Manage episode 297119312 series 2926608
Have you thought about buying a vacation property and putting it on the short-term rental market, but weren't quite sure how to manage the process?
Our guests, Bryan Marks and Jimmy Woodard, have known each other since 2010 when they met as students at UC Berkeley. Since then they’ve built over a decade of experience in the tech industry, and have put their tech know-how to good use in the launch of a short-term rental business. They bought their first short-term rental just 6 months ago at Lake Tahoe and are working on a second one across the country in Miami. In this interview, they join us with some tech tips on what they've learned, so far.
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Announcer: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investor's resource.
Kathy Fettke: Have you thought about buying a vacation property and putting it on the short-term rental market but aren't quite sure how to go about that? I'm Kathy Fettke, and welcome to the Real Wealth Show. Our guests today, Bryan Marks and Jimmy Woodard, bought their first short-term rental property just six months ago. It's been so successful that they're doing it again, but this time across the country in Miami. They're here to give us some tips on what they've learned. Hey, Jimmy and Bryan, welcome to the Real Wealth Show.
Jimmy Woodard: Thank you. Thank you for hosting us.
Kathy: Just first talk about the short-term rental business, a year ago, there was a lot of concern that Airbnb wasn't even going to make it, now I don't know if those were just scary headlines. Today, I think it's been busier than ever for Airbnbs and short-term rentals and Vrbos and everything else out there. How did you guys get started? Let's just start with that. How did you get started in short-term rentals?
Jimmy: Bryan, you want to take it away?
Bryan Marks: Yes, thank you, Kathy, for the question. Great to be on the show. Jimmy and I actually met a long time ago, 10 years ago in college. We actually started doing short-term rentals before Airbnb was a thing. I know some people don't remember that far back, but we went to Tahoe a lot, Lake Tahoe in California, and we loved it. We had a great experience. We always had aspirations to have our own that we could use in our spare time and, then ultimately, make that into a revenue vehicle for us to generate income, passive income, which is our opinion some of the best kinds of income. Ultimately, we talked about it for years, and then recently, we made the plunge late last year.
Kathy: Late last year? Okay.
Jimmy: Yes, we're still new. We started back in December of last year where everything came full circle and we got our first property in Tahoe to help other people also [00:02:00] invest in short-term rentals because we want to spread wealth as far as we can through our business model.
Kathy: You didn't exactly pick the cheapest market, and you also didn't exactly pick a down market. [laughs] I think that could've been the hardest time to buy vacation property in a place like Lake Tahoe. How did you get that first property?
Jimmy: Actually, it's funny you mentioned that because there were multiple properties that we bid on that we got outbid. It was a very frustrating process, but what ended up happening was we came across this company called Flyhomes. I don't know if your audience are familiar with them, but they help you convert your conventional offer into an all-cash offer. They at the time didn't even exist in the Tahoe market, so we had to cold email the CEO and beg him, "Can you help us get a property?" because we kept getting outbid.
It worked out where the very first time that we worked with Flyhomes, our offer, even though it wasn't the most money that was offered because it was an all-cash offer, we were able to purchase the property. I would definitely recommend them to all of your listeners. For anyone that going through that same frustrating process, keeps getting outbid, Flyhomes is a great partner that we worked with.
Kathy: Oh, that's wonderful. You had to have the downpayment, or they put up the rest of the money for you so that it's cash and then you finance it after?
Kathy: Are you guys from the San Francisco Bay Area?
Kathy: It's just like this tech hub of awesomeness where there's just something new happening, [chuckles] something coming online all the time. I don't know if you know, but I won this award with Goldman Sachs of top 100 most intriguing entrepreneurs, which was really cool.
Jimmy: Oh, nice.
Kathy: I sat at a table in 2012 with these two young guys [00:04:00] who were telling me about this new business they had. It was basically they were so tired of trying to get a taxi, and I think you know where I'm going. I don't know if you remember days before Uber. Fine, I do. In San Francisco, if you were at a bar at 2:00 AM and you needed a taxi because you did need a taxi because you shouldn't be driving from a bar at 2:00 AM after drinking, you'd wait hours. These guys were literally standing on the corner watching these cars go by thinking, "I just want to jump in one of those." As they were standing on the corner, they come up with the concept for Uber.
Jimmy: Got to love that.
Kathy: I got to meet them at the very beginning, I didn't even know what it was. It's just really cool to see that ridesharing, and now, house-sharing, which I think is what you guys are doing now. It's only been about six months, but how's that vacation rental performing?
Bryan: It's been doing great. Back to that tech story, we do have a lot of tech background, both Jimmy and I, myself being more on the engineering technical side and Jimmy being more on the sales. We did lean a lot into that. One thing that was really helpful and just for your listeners or viewers out there, there's plenty of tools called machine-learning tools where, basically, they're really good at predicting how much a home will do on these short-term rentals, whether it's Vrbo or Airbnb.
We knew pretty definitively that we can build a pro forma right out the gate and actually hit really good numbers and really feel confident that we're going to get a great ROI from the property. We jumped in there and did that initially. It's been doing great. It's actually exceeded it. We've added a lot of the amenities that have proven to improve the outcome of the home and have a great experience. Something ultimately that we wanted, two things that come to mind are, one, we added a hot tub to the property. It's always great to be in the snow and then just be in the hot tub. It's really nice to [00:06:00] have.
Kathy: It's a must.
Jimmy: [crosstalk] Oh, yes.
Bryan: It's a must. Then we added a little movie theater room, too, with very comfortable sitting and a bar area because I know, especially during COVID, people just want to be with their bubble and with their friends and family and they don't really necessarily want to go out, so we did have a bar, lounge area into the house so it felt like you could stay home and be safe while still having a good time. We added a lot of those amenities, and they paid off quite a bit.
Kathy: Do you think that's going to continue because I think a lot of people forgot there was a COVID? [laughs] It's crazy out there. My daughter was showing me pictures of San Diego, and there was no sign of anyone staying home.
Jimmy: Yes, they were binge spending, right? In full force right now.
Kathy: Yes, [chuckles] exactly. I imagine no matter what's going on, people like having hot tubs and bars in a vacation home. One of the sites you mentioned or one of the technologies, is it AirDNA? Is that the one you use?
Kathy: You can become a member there and get a lot of data on vacancy rates and what the average house is getting, right? We've used that before, that was really helpful.
Jimmy: Yes, very helpful tool because you don't want to go in blind thinking that you buy a property here, it's going to do so well because it's in a popular city, but it's not near any attraction or it's just in a bad zone and you waste all your money because you didn't do the research upfront. We made sure to do the right homework before we invested in our first property, and we did the same thing for our second property, which we're going to launch in Miami pretty soon.
Kathy: That's so cool. I had the founder of AirDNA on the show, and I didn't really-- hadn't heard of it and I didn't understand the value of it at the time. I was confused, but I think it's really taken off since then. All right, let's talk about Miami then because we started Airbnb business during COVID too, [00:08:00] and it has been really successful.
Kathy: It's just a little guesthouse right on our property. If my house cleaner doesn't show up, I can change the sheets, I can take care of it. Not that that happens very much. There's something really scary to me about owning a rental property, a vacation rental so far away, although I'm sure there's all kinds of [chuckles] management companies there for that. Rich and I are really seriously thinking about doing it in a ski area so we can use it when we want and other people can pay for it when we're not using. How do you manage it when it's across the country like that?
Bryan: Back to technology, everything to hammer is to nail type of situation, we use quite a little bit. Ultimately, it comes down to having a really good team in place of folks that you trust. The two most important components are your maid service, having a really good relationship with them and trusting them a lot. Then also having a really good-- a couple of handy people on a deck. The maids act as the eyes and ears a little bit, they do their job.
We cycled through a few, so it took a little bit. It was a little bit like a relationship, we were dating for a little bit, and ultimately, it didn't work out. Then we found a really great company that we work with in Tahoe. That's been super fruitful for us and really automated a lot of the process. Beyond that, we do use some little gadgets here and there.
Our biggest concern is making sure the neighbors have also a good experience because that's probably the hardest part about owning a short-term rental is, honestly, what the neighborhood takes into that and what's your impression in the community there? You really don't want to be-- you're negative area in the community, so you really want to treat those neighbors well, and that's something we really strive to do.
Another part of that is noise sensors. We have noise sensors throughout the property, so we can tell if they are being a little bit loud. We can just ping them or let them know, "Hey, we did pick up that you guys might [00:10:00] get a complaint soon if you're going to keep it up. Beyond that, we have some outdoor bell cameras to make sure that trash is accounted for in the right place. Tahoe, for example, has a lot of wildlife, and you don't want any bears coming out at your trash, which is-- Being a city person, you wouldn't think that that's a major thing, but in Tahoe, they take it very seriously, and we do as well, to have everything in the bear box locked away so no bears are at your front door. [laughs]
Kathy: Not just at your front door. My sister lived in Incline for many years. There was one morning she was-- turned around, there was a bear in her living room, and she jumped up on the counter and like- [crosstalk]
Kathy: -[unintelligible 00:10:38] away.
Jimmy: Live to tell the tale, right?
Kathy: Yes, that's right. She also went out into the refrigerator in the garage and all the chocolates that she handmade were gone, and the lasagna, because they do like our food. [laughs]
Jimmy: Oh, yes.
Kathy: That's really that's super helpful. I don't know if you know, but there was really just a horrible tragedy in Malibu where a woman-- There's very, very strict short-term rental laws in Malibu where you actually have to live there, that's why I'm allowed to do it. Let's start with the first question, is part of the research finding a place where you don't have to live there to own it?
Kathy: Yes, okay. [laughs]
Jimmy: We do that research. It's pretty simple, you can just type in "city" plus "Airbnb laws" and then you'll see a bunch of references that come up to make sure that you're following the rules because our job is not to put up illegal properties, it's to make sure that we're complying with the local rules around short-term rentals and things of that nature.
Kathy: Yes. They'd passed this ordinance, at least, I believe this is what it is in LA County that you can rent something on your property but you got to be there. A woman in Malibu rented out her home for the weekend. In the summer, you can make so much money, so a lot of people [00:12:00] have done that for years, the short-term rentals over the summer, and that pays for their living in Malibu for the rest of the year-
Jimmy: Oh, yes. That's right.
Kathy: -because it's so expensive. She rented it out. Well, these young kids rented it, they said there was just six of them, they ended up being about 40, and the neighbors called her and said, "Hey, there's 40 people at the house, and they're on the balcony," and she was on the phone with them for hours. Well, the balcony collapsed. I don't know if you saw that.
Nobody died, which is great, but young people were hurt, and now she's got lots and lots and lots of lawsuits. That's another thing that really scares me about-- At least, if it's where I live and I say on the description, "We're here, no parties," because we'll know. My daughter who's-- I won't say it was my daughter but her friends very, very regularly tell a different story to the Airbnb hosts to say they're-
Jimmy: Of course.
Kathy: -a Bible study group, and then it's the fraternity and then there's a hundred kids. Again, you said the sound monitoring, can they turn that off? What about cameras, can you have cameras? I know you can't probably inside but--
Jimmy: Well, the Ring, so that's another tool that we put to use. We have a Ring doorbell camera, so that's the easy way for us to monitor who comes in and who comes out, and in a way, that's not invasive because we're not trying to invade people's privacies here. Then the other thing is, on Airbnb, and I know we do the same on Vrbo as well, you can select what type of guests that you want.
If somebody has zero reviews is something that we recently talked about because of 4th of July. If someone has zero reviews, you can actually screen that out in terms of guests that are allowed in your property. There are different ways that [00:14:00] we try to get around it. Then, of course, the last one is having short-term rental insurance, separate from homeowners insurance, because you need a little bit more to some of these points that you're making to make sure that you cover your bases in having an Airbnb.
Kathy: You just call your insurance company and let them know you're doing short-term rentals?
Jimmy: There are actually specific insurance companies, so Proper and CBIZ are two in the space. Then you don't necessarily need both. If you are solely using it as a short-term rental like we are in our case, so we just go with-- CBIZ is the company that we work with currently.
Kathy: Okay. I was told that Airbnb offers a million-dollar policy, do you know much about that and if it's any good?
Jimmy: We know about it. If it's good, we haven't-- Thankfully, we haven't had [crosstalk] to take advantage of that.
Kathy: [laughs] Haven't tested it.
Jimmy: Exactly, we haven't tested out. We just want to cover our bases too just in case there are things that Airbnb doesn't cover.
Kathy: All right. Then you mentioned that there's ways to save on rehab costs by doing it yourself. I'm sure I wouldn't be qualified to do it myself, but what kind of tips do you have?
Bryan: Rehab costs, yes, that can be a huge cost to the business. If you're setting up your own Airbnb, that can be almost the majority cost of getting a house ready. You have to know when to pick your battles as far as with doing the work yourself. My recommendation is to get a lot of price quotes from folks but try to be almost a general contractor in a way if you have time, especially if it's very much a transactional nature. For example, let's say you're insulating a room, you can go and try to tear apart part of the drywall and do yourself and put insulation in there to make better heating.
There's also plenty of services that will charge you $1,000 to go through and drill holes and then they pump [00:16:00] this special material in there and they walk you through it, and it's very much transactional in nature, it's commodity. You can definitely find subcontractors that will do a really good job for a very affordable price, but it really depends on what it is.
Some like painting, for example, it's going to be very expensive because it's just the man-hours that you can only paint so fast, and that's something that almost anyone can do. You can even have a painting party with some friends and order some pizza and you guys can all paint together if you guys are really close friends and they're maybe staying at your house for free. There's lots of fun ways to approach it. For the most part, anything in the interior that's not going to be very sophisticated like patching some drywall or potentially putting together some furniture is something you can definitely do yourself. You might want to start to look at contractors if it's getting more and more sophisticated on the inside.
Kathy: Okay. Well, my goal would be to not-- [chuckles] just have it be completely hands-off. What do you think about property management companies for short-term rentals? How do you find a good one?
Jimmy: The great thing is, we actually do it ourselves. One of the things that we tell everyone is that if you have the time, which honestly it's 5, 10 hours per week, so not a huge commitment, if you have the time, you can do it. If you want to completely get rid of that responsibility, then you should be prepared to give away a huge chunk of your money because, for the most part, property management companies are going to charge you anywhere from 15% to 25% of your top line. Not profits, just everything that you gross, they're taking 15% to 25%.
There are a lot of good ones in the space, you can google and find a lot of options. Just make sure that you're not just paying for someone to [00:18:00] essentially help you with answering people on all these different platforms because you could do that yourself. Methodism-- [crosstalk]
Kathy: That's not too hard.
Jimmy: Exactly. There has to be some value add, whether that's increased bookings or consultation to help you increase your revenue with different amenities that you can add to your property. We do that ourselves, but you can easily find someone if you are looking to just completely offload that time to somebody else.
Kathy: You can definitely do it yourself, and I agree with that, it's not too time-consuming, although you can get an assistant too, that would be much cheaper. I know J. Martin, I think he's got assistants in the Philippines. I'm not sure, I could be making that up. There are ways to get people to handle that for you, although, like you said, it doesn't take a lot of time. Would it make sense to maybe hire a cleaning company so that if your housekeeper's sick, they somebody else? That seems like it would make sense.
Kathy: Yes. Then screening, I think you said something about if they don't have a profile, they don't have reviews, they don't have a photo, how do you pass on somebody? Are there fair housing laws around that? You just say, "No, [laughs] you can't rent it."?
Jimmy: It's your property, right? At least for Airbnb, we do Instant Booking, but they have a feature where they have to request a book prior to being able to Instant Book. We understand we're running a business and money is money, but we want to make sure that we're responsible with the guests that we take onto our property.
Bryan: Another thing, on that point real quick, is that it's a very seasonal business, so you have peak seasons and you have your slow seasons. You can be much pickier during peak seasons, and it's also when a lot of the parties tend to be and a lot of the people tend to-- cutting loose, so to speak, over the holiday weekends, so you can be much pickier [00:20:00] about who you let into the house and for how much during that time.
One really effective strategy is during peak season, you have set very high pricing and you try to maximize those days the most and you be very selective about who you let in the house. During the slow season, there's going to be less issues and, a lot of times, there's also less people too. You should be much more competitive during the slow season, lower your rates a little bit, maybe have Instant Booking. You really have to play to the seasons because you will generate the majority of your income during peak seasons.
Kathy: I see. What you're saying is if I want to break the rules and have a massive party, I should do it offseason.
Jimmy: Just not in our place, not in our place.
Bryan: As long as it's your party, yes. Anyone else's party, no.
Kathy: Okay, perfect. I'll invite you guys.
Jimmy: That's right, only a Kathy party.
Kathy: All right. Any last tips? I know you guys started a business.
Jimmy: The tool that I recommend to everyone for pricing, you can do either Beyond Pricing or Wheelhouse. Make sure you utilize one of these tools, they only take 1% of your revenue, so it's next to nothing. Otherwise, you're leaving money on the table if you try to price yourself. I would highly, highly recommend if you get into the short-term rental space, utilize a pricing tool because you're leaving money on the table otherwise.
Bryan: Yes, and the pricing tool's super effective for us because it's going to look at everyone else in the market, everyone else in the area and set a very reasonable rate. You should still double-check those. I work with a lot of machine learning engineers, and they're smart guys and girls, but they don't have the final say all the time. Definitely check the data. It's a great tool for really knowing where the market should be and how to really maximize your income.
Occupancy doesn't necessarily translate to more revenue. You could have 100% occupancy, but you could be leaving money on the table in a lot of cases, and so you want to optimize for even lower. Especially, lower occupancy rate for higher revenue. Definitely, you'll want to check out some of these tools that Jimmy mentioned.
Kathy: All right. Thank you [00:22:00] so much, Bryan and Jimmy, for being here on the Real Wealth Show. I love inspiring other people, showing that, "You can do this," you can do this.
Jimmy: That's right. Thank you for hosting us, Kathy.
Bryan: Thanks so much, bye.
Kathy: Thank you for joining me here on the Real Wealth Show. If you don't know already, at realwealthshow.com, we have a list of property providers nationwide in the hottest markets in the [music] country who offer long-term rental properties with property management in place and also short-term rentals in the Florida area mostly. You can get referrals to those teams, just like thousands of our members at Real Wealth Network, and get lots and lots of information, free webinars at realwealthshow.com. Have a great rest of your day and we'll see you next time, bye-bye.
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