BiggerPockets Real Estate Podcast - 948: 10 Rentals in 5 Years by Buying in Overlooked Short-Term Rental Markets w/Jarrod Tucker and Yiwei Cheng

Starting point is 00:00:00 Henry, if you were to put together a list of some great short-term rental markets, what markets would you put on that list? Well, the Instagram gurus would tell me that you have to have a property in the Smoky Mountains, Joshua Tree, California, or some beach town somewhere. But I know there's tons of other really cool fancy places that I'm leaving off that list. But what about not fancy places? Like, I don't know, Cincinnati, Ohio. I would say that that's probably number 472 on my list of short-term rental markets. Well, today I think you will actually learn something new and how some unsexy markets do make for great short-term rental opportunities. Welcome to the Bigger Pockets Real Estate podcast, everyone. I'm your host, Dave Meyer, joined today by Henry Washington.

Starting point is 00:00:50 And today we're talking with Iwey Chang and Jared Tucker. They are an investor couple living in, you guessed it, Cincinnati. Ohio, and they are doing highly profitable deals today in the short-term rental space. And when Henry and I talk to Eway and Jared, you're going to hear about why investors who like the short-term rental model shouldn't overlook Midwestern cities that might not be as sexy as some of the places Henry mentioned earlier because they have a great approach. They basically work to understand what amending these their guests want. they listen to feedback, they look at data, and they are able to use that to still make

Starting point is 00:01:31 profitable deals in today's market. Now let's jump in. Eway and Jared, welcome to the Bigger Pockets podcast. Thanks so much for being here. Yeah, I am so excited to be here. Yeah, thanks, guys. We appreciate the opportunity. So super excited.

Starting point is 00:01:46 Well, I'm feeling a little bit left out because you guys met Henry already at a conference just this past week randomly. And I was not there, so I'm still catching up. You should have been there. I should have, but I have no business at a, they were at a midterm rental conference. I have no business there. I have never done a midterm rental. No plans to do it. So I would be a fish out of water. But I do want to catch up on your background, Iway and Jared. Tell me about your first rental. I understand it was actually your primary residence. Is that right? Yeah, so background is we used to live in California and then moved to Cincinnati for work, for like a corporate work. And I knew I want to invest in real estate, but I didn't know what.

Starting point is 00:02:36 So when I came here, I started looking for like properties, but like none of the long-term rental numbers made sense. Even though like, you know, at the time it was like 2018, you could buy houses for like 70, 80,000 in some neighbor. hoods but I was like even with that a 30 year mortgage like I can only cash flow maybe like 100 200 dollars a month and I'm like how am I ever going to make money like how do you make money of real estate you know 30 year mortgage 200 dollars a month like I didn't get it and so I was like well let's just focus on like finding our primary residence so we found a house and then we also had an apartment with the lease we couldn't get out of so I listed it on Airbnb we moved Jared's furniture in there and literally did everything wrong from the start.

Starting point is 00:03:27 Like, we had guests who threw a party. I mean, they were like footprints all over the wall because I didn't have my pricing right. Wait, footprints on the wall? I don't even know how they got there, to be honest. I was like, I don't know if they're doing like handstands on the stairs, on the bedroom wall. Like, it was just all over the place. But at the end of the day, I was like, wow, you can really make money with short-term rentals. And it's definitely doing a lot more than what I could have gotten as a little.

Starting point is 00:03:51 long-term rental. So by the time we moved in to the house, that winter, I was like, I'm going to figure out how to do short-term rentals and I'm going to do more of it because at the same time, I also wanted to leave my corporate job. You're telling the story, right, of a lot of people. And what I like about your story is you just kind of jumped in and figured it out as you were going. And you did it in a way where you essentially limited your risk because you got started with properties you already owned or were stuck in a lease with, right? So if you don't try something with those, then you lose the money from the rent. And so it forced you to kind of learn. But let's back up a little bit. Like, when was this that you moved in to your new house and started Airbnb

Starting point is 00:04:37 your apartment? And like, when did you start learning about real estate investing as a niche? And like, did you just, were there any other strategies you tried? Like, kind of give us, paint that picture of your you're starting out for us. Yeah. So I think it was, it was like fall of 2019 when we got the house and started doing short term rentals. But we started with real estate investing like in 20, like winter of 2018. So I found a mentor here in Cincinnati. Jared was like, make sure she's not a scam. So I went and like met her in person. And I was like, no, I think we just need to pay for experience at this point, you know, because I, I don't want to, like, figure everything out on my own from scratch. So we did, she was like, you should start wholesaling. So that's what we did. Like, she, like,

Starting point is 00:05:30 also sew courses that we did, like, wholesaling. And I was like, this is not for me. Like, I cannot talk to sellers. I cannot look at a house and be like, oh, yeah, that house is worth this much, but they want this much. Like, it just did not work for me, for me personally, like personality wise. And then I also didn't want to try rehabbing because I was like, I don't know contractors. I don't know like how this rehab process goes. From there, it really started with the short term rental of our own house. And then after that, that winter of 2019, I went to this other real estate conference.

Starting point is 00:06:08 And Jared was like, you should check out this person who does rental arbitrage. So like basically you rent this. house at long-term rate and then you rented out as a short-term rental and she had like 20 of them in North Carolina and you know we just got started with short-term rental so I was like this is really interesting because that I could see a way to practice more and like kind of grow into that and learn like more about short-term rentals instead of making all our mistakes that we did so that's end of 2019 when we got really serious about it. Man, it sounds like you went down all the real estate goobber rabbit holes.

Starting point is 00:06:51 But what was cool was that you ended up landing on something that you kind of had your own experience with, right, through that apartment. Jared, like, how were you during all this process? Because it sounds like, Yowie was like, we should do this. And then you got to go off and do it. But like, you know, what role did you play in the business during this time? time and maybe it was just like devil's advocate or where did that come into play for you? How did you feel about all this new real estate investing methods going on?

Starting point is 00:07:21 Yeah, I think I was nervously supportive. That's a good way to describe. That's a phenomenal description. Yeah. So we, I mean, we, you know, we tried, you know, wholesaling together. We did a lot of driving for dollars. You know, we picked certain. Yeah.

Starting point is 00:07:38 We went to, you know, different neighborhoods, you know, throughout Cincinnati. And, you know, we actually, we got a couple of leads. We went, we walked through houses and just felt like, you know, hey, we can't envision the end product, you know, with the current estate of some of the houses that we walk through. So it made more sense for us to start with short terminals. We did a few other things as well. We looked at notes, private lending, got a little bit of experience with that, but really, you know, doubled down on the short terminals.

Starting point is 00:08:07 All right. So I have to admit, I've never been to Cincinnati where you guys invest. But it's not one of the places that you often hear about as one of the more common short-term rental markets. So was there something about the city and living there that made you, gave you a good idea that this was going to work from the beginning or were you sort of taking a shot in the dark? Taking a shot at the dark because I also did not understand who was coming to Cincinnati because it's definitely not all my list of vacation spots. And maybe for lots of other people around the country, it's like, who. would go to Cincinnati. But once we started doing like arbitrage and just started buying rentals, because we saw that you could make money. So it's like, why not try with more? And a lot of times,

Starting point is 00:08:56 I feel like you really don't know until you do it that you see like who is coming. You understand the guests a lot more and what they're looking for. So for us, it was like, okay, let's just do it because I know we can make funny and I want to leave my job. And then we can figure out the rest, like, as we go. I would say now that I've done it for, like, so many years, I know the, who the guests are that are coming. And as I start up new places, I have a better idea of, like, what amenities to put in and what specifically they're looking for. But at the time, I did it. And I was just like, there's people coming. There's people renting. Let's just do this. So who are the guests? Okay. So I categorize it.

Starting point is 00:09:38 into like three different categories. The first one is more like vacation people. So they're coming in for games, events, because we've got the fangles here. We got the reds here. And there's a bunch of concerts that are coming here. Lots of weddings. I feel like there's like a wedding every single weekend here. And then people just coming to visit family. And then within that, there's like two groups. You've got the couple traveling. And then you've got the families traveling. So there's lots of families that and travel together for vacation. There's a lot of amusement parks up north that they go to or a lot of like sports tournament. That's been a new recent thing, like lots of basketball games for the younger girls and

Starting point is 00:10:21 guys and things like that. And then the second category is like the medical slash business professionals, I would say. So the people that are coming here for medical reasons, like there's a hospital that's close by here, University of Cincinnati. And then there's also a children's hospital that lots of people come here for, for like cancer treatments or different surgeries. So there's like families that need extended period of time. And there's like the traveling nurses who are coming here too. So anybody who has like a one bedroom, one back would be really great for doing the midterm rentals with the traveling nurses. And then you've got the actual like patients who are coming in to get.

Starting point is 00:11:06 medical treatment. And then the third category are going to be more of your relocation business travelers. So it's like people that are moving here for work because their company moved them here and they need a place to stay while they find a house or they're just here traveling for work like construction workers, even like business like single person coming in, staying downtown. And Ohio, I did not know this until now. Ohio gives this huge tax abatement to anybody in the movie industry, like filming movies here in Ohio in general, they get a huge tax incentive. So Cincinnati gets a lot of like films, movies get made here. So there's like when that happens, you've got the actor, the actresses, and then you've got the film crew that's coming in. You also get like a lot of musicals that come in.

Starting point is 00:11:57 So like they need a place to stay. I classify that as business. Like people were coming here for work. They don't live here. They're just here for work for periods of time and they leave. Or it's the people that are coming and they are moving here for work and they need some time until they find a place. Interesting. Because typically when people who, especially people who aren't doing short-term rentals yet, typically when they hear about short-term rent as a strategy, they're thinking vacation destinations, properties with tons of crazy, awesome amenities, you know, million-dollar properties that you're essentially rent. renting out for people to have some sort of vacation experience. But there are a lot of markets where short-term rentals can do well where you don't have to be this vacation hub, this vacation

Starting point is 00:12:45 mecca, because there's a need for the short-term housing that is hard to fulfill with hotels. And when you think about hotel stays, if you're coming for an extended period of time, there's not a lot of great options that are an affordable price ring. right? Because there's really nice hotels and that's great, but that's not ideal if you've got to stay for 30 days, right? That gets really expensive. But if you don't want to stay in like an extended stay either, like, what do you do? And so I think that it's a really cool niche that you found. Now that we know why Cincinnati works as a short-term rental market, we're going to hear about how Eway and Jared are staying competitive despite increased supply. We'll get into that right after the break. A lot of property managers think their job is answering tenant emails and coordinating repairs. That's not the job.

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Starting point is 00:15:44 is a financial technology company and not a bank. Banking services provided by Threadbank, member FDIC. Welcome back, investors. We're here with Eway and Jared getting their insider tips on how to cash flow in the Midwest. Let's get back into it. Are you seeing a lot of competition for properties in this short-term rental space in these markets now, or is it really just like you can kind of have your pick because there's not a lot of other operators in these areas? It's grown a lot, right? Cincinnati, since we started in 2019, you know, listings have grown significantly, probably more so. I'll say at the lower bedroom counts, right? So when you look at one bedroom, two-bedroom, properties, obviously they're going to be cheaper. Most of them probably be in condos.

Starting point is 00:16:28 You know, when we look at the market today, that's probably that's close to 70% of, you know, the listings that are out there today. There's probably less competition at the higher bedroom counts. You know, once you get like four or five bedrooms, that's a lot smaller percentage of the market. But the overall listings have grown significantly in the last, you know, four or five years. Yeah, I would say Cincinnati follows the same trend that short-term rentals have seen nationally, which is like this huge increase in supply because lots of people are getting into short-term rentals after the whole COVID pandemic. And also, what worked then in 2019 when we started is very different than what works now in terms of like size and location. So now I wouldn't even recommend like

Starting point is 00:17:19 one bedrooms downtown because there's so many. And then same thing with the two bedrooms. Like, we started going into the suburbs during the pandemic because we saw downtown shut down, but the suburbs were doing well because so many families were traveling in. In the 10 to 15 minute range, it's all two bedrooms on bath right now. It's very hard to stand out at that size. So like one of the things we've been doing is going up in different sizes that the guests are looking for. And I just know that because of what they asked. They said, I want a three-bed two-bath. So, like, that's what they're looking for. So, like, if you have a three-bed-two-bath in that neighborhood where a majority of the older homes are two-bed, one

Starting point is 00:18:01 bath, like, you have that as an advantage. So I would say, like, listings have basically doubled in the last few years, but we're still seeing, we're still following the same trend as the nation's short-term rental, the national short-term rental trends. And you talked a little bit about supply, of housing. And this has been a trend that we've been watching on the show a bit for short-term rentals for a couple of years now, that just it's gotten so popular. You hear data about individual properties or individual cities starting to see income decline or revenue decline for short-term rentals. Are you seeing that with your portfolio or in Cincinnati as a whole that there's more supply than the demand can handle? I always say in certain pockets, yes, there's going to be more

Starting point is 00:18:49 supply in certain pockets are more supply than demand, but there are certain opportunities in those areas too, which is why we haven't been like, this is so oversaturated. We're not doing this anymore. It's like I am able to see what the guests are looking for. So for example, in that one neighborhood where it's like a two bed one bath where a majority of the supply in that area is a two bed one bath, there are opportunities for you to have three bed, two bath, four bed, five beds that are still doing really well in revenue. And we have this five bedroom in that neighborhood that the revenue has not changed ever since the pandemic. Like for the last three years, that revenue is super consistent throughout. Whereas like some other places like in general,

Starting point is 00:19:36 I feel like in general, I've seen about a 20% decrease in revenue from in 2020, 2024 versus 2022 and 2021 where like that was the peak. So I feel like there is a decline for sure that if you have a great product in a great location here, you can still do well. Yeah, and probably one add on to that, right? It's like I think the increased competition has probably created better products out there in the marketplace, right? So gone are the days where you could go, you know, buy use furniture off, you know,

Starting point is 00:20:10 Facebook marketplace, right? in the flea market and use all your leftover linens, right? I mean, these are professional operators today. Like, we were setting up houses specifically for short-term rentals, very particular about, you know, the types of linens, the type of amenities that were offered to the guests. You got to step your game up. Exactly. Competition is good and bad, right?

Starting point is 00:20:32 You know, you don't always want it, but it makes you better in the long run. It does. But, like, on a scale from, like, I can just put any house on the market. and with my furniture that I want to leave in the house or like Facebook marketplace furniture to like I need a themed house to even be profitable in all these vacation destinations. Like Cincinnati is kind of in the middle. Like it needs to be professionally managed and needs to be curated for a short-term rental. But it does not need extreme things that people might need to do in vacation markets

Starting point is 00:21:07 speak to just even, you know, stand out to even be profitable. For example, like, people might want to put like a game room in the garage and make it super cool, paint it, do like a man cave or whatever. But here, people want a garage. They want to park their cars. They don't want to carry their stuff in the rain. It rains here. It snows here. So they don't want to be, you know, shoveling snow or trying to heat up their car in the middle of winter. Like, a lot of people here want a garage for a garage. They're not looking for anything fancy. It, needs to be a great house, but it does not need some of the things that vacation destinations are known for. You know, what I love about what I'm hearing is it sounds like a lot of the decisions

Starting point is 00:21:48 that you're making are based on feedback from tenants and data. And then you're using that to kind of drive what you're offering, which is super important when you're dealing with the competition that you're potentially dealing with, especially in the smaller bedroom bathroom counts. So what are some of the other things that you do from an amenity standpoint or maybe some tips and tricks that you do to keep your particular properties competitive? So I would say our philosophy is you have to have a great product. Like I'm not trying to just, you know, make a quick dollar from this guess. I want that long-term guess. So we get a lot of guests that repeat that only stay with us when they're here in Cincinnati. They'll say, if they want to stay at one property, they'll know that

Starting point is 00:22:34 every other property is going to be consistent. So having a great product and then secondly, having that consistent five-star experience every single time. And that's kind of like how we've built our portfolio on and our business on, basically. And a few of the things I think through as I come up with which house is going to do well or which house we're going to take on and which property will do well in Cincinnati and how much money it can make, it usually comes down to like, one, what can I do to make guests want to book this house? Like, what is going to make this property stand out from others in the area and from others in my portfolio? And then the second thing is, like, what are the guests want? Like, would guests like being here? So, like, for example,

Starting point is 00:23:22 we're getting a lot of families and kids traveling in the area a lot more than I have noticed in the past. So one thing we've added to a lot of our bigger homes because that's where a lot of the families are saying, cribs because lots of people are traveling with kids and we want to upgrade the experience so they're not looking for a pack and play. It's like a real crib with a mattress that you can put the baby in. The other things we're doing that I'm seeing is the beds, you know, like before I had queen beds because I sleep on a queen bed. I'm like, everybody should be fine with a queen bed. But no, they want king beds. So sometimes we have to go in and re-buy-buy. the bed and redo the bedding for some of our other places that have maybe a queen in the primary

Starting point is 00:24:09 bedroom. So we're taking the queen out and we're putting in kings in a lot of these places. The mattress has to be good. And the other thing we do is like all name brand products. Like we don't really go for a lot of the private label. So like are the mattresses, the linens, the soap, the toilet paper, the paper towels is like Charmin Bounty, Ty, Dawn. Like that is, maybe what they would use at home. So I want to create the same experience. Like if they were traveling, it feels like they are still at home. They're still using the same products, the same brands,

Starting point is 00:24:44 the same cotton sheets and memory foam mattresses, like that kind of thing. Okay, so Jared and Iwey have built a portfolio of 10 properties over the last four years. But how have they funded these properties? We'll get into that and how they're finding deals today right after the break. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense.

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Starting point is 00:25:51 check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise flagship fund before investing. This and other information can be found in the fund's prospectus at Fundrise. com slash flagship. This is a paid advertisement. When I bought my first rental, I thought collecting rent would be the hard part. Nope. The admin crushed me. Every night was receipts, tax forms, and checking who was late on rent. I kept thinking, if this is one unit, how do people run 10? Baselane changed that. It's BiggerPockets official banking platform that handles expense tracking, financial reporting,

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Starting point is 00:28:28 That includes places renters are already searching, like Realtor.com, Apartments.com, Redfin, and more. No copying and pasting. No juggling multiple platforms, just one listing that shows up everywhere. If getting rentals organized and filled fast is on the list this year, start with Avail. Sign up for free at Avail.co slash BiggerPockets. That's A-V-A-I-L-C-O-Sash BiggerPockets. Hey, everyone, welcome back to the BiggerPockets Real Estate podcast. Let's jump back in. I want to talk a little bit about scaling, because I'm a little bit about scaling, I do think this is something that, you know, a lot of investors struggle with. And it sounds like you hit a wall at a certain point in your investing where your debt-to-income

Starting point is 00:29:07 ratio was no longer allowing you to take on more financing. And just for everyone, if you've never heard that term, DTI or debt-to-income ratio, it's basically something that lenders look at, basically how much income do you have? And they compare that to how much debt you're taking out what your mortgage payments are going to be. And for a lot of investors, at a certain point, you just, your income from your job is no longer enough to satisfy a lender to keep giving you more mortgages. So, Ewe and Jared, tell us how you got around this challenge. You know, once we hit that limit, we started talking to, you know, other investors in the area.

Starting point is 00:29:44 You know, we wanted to continue growing. So pretty quickly, we learned that we could go partner with others, right? We could do the majority of the work, right, the boots on the ground where somebody else could bring the funding. And so that's where we started. done a couple of partnerships with folks here in the area. You know, essentially what that structure, you know, looked like was we would find a property that we felt would do really well. We've got a pretty particular process of going through and betting that property and then estimating what the revenue will do. And we have a really good handle on what the expenses look like and it really

Starting point is 00:30:18 just comes down to the type of financing that we can get in the down payment. So typically what that partner would do, they would bring the down payment. And then we would work together on the financing. Now, the financing that we did do was DSCR loans. So it's debt service coverage ratio that we applied for as a separate entity. So that's one structure that we have put in place and allowed us to continue to scale. The other one is just creative financing where we work directly with an owner and they would carry back financing. Awesome. Yeah. And just for everyone, if you don't know what a debt service coverage ratio loan is, it's basically a residential loan product that mimics commercial lending in that the lender is looking at the quality of the

Starting point is 00:31:05 deal to determine if they're going to give you a loan rather than the borrower's personal credit worthiness. And this is a great strategy for scaling if you do run into these DTI debt to income issues because if you're able to source and find good deals, lenders are going to lend to you regardless of what your job income is. So that's a really awesome strategy. Thank you for sharing that with us. And, you know, last thing here, I just would love to know, like, does this still work for you today? Because, you know, all of this sounds great, but we're in a high interest rate, low inventory environment. Are you still finding deals that make sense in your market that are performing up to your standards?

Starting point is 00:31:46 Yeah, so I would say back in 2021, when we started doing the DSCR loans, it was like a new product we haven't heard of. They were lending on, like you were saying, the rental. income of that house without our personal credit. And at the time, we're paying, like, way higher rates, because the DSCR loans are going to be way higher rates than what you would get for your personal residence loan. So at the time, our rates were, like, 4.75. And everybody was getting, like, 3.2 or something. So I was like, this is such so high. But now that I look back, it's, like, a lot lower. But at this point, I feel like the DSCR rates are like 8%. And for you to really cash flow at 8%, you have to have like a really low price. But in Cincinnati, the prices have not come down so much to adjust for the

Starting point is 00:32:37 higher rates. So what we're doing a lot more of now is looking for that creative financing deal. So the most recent one we did was end of last year where the owner had to leave. Like they were moving out of the country, the property couldn't sell, and we worked out that creative leave with the owner directly. So at this point, I would prioritize creative financing if possible, especially if the owner is an investor and is more comfortable with this kind of deal because it is more about trust than it is like, you're a stranger, I'm a stranger. So let's like, I just promise I'm going to make payments to you. But I feel like DSCR could still work.

Starting point is 00:33:19 or even a commercial loan. So, like, one of the things I was looking into is a more, like a 20-year AM, and it's like an arm still. But it's not as great as the DSCR because you get the 30-year fixed. But it could hold you over until the rates drop some. So if I were to get financing now, those were the two. I would primarily go with the commercial if I can't get the creative financing. Yeah. And for those who are unaware, arm or adjustable rate mortgage is what that stands for.

Starting point is 00:33:52 And so I love commercial loan products, especially in this environment, because, yes, the property will be on an arm or an adjustable rate. Typically, that adjustable rate period is going to be anywhere between three and five years, which gives you time. It's not like it's going to adjust in the next six months, right? So if you get a buy a property on a three-year adjustable rate, if the rates come down over the next three years, you can refinance that property. And typically there's no prepayment penalty for doing that. So I think that's a great product as well as a lot of these commercial construction loans will allow you to finance in some of the renovation money or maybe even some of the money to furnish it. But what I wanted to do was jump back to you structuring these deals with your partners. I think that's a great strategy for almost any investor in any niche is you can you pair what you do have, which is the ability to find the deals or the ability to operate the properties with.

Starting point is 00:34:45 someone who has the money and then you can create this kind of 50-50 environment. But the question I had was when you're structuring these, how do you factor in the things like the cost for furnishing the property? Is that something that you're bringing? Is that something that the partnering is bringing? And then how are you ensuring that everybody kind of stays in their lane when you're doing these partnerships? Yeah.

Starting point is 00:35:07 So in our partnerships that we've done in the past, we have purchased the furnishings for the house. then you've got all those setup. So that's how we handle the furnishing, just to make the partner more comfortable, making sure that we've got skin in the game as well financially. In terms of how do we make sure that everybody stays in their lane? One is making sure that you have a clear understanding with your partners, right? And make sure that you have lots of conversations, you know, early on with those individuals. nothing's worse than partnering with the wrong person or a person that has different expectations

Starting point is 00:35:45 or thinks that it's going to happen one way. So one is just learning, you know, about one another and, you know, do you feel comfortable working with that person? And then, you know, once you do have that clear understanding is making sure that it's all documented. So all of ours are documented in operating agreements, you know, went to, you know, an attorney, had conversations with them and they helped us document everything. So it's in, you know, black and white, plain English to where everybody can can understand. And just to be more specific on the financial, how we split it.

Starting point is 00:36:16 So the partner brings the financing and everything to purchase the house, like the down payment and closing fees, points, all of that. And then we bring everything is needed to make this house a short term rental. So if we need a paint, we need to do flooring, like any of that minor stuff, we will do all the and all the furnishing. So we will pay for all that. if it needs a rehab. So there was one house where we actually redid the bathroom, the kitchen. If it needs a major rehab, we'll split that 50-50. And then like Jared said, we have that in the

Starting point is 00:36:46 operating agreement. And we talked that early on, like, how long do you want to own this house? Like, how would it look like if one partner wanted to get out and the other partner wanted to stay in? So we also try to keep a number of partners low. So, like, is usually us and one other person. it's not like us and like 10 other people well there's like so many opinions of what we need to do um so it's usually just us in one person or us and like the other one we did was it was him and his partner so we have it like 50 50 that way so really between them is like 25 25 but it was because they've worked with us before like we managed their property before and now they want to have more money to invest with us but they have a real job

Starting point is 00:37:33 so they don't want to be active in it. So that's kind of the specifics on the partnership side. No, that's great. Man, I don't know how many people have had conversations who end up in a bad partnership because they didn't communicate very well on the front end in terms of expectations. And then they didn't document what they talked about.

Starting point is 00:37:51 I literally have an expectations document that my partner and I filled out. It's not like an official document, but we just documented everything we talked about. We had it notarized and we signed it. And we've called back on it multiple times to say, oh, yeah, we did a great. that in this situation, we would do these things. And it really makes difficult conversations

Starting point is 00:38:09 a whole lot easier. Partnerships are like marriages, man. I don't know how many times I've had a conversation with my business partner that went something like, hey, when you said this, it made me feel like that. So the more you can document and the more you can have those expectation conversations on the front end, it's going to be better. So I appreciate that. Can you tell us a little bit about what your business looks like now. I know you talked about some creative finance deals. Are you continually to expand? Are you kind of holding the line and keeping what you've got? And then give some advice to some of the people out here who are maybe looking to invest in short terms in these mid-tier markets. What would you advise them to do? Yeah. So we have been doing

Starting point is 00:38:55 short-term rentals since basically end of 2019. And I don't see that. changing. I feel like there's still opportunity here in Cincinnati. So I'm recommending investors now who want to invest in Cincinnati, different sizes for downtown, different sizes for if you want to do midterm rentals. It's like specific size that I have found that worked for that particular model. And then like in different neighborhoods, what sizes, what locations, what areas, what price points. So I feel like at this point, we're still going to continue doing that here in Cincinnati. If you do want to do something hands-on, yourself, do it local. Don't try to do something five states away and manage yourself. You're not

Starting point is 00:39:38 going to know that market. You don't know cleaners or how to get people. And it's really easy to mess with people and find people on Facebook. But a lot of times once you go walk that property, it looks very different than what somebody is telling you. You know, we've helped others in that instance before, right, where they've been, you know, many states away and they tried managing it themselves and they didn't necessarily get the results that they thought they were going to get. So stay local and then understand, like, do you have the time that's required, right, to operate these properties? What I would say is that, you know, short-term rentals, it's very different than long-term rentals. It's a lot of hands-on, right, and time requirement that you're going to spend on that property.

Starting point is 00:40:23 Yeah, I would say, do it next to you. Don't feel like you have to go to a vacation market. You can do it in a bunch of unsexy cities that will still generate a lot of money, you know, like Arkansas or daddy. It is not somewhere where people might think about is not Orlando and it's not Aspen, but it will make money for you if you buy the right property. So those are the two I have, you know, and it doesn't have to be like a million-dollar house. It could just be a $300, $400,000 house to do. do well. All right. Great. Well, Jared and Iway, thank you so much for joining us for the Bigger

Starting point is 00:41:01 Pockets Podcast. We really appreciate your time. And anyone who wants to connect with these two, we'll put their contact information in the show notes below. I'm Dave Meyer, and he is Henry Washington for Bigger Pockets. We'll see you all soon. 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, 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.

Starting point is 00:41:52 Copywriting is by Calicoe 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.biggerpockets.com. The content of this podcast is for informational purposes only. 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.

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BiggerPockets Real Estate Podcast - 948: 10 Rentals in 5 Years by Buying in Overlooked Short-Term Rental Markets w/Jarrod Tucker and Yiwei Cheng

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