From Wealth Manager to Building Personal Real Estate Wealth

0:00After you bought the one in St Pete you decided that you're going to start co-hosting what did your first property look like how' you target that yeah so it's kind of funny so it starts with the Arbitrage property I did the Arbitrage property I was paying a lot in rent it was 4750 a month in rent so it it was in that same neighborhood that I had bought those first two properties had a pool so I to put first month last month security deposit and then I furnish the property on Facebook Marketplace for like 12 Grand so maybe I'm into about $30,000 and I went I went live in the summertime and the duck work needed to be replaced in Florida because it was getting up to 81 degrees in Florida in this the summertime which is way different than 80 degrees in Chicago because the humidity down there the owner didn't want to replace a duck work and

0:49So I'm having to refund guests for about six weeks until he finally replaced a duck work which was like $99,500 after going through this whole thing I'm just like all right I don't want to do Arbitrage anymore let's focus on the hosting thing and remember I had somebody who who wanted to learn the process about how to do AA bnbs from me so I said hey find a property close the deal and then I'll teach you how to do it and we'll be partners on this so he had a truck at that time and he just put like a lot of random stuff on the back like he was a jack of all trades and one thing he put was like Airbnb management and somebody just ended up calling his his truck his phone number on his truck at a Walmart parking l lot and he goes hey man I have this I have these people that want us to manage their Airbnb will you do it

1:37With me I was like I've been hearing about this co-hosting thing I was just like yeah let's go meet them see how it goes went there and that was our first property it was doing about $100,000 a year as walking distance from the beach two bedroom condo so we were making somewhere around $1,800 a month charging 20% and then the light bulb kind of just went off because I'm just like I have no risk I'm just managing for somebody else but I'm already know how to do and I can pretty much scale it to however much I want to so that's how the first one came and then when that light bulb went off I was just like all right how do I get clients so what I did originally is I would go to Facebook groups and try to message people that were like I'm looking for an Airbnb co-host but people ended up catching gone and there was like 30 different people that was just like I'll be your co-host and then one person

2:25Be like I'll do it for 5% instead of 20% they go with that person and then it was it was kind of crazy so then I dug a little bit deeper and I was like door knocking so I was going to agents doors in West Palm Beach I had a pamphlet go knock on their doors introduce myself say hey look I run this Airbnb management company I'm here in town happy to run your analysis for your clients and then if you refer clients to me in the future I'll pay you $1,000 referral fee so trying to add value on the front end by running their numbers and adding value on the back end by giving them referral fee too so that took a lot of time to to build up that those connections but eventually people started referring me clients but then what I ended up doing is I kind of just sat down and I just said hey look this is taking a very long time to get clients like

3:14What's the better way to get clients and then so what I realized is if I look at all these larger property managers out there like Picassa evolve tury bontate all these different managers out there they spent a lot of money on marketing each year FASA spent $7.5 million on postcards alone last year not to take into account like ads or anything like that and majority of these owners they're in pain they have bad word to use because when you scale so quickly as a large corporation you don't have your systems in place U the quality of work that you provide pretty much goes down so I just said to myself well why don't I just Target these people they're not happy they're already paying somebody 20% I don't have to convince them to pay me 20% when they're already paying somebody 20% and their property's already live so

4:02I don't have to wait for someone to buy a property furnish a property I can pretty much sign a contract and I can have their property live with a new listing in seven days so that was my that was my whole strategy and then I just had to figure out like how do I get a hold of these people now right how do I get a hold of these people to do that because on these listings direct booking sites and Airbnb nobody shows the address so you can't skip Trace yeah so had to find somebody that could build a software to be able to extract the locations on the back end of their websites so they develop the software that pulls all the locations and then I go through a verification process then I skip trace it then I input all that information into a CRM to keep track of all my leads like where they are in the sales cycle initial

4:50Call sales call negotiation call onboarding call and just treating as an actual business and then just going through them prospecting phone calls text messages emails and just asking them how their current experience is going if they're happy if they're not figuring out their pain points and then booking them on a s's call wow that's interesting and it's makes so much sense because I've seen the exact same thing with Vasa and evolve like you always see like 4.6 star ratings and you know angry guests who say oh they didn't respond to me and had this maintenance issue and stuff like that so so it totally makes sense Are there specific properties that you were targeting like are there ones that if you're going to get into co-host or management you want to avoid certain properties and Target other properties

5:40yeah so like for me because I was focusing on West Palm is I only want to focus on the properties that were bring in the most income because I'm paid on a a percentage basis so properties that I would do 100 120,000 or more down here four B and pool houses so whenever I would pull this data I would just pull those types of homes and Target those because it's the same amount of work to do a 40,000 versus 120,000 same exact work people just don't understand that same amount of work to close a client too same amount of work to manage the client so I would I would focus on those got it okay and what are some of the the biggest mistakes that you see people make as they're getting into co-hosting are there certain things that you see over and over again that you're like oh man I you need to avoid these things or I learned

6:28That the hard way yeah I think that's a really good question because so many people want to get into co-hosting and they hear all these different strategies to make more income on YouTube videos Facebook groups things like that and those strategies that they hear or when you actually already have a foundation a track record and have like five to 10 clients in their management then you can Implement those but in the beginning when you're closing your first few clien is you want to cause the least amount of friction as possible to get these people to sign with you so no technology fee no year-long contract so pretty much what I do is if I was starting my business again I wanted to sign my first contract I would tell them hey look we signed a year contract but I give you the

7:16Ability to leave within 60 days if you want to if you're not happy you can leave within 60 days just let me know and then you're you're good and I do the yearlong contract just so I don't have to keep sending you a contract every 60 days and they're like okay that makes sense I understand and and then I also say but we're going to do a 30-day test period as well to see if you like working with me if I like working with you and then after the 30 days we'll we'll go back and review that together because you don't want to work with hmos high maintenance owners because one HMO you have one HMO and you have 10 clients that one HMO would take up 80% of your time so it gives you the ability to fill somebody out first before you go into a year-long contract with them and then you can just cancel within those 30 days but in the beginning take on that HMO just so you can have like a plan or two and then after say 60 days or whatever you want to do then you can cut them off but

8:05You can use them as to build your you can use them to build your credibility when you're talking to more clients like hey look I'm working with this client right here this is their property and then you sign another client and then after you get two more clients and you're cut off that HMO whatever it is but don't keep on with that HMO yeah yeah I think that's with with a lot of businesses where you can see that you know the the clients and a lot of times like it's it's clients that are like the least profitable clients that are the most demanding you know we noticed with our bookings even you know in the summertime in our peak season when we're charging up to $ th000 Dollar a night in some cases those clients or those guests you never even hear from but then in the offseason when we marked it down to 99 bucks a night those are the most difficult

8:53clients that cause damage and you know it's it's really interesting how that works but that's great advice and then when it comes to your team what does that look I know you mentioned in the beginning you can start off with you know you doing pretty much everything but as it grew what type of team members did you add and what's the division of responsibility yeah so I like to do things as as efficient and costly as possible so your cleaner is your if you can find a rockstore cleaner that actually specializes in short some rentals and they have cleaners underneath them she can pretty much cross reference as your quality control person so she has her Cleaners clean it and then she goes in checks after it and then it takes away you having to hire somebody do that as well from an operation

9:42Standpoint so finding a cleaner first second thing is like finding a runner handyman and paying them on like a per run basis instead of hiring somebody full on so for example if I had something that needed to happen it's usually somebody who's retired maybe in their 60s pay them $75 every time something happens they can go over there fix it or something needs to be replaced they can go over there and replace it whatever that is the next thing I would recommend having is a operation onboarding manager because onboarding takes a lot of time usually so operation manager can do all your onboarding for you do some guest communication client relations things like that and then the the next IR I would do is like an actual guest communication VA they

10:31Can be as long as you have your good Sops and tracking things in notion or Google Sheets they can be overseas pay them 900 bucks a month and they can they can usually handle about 30 listings or so for communication and then the last hire I would recommend doing is a revenue manager because people aren't happy when they're not making enough money so you kind of want to have somebody in price Labs at least three to four times a week doing that so I found a I hire somebody I found somebody that does revenue management and then when I gave them my listings he gave me a significant discount so then it took away from my time to actually manage people's price labs for them and then I knew if they're doing it constantly every single week they're probably most likely going to make more money than myself managing it for them right so that those are probably The Hires that I would recommend as you

11:19Begin to scale in that order interesting yeah yeah so Revenue manager so so full-time that's what they do is just analyze markets analyze supply and demand and understand how to price your properties exactly so like they'll look at the threshold for the market so you can go like 7 days you can do 14 days 30 days 60 days 90 days 6 months out and then you'll show like if you're in the green if you're above the market Standard if you're in the yellow you're in the market Standard red if you're below the market Standard then they just adjust accordingly try to fill orphan days as well just to make the most money as possible so that's all that they do so they manage so many people's listings and they just focus on Revenue management as a whole that's interesting wow very cool and you said that your VA the guest

12:08Relations VA could handle about 30 listings how does that work in terms of their time because you know obviously people are messaging from probably 7 AM to late in the evening how how did you structure their time frame to be able to to manage the the responses and guest communication yeah so I'd usually have it like they start somewhere around like 8:00 a.m. Through potentially 11:00 p.m. 10 10 p.m. Around there and then we didn't have somebody covering the night shift at that time so we kind of did at that and like worst case scenario is somebody gets locked out so we had a we had a lock box on the premises and then with our check in instructions we have the lockbox code so they can see that too if they get locked out but

12:56Majority of the time not really covering messages over over the night period of time and it's not like they're they're constantly getting hit by messages all throughout the day it's just radically throughout the day so yeah yep cool so it was a couple people then that would trade off then throughout the day or just one person just one person okay wow some long shifts yeah but I guess yeah like you said it's not fulltime where you have to be on the whole time and and answering questions you know it's just when they come in so so when it comes to your or the the sale of your property or I'm sorry the sale of your business then I was curious about that did you start with the thought process in mind I want to build this and scale it up to you know

13:4535 deals or or 35 properties and then sell it or did that just come as a side benefit as you're building this business yeah I think for me it's just it wasn't really my goal to build property management company my main goal was just like how do I get more cash coming in so I can use that money to potentially buy other properties in the future so that was kind of my whole my whole idea my whole thought process and then eventually I had a couple friends that were talking about buying management companies and just ended up having somebody reach out and then talk to me see if I was interested in selling and it just the numbers just ended up working out just kind of made sense but like my whole my whole thing is just like whenever I start something I never want to stay in that same situation

14:34Or that same that same company that same business I want to eventually trade up to something bigger right same thing in investing in real estate like start with maybe a single family home then go to small small multif family then 1031 exchange to something larger so that was my kind of my whole thought process right use that money to eventually buy a bigger business in the future yeah that's that's that's really smart and and so so for others who might want to start a a management company and and eventually sell it how does how does a management company get valued how can how do you know you know what you could expect in the future if you're putting in all this work yeah that's a really good question because a lot of people don't really they see the amount of income that they could potentially make from a cash flow standpoint per month charging 20%

15:23Right so your property does $120,000 a year you charge 20% making $2,000 per month or if it's $60,000 a year in gross revenue make $1,000 per month but what they don't see is the value of the actual contracts now when you're a smaller player maybe like 20 to 30 it's usually one to two times the amount of income that the that the contract brings in a year so say for example the contract brought in $24,000 a year right so that contract is valued between one to two times that valuation whenever you exit and sell that contract now if people are smart when they're buying management companies is they'll put a a thing in the actual contract that says hey look we'll give you half of it now we'll give you half of the valuation

16:12Now and then whatever's left after that year then we'll give you the remaining half based on how many clients actually stay on and how many how much income they potentially bring in as well so that's usually the structure so you're bringing in $24,000 a year in income one to two times depending on how well you negotiate and what type of properties you have under your management and how close they are in management too like if you have some in West Palm Beach then you have some in Kansas City two different markets as well your systems probably aren't as dialed in because they're not in one location to the valuation is probably going to be closer to one got it okay that makes sense and did you stay on then and help with the the the management afterwards or how cu I imagine you were probably

17:00Not fully extricated from the the business like some of it depended on you I would think right or or maybe you were but what did that look like once once it was handed over to the new owners yeah so pretty much communication with the clients saying hey look like I'll still be here if you have questions just to make sure they don't want to leave right because when you feel like when you feel like somebody's like giving you away selling you away you kind of you kind of want to you kind of want to elsewhere but if you explain the conversation with them that hey look you'll still be involved to a certain extent they're more likely to say so that was kind of the situation like maybe randomly I would get phone calls but most of the time I didn't