BiggerPockets Real Estate Podcast - 875: BiggerNews: Top “Snowbird” Rental Markets with Year-Round Cash Flow w/Kristen Taylor

Starting point is 00:00:00 This is the Bigger Pockets podcast show, 875. What's going on, everyone? This is David Green, your host of The Bigger Pockets Podcast. Today we're bringing you a bigger news episode, and I'm joined with Dave Meyer, the man himself on the bigger news show. We cover the news, data, and economics impacting the real estate industry. Dave, tell us about the show that we're in store for today. Well, today we are talking to Kristen Taylor.

Starting point is 00:00:24 She is the vice president of operations at Vicasa. They are a big short-term rental. property management company. And they have some research they have done that they're going to share with us about snowbird markets. For those of you who don't know, snowboarding is when someone migrates from a colder market like New York, the Northeast, the Midwest, to a warmer one, like Florida, Texas during the winter months. And investors should pay attention to this because it impacts demand for short-term rentals or medium-term rentals as well, because a lot of these are longer stays. And so where these people are going for snowboarding could be potentially great places

Starting point is 00:01:04 to invest. And make sure to listen all the way to the end of today's show where we have an incredible seeing green segment for you. Dave and I get into a gentleman who's got a great problem. He's got a property with a ton of equity, but it's not cash flowing as much as it used to be. It's a short-term rental in the snow. And we get into what options he's got and how he should execute his transition. Well, I'm super excited to bring on Kristen. But before we do, let me just mention one very important, cool thing quickly. BiggerPockets is doing its first ever multi-day virtual summit from January 22nd to 25th. You can join me, Mr. David Green, and several other season investors for a four-day summit. There's going to be a ton of free content, some of it's available for

Starting point is 00:01:47 pros. If you want to learn more and register for the summit, go to biggerpockets.com slash virtual summit. You're going to learn a lot, so go check it out. All right, let's get to Kristen. Kristen Taylor, welcome to the podcast. So glad to have you here. First question, can you explain to our audience what snowboarding is? Yeah, thank you guys. Thanks for having me. Happy to be here. So snowboarding is when historically older generations would migrate from colder destinations from up north down to warmer destinations in the kind of southern parts of the U.S. during those colder winter months. All right. And how many Americans are considering snowboarding? According to a recent consumer survey that Acosta conducted with an external partner, this winter, we're looking at about one third of Americans who are considering or already making plans to snowboard. So that comes out to about 34%. And it's actually a really big jump from the 19% who responded

Starting point is 00:02:40 they were planning to snowbird in 2022. So definitely seeing an increase. That's super surprising because I would have guessed perhaps the increase happened. sometime earlier in the pandemic when work from home became more apparent. But it seems like a lot of people are getting more interested in this concept. Are they more younger people who are starting to do this as opposed to the historical demographic that we're doing this snowbirding? Yeah, we, you know, we don't have the exact statistics around age groups or demographics or anything like that. We do believe that the majority of snowbirds still tend to fall. into an older demographic, but there is absolutely a new wave of what we're seeing younger snowbirds

Starting point is 00:03:24 that has emerged due to the remote or the hybrid work environment. A lot of younger folks have the ability to work from anywhere. And I think we're also seeing a generation that's having kids a little bit later in life that maybe you're choosing not to have children and that really opens up their flexibility to be able to be those hybrid workers and be a snowbird at a younger age. That's super interesting. Does it change the dynamics of snowboarding when, you know, I would imagine if you're older and retired, you're looking for a place that's probably got a lot of amenities like a pool or a beach. Is it sort of changing where people are going and what they're looking for in the winter destination they're going to? I think it definitely does. I think people are,

Starting point is 00:04:10 they're looking for sunshine more than anything. But yeah, I definitely think there's more of a desire for that younger generation to have great restaurants, to have maybe a little bit of nightlife, to have outdoor activities. It's not necessarily just your traditional idea of golf courses and, you know, quiet, gated communities. I think there definitely is a desire to have more of a lifestyle in the places where people are snowboarding. All right. So when somebody's moving out of their primary residence and they're visiting somewhere that's warmer, what are most of them doing with their primary residences? I definitely think it depends on that generation. So I think we have the older generation that might have more of the luxury to own their primary residents.

Starting point is 00:04:50 They bought a long time ago, potentially their homes paid off, and they don't need that revenue stream. So I think they have the opportunity to just vacate their primary residence, relocate for a season or winter, and not necessarily need that income stream. I think the younger generation of snowbirds were sort of in the opportunity of the gig economy, Airbnb, home. I think there's a need for that revenue stream to cover their costs as well. So a lot of folks, if they are snowboarding and they are of that younger generation, I think they are looking to rent out their home, whether it's one room in their property, a whole property, but I think they do need to offset those costs to be able to afford them the opportunity to

Starting point is 00:05:37 rent somewhere for 30, 60, 90 days in those winter months. I think I officially would like to become a snowbird. I don't live somewhere where it snows. I live in Amsterdam where it just rains for six straight months and it's really not enjoyable. So if there's anywhere I could go for like six months, that seems desirable. But maybe that's longer than what most people do. Is it, you know, a month or two? Is this kind of just like an extended vacation or are people truly like transplanting for a full season? That's a really good question. And again, I think think that depends on the generation. I think historically we would see snowbirds in more of that retired age bracket staying 60, 90 days. Bacasa is seeing 40, 45 days as the average amount of stay.

Starting point is 00:06:26 So it really has shortened. And I think there's a lot at play there. I think people want that escape from their reality or whether it's raining in Amsterdam all the time or it's in a freezing climate or really, maybe they're in a landlocked state and they just want to get to the ocean. or they want to get to a lake or they need a break from their norm. So I think that's why we're seeing those reduction in lengths of stay is there's not only opportunity for them to do that, but destinations where they can drive to and have their vehicle and still be back and forth if they need to head home to take care of something, have an appointment, have a work meeting, something like that.

Starting point is 00:07:03 So I think that's where that length of stay has changed. We're not seeing those long six-month blocks. Okay. So how long is the snowbird season? And what months do we find that people are traveling the most? Yeah, I think, again, I think that's evolving and progressing as well. Historically, those snowbird months were kind of October through end of winter. So right now, I think with the season sort of changing and winter's been delayed a lot.

Starting point is 00:07:31 This year is a great example. The West has barely seen any snow and we're almost halfway through January. So I think the traditional idea of snowbird as people would pick up and they would relocate around October and they would head back home, you know, in that March, April time frame when spring pops. But I think we're seeing that shift a little bit. I think people are sticking where they are through October, even in November, in the West especially, which is my market, that's the best time of year. So if you live in the West, you want to stay put. These are beautiful months. But if you are trying to truly escape the winter and truly escape the cold temperatures, we're seeing that

Starting point is 00:08:09 shift a little bit into, you know, January, February, where we're kind of more in the dead of winter and winter is progressing into, you know, kind of that earlier spring. So I think the dates and the seasons are changing as well. Do you think one thing I'm curious about is you said that the amount of time people are staying is declining. Is that because perhaps people are going to multiple locations? Like, you know, they leave Colorado and go to Arizona and then do a little bit of Florida, maybe sprinkling some Texas in there, or whereas back in the day when maybe short-term rentals weren't as easily booked, they would just find one place and stay there for the whole season? Yeah, we're not seeing that as much. So we're not seeing people pop around to various locations.

Starting point is 00:08:50 I think, if anything, we're seeing the back and forth more. So they'll pick a spot to Snowbird for that 45-ish days. They'll head back home, take care of business, and then potentially, pop to another location, but we're not seeing trends that support people going from, you know, Coachella Valley to Tucson to Texas to avoid winter. We're also seeing a lot of folks that, you know, neither vehicle. So they're not necessarily doing those long road trips all over the place. They're staying put and then heading back home. All right. Now that we've covered the changing dynamics of Snowbird stays, stay tuned because we're going to get into which markets are best positioned to capitalize on these trends right after the short break. There are two kinds of

Starting point is 00:09:34 of real estate investors, those who have reviewed their insurance, and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC-held properties. These gaps surface only when filing claims. That's why investors work with NREG. They specialize exclusively in real estate investors, understanding portfolios, risk at scale, and cash flow protection. One claim can erase years of returns. If you own a rental property, don't assume you're covered.

Starting point is 00:09:58 Have NREG review your insurance with someone who gets investing at NREG.com slash BPod. That's NREIG.com slash BP pod. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value in the best markets across the country, without making real estate your second job? That's exactly what rent to retirement does.

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Starting point is 00:11:34 We are here with Kristen Taylor, vice president of operations at Vicasa. And we're talking about Vicasa's latest research on snowbird markets and how investors can take advantage of this information. All right. So what are some of the most popular destinations that we see people traveling to recently? Yeah.

Starting point is 00:11:50 So we've seen some trends change quite a bit. There's my market. So I grew up in California. So these are no surprise to me. but Coachella Valley is a big one out in California. So for those of you that aren't familiar with Coachella Valley, we call that the desert in Southern California. And it encompasses Palm Springs, Indio, Palm Desert, Rancho Mirage.

Starting point is 00:12:13 And it's, you know, about two-hour drive from L.A. You're about an hour and a half from some of the mountains. So it's beautiful. And it is very hot in the summertime, but it is wonderful in the wintertime. And it has just an absolute array of activities. So you've got golf, you've got hike, you've got Hot Springs, you've got a lot of resorts. So you've got the spas and the great dining and things like that. It's also a great destination because of that diversity.

Starting point is 00:12:44 So growing up here, it was really kind of more of that retired area. It was snowbirds truly. But Palm Springs has become such a massive destination, especially for folks in L.A. So demographic is all over the place, age all over the place. It really is a great destination for pretty much anyone looking for anything. I also think kind of sticking with the West, Arizona is another great one that is a very desirable destination in the winter. Mild temperatures, pretty much 300 plus days of sunshine in Arizona. So you can't beat that.

Starting point is 00:13:18 And same thing, lots of activities. So biking, hiking, horseback riding, great mountains, tons of water. golfing and then some really fantastic restaurants and, you know, nightlife experiences, especially more in the Phoenix areas. And then Texas is a big one. So Southern Texas is absolutely a snowbird destination. Great weather, more affordable than some other snowbird destinations. So that tends to be a big draw. Some budget-friendly housing options in places like Houston, Galveston, Corpus Christi, South Padre Island. Those are all really popular destinations. And some new ones we've seen in trends recently include a lot of South Carolina.

Starting point is 00:14:00 Myrtle Beach, I love Charleston. It's such a charming, wonderful city. And Hilton Head are all big destinations that we're seeing. Okay. And what about some markets that did well in the past and their popularity is sort of trending down or they're not being visited as frequently? Yeah. I forgot to mention Florida. We all know Florida is a massive snowbird destination as well.

Starting point is 00:14:20 But parts of Florida are declining. the forgotten coast we've seen a decline in since 2022. And then Hawaii is another interesting one. So Oahu, we've seen a fairly big decline there. And we're not, you know, again, don't have data to support this. But I think cost is a big thing. Travel is a big thing. We're seeing snowbirds that want to be able to just drive to where they need to go.

Starting point is 00:14:48 Getting on a plane, getting to Oahu is a little more challenging. So we've seen a decline there. there as well. And then we're seeing a lot of regulations change. We're seeing a lot of areas and HOA's change booking patterns and things like that that have also impacted Hawaii. Are we thinking that because there's more options of where you can visit for these snowboard months? You've got Airbnb, you've got VRBO. It's very easy to find. Ooh, look at what that has to offer. Where Hawaii used to just be the go-to, it's warm, it's tropical, it's perfect. Go there and figure it out when you get there. And there was a lot of brochures and there was hotel concierges that can tell you where to go.

Starting point is 00:15:21 That was kind of one of your only options. Now people have so many options that Hawaii is not as popular. I 100% think that's accurate. And I think, look, call spade to spade, Hawaii is expensive. So if you're trying to experience a snowbird experience and you're more of a millennial, you're younger with kids or whatnot, it's expensive to be out there. Everything, you know, you're going to have to rent a car. You are paying for groceries.

Starting point is 00:15:44 Hawaii is just, it's a more expensive cost of living. So I think that factors into it. But I think you're exactly right. There's short-term rentals and the idea of snowboarding has become so much more attainable for a younger generation. And I think people are looking to all these places they've never been to. And I think the desire to see and have experiences is also very much a motivator of the younger snowbird where they want to see national parks. They want to stay active. They want to try new places and see new things where, to your point, Hawaii is beautiful and it's lovely.

Starting point is 00:16:16 But you're going there to vacation. You're going there to relax. are going there to swim, and these other places all over the nation are going to offer some some really great experiences. I'd also have to say, Hawaii, as someone who works in a very different time zone than the rest of the people I work with, I think it's also harder for people who want to work from home. You're significantly big time difference, especially from the East Coast. So maybe traditional snowbirds want to do that, but more of the work from home crowd, it's not super convenient for. So, Kristen, one of the things I want to ask,

Starting point is 00:16:48 about is what should investors make of all this information? A lot of our audience are short-term rental investors currently or aspiring short-term rental investors. Are there any things that come to mind from your research and data that you think would be useful? Yeah, one thing I'll definitely call out if you are an investor looking. The best thing you can do is just check your regulations and where you're looking to buy. So a lot of areas will, like, Oahu's a great example. So many parts of that island are 30 plus only. So you're only getting long-term rentals there. You're not going to be able to pepper in those two, three, four night stays in between. So that will severely limit your occupancy and your overall annual revenue. So definitely checking to make sure that if you

Starting point is 00:17:34 are interested in buying in a snowbird market, that that area, that region can support both short-term and long-term, because that's going to be able to allow you to maximize your profit. Definitely checking into your HOA regulations as well. So some HOAs will not allow long term. Some will not allow short term. So you want to make sure that wherever you're looking supports your goals. If you're looking to buy a property purely for investment and you don't plan on using it or staying there or enjoying it yourself, I think there's great opportunity for those long term stays. They're a nice chunk of money that cover a big part of your winter income. But again, just make sure that you can offset that in the summer months with short term. So Arizona is a great example where you might

Starting point is 00:18:18 be able to get a 30, 60-ish nightly booking. But you want to make sure that in the summertime, people aren't going to Arizona for three months in the summer, but you're going to get weekenders, golf tournaments, bachelorette parties, things like that. So you want to make sure you've got those covered on both ends. Thank you. Yeah. I think that last point is something I'd love to just follow up on because, you know, these seem like interesting markets because there's going to be increased demand during these winter months in these markets. But do they stand out in terms of annual revenue? Like, is this, are these better markets than, you know, say a market that is really hot in the summer? Like, is there something that points to this being a, you know, a particularly good

Starting point is 00:19:03 investment? I would say yes, in terms of affordability. So our markets that are going to be, hugely desirable and booked all year round, they're going to be very expensive to break into. So you're looking at buying a home for, you know, one, one point five million in parts of San Diego versus being able to buy something, you know, maybe in Palm Desert for half that. So, you know, the bookings are going to offset a little bit. And I think you're going to be able to break into the market in more of a snowbird area because of the affordability versus something that's a vacation destination year round is going to be very expensive. So I do think there's benefits on both sides. I think the snowbird market is great.

Starting point is 00:19:45 You do those long-term guests can be wonderful. You're going to see a little bit less wear and tear on your property, especially in more of the retired areas, ideal guest more or less, whereas in the short-term rental, you're going to see more folks coming in and out of the property. So there's pros and cons to both, but I think if you do want to buy in a snowbird market, you're going to get a more affordable home and then be able to offset that with a long-term booking in the winter and then potentially, hopefully, some short-term bookings throughout the rest of the season. Well, thank you so much, Kristen. This has been very helpful learning about snowboarding trends and where it's heading in the

Starting point is 00:20:19 real estate market. I want to thank you for being on the show and sharing your vast array of knowledge on the subject. We hope to have you on again soon. All right, guys. Thank you so much. I appreciate it. Stick around as Dave Meyer and I give you our two cents on what investment decisions we would make based on the info Christian just gave us.

Starting point is 00:20:32 And after that, the seeing green segment right after this break. There are two kinds of real estate investors, those who have reviewed their insurance, and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC-held properties. These gaps surface only when filing claims. That's why investors work with NREG. They specialize exclusively in real estate investors, understanding portfolios, risk at scale, and cash flow protection. One claim can erase years of returns.

Starting point is 00:20:59 If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing at NREG. slash BP pod. That's N-R-E-I-G.com slash B-P-Pod. People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country. Their local teams handle the build, the property management, and the details, so you don't have to. In some cases,

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Starting point is 00:24:34 What does this mean for investors trying to make financial decisions today? I think the main thing investors should take away was one of the last points that Kristen said, which was about the value that you can get in these types of markets. I think a lot of different short-term rental markets offer different things. Ski towns offer one thing, beaches, you know, big cities where a lot of people travel for work. But I think the key is to figure out one, which areas offer the most revenue on an annual basis, and then how much you're paying for each dollar of that revenue. That's basically, you know, in the short-term rental business, that's much of the game. Like how much cash flow can you generate for each dollar that you're investing into it?

Starting point is 00:25:17 And it sounds like some of these markets are potentially good ones for that because they're less expensive than, you know, as California or Hawaii and do offer. some good things. The only thing I'd say, I mentioned, though, is that seasonality is really important. And if you are going to invest in these types of markets, you have to get really good at cash flow management and just make sure that you're able to keep your money in a bank account or you have other money from somewhere else so that during the low occupancy months, you are still able to sustain the property. Yeah. And I just want to highlight when you say cash flow management, that's a great point. It does not mean the same as when we use the word cash flow. when we're talking about real estate analysis, right?

Starting point is 00:26:00 There's words that get thrown around a lot. When we say cash flow, we're usually talking about cash on cash return. Cash flow is typically within a business sense used to describe money coming in versus money going out. So if you ran a construction company, they frequently run into this problem, where they get paid from a client and they don't save enough money to pay their workers. And so they run out of cash flow and they have to go back to the client and say, hey, I need an advance so I could pay my guys because they didn't manage their cash flows.

Starting point is 00:26:27 Something I loved about this. If you think about the investors that have traditionally done the best, they always got in early before everyone else. So short-term rentals, there was a point where we thought these things were crazy. They were considered risky. It's a flash in the pan. They're not going to do well. I heard about all these people crushing in short-term rentals and thought, well, that's not

Starting point is 00:26:47 going to last. What are you going to do if? And I was wrong. It ended up becoming an incredibly sustainable business model that a lot of people are doing well. In fact, it did so well that everybody just did. dumped into the pool. Now it's very hard to run a short-term rental business profitably. And if you are able to eke out a profit, it's a lot of work for not a lot of money. Now, it doesn't mean don't do it.

Starting point is 00:27:07 It just means to be aware. It's much harder to get into it now once it's safe. If you get in early before it's safe and you take more risk, you're much more likely to have a big reward. The Snowbird model is sort of another link in that chain. You've got an opportunity to buy into these areas, like you said, Dave, that are traditionally cheaper, that you can still make some pretty good money that you don't have as much competition. You don't have all the other investors rushing there and picking the bones clean before you get there. And it's likely to be sustainable in the future because it's not very likely that human beings are all of a sudden going to love cold, snow, dark, depressing, damp conditions. They're going to want to be visiting somewhere where there's sunshine

Starting point is 00:27:44 and words going to get out that this is a viable option. At the same time, we're seeing an increase in the ability to work from home. And we're seeing an increase in medium term rentals, stuff like Furnish Finder where people can say, hey, I want to rent a place for three months, not one week and having to negotiate three months, right? So all of these things are sort of coming together to create an environment where I think this snowbird phenomenon can become a legit investing strategy. What do you think? Totally. Yeah, I think it makes a lot of sense. This is exactly the type of thing you need to do. If you're looking for an edge right now, if you can spot markets that are going to increase demand in the near future, that bodes very well for your investments.

Starting point is 00:28:23 and this is just another way of looking at that. They're shifting demand dynamics and they're moving to these markets and that can be really good. And I'll just like speak for myself. You know, I was kind of joking when I was like, I live in a rainy place. But I, you know, I work remote full time. And my wife and I definitely try and get out of Amsterdam as much as possible in the winter. We're looking for sun. Obviously, they're different locations.

Starting point is 00:28:47 But I do think that, you know, people who have worked situations like me, which is an increasing number of people. This is a very appealing option, unless you live in really nice places like California, Hawaii, full time. There you go. Well, thanks, Dave, for joining me today. I thought this was an awesome show. Love that we were able to get some data and love having you here to unpack it. And since you're here, Dave, I'm going to bring you along into our seeing green segment as a listener to this podcast. You are part of the growing and thriving bigger pockets community.

Starting point is 00:29:16 And this segment is where we get to connect with community members just like you directly by answering listener questions that everyone can learn. and we're going to do that now. Today's question comes from Rory in Colorado. Hey, David. Rory Corporal from LaMont, Colorado here, a long-time listener, first-time poster. So, hey, we've got a mountain property that we did as a buster. We built it back in 20 and 2021. And the short-term rental market has really slowed down,

Starting point is 00:29:44 but we are sitting on a ton of equity, really thinking about what our next steps are. Looking at either a 1031 exchange, moving that into turnkey properties or an RV park or self-storage, something with real estate involved, or potentially or multifamily. Another option would be to have a heat lock on it and use those dollars to invest in some other building projects that we're looking at, as well as perhaps buying a cash-plane business. I'd love to get your thoughts on what we should do with the equity. We've got about 600K that we're sitting on right now. And yeah, love the show. What would you guys

Starting point is 00:30:22 have going on and really appreciate your help. Thanks. Bye. All right. Thanks for the question, Rory. This question actually is near and dear to my heart because I also have an STR. I did a little burr on in Colorado and I'm sitting on some equities. So this one's very relatable to me. And just to summarize basically, what Rory said is that he did a burster, which if you haven't heard of that, it's like the burr strategy, which is buy rehab, rent, refinance, repeat, but it's doing it with a short-term rental property in Colorado. And Rory's basically wondering he's what to do with the money he's built up. He's got $600,000 in equity, a ton of equity in there.

Starting point is 00:30:59 And he's wondering, you know, because he's making less money, short-term rental incomes going down, should he do a 1031 exchange who basically sell the property in 1031 into a different type of real estate asset? Should he use a HELOC loan to pull some money out and reinvest it into real estate or potentially even go into something outside of real estate, like buying a cash-rolling business, laundromat, car, something like that. David, what's your take?

Starting point is 00:31:24 My first take is, I'm curious, if nobody knows there was a bit of an underground war going on between what we were going to call the short-term rental-brew hybrid. The Burster was obviously one of the two. I never heard that one. Oh, man, this was huge in my world, right? As Sir Burr himself. I've heard of Air Burr and B.

Starting point is 00:31:47 Airbnb Burr. Airbnb Burr. Yeah, yeah. I heard that one. Yeah, not Burster. So that's what it was. There was a huge clash between the Likens and the vampires. Are we going to be a Burster or an Airbnb?

Starting point is 00:32:01 Yeah, and I'm not quite sure where the chips fell, but it looks like Burster might have pulled ahead. Now, regarding this dilemma, it sounds like he's got a lot of equity in the property and there's not as much cash flow coming in, maybe because of more competition, maybe because the snow is down. There's a lot of reasons why the short-term rental market may be fading out.

Starting point is 00:32:20 But I refer to this in long distance real estate investing as a return on equity, right? So we all know about return on investment when you're putting that initial capital into the deal, what's your cash on cash return. But sometimes you don't think about the fact that if your property goes up in value, you're sitting on a lot of energy there. There's a lot of equity. And it's not giving you good return. That's typically when we think about moving some of that energy, which we call equity,

Starting point is 00:32:45 when it's in a property, into something else. And you've got two vehicles, just like you mentioned. You can either sell it and move the whole stack minus your closing cost and your realtor fees into another property. And usually a 1031 is how you avoid bleeding more of that energy in the form of paying taxes. Or you can keep the property and suck some of the energy out of it through a cash out refinance or a helock and move it somewhere else. The way that I tend to look at these decisions is I ask myself, is the property going to continue to appreciate or is there reason to think cash flow is going to continue to go up? If the answer is yes, I look for a way to justify a cash out refinance or a heloc, so I keep the property and the future benefits of holding it,

Starting point is 00:33:25 and then I just move some of that energy somewhere else to get more cash flow. If the answer is no, I don't think it's going to go up anymore. It's kind of hit its cap or it's not going to go up more than my other options would. There has to be a delta there. If it's basically, yeah, it's going to go up, but so is everything else. You might as well sell it and move the money somewhere else. And here's one of the big reasons why. When you sell a property that you've already put a lot of work in,

Starting point is 00:33:46 into. Like you mentioned this was kind of when they built on their own from the ground up. There's some sweat equity there. They acquire what I call buying equity. In the next book I have coming out with BP, this is one of the ways that I talk about making money in real estate is you actually can buy equity. You can buy something for under market value or you can force equity, which is where you improve the property. When you sell a property that's pete and you buy another one that's a fixer upper or you get a great deal on it or there's a way that you can take that energy and you can add to it. It's sort of like growing your snowball. I would lean, towards the 1031 in this situation because it doesn't sound like the property is going to continue

Starting point is 00:34:21 to increase in value. But if you move to another market that is going to increase in value, and you buy something below market value, and you add value to it by forcing equity, and you get more cash flow from something else. You've won in the four out of the 10 ways that you can make money in real estate and you can exponentially grow your wealth that way. What do you think, Dave? Well, first of all, I love that you talk about return on equity. I think it is the most underused metric by a lot of real estate investors. People focus on cash on cash return. But as you said, when you build equity, which is a good thing, it forces you to have to think about, is that equity being used efficiently? And it sounds like in this case with Rory, it's not being used

Starting point is 00:35:01 efficiently. $600,000 of equity is obviously a ton of cash. And it sounds like it's not generating a lot of cash flow, meaning that if cash flow is your goal, it's not making it very efficiently. And to David's point, we don't know if the property is going to appreciate, but if it's not going to appreciate, that's further inefficiency in the use of that capital. Now, in these types of situations, and I think many experienced investors face these, I like to do something I call benchmarking, which is basically like trying to understand what you can get with your money elsewhere. So, like right now, it seems like Rory's saying like, oh, I'm interested in multifamily, an RV park, a self-storage. those all just seemed like these sort of hypothetical potential options. Like, what would you get? What's the return on equity you could get there?

Starting point is 00:35:48 What's the 10-year return that you would get on this property compared to self-storage? And obviously, we don't know. You have to forecast that. But I think that's, to me, the first step is like, just run some numbers and see, like, if I held down to the property or I did a helock, here's what I would get. And if you look at selling it and doing 1031, it might be a very different number. So I think that's super helpful in just like comparing numbers to numbers. I'm with you though, David.

Starting point is 00:36:15 I think in this type of situation, if, you know, I'm just making some assumptions about Rory, but I'm going to say that if he's already feeling like this property's not efficient and the income is going down, then the HELOC is only going to further deplete your cash flow and make this property perform even worse. And so I think take the win, you know, it sounds like you had a great success with this property. I would take the win to the 1031. There you go. Regarding the very last part of it, should I buy self-storage,

Starting point is 00:36:43 should I buy an RV park, should I buy a cash-link business? I would lean away from buying a business unless you have experience in that business, right? There's always this point when you get into something new where you don't make any money. You might even lose money as you're learning how to do it before you do well.

Starting point is 00:37:01 It's not all apples to apples here. I would try to reinvest that money in something as similar to what you already understand as possible, which would likely be a short-term rental in another market. You're also going to get some of the upsides, like we said earlier, where you could get a better deal. You could add value to it, maybe even build another one from the ground up. Cash for that one and sell it and move the equity somewhere else.

Starting point is 00:37:20 Just a very reliable staircase level of building wealth where you repeat the same thing. You want it to be as boring as freaking possible and as safe as possible all the way up to retirement. So thank you very much for submitting your question here, Rory. It was great to hear from you. Best of luck. Let us know how that turns out. And remember, if you want to have your question featured on seeing green, we would love to have it. Simply go to biggerpockts.com slash David, where you can submit your question.

Starting point is 00:37:44 And if you're listening to this and you loved it, let us know in the comments on YouTube what you thought. And if you're listening on a podcast app, please go give us a five-star review. Dave, thanks for being on today. Love you. I know you wrote a new book, start with strategy, right? Where can people go to get that? Oh, well, thank you for having me. I appreciate it.

Starting point is 00:38:01 And yeah, if you want to learn about how to craft your own real estate strategy, go to biggerpockets. com slash strategy book. All righty. Thanks, man. We'll see you on the next one. This is David Green for Dave the strategy man, Meyer, signing on. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify,

Starting point is 00:38:41 or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.w.com. The content of this podcast is for informational purposes only.

Starting point is 00:39:04 All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.

BiggerPockets Real Estate Podcast - 875: BiggerNews: Top “Snowbird” Rental Markets with Year-Round Cash Flow w/Kristen Taylor

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