Retiring From Firefighting Through Short-Term Rentals in Hawaii

0:00I was a firefighter at the time and you know we have a young baby. This was 2016 when we had the ADU and I'm driving to work. Every day on my drive to work I'm listening to Bigger Pockets or Real Estate Guys Radio or something along those lines or an audio book or something. So I'm constantly learning, right? And I have been a firefighter for 5 years already. And one of my senior firefighters was a real estate investor. He was just kind of dabbling in it. He had a few short-term rentals or whatnot and I'd hear him on his calls or whatever.

0:34You know, talking to guests and being all stressed out and everything else. And you know, so after I got the ADU and and had that rented, we kind of started bonding a little bit more and I was asking him about these short-term rentals and what he was doing. He's like, "Yeah, man. I'm happy to share any kind of notes I have with you." And I was like, "Okay." And so I started looking at his data and it was incredible. I'm like, "Wow, you're making how much money off of this stuff?" It's like, "Okay, we got to get into that because like like looking at me, I'm at at this point I was 145 pounds soaking wet.

1:10I'm a firefighter pulling hoses that are heavier than me, right? I know that I'm not doing this until I'm 75 years old. This is not going to happen." And so I needed an escape plan. And so I was like, "All right, this guy is dabbling in this, but if we take it seriously and we build some systems around it, I think we could actually make some really good money off of this, and it's not going to take away from our day-to-day. Like, I can still do the W2 job, but we're going to actually be able to put money aside." And she's at home, stay-at-home mom nursing a kid.

1:44— And so we got really, really, really clear about exactly what we wanted. — — and so clear in fact that short-term rentals on the island of Maui are pretty much limited to condos. And so even those have to be within certain areas. They have to be zoned correctly, all that kind of stuff. And so even with those, we found that there were several buildings, actually there are two buildings on the south side of Maui that have lockoff units.

2:16So, it would be two-bedroom, two bath units, but you could lock off a portion of it and you'd have a studio on one side and you'd have a one-bedroom on the other side. Both have their own separate bathrooms. So, I was like, well, if we could get one of those and we can split it and we can essentially create two rental units in it, this would be incredible. — And so, we got to the point where she got on board. There were, let's see, like I said, two buildings. I don't even know how many units.

2:48Maybe 400 units total, if No, not even that many. Probably half of that, really. That — our buy box became very, very strategic, very small. — So, — and we waited — and we waited and we waited until we found one. And when we got the first one, this was actually in 2018, we or actually 2017, we got one under contract, but we didn't know — we didn't know our finances well enough to close on the property and we had to let it go.

3:21— So, we lost that one. And at that point, it was like, oh my gosh, we have to get things lined up correctly when the next one hits. And so shortly after that, I think it was February of 2018, we find another one and we were ready to go. So this one came on the market. It looked like it it was so dated, you know, it was built in 1990 and it looked like nothing had changed. Popcorn ceilings, all the things, cat urine on the on the floor and, you know, pink tiles in the bathrooms, like all the fun stuff, right?

3:56And so, yeah, so, so we got this one and we got it under contract. We did a, we ended up doing a cash out refi of our house. Now, at this point, we had added so much value to our house in such a short amount of time that we were able to roll the loan that we had from from the ADU into what we were pulling out or into the refi. And then we we cashed out stocks and you know bonds and 401ks and all that kind of stuff and we actually bought this condo in cash.

4:32— Wow. — And so that one you know it closed on April 1st and the story of how that got to be a short-term rental or how we got it to the finish line. Holy smokes, man. That that was the — talk about — most stressful project that I think we've ever been a part of for sure. — When you put in sweat equity, there was a lot of unknown sweat equity that we were going to put into and YouTube University was our go-to and our contractor handyman that we had all set up, we had the dates wrong and so we ended up having to do all of it.

5:15— Oh, — it was messy. How long did that take you? — Yeah, so we we closed on April 1st and we had in the in the interim, we had talked to our handyman. We're like, "Dude, this thing is 900 square feet. We're going to knock this thing out. I'm going to give us three months. It should be plenty of time to renovate this thing." I didn't know the the way to hold a hammer at that point, right? Like I'm clueless on a lot of art school. — I went to art school, right? — So, you know, handyman is I think lined up. I was like, "Dude, we're gonna close April 1st.

5:47We'll be done by July 1st and we'll be off to the races." Cool. Yeah, no problem. Just let me know when you're ready to go. All right, cool. So, April 1 rolls around. I call up my guy. I said, "Hey, man. We're ready to go. Let's do this." He's like, "I thought you said July 1st." I said, "No, dude." I said, "We're going to be done July 1st." He's like, "Oh, got the dates wrong. My bad. I I got you scheduled for July 1st. We'll get it done then." Now, in the interim, so while between February and April, we actually put the listing up on Airbnb before we closed on it.

6:22Anything like that. So, we had like pictures of this old unit — on there and we're just like, "Please trust us. We're going to renovate. It's going to be beautiful." All this kind of stuff, right? — And so, we had taken bookings and they were low price bookings, but we knew like we're not going to get anything with these pictures, but we did, right? So then wasn't around. — We can't cancel these things. We We got — you. You could have just put it on, you know, just made up pictures with AI.

6:55— Totally. Yeah. This was 2018. We didn't know what chatt was. So, so we're like scrambling now and we're like, "Okay, well, there's popcorn on the ceilings. That's got to go. How do I get that off? YouTube. Da d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d — Okay, I can do this. Start scraping ceilings. Get stuff everywhere. Yeah, — but it gets done. — All right, well this carpet's got to go. How do I do it? YouTube, take a razor blade, cut it, cut the carpet, peel it back. Okay, I can do this, right? Like little steps that just move the needle forward.

7:29And so by doing those things, we got a lot of it done. Now these were, you know, 21-hour days in between my days at the fire station that I was working on this. She's still with the baby, right? Like I'm not seeing the baby. And so, it got to be I mean, literally July 1st, our first guest is checking in and the paint is drying on the wall. Like, we're like, "Oh, please, please, please don't rub up against the wall. Please don't rub up against the wall." Guest checked in, they paid, we got paid.

8:01Money came into our bank account. We're like, "Holy cow, this is amazing." Guest checks out. They had a great time. Oh my gosh, this is amazing. Right. And then then it just became like, holy smokes, this is incredible. We can do this. — That's amazing. Yeah. That so I mean to get it done by July 1st, you know, even with all those setbacks is just incredible because most projects it's like three times as long as what you initially project on your especially on your first one. So, — that's that's really amazing.

8:35Yeah. — Your breath is against the wall. You — right. Like you you gota you got to move. And so I didn't know anything about electrical but still standing. — Didn't know anything about plumbing, but it hasn't leaked yet. So you know. — Yeah. Exactly. Yeah. When you when you have [clears throat] to get it done, you some somehow find a way. And and — yeah, — there's a lot of like what do you there's a lot of people who I guess like they talk about getting to financial freedom.

9:12You know, you hear, you know, a lot of people striving for financial freedom. You guys actually achieved it. What do you feel like you guys did differently along the way that led to that? Like, you know, it sounds like this project like it didn't go as planned. You just found a way to get it done. What what kind of set you guys apart from the majority of people? — I think having a clear goal that we were both on the same page with helped us both know that no matter what the dayto-day was bringing, we were still on the same team going for a a better life for our family.

9:50And so that was kind of the driver and we mapped out how to get there and got the systems tighter so that our relationship didn't suffer because it wasn't just about money. And also we didn't spend. We kept rolling whatever we made into the business and into growth. And it took us until 2022 to really ever spend any of that income from all of our properties onto anything for us.

10:21Like I always joked like our guests have the nicest stuff. Like they have the nicest showers and granite countertops and all of those things. But that's what kept us moving and being able to get to a point where we were able to get closer to our goals and live more passively and that was what our what we were trying to do and to retire him from the fire department. — Yeah. And what would you do differently looking back at that project and maybe some of the others that you did along the way?

10:53That's a really good question and I would honestly say — I don't think I would change a thing and the reason is because every lesson that we learned it was difficult at that time but we learned that lesson right landlording short-term rentals is landlording on steroids and you're going to see every issue come your way and because of that we've learned how to handle you know long-term rentals no problem. We got this, right?

11:24Anything else that comes up is cake — compared to what you go through when you're starting to build all this stuff. And especially, you know, you get a couple of these under your belt and before you really know or before you start putting in those systems and you just have to figure it all out, it's a lot. But as you start implementing those systems, you know exactly how those systems need to work. And if there's not a product out there for it right now, the beautiful thing is in 2026, we can build those systems in a week with Claude or Chat GPT or Perplexity.

12:01Like these things, they work and they're amazing. — Yeah, absolutely. That's a great point. When you can you can you kind of share a little bit about that first project in terms of the numbers and what that looked like for you guys and then also I'd love to hear how you fared during CO because that was right before then you guys go into CO we're in a drivein area so we like you know got shut down for a couple months and then every it just picked up like crazy but to fly at that time I know was a totally different story so what did that look like for you Sure.

12:40Good. We bought the condo. I think it was we paid 540 for it. — Yeah. — 540,000. Like I said, we paid cash because we cashed out everything we had essentially to get this. — We put about 45,000 into it. And then we yeah, we started running this and and all the I think we were running it at the one-bedroom side initially was like $120 a night and then the studio side was $100 a night is what we were trying to get.

13:18And we quickly realized that we were priced too low. And you know, before we started doing this, we had spreadsheets that were a mile long. Like worst case scenario, where do we need to be? Right? And so we knew that we needed to be at 60% occupancy with these numbers, 120 and $100 a night in order to break even. And so we were trying for that. We we just need to break even right now because the holding costs were expensive. The HOA fees were really high. Insurance was really high. Even though we didn't have a loan on it, we still had intangible costs and we did have, you know, we refinanced our house and everything else.

13:54So, we did have some costs that were significant. So, we needed to get 120 and $100 a night. So, we we basically needed$ 220 a night. Well, within I mean I would say a month or two months, we realized like we're booking out too fast. — And so, what we did and and we anticipated cleaning all the units ourselves, being the handyman ourselves, all this kind of stuff, right? And so with a baby, she's coming down and cleaning after, you know, every guest checks in both units, right?

14:29— And and so it got to the point where it was like, okay, we we need to hire a cleaner, — but we know how to clean. And so we had the checklist that we put out there for the cleaners. This is how we want it done. I don't care how you do it with everybody else. This is how we want it done. And we had previously, we met at the Four Seasons. So we have quality as like our standard. Oh, you're both working at the Four Seasons, — you know, getting this to — we well I was — he was and I had majored in hospitality and tourism and I did my internship through the Four Seasons.

15:03— So, fivear, five diamond level of care and and SOPs were very strong within our veins. — Yeah. — So, so we had this going and so we we started hiring cleaners and we jacked up our our cleaning rates a little bit because now it's not us. We have to pay these bills. And we didn't think anyone was going to pay them, — but we jacked them up to like — I want to say it was like $200 per for this one bedroom and then like 150 for the studio and we needed that to cover our costs — and people paid it.

15:36— We're like, whoa, — well, what if we could increase our rates — to a level, you know, that's — gets to us to this level. And so we ended up getting we we figured out how to maximize our our daily rates, our cleaning rates, all that stuff where we were for the first three years we were sitting at about an average a blended between the two units. Well, actually three years we had — more but — five or six units — but between those two — we were blended at about 94% occupancy year round.

16:11So, high season, low season, — and we were we were cash flowing a ton off of these things and COVID, you mentioned COVID. So, when COVID hit, Yeah, man. That threw a huge wrench into our operations because — islandwide. — Island, well, statewide we shut down and we are a very democratic state and we are very much hands no, we can't we can't do anything. Everyone has to wear masks at the beaches. You can't go in the water unless you have a mask on.

16:44I mean, there was like ridiculous stuff. You can't go watch a kids soccer game without having a mask on and be walking around and like goofy things, right? — So, tourism was dead. We weren't allowing tourism unless you were able to stay for two weeks to quarantine — and then, you know, then you can go out of your room and in that time you had to Instacart everything or whatever. So, no one was coming to the islands and so we had to shift our our marketing and everything else. And we're like, dude, there's no one in the islands.

17:15This will never happen again. — And we had multiple short-term rentals at this point and mortgages to pay. And the monthly HOAs for those same properties today, they're 1,700 a month per unit. And so HOAs here are very expensive. So that was like a mortgage. And we had no one. We went from 94% 94 through all of our units to zero. And so we had to pivot. — Yeah. So we we had, you know, we had to cancel everything. But then we started getting back on the phone and emails with all these people that had canceled and we're like, look, here's the deal.

17:52If you can stay for 2 weeks then and quarantine for two weeks, you can come to Hawaii. It's still a thing, but you have to be able to stay at least that long. So here's what we recommend. We're dropping our rates to like super super low. — But come out for a month, stay for two weeks, get Instacart, whatever. You can still see the ocean from your LAI. It's gonna be amazing. After that, the beaches are empty. This will never happen again. The road to Hana, you won't see a car on that road, right? Like all the things that we had were like it was like Robinson Caruso.

18:26Like people weren't even going out of their houses here. So we had this amazing opportunity to see the islands in a way that people will probably never get to see it again and we pivoted right into that. And so at the end of co like we had — I think one of the reasons why we succeeded and we didn't have to sell out during that time because a lot of people lost their properties. Yeah, — one of the reasons we didn't was because we were very meticulous about putting money away.

18:59We had a lot of reserves and we needed those reserves because we were dead for 8 months. We were essentially breaking even and we were carrying a 73% occupancy rate through COVID whereas the state average was 32%. So we hobbled through it barely breaking even but we made it through. Oh,