How He Replaced His Tech Salary with Short Term Rentals

0:00Once I saw your model and the way you do that, I was like, "Oh, this makes so much sense." So, I was like kind of starting to do that, but I had no systems, no processes. And then once I like really saw how you were doing it, I was like, "I got I got I got to do this. Like, I really need to do this." And so, yeah, implementing and I have, I'll be honest, I haven't implemented everything from the course yet. There's still a lot to improve on. But it definitely definitely helped my business. I think I'm six six or five listings right now and growing.

0:34I'm just kind of like taking my time. I'm not trying to really push it but it's had a huge impact on my business for sure. Guess we could talk into like one strategy in specific that you that I was kind of doing but I never realized I was doing is when you go directly to the listing agent for for your deals. Like most people sleep on and they're like, "Oh, there's no deals on the MLS." There's so many deals. Like literally all the deals I do are MLS. You just got to, you know, get directly to the people listing the properties and if they see that you're serious, you you you'll have success getting deal.

1:10I mean, as you know, obviously. Yeah. Yeah, that's a great point. I think that's overlooked a lot. People just assume you need a buyer's agent and we don't really use buyer agents. You know, I I just set up searches and then call the listing agent directly when a property meets my criteria and let them represent me as a buyer and the seller. So, they're doubly motivated to get that deal done. And, yeah, that's that's a great point. So, cool. Well, I want to talk through one of your most recent deals that we talked about on one of our one of our coaching calls back in the fall, and it's one that you bought that's I believe it was a two-unit first, and you're convert you converted it to a three-unit, and I know it's not up on Airbnb yet, but we can talk through like if you don't mind sharing how

1:58You found that deal and then what your plan was with it and then maybe some, you know, how it's how it's worked out so far. Yeah. So, I found that deal, believe it or not, from a wholesaler. And I nor normally don't do deals with wholesalers cuz it's really hit or miss. I wasted a lot of time looking at these $20,000 rehabs that end up being $100,000 jobs. But I think they kind of undervalued this one. So, I went to go look at it and I I believe we got it in contract for $145,000.

2:33So I I got it locked up for 145 and it was already set up as like a mother daughter. It was kind of mostly cosmetic except I completely converted the basement so it cost a little bit more. I think all in on that one I put about 70 maybe. I want to say 70 give or take. So I think I'm all in for that one around 215. And actually the basement is an Airbnb now and it's bringing in it's it's doing pretty well. Just the basement alone is bringing in like on average over a thousand a month.

3:06Wow. But the So the other two I have longterm right now one unit is getting 1,600. It's a twobedroom. The other unit is 1350. So let's see what I don't even know. 13 about three $3,000 a month. Yeah. Something around there. And it's in a good spot. There's like like you you you ran the numbers on the deal and you saw right like it's right around a bunch of different stuff. So, the reason why I didn't put it directly on Airbnb is I wanted to work out some of the kinks.

3:40You know, when you launch a new property or you set up a new property, there's like things that still need to be worked out and you know, some guests are really unforgiving. So, I was like, let me put some long-term tenants in there, work out all the issues if there's any. And thank God I did because like some of the plumbers messed up like everybody messed up everything, right? So, yeah, there was some stuff to fix. I got it all sorted out now. So, when I do launch now on Airbnb, like all of them, I think it'll be really really lucrative on that property. Yeah, that's incredible.

4:13And that's that's part of the power of this multi-unit strategy is like you look at this and you're you're all in for like what I got the deal analyzer pulled up, but basically like 300,000, you know, after all your furnishings and everything. And having three units worth of income. You know, we talked about one unit being an average of 155 per night, the other two 135 per night, which doesn't sound like that much, and you're not going to have it rented out all the time. We we used a 57% occupancy.

4:43So that's almost half the year it could sit vacant. But when you add up those three sources of income, I mean, you're at $425 per night, that's $100,000 of revenue between the nightly rate and the cleaning fees on a on a, you know, $300,000 property. So you just don't see anything anywhere close to that in any other sector of real estate. And that's like consistent, you know, those are conservative numbers.

5:14So, I'm excited for you to convert these over to short-term rentals. What What I guess what did you learn from that deal? Like, you know, it sounds like there was a few road bumps or like there was some things that you you didn't expect. What can you share with with the audience? Yeah, I I think the biggest one I guess it depends, you know, cuz some some people buy turnkey. I like to do the burr strategy. And for those listening that don't know what it is, it's basically buy value, add properties, create value, and then refinance as much or all of your money that you can out of the property.

5:49I think one thing if you're doing that strategy that's critical is having good contractors and having good oversight. And it it helps a lot that I'm local. I know people can pull off the remote. I'm not sure if I could do it. If you have really good systems and processes probably like you have in place, it's going to be easier. I'm just not there yet. But I think if you can work out having a really good contractor so that you like for example, they left an open so on the first floor there's like a crawl space where they ran plumbing to expose and there was some exposed water lines.

6:27Well, I don't know if you know this past winter, we had like a record-breaking freeze. So, the pipes froze and burst, flooded the fully finished basement. It worked out. I mean, it didn't work out. It kind of sucked, but I had and I had Airbnb guests in the basement at the time. I had another vacant vacant unit that I was able to move them over to right away and just resolve it. So, it was like a non-issue. Luckily cost a couple dollars but just like little things like that like come up like that's why you got to really use good people and you know they I thought they were good but you see things like that so things come up nothing goes perfectly or according to plan and that's fine you just keep working but I would say if you that was like my biggest learning learn lesson on that

7:15One is like make sure the contractors are you you're using know what they're doing. Yeah. Wow. Did it Did you refinance this one then once you're done? I'm actually in the process right now of refinancing. Oh, cool. Did it appraise where you expected it to? So, it's kind of interesting. It was zoned as a two family. So, I had to I had to run it as a two family, so I lost all the basement finished square footage space. Okay. But it's still it's still appraised at 300 300.

7:47And like I said, I'm into it for 215. Oh, 215. Okay. I'm into it for 215. Yeah, 215 220 maybe. Wow, that's incredible. Oh, your Yeah, your after repair value was 280. That's what I was looking at. Yep. Yep. Yeah. Okay. So, yeah, with your Yeah. Purchase of it was 145, I think you said, right? 145. Yeah. Yeah. About 70 into it. So, yeah. Okay. So, yeah. So, you've got you created a huge spread then at 300,000. So, you were able to basically pull out all your cash for the most part. Yeah. Wow.

8:19So, so not only are you going to be sitting on several thousand dollar of net cash flow once these are all set up as I mean you're already sitting on quite a bit of net cash flow but once they're short-term rentals it'll be even more but then that's infinite cash on cash return because you have no none of your own cash in the deal. So that's amazing. Is that so I guess everybody's got their own barometer for what a deal is. It's incredible when I talk to people because you just assume based on your own experience.

8:51Everybody kind of thinks like you and it's like a deal is a deal to everybody. And when you start talking to people, you realize that a deal means something totally different to people. You know, and some people it's like I'm targeting a 8% cash on cash return and that's just, you know, slam dunk deal. And other people like you, like it's like, you know, I want to create $80,000 of equity and have infinite cash on cash and also three $4,000 a month of net cash flow, which is absolutely possible. So, what what is it?

9:23Do you have certain metrics that you look at when you're considering a deal? So the bare minimum for me is that I could either be very low of my own money in the deal and it pays for itself. That's like the bare minimum. Okay. But but it just hasn't worked out. I'm just coming across great deals. Yeah. All the time. And I guess it's the I don't know if it's the market, but like the way I look at it also is like I'm not looking at the cash because I have a day job and I don't plan on quitting anytime.

9:56I like my job. So, this is like my long-term 401k. I'm just like planting seeds right now. But it's, you know, they're all cash flowing well. And I say like I don't think I've made less than 50,000 equity on every deal that I've done so far. Wow. Wow. Yeah. And these are MLS deals for the most part. MLS deals. I could tell you a deal that I'm working on right now that I'm just basically handing off to a friend of mine. We I'll I'll run this through the analyzer, but I just locked it up. So, purchase price 100,000.

10:28Renovation 100,000. It's illegal up to four. We're going to convert it to a three. So, all in for about 200, call it 220 with the fees and everything. ARV I think conservatively there should be 325 plus but I wouldn't be surprised if it comes back closer to four because it's like in a really central location where the comps support it by hospitals like by everything so it would be like a home run short-term rental. That deal I think we should be done with it in about six months.

11:03But the model I'm using is like, "Hey, ride sidec car on the deal. Come on the loan with me, and then when it's all done, you could refinance it out." I just told him, "Give me a third of the equity and and we'll call it even." Wow. So, he'll probably be in your program soon, too, actually. This is his first deal. Nice. That's great. So, you you This is one where you just decided you wanted to sort of be a advisor partner in it, but let him kind of do the leg work and split Yep. Split it. Yeah, that's smart.

11:34Yeah. And and that's I've seen as as investors grow, obviously time freedom becomes more important. In the beginning, you got to do everything yourself and you got to just like get it done like you like you have. But like you're talking about with systems, you know, you start to recognize the reason I'm doing this is because I want more autonomy. I want more free time and be able to you know, your time becomes more of a premium. And so leaning into relationships, that's actually exactly why I'm doing the the deal I'm doing in Cincinnati, you know.

12:06Yeah, I've got a great partner there. And we're buying a pretty turnkey property that we could couldn't build for anywhere close to what we're buying it for. You know, it's 460,000 for this just amazing, totally rehabbed property just ready to go and it's going to just generate incredible income. But I'm more of an advisory role in that as well. And and it it can work really well. You know, you can structure these partnerships a lot of different ways. So, yeah, those numbers are just like so foreign to somebody living on the coast where they're looking at a starter home for a million bucks and you just get so much bang for your buck there.

12:46It's incredible. I feel like a lot of people that I talk to about not here that don't know the numbers think that I'm making it up. Like they just don't they just don't believe the numbers. Yeah. I remember talking to my wife's cousin who's overseas like different market. I think he's in Cypus and I was telling him like what kind of returns we're getting on these properties and he just wouldn't believe. He's like there's no way. Like there's way too much risk. You're way too leverage. And I was like no it doesn't they're used to like 3 4% return. So they hear stuff like this and they're like what? Yeah.

13:17But it's real. It's real. Yeah. And it's funny you brought up leverage and risk because a lot of people assume those are the same thing. They the more leverage, the more risk. And and it can I I I'm not saying that's not, you know, necessarily the case, but I assoc associate risk with just worse deals. Like if you have a deal, if it's 100% leveraged and it's got $3,000 a month of net cash flow and the backup option that you could use it as a long-term rental and still cash flow, who cares if it's 100%, you know, like what's the downside there as opposed to, you know, something that doesn't cash flow as negative cash flow, but you're only 80% leverage.

13:59You know, I'd much rather have 100% leverage. So, yeah. Yeah, I totally agree. I think I think the biggest risk in this business is like the knowledge gap, making a bad deal or taking a bad deal. But like you said, now 100% of the deals that I get are finance. 100% fine. So basically, they're 100% leveraged. Yeah. I put no money in pocket and but the numbers work. So as long as the numbers work, I mean, it checks out. Yeah. Absolutely. And when we first spoke, it was I think it was December of 23.

14:32So, you know, like I said, like a year and a just over a year ago or a year and a half ago, something like that. But at that time, you know, tech the tech industry was like real shaky. You know, the a lot of the stocks, tech stocks had just dropped. They were laying off people. And I remember you saying like, you know, you liked your job. You know, you want to stay there, but also you wanted the security of knowing that you could be financially free if you wanted to be. Have you calculated like where you're at like how close you could be if just from your real estate to being able to live off your your rentals if if you had to?

15:08I think I could probably do that now. Yeah, I have some I don't really have any bad habits, but I have one expensive habit of buying nice watches. So, outside of outside of that habit, I think we could be covered probably right now. Like my biggest expense is the mortgage of my personal residence which the basement we we evaluated that we'll we'll cover the mortgage. So once that's done I I really don't have any big expenses and yeah the cash flow is coming in. So I think I could be covered today if I really needed to something bad happened and I don't know if you're following but the tech tech stocks are all crashed.

15:48So like half my portfolio just went down to the dumps and I was just telling all these guys that are telling me I was like that's why I do real estate. I don't got to worry about any of that. Like I don't care about that stuff. Yeah. Exactly. Yeah. There's people like jumping out of windows and stuff and you got some stability there with cash flow. Yeah, other than meta for some reason meta keeps going up but everyone else keeps crashing so I don't don't get it. But so you're you're converting your basement. So, let's talk about that cuz I always say on this show like one of the best personal finance decisions anyone can make in my opinion is a really good house hack.

16:24Because it not only pays you today, but it pays you the rest of your life. Like, we've been house hacking in some form or another since 2017 and I don't think I'll ever go back because it doesn't impact our lifestyle in one bit. But, we have no cost of living. We have no mortgage or no cost of housing, I should say. No mortgage because of this. So, what does that look like for you? Like, what are you going to do with your basement and what's the numbers look like? So, the basement it's it I live in a ranch style home, threebedroom up top, and when we first walked to the like I had no intention of moving, but when my wife was like, "Let's just go look at this house." I came in here and then I saw the basement at like almost 10ft ceilings unfinished, the light bulb went off cuz like it's in a really good area too here in Mason.

17:11It's by the Cincinnati Open, Kings Island, which is a pretty big attraction. So, I was like, "All right, that's the ticket. This is going to be expensive in the beginning, but once that's done, it'll probably cover itself." So, down there, it's almost actually done now. It's a three bedroomedroom, two bath, so we added a a master bath. Wow. In the master. It's It's like a whole other house down there. Yeah. Yeah. It's like the same. So, it's the same footprint as the upstairs. Pretty pretty much. Yeah. Yeah, pretty much.

17:42Yeah. Wow. And so you you'll use it as a short-term rental or long term. Short-term. I'm thinking short-term. Cuz over here, I guess the advantage I have is you can't have short-term rentals here unless you're an owner. Like what do they call it? Owner occupment. Oh, yeah. So, so there's not a lot of them. Yeah. Here. You know, like in different areas where you you you could operate as an Airbnb. You can't hear unless you live in it. So, we can legally operate the Airbnb and it's in a great location. Oh.