How Grit, Trial and Error, and the Midwest Beat the Vacation Rental Hype

0:00So, in 2022 when I decided to quit my corporate job, it was January. I think January I gave the notice was my 30-day notice and then like February I quit. So initially when I started short-term rentals, I wanted to invest in real estate, but I also wanted a replacement for my income because when I started working at the new job that I moved here for, I realized that I did not want to depend on somebody else for my income.

0:32And I didn't want to depend on somebody else to tell me how much I could make because, you know, they didn't think you should deserve a 10% raise. You're not getting a 10% raise or if they didn't think you were good, you could get fired and stuff. So, I was like, you know, this is actually really risky to work for one person corporately, like I needed another income, which is why I went all in in short-term rentals at that time period. And so in 2022 it was we were at I want to say about 10,000 a month in re in revenue and we were about I want to say like 10 to 15 properties.

1:15And another reason was because when we were shut down for those two years I was doing both at the same time. — Mhm. And I was doing everything myself and it was just too much because I was like taking calls in the car while I was driving from property to property and I was just out all day like being super reactive to things. And I was like this I'm going to go crazy. I can't work two jobs at the same time. And so when 2022 the company also said you know you need to start coming back into work.

1:49And so I was like well at some point we to make a decision. So, my husband and I decided that we made enough for me to just stop working. So it was like a combination of different factors, but I felt like that was a really good decision because now I do this full-time. We continue to make the same or more money, you know, as since I've stopped. And so that is how I made that decision.

2:21— Yeah. I love that. I love what you said there, too, because I, you know, it just gives you the ability to make decisions like that. Like, you know, I talked to a lot of people who are who say, "Well, I like my job. You know, I don't it's not like I I you know, I don't need to make extra money, but I just or I don't need, you know, I don't need to replace my income. I just want to make a little bit extra money." And what they don't realize is all of a sudden there could be a decision like somebody buys the company and now there's a a terrible work culture or you know you wanted to work continue to work from home and they said no you're coming in the office.

2:59And so it just gives you that ability to to live intentionally and make your own decisions and say hey — that's fine find someone else then because I I've replaced my income at this point. So, — right. — that's amazing. And and — it's so funny. We we have very similar timelines. I started in 2017, my wife and I started with our own property, in the basement, you know, at the short-term rental. And then in 2021, we got to eight units where we we were basically cash flowing $1,000 per unit.

3:32So, we created $8,000 of cash flow. Yeah. — And, we decided to walk away. I mean, that was kind of the goal of getting to to eight of them. And and then we've built, you know, significant amount of cash flow since then because we've had so much more time and capacity to do so. But very similar kind of trajectory there, which is which is kind of ironic, but so I I love the Cincinnati market, very similar to where we invest in Northern Indiana. Kind of you know, not a primary vacation market, but yet there's still a lot of population there.

4:08Still affordable, still nice nightly rates and occupancy. What is it that I guess how did you choose that market? Was it just because you guys moved there or what was it that you were looking at when you chose that market? — Yeah, I picked Cincinnati just because we lived here. I had not thought about short-term rentals or vacation rentals. You know, I stayed in an Airbnb when it first came out in like 2014 when I traveled abroad. I think I stayed in Airbnb a couple times, but I didn't think about it as an investment.

4:39I just thought, "Wow, this is something I could do here and I could physically work on." So, it wasn't super intentional when I picked the market. But as I've been doing it more and like just being in the industry and hearing about all the things across multiple markets, you know, in vacation, nonvocation, urban, like Hawking Hills, like different type of areas. I actually think that being in a metro urban market like Cincinnati, Columbus, Indianapolis, like these type of markets has a lot of pros that people don't see when they invest in like vacation markets because I think 2020 with COVID like a bunch of unknown vacation markets became really popular like Broken Bow, Oklahoma, like all these little places

5:27You've never heard of before. But those areas are becoming like more and more I don't want to say saturated but it's like a lot of listings there. Yeah. — And the prices have gone up from people who are like went in to purchase from COVID. And so I don't think it's terrible to invest in a vacation market because, you know, if you do it right and you invest the money into the right amenities, you can still be getting really good revenue and there's operators that are making like a bunch of money on it, but you have a lot more competition.

6:04And then the other thing that I didn't like as much was that you are really dependent on tourists because it's like a touristy destination. So nobody is going to Gatlinburg for medical treatments and nobody is going there for corporate travel. And so when you have a market like Cincinnati where there are multiple reasons that people are coming into the area and I didn't know this when I started. I was like, "Oh, you know, I thought we had to be downtown cuz that's where everything was." But as I've been doing it, I'm seeing we have like people traveling here for medical reasons.

6:43And that's not just like traveling nurses. That was like popular. I feel like now traveling nurses a lot less common here. But we have a really good medical system here in terms of like specialty doctors and children's hospital here. Like cancer treatment here. We have people coming from like Dubai and coming from like Boston, like coming from multiple areas getting medical treatments here. And so that's like a really major reason some people are have been coming.

7:14There's also people coming for like work relocation. And that's not even like corporate jobs. It's like construction work. I mean, I had no idea all these construction workers travel to do work in a place. And so like for example here there was like a plant being built like Nestle was being was is building this dog food plant. And so there were workers coming for a year just to build and then they have people coming in just to like start up. So if you have places that are close to their plant like our short-term rental there that we managed for somebody was booked like fully high season low season at super high rates for like an entire year and a half it seems like.

7:57And then so in Columbus, they're building like data centers. So a lot of my like people I know who are in the industry there, they switch from short-term actually to midterm, which is like over 30 days because they just constantly get these people that are coming in for that kind of stuff. And then there's like insurance people or I call them insurance people, but basically their house burned down, their house had a fire or their house had water damage and they need a place to stay that insurance is paying for.

8:29So that is also happening a lot here. We also get like athletes that come in. So for like the baseball team, they're coming in for the season, they need a place to stay. Just all sorts of different reasons why people are coming in the area that I never thought or never would have known, you know, as I was starting out. — And so the more I do it, the more I'm like, this is actually mitigating your risk because you're not depending on one type of guest who is coming into the area.

9:03You have the ability to do multiple strategies depending on what is working for this high season or low season or you know if something happens to the economy and people pull back their discretionary spend on vacations you still have somebody coming in for work or relocation like kind of like what happened during COVID. You're at least breaking even if anything did happen. Or you can even switch to a long-term rental if you really, you know, want to change completely. So, there's just multiple strategies you can do in a market like the metro urban one versus like if you were in, you know, Veil or like Gatlinburg or, you know, Orlando where there's like 10,000 listings.

9:47So yeah, — that's why I I have the option now if I want to invest elsewhere, but I still invest in Cincinnati just because I like being close to the property and then I feel like there's still demand in this area. It's just changed. But there's still opportunity in Cincinnati. — I think exactly what you said is so underrated when it comes to investing in short-term rentals. So many people never think about this. You know when you invest in those vacation rental areas that like you said is the only reason that somebody's going to travel is for a high-end vacation typically you know and how many people of that — that sector how many people are there you know like once you get so many properties and so much competition you're all fighting

10:36For those individuals and they all tend to book far in advance you don't get as many last minute fill-in bookings people don't book because they're in town for a funeral. Like, it's just for high-end vacations as opposed to what you're saying where — you book for every reason and and you can get a last minute booking for today because somebody, you know, is coming in town to work for the next week and we get Sunday night bookings for the entire week all the time for the same reason. You know, they're in town for the data center work or construction or whatever. — and so, yeah, I I think it's it from a risk perspective, I totally agree.

11:12It just it it it really reduces your your risk profile and you know I think increases your your cash flow and occupancy overall. So so today you you mentioned that things have kind of shifted a little bit when you buy a property today. What are the key factors that you're looking at? Is it like a you know a mix of location or property type or certain metrics that you're looking for or amenities that need to be there? Like what makes a perfect deal for you? Yeah. So, I think now that I've been in this market for like six to seven years and I've talked to enough guests, I usually base on picking properties based on what the guests have been telling me.

11:54— So, when I look at what properties to buy next or what I recommend my clients to buy next, I look at where what guests are saying that they want. And if I don't have it in our portfolio, I would recommend them to buy that kind. And if I do, then we either like go more on that kind or we, you know, base it off that because I want to go where the demand is. So right now in Cincinnati, I will say one or two bedroom condos, apartments, houses are too saturated.

12:34So that is one layout I'm not going to go into. So when we look at the entire market, they make up about 70% of the market. And so if you are also buying one bedrooms and two bedrooms, it's just harder to compete because right now downtown there's like buildings that are just let's say this building has six condos. They're like all short-term rentals. It's kind of like a mini hotel in a way without being a hotel. And that's just like everywhere downtown.

13:07— so back then these two-bedroom houses were doing fine even in like the well I call like the neighboring suburbs. They're like 10 to 15 minutes from downtown, a really good location. But even but now that's not even doing so great. So, it's like more better to have a long-term rental for those properties than keep running as a short-term rental. So, what's working now I'm seeing are we do a three-bedroom or above because that gives you the chance to do that hybrid mix of short-term and midterm because usually when people are staying longer, they want at least three bedrooms, at least two baths.

13:47And then when you as a short-term rental, that also will do good. Cuz before what worked well with just two bed, one bath, three bed, one bath when demand was super high. Now people are being picky because there's more supply in the area, they're like, well, I want at least two bath and I want a fenced yard and I want off streetet parking and a garage. So, their demands, I would say, have changed since before where they're just like happy to rent a place and they were willing to pay higher prices back then.

14:21So, what I look for now, I definitely look at location because you can't change location. Like, I have seen really great houses, but they're not in the best neighborhoods or they're not on like a really good street. And guests would walk inside, they would like it, but as they're coming into the neighborhood or into the street on their drive there, they're like, "This is not safe." So, they say, "This is not safe. I don't feel safe here." And so, they'll either want to leave or they'll still stay and then just give you a really bad review because they're like, "This neighborhood is not safe." And so I always go for class A neighborhoods in Cincinnati because you get the appreciation, you get the cash flow, and then whenever you want to sell, you're going to make more

15:10Money because there's families that also want to live there. And then guests also want to live there because when they're new to the area, people tell them, "Oh, stay in these two neighborhoods or stay in this neighborhood and this neighborhood." So that's the name they're looking for. So we I like personally staying in those neighborhoods. There are other people that, you know, buy in other neighborhoods that still do well, but for my properties, I stay in class A, I look for bigger homes. And then I also look for amenities that stand out from others in the area.

15:42So, some places that might be off street parking, some places that might be having a garage. And these sound really boring compared to like a lot of the vacation markets where they're like, "We're putting in a a pickle ball court or I'm putting in like a sauna and stuff like that, which I think you can try to do here, but I feel like that's another difference is like the amenities that guests look for here are like very different than when they go on vacation where you have to have a bunch of other crazy amenities just to stand out.

16:17But here it's like if you have a garage, people are like, "You have a fence. You're in a garage. I'm booking that one." So, it's very different. But yeah, so those are the different amenities that we look for. And then the layout, the the bathroom to bedroom ratio I think is important. So I'm not getting like a fourbedroom and one bath. Like it doesn't make as much. So yeah, in a roundabout way, that's kind of like what I look for now. — Yeah. Yeah. So, so great neighborhood, sleeps a lot of people, and then has some of the upgrades in terms of like it doesn't have to be like crazy high-end amenities, but just garage or off- streetet parking and stuff like that that might be a search criteria that that people are looking for above

17:05Others, — right? Yeah. And then the inside, we can control that. Like I can control what kind of furniture, what kind of design I'm doing, if I want to renovate and what kind of finishes are the insight, but when you're buying a house, you have to buy what you can't control, which is like the location or the amenities, like a driveway or a garage and that kind of stuff. So, that's important when I look for a place. And then the inside, you can always change and upgrade. So for ours, we still go for the higherend finishes, the nicer furniture because I don't want things that just break all the time.

17:40But so all that is important. But when I look for a place, I'm looking for things that I'm not able to change that make a difference. — Yeah.