and then you know we started building up a whole bunch of cash whole bunch of cash flow so it was like well we need to park this somewhere and actually you know put down some put down some routes so we you know we took all of our cash and took all all of our cash flow and took all of our business business plans to the bank and said we want to buy a property and we live we actually house hack so we built a I guess it's technically a four no yeah four-bedroom house but one of those bedrooms actually has its own front door in its own studio so it's a self-contained apartment nice and so we house hack so the

0:48The income that we earned from from that property U pays for the whole house which is nice wow that's amazing yeah and you built that from scratch there in Tokyo we did so we bought being downtown Tokyo there's no there's no land right so we we we bought a we bought something that had an older place on it houses go up and go go down a lot here there's no usually the shelf life of a house is about 30 years and they're a depreciable asset so get your head around that one yeah they they depreciate like a car the land holds its value though so you want the land and so we bought land in yoyogi which is between Shinjuku and shibba so basically right in the center of everything

1:38And we knocked down the old house and popped up the new one and because we were building a new building a new dwelling then we got we were able to get Finance because Japan loves construction Japan loves to lend money for people who want to build things so we we yeah so we met that we met that threshold of wanting to build and so we built a a hotel within the walls of our house so that's the one we own we also work with a number of owners who who own property and they're nomadic you know they might have they might be a a a family that has one spouse who's Japanese one spouse who's who's foreign and

2:26They have you know a life here and they have a life abroad as as well so we have a couple of couple of clients who have that sort of Lifestyle they come and use their house for six months of the year which is great for 180-day license and then we we do the property management side of it for for the other six months and yes so we have a number of of people that we co-host with Pro profit share it's mainly what we're looking for properties that meet our our brand that really suit the needs of our ideal guest so I've turned down properties all the time that sort of don't fit what I can sell yeah got it okay and and what's your criteria in terms of numbers like is there a like a net amount

3:15That you're looking you know a net spread on a monthly basis to take on a new property or how do you decide yeah this one is is worth it for the time we're going to put into it that's a great question so for for an Arbitrage I'll look at the numbers and I'll also download all my price lab Market dashboard I love them they make my life so easy and and I'll look at obviously occupancy all the market data data is golden which I didn't know in the old days in the old days it was just on Instinct and but now I'm really I'm really dialed into the data so if I can make my fixed costs so that's rent rent and salaries Etc in the first seven

4:04Days of a potential ADR so my like the if the nightly rate over seven days will cover all my fixed costs then I'm interested if all of the fixed costs plus the variable costs are covered within 15 14 to 15 days then I'm really interested and and then I the the the rest of the month is then you know I would consider that's the Prof side of it so that's usually my rule of thumb yeah and and what are your occupancies typically the the occupancy percentage 95% wow that is awesome can I say that yeah it's it's it's right now we are we it is it is booming here right now absolutely

4:52Booming that's incredible so so yeah so we're typically at 95% I know it's it's unheard of that's great though I mean so so thinking through that that I mean 50% of the the the month is your expenses and then your other you're you know rent out 14 of the other 15 days probably which is all profit which is that's a great great business model well I'm looking then at that data I'm looking at the 50th percentile right so I'm really trying to be very very conservative I'm usually hitting I'm usually hitting all the costs Within you know fixed and variable cost within the first seven days because especially now prices you know prices are quite high so yeah so but I don't go into a

5:41Deal unless I'm at least at that 50 50 percentile I try to obviously beat the algorithm with with a lot of things so with service and with yeah so I'm really trying to hit that 7 at least that 75% that's that's fantastic and speaking of expenses what what does your your team look like like what what are you do and what do you Outsource like what are some of your biggest expenses and what does your team look like sure I do too much I'll be honest I I work I I need to really sort of manage some some of my I'm I'm just I guess I can be honest here in in that you know we had a such a rough time over the pandemic when the

6:29ERS were shut that I that even though things are going so well now I'm still like I I still think even though we're doing so well I keep thinking how long is this going to last how long is it going to last so I've I need to get a bit more trust factor and then I need to sort of pull back on my day-to-day a little bit but yeah so I started by myself as I said with that one small unit and then it was me and then I brought in a cleaner because yeah I'm that's not my skill set and and because I you know I'd be I'd be playing you know if I'd be cleaning I would be cleaning apartment and then I would also be fixing things and it would take me so long when you Outsource to a cleaner that's all that that's all they're focused

7:18On and so it just gets done really quickly so it's a much better use of time and and money so I so obviously the biggest you know the biggest expense with we have is in our cleaning team who I pay well and I pay early and I look after and because they're family I could not could not run this business without without them also wanting us to succeed so you know we have five cleaners and then we have a couple of extras after I had a few houses then my husband who was working in restaurants he was working you know Hospitality hours we had a small child Hospitality hours are rubbish and the Pay Here is rubbish

8:06There's no tipping and so you know he said what are you work why are we working like this this is nuts so let me get another couple of houses on on board you can you know you can now come work for me very interesting having your spouse work for you that's another story so he sort of joined the team and he looks after things like maintenance and he does all of the check-ins still does and and we've got another C I've got couple of admin assistants or bookkeeper I've just hired an ops manager and I'm bringing her up to speed now because I'm hoping to offload some of my sort of day-to-day stresses onto

8:55So five cleaners my husband his assistant ops manager and two virtual assistants and a social media person but that's marketing that's slightly different wow nice so so you're are you're not taking the bookings and it's a virtual assistant that's doing the the guest communication or you doing you okay or me or me so I have a lot of automation built in I I obviously I know my guest I know my standard standard booking Arc so I know the Milestones of the guest experience and and I've automated all the key the key points along that Journey and that but things like the you know the random questions

9:44I'm still answering those I'm I have been playing with AI I'm not loving it to be honest because our brand is built around us our brand is built around our personal touch our high touch hospitality and I don't want to lose that so I've got to make sure that that that is maintained even if we're not the ones doing the actual delivery of that service yeah yeah that is important and I forgot I didn't even ask you this but I assume you speak Japanese fluently or or no enough to get me into trouble not enough to get me out of trouble so no I I mean I've lived here 24 years so but I'm still not fluent it's a hard language we speak English at home my husband's Australian as well

10:32My son probably speaks more Japanese than we do because he's at local school but yeah I'm not completely F so when we built the house and when we did everything I hire a translator just you know to go through all the legal paperwork because the written language is brutal but daytoday and getting around and like I'll meet up with the fire the fire people tomorrow that that'll be no problem okay in your team are they Japanese citizens or foreign my cleaners are all Philip my cleaners are mostly Filipino or and I have a Russian a Russian lady who is one of my cleaners as well no no they're not all like there's one Japanese woman I have an my

11:20Ops manager she's half Korean and half Japanese and english- speaking but all of our guests are English speaking okay so interesting okay yeah because that was I think probably what a lot of people are wondering is like could could I do this if I didn't speak the the local language could I do it you know in another country and it sounds like that's that's possible absolutely you know living in Japan for as long as I have what I've recognized is that you know I have enough Japanese to survive to get myself around to do PTA to do all of this I've got I'll I'll never be 100% fluent because it's just such a hard language but I don't stress about it too much because if

12:10You know if my job depended on me being a native speaker then I hire a native speaker there's 300 and something million native speakers so so I I always look for people that complement what I do rather than do what I do so no one can do you know everyone's unique so so I've got my skill set my husband's got his skill set so I'm just trying to build a team where we we cover all the bases and the Japanese language part I have a virtual assistant who does who who can do all of that for us