Scaling to 10 Rental Units by 25 with Midterm Rentals

0:00So, still in college, I think I'm like a junior at this point, maybe, and me and this guy, we buy six properties total together. And this is all I want to say junior year, get maybe one was in sophomore year, something give or take. One was in the summer going into senior year. But we bought six properties. — that that you were you just kept cold calling and finding deals? — cold called, cold text messaging. Yeah. Just those basically. And like two of them were from one specific owner, and then like So yeah, they were kind of all random off-market deals, I guess.

0:33And from doing those six properties, two of them were fix and flips, two of them were long-term rentals, and then two of them were short-term rentals. So this time, we don't like have a strategy, honestly. We're just like we're finding someone who wants to sell the property, and we're saying, "What can we do with this property?" Now, I don't do that today, but that's just what I was doing at the time, and I was able to learn so much. So, I get the the the two Airbnbs that I did with this guy and a couple more people from this group, they were all in like their 40s, some were a little bit older, some a little bit younger.

1:05So I was like the self-proclaimed like I was going to manage the property cuz I knew that I could kind of figure out how to do the technology part of it and hospitable and connect everything automations. — -huh. — short story long, I managed the two properties we had, and then my partner kept on buying more Airbnbs that honestly I didn't think were good deals. So I said, "Eh, I'm not going to be part of them, but I'm still more than happy to run them for you if you'd like." Cuz he didn't really know the operations part. So he bought like over 10 properties in a very short period of time, like I don't know, six months to a year, maybe, that I was running for him.

1:44And then during that time, I had So I then had a portfolio small portfolio properties I owned, which was bringing me like maybe a thousand dollars a month, like nothing crazy, but I'm in college, so it was like kind of cool to have something coming back. And then the prop the when you even mentioned beginning I was making $5,000 a month, that wasn't necessarily like property dividends. What that was from was from my co-hosting business. So I was running like 10 to I don't know like 12 properties of his at the time, plus the two that I had with with partners.

2:15And then just from talking about it on social media, I got like 10 to 15 more. And that and that the additional 10 to 15 came like I don't know like after I dropped out of college I was able to really pick up momentum there. And I was like okay sweet like I'm making enough money. I don't want to do this college thing anymore. I've been talking about dropping out for like years but I had nothing to show for it. Now I do. Long story short, yeah, so I dropped out of college. Parents, girlfriend at the time who's now my fiance, they were not too happy.

2:49That was a whole story in itself. But anyways, — But she decided to marry anyway, huh? — Exactly. Yeah, she didn't talk to me for a week, but after that it was all good. — Yep. — What What she found out her uncle also dropped out, she was like okay like kind of more normal like I guess. So that helped me for sure. — Wasn't Zuckerberg dropped out too? — Yeah, exactly. Exactly. So okay, so how the midterm rental stuff came to be. I was running all these short-term rentals. I had three employees that were helping me run the show because we're having like constant turnovers 30 properties basically every weekend.

3:24It was a madhouse. Like looking back it was it was it was crazy. So one of somebody that I connected with on social media it was like a connection of a connection on social media said hey, I have these properties in Indiana. I bought them for like $60,000. They are currently long-term rentals. I forgot how much they're making. But I'm interested in doing this like Airbnb thing. And I was like okay like I'm I'm down to do it. So I turn his long-term rentals that he bought for $60,000 into Airbnbs.

3:56And I think it was honestly a complete accident. We just like happened to get a mid-term rental booking. I never like intentionally sought it out in initially. But we got a booking for like $2,500 a month. And he is thrilled. He bought this property 60 grand, we're making 2,500 bucks a month. He's happy. So, then he's like, "Hey, I got another property in this town. Here you go. Go turn this one into an Airbnb." So, did that. And we started shifting language from Airbnb to, "Okay, turn this one into a mid-term rental now." cuz that that was all we were focused on.

4:27So, I basically did three of those for him. And — And were you furnishing all these, too? — Yeah, I was furnishing all of them. Completely remotely. — Yeah, so at the time, I did not go to the property or even the city or the town or even the state of Indiana one time for these three properties. So, yeah, this is doing it all remotely, finding finding local people. And yeah, basically set up three for him that were absolutely crushing it. And at this point, a lot of things happened.

5:01Long story short, the initial partner that I partnered with, he was doing some shady things. And I did not I had no interest in being part of anything shady. — Yeah. — Just to give an example, just cuz people are like cuz I don't know, people talk about like horror stories, but just to give an actual concrete example, I hired an accountant for like the first time ever because before college, like I didn't make any money, so I didn't have an accountant. But once I started making some money from the co-hosting, I was doing some social media stuff. I was like, "Okay, I need a professional here." So, he's prepping all my taxes, and he says to me, "Hey, can you get me some form?" Now, honestly, I don't even remember what form he asked for, and I didn't even know what he what he was talking about.

5:40But I asked my partner, "Hey, can you send me this form?" And he goes, "Oh, no, don't worry about it. Like, we don't need to do that." And I go back to my accountant, and again, I'm like 21, I had 22 maybe. I didn't know what what what any of this meant. — Yeah. — And my accountant's like, "No, no, no. This isn't like a suggestion. This isn't like a maybe you should file like taxes for this property. Like, you need to 110% get this form so we can file your taxes properly." I went I went back to my partner, and he was like, he still was not really on board.

6:11I was like, "Hmm, this is weird." That was one of like 100 examples I can give, but probably the most like concrete, easy to explain one. So, at that point, my accountant was like, "Yeah, something doesn't seem right here." So, I essentially ended that business partnership. So, that was that. And at the same time, I had enough money that I was making and saved up to essentially buy my own mid-term rental by myself for the first time, cuz I'm like, "Listen, this partner thing was great. I'm so glad I learned from it, but I do not want partners ever," I said at the time, "or at least right now, because I don't want to have to deal with this situation again." — Is that guy in prison now?

6:54— He should be. And And I did And I didn't know this before, but he has been in prison before. — Oh, wow. — And it was it was this whole whole thing. It was it was a whole thing. Luckily, like, I got out clean. The investors on the deals also, for the most part, got Oh, the deals that I was part of got out clean. The deals that I thought were terrible deals that he thought they were great deals anyways. Some investors didn't do too hot on those. And yeah, he should be in prison, for sure.

7:26— Wow. — even looking back, like, I mean, he crazy situation. I don't know where I'd be if I didn't at least have the positive experiences that I had, cuz I did learn a lot from this guy and a lot from the experience. Now, that doesn't That doesn't mean anything he did wrong was right. Like, it doesn't take away any of that. But, yeah, I I didn't just necessarily, you know, go to college and then buy a deal when I was like 18. Like, no, it took It was a big, I guess, progression of buying deals with partners, helping people co-hosting their properties, seeing how it worked from the inside, and then finally being able to do it myself.

8:05— Yeah. I love that you shared all that detail because I think on podcast like this, sometimes people can get the impression that I was like, oh, I just kind of like doing my life, and then I decided I'm going to just going to go buy a property, and then everything worked out, you know. And And I think more often than not, it works out exactly as you as you described. Like, you don't know what you don't know in the beginning, and so you do something, you make some mistakes, you learn from those, you do something a little bit better, and it it's this constant evolution. And the great thing is lessons always build on themselves.

8:37You don't have to learn the same lesson twice, typically, you know. And they never go away. So, like, you just consistently get better and better at honing this craft of real estate investing over time. So it's awesome that you started that early cuz you have so much time to, you know, you can invest until you're 95 years old. So you got a lot of time. But, what So, so you decided to buy your first mid-term rental. Was it in the same area that the ones you're managing in Indiana, or where did you decide? Yeah, so I had I had those three that I was managing in Indiana, and I wanted to just buy in the same city because I was like, I know it works here.

9:14I know this town now. Like, I want to do this. I literally could not find a deal that I was like comfortable with enough for probably like two or three months. I just didn't I don't know. Looking back, I'm sure I could have found maybe made something work, but nothing clicked at the time. So, what I ended up doing was I basically took all of the same like market characteristics. Like, the population, like, just like the rough like how many Airbnbs were in the town. The rough, like, rents price point for the houses. And I just did like a Google search to figure out what other cities in Indiana can I do this in?

9:49Now, I just felt like I'm more comfortable in Indiana because I had these three successful there. So, — It's a great state. I mean, — It is a great state. — you got to give it to it. — I agree. I agree. So, I basically found this other city that was literally like 2 hours away. So, it's not like the next town over. It's a completely different city, but had what I felt like, and I still feel like, is like the exact same market dynamics. It had a small a small college, it had a hospital, it had some manufacturing, it had just some random things that I'm like, all right, this sounds kind of good.

10:21And I would basically look on Zillow. I like actually I like Redfin. Zillow's just easier to say. But But I I basically look on Zillow and I would just call a bunch of on-market properties and just like kind of sniff out the deal. Hey, I'm an investor. I'm I'm interested in buying a property. And I'll just talk directly to the seller agent. And did that for probably, I don't know, 20 houses until the 21st, or I don't know how how many houses it was. But I was talking this guy and he was he was kind of interested, like, oh, like, why are you interested in buying here?

10:53I'm like, well, I have these Airbnb properties in this other city, da da da. Gave him the story and he's like, he's like, no way, this property that you're calling about is an Airbnb currently. I'm like, what do you mean? I I I honestly didn't know that. I think they unlisted the the listing when they listed the property for sale. I'm like, I didn't know that. How much are they making? Like, give me the rundown. Does it come furnished? Like, what what's the story here? So, he was able to tell me that the property's making $2,500 a month. And I was able to finally like figure out I think he sent me the Airbnb listing.

11:25And I was like, okay, I can run it had good ratings and good reviews, which made me comfortable, but I'm like, I can run it better this than this guy. So, I'm like, I can I can make more than that. So, it was listed for 130 and I really wanted the furniture to be included, but for some reason, I was trying to play hardball. I was like, let's do 105. I don't even want the furniture. And furniture is a pain in the butt for most people to get rid of. So, he's like, how about 115 and you can keep the furniture? I'm like, done deal. Done. So, that that property I bought for 115,000.

11:58I got an 8.52% interest rate. By the way, people thought I was crazy. This was a This was the same year, by the way, I dropped out of college. So, I dropped out of college in like January. And I think October is when I bought this my very first property. Never been to this city before. Never saw the property before. 8 and 1/2% interest rate. I put down a 38, 39,000 down payment. People thought I was absolutely nuts. Well, I was able to basically get it up and running essentially right away cuz it was already furnished.

12:32It was already operating. — Yeah. — I built a team there pretty quickly and I've been making around 25 hundred to 3,000. I've had months that have even been better than that, but on average, 25 hundred to 3,000 per month from that property. And most notably, so that was in 2022. Most notably, literally a month ago, I want to say, I just did a cash-out refinance on that property. I went from an 8 and 1/2% interest rate to a roughly 6 and 1/2, maybe 6.6% interest rate and pulled out basically 20 The it said 28,000, but after fees and stuff, it was closer to like 25,000 dollars cash free in my pocket and it's yeah, very happy with the deal.

13:17Now, at the time, people were like, dude, you're crazy. 8 and 1/2% interest rate. Don't do it, but it has that that deal has worked out very well. — Yeah. That's amazing. That's great. So, and you you decided to do midterm rentals because I mean, can you make Are you making more as a midterm rental than a short-term rental or what was the the reasoning behind midterm versus short-term? — Yeah, I think a couple things. Number one, after running 30 short-term rentals at the same time, I kind of got a little bit I would say scarred cuz I still do run some short-term rentals today for other people.

13:54But very select properties. But I just I didn't want to buy I just didn't want to buy a true short-term rental that had turnovers every single weekend, complaining with guests, the cleaning's always a disaster. Like I I just I went through the wringer with it and I was like, I don't want to do that. And once I found out that the midterm rental thing was working in this town in these cities that had properties that were low cost, still made very good money per month, I was kind of like, let me just do that also. The three properties I was co-hosting in Indiana, it is not a vacation town.

14:28When I when I meet people from Indiana and I tell them where I invest and I and I usually say I do Airbnb just to make it easy, they're like, who does an Airbnb there? Like, who are you What Who's vacationing there? — every week when I tell people, yeah, I live in Indiana and why do you have Airbnbs here? They're like, wait, what? Especially people from the coast are like, Indiana? Does anyone ever even go there? I thought it was just farmers. Like — Right. — Yeah. Yeah. — So — So, who are your your your guests then that And and how long do you are your your average bookings?

15:05— So, I'd say average booking right now is like honestly rough roughly 6 months in — Okay. — On average, I have for my single-family properties, like I have a construction crew. It's actually just a dad and his son, but they're both construction workers. They're working on a project like 30 minutes away. I have a family who relocated from I want to say Nevada or some other state for to work at an army base. So, I don't know what he does in the army, but some sort of military ordeal. I've had several insurance claims where I host people who lose their house to fires or floods.

15:42And I've also hosted a decent amount of people who are who basically need housing. These are the shorter stays, but like if someone's redoing their house and they need a place to stay for a month, I'll host tho- those people, but I do really like the longer bookings. The longer the better.