Epic Real Estate Investing - Airbnb Business Strategy for 2019 with Eric D. Moeller | 566

Episode Date: January 14, 2019

Today, our guest Eric Moeller, experienced real estate investor, shares his Airbnb business strategy for 2019! Eric takes us through what type of properties to look for, how to find them, how to leverage OPPs, and how to make technology work for you when it comes to short-term rentals. Tune in! Learn more about your ad choices. Visit megaphone.fm/adchoices

From coast to coast, Epic investors are doing the most. It's time for another Epic Field Report. All right, so I'm on the phone with Epic Pro Academy member, Miss Anita Hearth. Welcome to the show, Anita. Thank you for having me, Matt. You bet. I just want to talk to you really quickly about the deal that you had posted and followed through Friday inside of our Facebook group. And I'll go ahead and read it, and then I got some questions about it.

So it says less than two years ago, you purchased a fourplex for $350,000 with investors. you put $90,000 down. It has been an amazing performer, and we have been able to raise rents by well over 50%. I approached our bank about the possibility of doing a cash out refinance, and they agreed to give us a second mortgage of $95,000. We close on the second mortgage. Even with the second mortgage, we are still cash flowing very well with this property. I never put a dime into this property.

I had a deal with my investors where they loaned me half of the down payment, and we own it 50-50. Now we have infant returns for both me and my investors. Sounds fantastic. So congrats. Thank you. You bet. So you've had this for less than two years.

How did you originally find the deal? It was on the MLS, believe it or not. Okay. That seems to be a trend right now so that you can find deals on the MLS. Well, you could. I'm sure you can in lots of places now. Right? And where are you located?

I work in Colorado in the hierarchies in a few markets, but this one is in Fairplay, which is about a half hour from Breckenridge, which is a big ski resort. town. So this is a bedroom community for a big ski resort town. Perfect. Okay. So you found this on the multiple listing service. And then you brought in a partner. How did you meet your partner? Well, this was the very first deal that we did with none of our own money. So at this point, we'd completely run out of money. We'd gotten a he lock. We did everything we could to get as many investment properties as we could. And we were out. And then this deal came along. And it was so good. We said we have to find a way to get it. There's no way we can not get this property. I knew that

the rents were so far below market. And we just started calling everyone we knew who we'd ever spoken to about real estate. And we got nowhere until we got somewhere. We found someone. We showed them all the numbers. And I said, look, I have other rental properties in this town. I know how well this will perform. And they agreed to do it with us.

And we've done a whole bunch of other deals with those same investors ever since. That's fantastic. So how did that that initial, I guess, conversation kind of go? Maybe you just did it. But can you go into a little bit more detail on, You pick up the phone, you call, and how does that go? You know, my husband did it. So I can't give you all of those specifics.

But it was someone he had worked with for a while when he did a rotation out of town. He was a resident at that time. He was a doctor. And he was working with her in the hospital. And he's a surgeon. When they do surgeries, they talk a lot during the surgeries. And when he would do them with her, they would talk about investing. And so, you know, we called her.

I think he said, look, we've got a fantastic property. This is going to perform so well. Here's our thoughts for a partnership arrangement. What do you think? Yeah, pretty simple, right? Very much a testament to if you have the deal, the money is a little bit easier to find, right? You know, when we found this, we were listening to your podcast then. We said, Matt says, find the deal and the money will come.

So we've got the deal. We've got to find the money now. It was, you know, there's no way around it. The deal was too good. And we did, and it's worked out great for everybody. Fantastic. So this other person or this couple have turned in to be partners with you on other deals since then. Is that correct?

Very good. So another thing that I always talk about, like you don't need a bunch of money partners. You just need one or two and to do right by them and all of a sudden a lot of other opportunities will open up. Has that been your experience? That's totally been my experience. And I always try to talk about what we bring to the table and how, you know, we can help them meet their investing goals. And again, I'm not growing so fast that I need tons and tons of investors. If you've got a solid investor who has cash coming in that they want to keep investing in real estate,

you know, you can do a lot of deals together. Very good. So you've been able to refinance basically everybody out? So we still, the way that we did our deal is that they loaned us half of that down payment. Okay. So we still have some of that loan and we're paying them interest on it and we're paying it down. So that'll be paid off in a few years. but they've gotten almost all of their money back.

You know, we get cash flow, we got a lump back from this refinance. You know, we've had infinite returns from the start. Very good. All right. So you are getting an infinite return on your investment. And it sounds like your partners are happy. What's the biggest lesson that you learned in this transaction? You know, it's hard to say because I feel like you learn lessons when things go wrong.

And this is one that's been really great. And I've had a lot of other ones where I have learned a lot of lessons. Maybe the lessons I've learned is that every now and then, everything goes really well. Better than every now and then. Every now and then. I've had plenty of challenges on other deals, but this one's been smooth. I guess one thing maybe I've learned is that if it seems too good to be true, it might not be too good to be true. Right.

If you could just be this, you know, ripe apple sitting on the MLS waiting for you to pick it. This is Terrio Media. Yo. Yeah, yeah, we got the cash flow. You didn't know home for us. We got the cash low. What's up? And welcome to the epic real estate investing show.

This is where we meet each and every week, five days a week, to help everyday people escape the rat race using real estate. So thank you for listening to the show. Thank you for staying connected with us. If you're brand new to the show, glad you found us. You can stay connected just by hitting that little subscribe button. inside of your podcast app, wherever you're listening to the podcast. And you can stay connected with us on Instagram at Epic Real Estate and on YouTube by going to EpicREI.tv, that domain or that URL that takes you right to our YouTube channel, EpicREI.TV.

And this is where the video versions of the podcast are uploaded each and every week. And so much more good stuff happening over there. And that's ramping up to be five days a week as well. So if you don't know, now you know. All righty, so today's show is a topic that is becoming more and more common in the conversations of real estate investors. As you heard on today's Epic Field Report from Epic Pro Academy member Anita Hearth, her exist strategy for the deal was using the property as a short-term vacation rental. And she's got a few of those and it seems to be growing to be her exit strategy or her investing strategy of choice because it's working. It's working really well for her.

and I've looked into it. I looked into it this last year or so for the last 12 months. I don't know much about it. And I still don't. I don't have a vacation rental. And I didn't even know anything from even the consumer side. Like what is the person that stays in the vacation rental? What is that experience like?

So this last year, I've just been kind of doing my research as I've been traveling. I've been staying in more and more Air and B's. Airbnb, yes. I've been staying in those. And, you know, I've got my thoughts. on it and I'm still contemplating. I'm still trying to figure it out. I'm still thinking about it.

I just don't want to get my focus too dispersed over what we're doing over here right now. But I still interested. It's got my interest. I'm curious about it. And I want to have a much more experienced perspective to talk to now. Now that I know what it's like from the consumer side, I want to see what it's like from what they call the hosts side. So I found our guest today through a mutual friend.

And he's absolutely been crushing it in this niche. This is almost his entire focus. And so I recorded the conversation just in case you had any of these same questions about the short-term rental strategy. So please help me welcome to the show, Mr. Eric Mueller. Eric, welcome to Epic Real Estate Investing. Yes, sir. Thank you for having me. You bet.

I've been looking forward to this. This is a hot topic. And you're in the world of Airbnb and running that business and using that as a real estate investing tool or one of an additional exit strategy. We'll talk a lot more about that. But tell me what were you doing just before you stumbled into this niche. Yeah, yeah, yeah, of course. I'm just assuming if you stumbled. I'm not sure how you got here.

I did stumble. You did? Okay, go ahead. I did stumble. I was a real estate investor developer for nearly 10 years. It's actually, it got started right after high school investing in real estate and did a little bit of everything. The vacation rentals, but my first vacation rental at 21. And then from there, I turned that into a short. sale business and then turn that into a flip business.

And then all the way up to doing small apartment buildings. So we were doing that all throughout New Jersey. I'm originally from New Jersey. And I'm sure that everyone who's listening could relate to this. I just got completely burnt out with the development model. And long story short, I sold my equity to my partners at that time and started traveling for about six months. and this is going on three and a half, four years ago.

And at that time, Airbnb wasn't as big as it is today or as popular. And no one really understood the investment model that Airbnb was essentially creating. So I started bouncing around to all these different Airbnbs and chatting with different hosts. And I really kind of stumbled into the model that I focus on now, which is leveraging other people's properties of either leasing from them or partnering with them on their homes and then running my Airbnbs through them. So it was kind of just, it was like a big aha moment. I was looking to stay in real estate, but also focus on a technology driven business. And I realized that I could do that through Airbnb. So I stayed in San Diego in this Airbnb and I haven't left. I've been here for going on three years now, which is crazy.

just got back from Hawaii and it seemed like every every attendant there was I came to vacation and I never went home San Diego has an element of that for sure yeah totally all right cool so I'm saying Airbnb I hear vacation rental one is probably the proper term the other is kind of the logo or the brand is that right

right I'm gonna be really I'm gonna play really naive and I'm saying I'm going to going to play really naive because I don't want people to know that I actually am really naive. I'm just going to pretend I'm pretending. Yeah, for sure. Yeah, so I use the term Airbnb because it's such a, it's a hot topic right now. Everybody understands what Airbnb is. And it's essentially short-term rentals, right? So it's, you're renting your space for 29 days or less. Okay. Once you get to 30 days, obviously, you start in most states, you start dealing with landlord-tenant law.

things like that. So 30 days or less is the number, you said? I focus on 29 days or less. Okay, got it. But what Airbnb has done for, so short-term rentals has been around for literally forever, ever since, you know, real estate was a thing. Short-term rentals has been a thing. But what Airbnb has done to the short-term rental slash vacation rental market

is they brought short-term rentals into the urban areas. So into downtown center cities where prior to that, it was mostly in vacation rental markets. So beach towns, ski resorts, things like that. It was based on seasons and really pinpointed to certain markets around the world. Now, Airbnb, you can literally go in any corner of the world, in any state, any city, and find an Airbnb. be and someone's making money off of that. So they essentially brought short-term rentals and home share into average Joe's home in any part of the country and now, obviously, any part of the world, which is exciting.

And then VRBO, that's just another, that's their competitor. Exactly, yeah. So VRBO essentially, so Home Away is the big short-term rental listing site called the OTA. And they're the biggest competitor in the space. They purchased VRBO back in 2008, I believe. But they're essentially a listing site, right? So we have booking.com. We have Expedia.

Google is now tapping into short-term rentals with their own listing site. You have Homeway, VRBO, and then Airbnb. Airbnb is the new kid on the block, if you will. But again, what they've done is they brought short-term rentals into urban areas and unique spaces. and they've created a culture of HomeShare. They've created a culture of this community on their platform that every other OTA, every other listing site, has not created. They failed to create that.

So, yeah, it's exciting. It's an exciting move right now. We're watching this. I mean, they're the ones that are responsible for this whole shorts and rental movement that is happening around the world right now. Good. All right. So you've done.

Then the vacation rentals a long time ago, you were doing that for a while. You did the short sale thing. We certainly had that in common. Those were the good old days. Those were the good, strong nine months where we really cleaned up. Yeah. Then you did flips and you went into development and you've kind of pushed all that aside to focus solely on this. As you're looking at, what was the big appeal?

What was like, okay, this is what I'm going to focus on? Yeah, yeah. I mean, the big aha for me was, like I said, I got to a point where, at the time that I wanted to get at a real estate, I was watching the prices go up and up and up and up. And I started noticing more and more competition in the space and my my spreads on my developments and on my flips were getting smaller and smaller. We started tapping into the apartment building investment model. And that was just getting more and more difficult on the East Coast. And this was again four years ago.

So I'm sure it's more competitive now. But we were just watching like our efforts are getting, our time and effort into the business was getting harder and harder every single day and our spreads and all of that profits were getting smaller and smaller. And then on top of that too, I really love the idea of starting a business or having a business, building my business with technology to where I could essentially run it from anywhere in the world. I'm big into travel. I love traveling. We met down in Florida at an event. I go to events all the time. So I wanted that, but my real estate investment business wouldn't allow me to do that.

And I got into real estate with that mindset that I'm going to create a passive income that allow me to support a lifestyle of design. So when I got out of that and I started traveling and staying at these Airbnbs, I was just renting extra bedrooms off of hosts. And then I got San Diego and I was staying in an apartment above a garage. half a block from the beach. And after talking to the host, and again, this was nearly three years ago, or over three years ago, after talking to the host, I realized that this guy was renting the property, running all these Airbnbs through all the extra rooms and everything that he has in the house.

And he was making $1,000 above his rent every single month. And to me, I was like, all right, first of all, that's amazing. I don't have to worry about raising millions of dollars to buy all this real estate anymore. what blew my mind is that this guy was living for free, making money above his rent. And then he showed me that he was able to run his entire Airbnb business off of his cell phone. He had a bunch of different apps that essentially ran the whole business. And that was the big aha. I was like, all right, I'm going to stay here in San Diego.

I'm going to rent up every property I can get my hands on, stage it, and then re-rent it back out on Airbnb. And as soon as I did that, I realized, I'm like, man, I can leverage other people's properties, right? We know what OPM is, other people's money, right? For me, OPP, other people's properties. I'm like, man, that's a whole other avenue to go down. And we started real life about OPP.

Hey, man, it's getting there. OPP for Airbnb. So you thought of it. Yeah, I'm getting there. I want to, I definitely love the idea of OPP. But yeah, yeah. So we started realizing like, man, most of my properties now, we're generating anywhere between $1,000 and $5,000 a month per property into the business, which is crazy.

And we don't own any of these properties. And the best part about this entire thing is I was able to build my systems to completely run my business anywhere in the world. You know, we have team members, customer service team that deals with all the communications and all that. They're based in the Philippines. We have a couple of people here in San Diego that help manage the actual properties. And then 90% of my systems and everything I run off from my computer and my cell phone. So for me, I was like, man, this is, this is incredible that I could build a business model like this off of other people's properties with technology.

So that was a long-winded answer to that question. But I love the idea of leveraging as much as possible and injecting as much technology as possible into businesses to free up time. Very good. Okay, so the $1,000 to $5,000 per month per property, is that cash flow or is that gross? So that's right. Yeah, that's that's that's top line revenue into the company. So to expand off of that a little bit, like I said, we have two business models. My company is called Homel and we do, we have two business models that we focus on. One is the mass releasing, and that's where we partner with mostly real estate investors and developers. We'll rent up either a house or an entire apartment building. We'll rent up an entire floor of condos and a condo development or an apartment building.

Turn those into Airbnb's. And we set a certain rate for it, and then anything above that is profit back to us, right? Now, with the model, we're switching because we're running into a lot of challenges with that model when it comes to city regulations, competition, cost to expand, all of that. And now what we're doing, which we're finding is as profitable, if not more profitable, is what I call co-hosting, where I actually, say you own a single-family home, that's perfect for Airbnb. I partner with you directly. You own the home. you're responsible for the home. I bring my business, my systems, people, and processes,

and we'll run the Airbnb through your property. And then at the end of the month, we'll divvy up all the revenue, 100% of the revenue. So even with that model, which we're starting to double down on, the co-hosting model, we're generating on our luxury properties. We're generating $5,000 a month in the good months, top line revenue to the company. And then our expenses for the company is very,

minimal compared to our past development and landlord business. Okay. So in that example, we just talked about that one $5,000 luxury property. That's after the owner of the property has been paid out. Correct. Okay. All right. That's what I was.

That's where I was trying to do with it. So we have some properties like obviously I'm in San Diego. So, you know, the numbers here are much higher. And we have nearly year round travel to this area. So our luxury properties are. multi-million dollar properties we'll do anywhere between 20 and 40,000 dollars a month on Airbnb in the good months, right? On the slow months now, we're doing anywhere between five and 10,000 total for each property. And then on average, our splits with our owner,

anywhere between 30 and 50% of total bookings on co-host deals. Okay. Boy, a lot of questions. Yeah. Anything written down. So I don't know if I'm going to get this perfectly in sequence. But one thing that came to mind is you're from New Jersey. You moved to San Diego. So is this location specific or some types of locations better than others?

Yes. I mean, you know, it's like anything else in real estate, right? Location, location, location. But also I say this all the time. Unique, unique, unique. And I've got to figure out a better way of phrasing that. But what's awesome about Airbnb is that you can run properties essentially anywhere in the world that supports Airbnb. Airbnb is in 191 different countries in 81,000 different cities.

And they have nearly 2 million guests per night staying at Airbnb. So these are huge numbers. And the best thing about it is the technology doesn't change. I had when I first got started in the business, we had properties down to Mexico. We had properties in Canada, New York City, all of that. And we're running that all from San Diego. Yeah, Eric, let me just interrupt real quick. I understand that you can run it from any location,

but is there certain types of locations that's higher demand from a consumer perspective? Sure, sure. So the biggest, what we're watching and seeing right now is the biggest markets are inner cities. So any major city, if you're inside the urban areas of those major cities, and within a half hour of attractions, those are going to be your best bet for Airbnb's. Okay. Is it mostly a vacationing type customer? So I noticed that we have three different types of guests.

We have families, leisure guests, of course, people are just on vacation. And then our third biggest focus is business stays. So people come into town for business, and they typically rent apartments or condos or small little one-bedroom, two-bedroom houses. That's who we focus on. But also, going back to that unique part, doesn't necessarily have to tie to a specific location for the property. I have some friends on the East Coast that are building tree houses in the middle of North and South Carolina, away from anything that is attractive, right? But they are making hundreds of thousand dollars a year per treehouse because it's a unique experience for the guest. So these guests will

travel outside of a destination spot to stay at a really unique piece of property. And that could be a tree house. That could be a farmhouse. I could, whatever it is. But the more unique you can create the experience, the better success you'll have on Airbnb. Okay. Good.

So there's that. And so the other thing that was coming to my mind while you were talking and I didn't want to interrupt was you're not owning any of these properties. So some form of what I would probably know is a master lease. Is that type of an agreement that you have with us, the owner of the property? Yeah, exactly. So if we're looking at the leasing side, we'll put together an actual master lease, and that's typically three to four years.

We'll sign a lease on a property for three to four years. And it's specifically designed for this model to explain, you know, what we do, how we structure it. And then, of course, we have some exits in there, in case, city laws change or something happens to that business model. But when it comes to the co-hosting model, which we're doubling down on, that's more of a partnership agreement where me and the landlord will sign an agreement saying that all expenses, everything will go through the owner for the actual property, running the Airbnb business, all the expenses will come through me,

and then we'll divvy up the revenue at the end of the month. Got it. So I know you just said this, but let me confirm. Yeah. What's the, or clarify, what's the difference between the relationship you have with the person that you'd use a master lease and the relationship you'd have with the co-hosting? Yeah. So the master lease, it's, you know, it's cut and dry. It's, you know, it's, you're the landlord. I'm the renter, right? I'm the professional renter that's coming in and signing a two, three, four, five-year lease on your property. At the end, the month, or the beginning of the month, I pay you a flat fee, and that's that. You're giving me permission to run my Airbnb business through your property, but you don't want to know anything else other than collecting your check at the end of the month. Right. The co-host model is where you and I partner on your investment property. You're a little bit more involved in the process.

You're involved in keeping that actual asset up to snuff. So, you know, just paying all the expenses that come along with that. So you have more risk when it comes along with the co-host model. However, you're sharing the upside on what we're bringing in. So what we've found is that we typically generate any, we'll generate a higher amount for our co-host partners than what they would on their actual lease if we leased it from them. Our goal is that generate some extra cash flow for them. You're acting sort of as basically a problem. property manager in this Airbnb model. Yeah, I call it like a new age, like the reborn of property managers.

Right. So it's it's a little bit more involved with the property and with the owner. But that's the best way to correlate it with the co-hosting is that we're stepping in almost like a Airbnb manager, property manager with the owner. Right. Okay. No, now I totally get it. Yeah, I'd heard about this strategy probably about 18 months.

ago, maybe almost two years ago. And I thought it was very appealing because, wow, you can get so much more by renting the property per day than you can per month. So there was a lot appeal to me there. But I didn't know anything about it. I never even stayed in one. So I started staying in

Airbnb just to kind of get the consumer perspective, and I've probably stayed in a dozen since then. Sure. And now on my other side, I'm kind of watching what the host does. There's more to it than just having

a rental property. Like there is a business side of it. Um, so I think some people think it's like, oh, I just can rent it out per day and I'm going to make a lot more money. But you're kind of now you're in the hospitality business, right? A hundred percent. 100 percent. Yeah. 100 percent. You're creating a hot. And I teach everybody this that comes through my, my events and everything else. It's like you're starting a hospitality business first. Like that's what you focus on is the hospitality side. And that took me a long time to really figure that out. I approached it as a real estate investor, just thinking that top line revenue that we can bring in. And then you realize, like, oh, you're creating an entire experience for this guest who's coming through your property.

So you are hospitality business first and you're customer-centric. And it's a challenge to understand that. But with the right tools and training, all of that stuff, it's really easy to create the systems to start a small hospitality business and then inject it into, your business into your actual real estate portfolio and get that model going. Right. Yeah, the properties I've stayed in, I can tell some hosts have their act together where everything is automated and I never even have to talk to them. And then others where they want to meet you with the property, they want to let you in,

they want to show you around. I'm like, well, that's not what I want to do. So I have seen both sides, I think. And so it can be 100% systemized. The technology that's out there to give people access to properties and, you know, the home manual that shows them around and everything like that. Okay, cool. So I got the business systems. So let's talk about the property itself. Like, you know, a big part of traditional real estate investing is, you know, prospecting, right?

You're doing marketing, whether you're initiating that contact by knocking on doors and co-calling or you're sending out direct mail running advertisements. Trying to find the person that's motivated. Yep. So to find these is as simple as going for. through the for rent sections? Yeah, yeah. It pretty much took the same approach that I took for my real estate flip business and wholesale

business and all of that. It's like there's really no new way of finding properties. I get asked that all the time. What's the golden ticket of finding landlords for this? And it's just the consistency on the channels that we know. So our biggest channels, very simple are Craigslist, Realtor.com, hot pads, Zillow, pretty much anywhere where a landlord put a property for rent. And what we do is we focus, again, I handpicked communities for this model, but what we do is we look for luxury,

fully furnished properties for rent. So anytime they, you know, one of those posts up, we have a team member, send letters out, emails out, video emails out, all of that to get in touch with these owners to present them the business option. Like, hey, we could rent this from you for this amount. However, this is our co-host model, and we feel that we can make X amount more per month for you than what you're asking for rent. So yeah, it's all consistency. So we send out, we have some pretty intense email campaigns for all those channels. And then we do a lot of focus, we put a lot of focus on building relationships with realtors, brokers, and developers. And they just, I mean, we get a ton of properties per month that come through those relationships.

Got it. Okay. So you're going through Craigslist. You're going through realtors. So if you're just getting started on for your first property. What does that pitch sound like? Yeah. Kind of take me through that.

Ring, ring, ring, and the person says, hello, and where does it go from there? Yeah, so, I mean, it's it's all about rapport building because when it comes here, too. I mean, I got to talk to people. It's all about report building because there's such a, for most landlords, there's a huge learning curve to really understand what my business model is all about, what the Airbnb model is all about. They feel that if you read anything in the news as a landlord, Airbnb is destroying community. it's destroying properties. They're worried that people are going to throw parties and damage the house and all that stuff, right? But what they don't know is that every single challenge that they're concerned about,

there's a piece of technology that we have in place to resolve that problem, to make sure those problems don't come up. So it takes a long time to build rapport with them. We introduce ourselves as a professional short-term rental company. And we let them know that like, hey, we came across your property. We're extremely interested in working with you to open up your property as a short-term rental. And we could either rent this for you and we'd be interested in renting it for three to four years. And here's our security deposit.

Here's all the other properties we lease in the marketplace. But we're also interested in working with you directly if you want to generate some additional cash flow on this property through short-term rentals. And we ease in the word Airbnb because landlords, they hear Airbnb and they freak out. Right. What they don't realize is like all the challenges like the party, right? Everyone's biggest concern is, oh, how do I know that who you rent to won't throw a huge party in the house? Right. Well, we have a piece of technology that we plug into every single one of our houses that is a smoke detector for noise.

it detects the loud noises in the house. And if it goes above a certain point that we set, it'll shoot me a text message immediately. So we know immediately if someone's playing the TV too loud, music, all of that stuff, and we can send our field rep out to deal with the problem immediately. And then we have cell phone detectors in the house that detect how many cell phones are in the property. Get out of here, really? Yeah, yeah.

Wow. have it all. We have cameras on the outside to detect how many people are coming and going. So we're able to fully automate the process. Of course, things slip through the cracks. But we've got that down to, I mean, maybe one or two issues a month we have right now with our properties. And then also the other biggest concern is like, you know, people are going to destroy my home, all these people coming and going. But what they have to understand and what we make them understand is we're running a hospitality business. And we have to have this property at a minimum of five-star standard for every single guest that comes in. So if there's a problem,

we're inspecting it after every guest and fixing that problem. So typically our properties are in better condition when we hand it back to the owners than if a long-term tenant was in there. So it takes a lot of education, a lot of report building. And yeah, I started a imagining what that conversation would sound like and there's just like I feel like you could have really long conversations. Yeah. They just say, no, thank you. Yeah. Oh, yeah.

Yeah. That happens as well for sure. Okay. So say you make the call, you got an owner that's like open to the idea and says, okay, let's do it. You know, when you typically buy a property to rent it out to a traditional tenant, you know, you've got to bring it up to a certain level of standards. You kind of touched on already that you've got to, you know, you got after this five star, um, level of standards. What kind of, you know, capital investment is required to go ahead and improve a property

in that way? Yeah, yeah, great question. And this is why we started really focusing on the co-host model because we realized that we were generating the same amount of cash flow on our co-host properties than what we were doing on our mass release properties. But on the co-host model, we weren't investing any money into these properties because we focused on fully furnished properties. And any upgrades, anything like that, we get the owner to invest and make those capital upgrades. So the co-host model, and anybody can really get that

type of business going, especially if you're a real estate investor, you know other investors that have turnkey properties and doesn't cost you any major investment into those properties to get that business rolling. When it comes to the mass release model, we found that we were invested. We were investing anywhere between $15,000 and $25,000 per lease that we took on. And that includes the first month rent, that includes security deposit, and then obviously most costs goes towards furniture and technology that you have to install in there. The more units or the more bedrooms you take on, that investment goes up, of course. But that's when I look at a property, I allocate 15 to 25,000 to invest into that home.

and that's why it's so important to sign a how much you said 15 to 25000 15 and 25 000 got it and that's why it's so important to sign a two three or four year lease to get your investment back and as real estate investors you see that number you're like man 15 to 25 grand to get a rental property going it's pretty incredible especially if they're you know spewing back a thousand two thousand a month yeah totally and if you got a three to four year commitment that'll come back to you pretty darn quickly at those rates. Yeah, 100%. Yep.

Okay. Let's see. The next question would be from me is, this isn't really an investment strategy unless you own the property, though, right? It's a business. Yeah. So the models that I just shared with you now is, that's a business focus, right? And what I like to tell people, especially real estate investors, look at those two

models that I just shared as a way to bring cash flow in. into your business right away. Very quickly, you can go out, and especially if an established investor has a team and you have connections in your marketplace, all of that, you can go out easily and put together, you know, 5, 10 of these properties over the course of a few months and start generating 5,000, a month into your business,

which will completely change everything. Everything. I mean, it's incredible. You don't have to invest a crazy amount of money into it, right? So you are starting a new business. Obviously, you're, you know, it's a different model, but I looked at it as a way for me to expand my business or my real estate portfolio in different markets or different countries, all of that, generate incredible cash flow.

Now, where all of this is leading for my business is getting back into developing and buying properties specifically for the Airbnb model. So I know plenty and I work with plenty investors now. her buying single family homes and converting them into Airbnb's. So now they have the equity side and they have the higher cash flow coming into the business. And then developers as well that are developing, you know, luxury condo buildings or apartment buildings specifically for Airbnb. So, of course, if you can get, if you can own the property, that's obviously a hell of a lot better than just leveraging it. But the leveraging side, the OPP side is a great way to generate cash flow, understand the industry, and start expanding that pretty quickly.

Right. Then you get to cherry pick investment properties as they start coming through for that model. When you got a big stack of cash, you got a little bit of an advantage of acquiring those properties when they show up, right? 100%. Speaking of the industry, let's talk about the industry. It seems like it's grown in awareness. size, at least from the outside looking in significantly over the last couple years, what is the competition like? What do you have to do to compete with the competition to make

sure that your properties get rented over somebody else's? Yeah, that's a great question, man. It's increasingly getting more and more difficult to maintain a steady flow of guests coming through your properties. So the number one thing that I always drive home, especially to my students is, you know, if you're getting started or if you're already established, it's focusing on how what the experience is for the guest, right? From everything from when they find it on Airbnb, what that experience is, looking at your listing, reading the descriptions, photos, all of that. So when they send you a message, how that customer service flow goes.

So when they stay at the home, how do you integrate this really unique experience for the guest. And that can go in so many different directions. But it's like you think of your favorite boutique hotel or your favorite boutique restaurant. They all have a specialty uniqueness experience to them, right? That it's not just because they have good food. It's because they have this amazing experience as you're going through the property.

You want to do the same thing with your Airbnb's. And that doesn't take a lot of money, but it just takes a lot of, thought and time to develop all that out. Now, on the business side, on the marketing side, once you figure out your experience, it all comes down to the marketing. And we don't just market on Airbnb any longer. We used to just focus on that platform, but now Airbnb is making a huge push to get more and more hosts on the platform.

So it becomes more and more difficult just to rely on that. So we syndicate our listing across 25 different websites. there are probably more than 25 sites now, which now that's a next level into your Airbnb business, right? Because now you're managing communications and bookings and money and cancellations and all this other stuff from all these different websites. Right. Right.

So you have to constantly stay on top of how can I get in front of my guests that are coming in. And then long term is how do I capture their information, keep them in a database to where I could retarget to them for their next time they travel or next time they want to come to San Diego or wherever. So it's a lot of marketing. It's a lot of staying on top of it. But, you know, it's very easily, you can very easily outsource a lot of this and streamline it through systems and technology.

Got it. Another part of the industry. And my reference point is having been in the music business for 15 years when the digital download came along there's a lot of pushback from from the music industry on that and i've seen something very similar happen with uber a lot of pushback from the taxi uh unions there um and i'm starting to hear that's starting to show up in the news now with with Airbnb what's what's the current status of of the i guess regulations yeah it's exciting man like we're watching the reason why i'm so excited about the regulations is we're seeing in my opinion a new asset class

come into the real estate industry, especially here in the States. If you just focus on the States, this is a global challenge right now. And you're watching every major country and city trying to figure out their own ways of regulating shorts or rentals. But if you're just focusing on the United States, in my opinion, this is a brand new asset class being added to the inventory of real estate. And you're seeing more and more, not only mom and pops, trying to generate extra cash flow through renting out an extra bedroom in their house. But investors like us, noticing the models that

I just talked about or buying properties running them through Airbnb. And then like I mentioned earlier, is we're seeing more and more investors and developers specifically designed properties to attract short-term rental guests, which is crazy. We've never seen that before. So we're seeing every single city struggle to try to figure out how to regulate this. Every government seems to just want to ban it. We don't want it, blah, blah, blah. But then the people come back and say, no, we do want this. We want shorts and rentals, generate beautiful money for our city. Plus, it helps us pay for the high rents and mortgages in our city areas. So it's crazy. We're watching every state, every city, every community come up with their own rules and regs and then we're watching a lot of the

members of those cities fight them here in san diego the laws have changed twice in the last 90 days it went from no laws to a complete out ban on it back to no laws again and we're seeing this over and over we just seen in it was like Vegas with Uber like one trip yeah I couldn't get Uber at the airport next trip. They were there. Next trip, they weren't there. And that's exactly what's happening in Vegas right now. They just, Vegas was, they had an amazing shorts of rental law in place where you had to get a license and all this other stuff, right? But you're allowed to run as many as you want. They just proposed a new shorts of rental law, which will restrict anybody for renting out shorts and rentals for 30 days or less.

So you have to rent it out for 30 days or more. And you can only do one of those. in your community. So like we're seeing all of this. People are just trying to figure it out. And I don't think it's going to go anywhere in the cities that are banning it, like San Francisco, New York City, Austin. They're doing that for good reasons because they have high, high rents and low inventory. And people like us that are renting to rent it out 100% for shorts on rentals,

it is causing a higher rental amount in those cities and higher demand. So I don't know, man. It's exciting because it's like, obviously I don't want it to be banned. I do believe in regulation. But to have restricted 100% from residents, now we're getting into constitutional rights and all this other challenges. So it can be interesting to watch. Yeah, I mean, if you just kind of look, though, on history in other industries,

someone that we just already named, seems the consumer demand kind of always wins out. Right? That mass demand is, we'll always push it in the direction that, for the people, right? Yeah. Yeah, man. Great. So no business is perfect. No investment strategy is perfect. What are, give me some things that you know now you wish you would have known when you got started. Would have made things a lot easier. Yeah, it's the customer service side. You know, the customer service side is something that I always knew was there.

but I'm like, oh, someone just wants to stay and, you know, it's going to be simple, you know, just send a couple of messages back and forth. But really understanding, again, that this is a hospitality business. And, you know, I learned a lot. I thought I was good at customer service. I learned a lot on how to deal with the influx of questions and concerns. And especially it's not only the customer service satisfaction side of making sure that this person is having an incredible time when they stay with you. But it's also the educational part of

teaching people. There's a lot of new people every single day on this platform. And they're used to hotels where it's kind of very easy. You go to the front desk. They check you in. They give you a key. You lead to your room. Boom. That's it. On these new Airbnbs, you have to educate, oh, no, I'm not going to be there. Here's the code. Let yourself in. Here's all the information. So the customer service side took a long time for us to really figure out and we're still figuring it out and building on our systems. But that was the biggest concern and I think will always be the biggest concern is how to maintain customer service. And there's so many rabbit holes from there. It's like that all leads down to how do you maintain a five-star cleaning standard in your house, which becomes another challenge, right?

for those that's simple to develop systems around. But yeah, customer service and really learning how to lead with the heart versus, you know, reacting to when guests find a spider in the house and they're freaking out and they want their money back and you're like, you know, trying to ease that stuff over. It's one of the biggest challenges, my opinion. Yeah, I mean, you find all kinds on the internet, right? Yeah, yeah. We've come to learn that as well.

I didn't even know these people existed before the internet. What else was I going to say? We're talking about the customer service and the satisfaction, and then it's a hospitality business. I want to blink. All right. So, yeah, sounds good. So if someone wanted to learn more about this

and they're inspired by what they've heard today and they wanted to reach out to you directly, what would be the best way for them to do that? Yeah, I appreciate that. I have two resources. I run a private Facebook group that every day we're posting up information, resources. We have an incredible group of about 5,000 people globally in that community. So anybody who's interested in just learning more about it, just join that Facebook group. It's called the Airbnb Profit Club. So you can go to Airbnb Profit Club.com or just go to search it on Facebook. And then also I do training on this. So if anybody wants to learn more about the co-hosting model and how to scale that and just learn more about the technology and systems, they can go to co-host mastery.com. And I do one live training per week on this. So those be the easiest ways.

I'm in the Facebook group all the time or people can jump on live with me for the co-host mastery training. Awesome. Fantastic. Well, Eric, it's been a pleasure. Thanks for being so gracious in giving with all of your experience and your information, your expertise. And let's stay in touch. Let's do it again.

Of course. Yeah, I appreciate the time. Thank you for having me. All right, Eric, take care. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know home for us.

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