Epic Real Estate Investing - Creative Investing with Kira Golden | EREI 172

Episode Date: September 14, 2015

Today Matt welcomes an incredibly talented and creative investor to the show, Ms. Kira Golden.  Kira holds over 1000 doors across the world with no end in sight!  She owns a lifestyle investing company which, among other things, leverages vacation rentals to reduce vacancies and uncollectables and boost rent rates and tenant quality in her traditional buy and hold portfolio.  You don’t want to miss it! ------- The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? E ducation P roperties I ncome C oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. From Terrio Studios in Glendale, California, it's time for Epic Real Estate Investing with Matt Terrio. Yeah. Hello. And welcome. Welcome to Epic Real Estate Investing, the place where I show people how to escape the rat race using real estate. So you just got to shift your focus from making piles of money to making streams of money, change that one thing just one time, and you are on your way to financial freedom. It's not the most exciting path, but it is the fastest, and once you get there, life then becomes exciting.

And if you'd like to get started the exact same way that I did with minimal finances and a really crummy credit score, you may do that. I set that all up for you. You can go to free real estate investing course.com, free real estate investing course.com, and that will get you started. Got a lot of great feedback from last week's episode with Drew Hitt, and it seems, you know, every time I discuss creative financing of any sort, you guys really come. come alive. You really like the creative stuff. So if you missed last episode and creative financing and deal structuring is your thing or you want to make it your thing, go back and check it out. Episode number 171. Gosh, can you believe it? We're approaching 200 episodes. And, you know, since last episode, I actually received a number of questions and comments. And I was going to do

kind of like what I typically do is I'll go ahead and I'll read the question and I'll answer. I'll read the question. I'll answer it. But there are so many in that same the same idea, the same topic. And so I just thought rather than addressing each of those individually, I put together three different scenarios for you to tap into creative financing for your real estate that should you address, you know, should I address all of these questions at once, rather than doing that, I'm just going to do kind of, you know, when you watch a movie, and they say the names and the incidences and the characters have all been combined

for greater ease of the storytelling. This is kind of like that. All right. So if your real estate investing has stalled, okay, say due to a lack of funds, that was a common scenario, or if it has failed to even get off the ground for this reason, I just want you to know. You're not alone. All right? There's good news here, though.

You see, most people think that they have a money problem when in actuality all they have is an idea problem. So I've got two creative ideas for you that you can use to get your real estate investing back on track faster than you can say no money needed. All right. So the first idea is a creative source that I shared with, that was actually shared with me by my students. Imagine that.

My students taught me something that has improved the results of my own real estate investing. There lies a valuable lesson right there, by the way. Just always be open to new ideas. Don't be that reluctant learner, okay? Be open to new ideas, regardless of the source of the idea. It could change your life. It really could. Anyway, this source of funds, my students turned me on.

on to is it's so easily accessible and costs is so negligible that it's almost free. Well, almost free when compared side by side with the traditional sources of money that's available through the banks and hard money, private money and stuff like that. So I'll share this creative source with you in a minute. But let's first cover an idea for your funds that actually can be free or actually is free. And that's source number one. It is surprise, surprise, your creativity. Your creativity can be a bigger financial resource than actual money to the point where you don't

even need money or access to bank loans. That's right. No need for money or credit. Just your words and imagination. Specifically to what I'm referring is the seller of the property that you want to buy. Always look to the seller to provide financing for your deal first, as opposed to getting a conventional loan or tapping into friends and family. This is the first place you should look because it's the best place.

It's the first and the best because it can be really easy. I like easy, by the way. And typically this is referred to as seller financing or seller carryback. And I've come to discover over the years that there are endless ways to creatively finance a deal using the seller's money. Drew shared last episode, shared with his few ways. And I've got a dozen ways that I teach you about in the academy. And I'm always learning something new. I've got a great guest for you later on today that has got something totally out of the box and totally new.

Something I'd never even considered or probably wouldn't even thought of. So before you can put a creative deal together using the seller's money, there are three things that you need to know. First, you need to know what does the seller need and when do they need it. Second thing is, how much does the seller owe on the property? And third, are the seller's payments current? Those are the three things you need to know. What does the seller need and when do they need it? I guess that's two things right there.

But we'll call it one. What does the seller need and when do they need it? how much does the seller owe on the property and are the seller's payments current? And once you've got answers for those three questions, you can now get to work, massage in the price and the terms to see how they can help you help them. So to prepare you, I've put together three real world seller financing scenarios that you're most likely to encounter. All right.

So seller, scenario, number one, free and clear properties. This is your first scenario. Most people don't realize that more than one third of the properties in the United States It's our owned free and clear. So don't think this is some sort of unicorn that you never come across. One third of the properties out there are owned free and clear. And this is, so if the seller owns it free and clear and they're open to seller financing, then that's an easy deal right there.

Right? But wait. Why? I know what you're already thinking. Why would someone want to take payments instead of cashing out? If they own the property free and clear, why don't they just sell full price and list it with a realtor? Why would they even want money over time instead of getting all their money right now? Well, maybe they don't want to be landlords, but they like the cash flow.

Or maybe they're up there in their years and they have no use for a chunk of money, but would rather live out their days in extra comfort with some extra income. Or maybe they don't want the big giant tax obligation that comes along with the big sale. whatever it is. Their reason doesn't really matter. And I can really tell you there are more reasons than you can conceive of as to why they would do this as opposed to why they wouldn't. But stop trying to figure it out. Just stop trying to figure it out and just ask.

Don't waste your time trying to figure out why a seller won't finance your deal and focus on figuring out why they will. Get out of your own way. Okay, so that's scenario number one. Scenario number two, there is an existing list. loan on the property. Now, and that's just, they might have some equity in there, but there is a loan on the property. The properties that you come across are not always going to be owned free and clear, which you've probably experienced if you've been in this business for longer than five seconds. If there is a loan in place, don't complicate it. Just leave the loan there and transact what is

known as a subject to deal. Subject two means you take ownership, subject to the existing loan. And at the end of the transaction, you are on title, but the loan remains in the seller's name. Essentially you've become their loan sitter. You make the payments on time and in full and from there you'll be free to flip the property and pocket the profit or you can rent it out and hold it onto it for your own cash flow. Again, why would a seller let you be on title when they're still responsible for the loan? Remember, don't try to figure out why they won't, but rather focus on why they will. Get out of your own way and don't get cut up and caught up a

negotiating in your mind on the seller's behalf. That's their job. They're supposed to negotiate for themselves. You do yours. You negotiate for you. Okay? Scenario number three. An existing loan and then some.

So they've got a loan, but they want some money above that. All right. So in those cases, look to the seller again and present them with the option to carry back an additional loan. A second. You may have heard of that before. That just means it's another loan in the second. position. And the position means if there should be a default, whoever's in first position

gets paid first, whoever's in second position gets paid second. If there's anything left and if there's a third or four, that's how it just goes in that order. So ask them if they would carry back an additional loan in second place. If they agree, you can either keep the loans separate and you can pay the bank with one check and you can pay the seller separately with another, or my preference is to wrap them all up into one loan using a third-party servicing company who then distributes the payments to each lender accordingly. It's very tidy, it's simple, it's much safer for you this way. So I like that way.

If after you've accessed all the funds the seller can provide, then you may actually need to bring some money to the table to close the deal. My clients and students have been finding this to be the most common scenario. So even with the most creative seller finance structures, your imagination can conjure up, it's a common occurrence where you'll need some money. But still, it doesn't have to be your money. Here's to what I'm referring.

The almost free source of money I mentioned earlier, my clients and students are using business credit to close these types of deals, as well as to fund their marketing, their rehab materials, and pretty much all of their business expenses. And we talked about it last episode, and I'm going to continue to talk about it because they are a sponsor of the show, but it's also becoming a really an invaluable asset for all of those that are taking advantage of it. And that's it over at epicfastfunding.com.

completing a quick 60 second application inputting your credit score and then just stating their income. And as little as 24 hours, they're receiving approval for $100,000 to $150,000 a 0% interest for the first 12 to 18 months. They get that to use in their real estate investing business as they see fit. Those funds are landing in their bank account and as little as seven days after approval. We've had more than $4 million this year gone to you. Been approved and funded to you, the epic community. And it's changing the way people conduct their business. It's changing the speed of which their business is growing.

It's changing lives. Okay, so let me clarify that almost free part. There is a flat fee charged up front, and you can pay that fee out of your business credit line as well. So no upfront money is needed. And when you take into consideration the 0% interest rate and the average loan amount, my clients and students are paying in the ballpark

of 2, 3.5% for these funds. It's just a math equation. Do the math. You know, based on what they found, it's the cheapest money in the marketplace, not to mention the easiest to access as well. Again, I like easy. The bottom line is their real estate investing businesses are growing because of these two creative ideas, seller financing and business credit. See, it's never a money problem, merely an idea problem. And the more that you

creatively fashioned deals involving the sellers and other people's money, the less of your own money that you need and use. But understand, this is a skill. It takes patience and practice. It takes both of those things to develop it, but stick it out because it's worth it to practice and get this down. Sure, not everyone has the ability to make money appear from the words that they speak right off the bat. But those who figure it out

they can be found sipping those fruity cocktails on remote beaches whenever they feel like it. That's what I mean when I say it's worth it. You get to do what you want with your time when you want to do it. That's what practice can do for you. And that's what asking can

do for you. And the majority of my Epic Pro Academy focuses on negotiating and creative deal structuring. And I say that because I've been asked more than once. Matt, you give so much information away for free on your podcast. What else is there that the Epic Pro Academy could possibly offer? And that's the answer. You know, once you get through the fast start, the majority of the Epic Pro Academy focuses on

negotiating and creative deal structure. So if you're serious about honing your skills, maybe it would make sense to become a member. Just go to Epicproacademy.com and decide for yourself. All righty. So up next, our guest has come up with a very creative idea on how to build her real estate portfolio, but also build it while she's maximizing her returns, and she's significantly hedging those returns against losses. Like I said before, I like to think I'm pretty creative when it comes to creative financing, but I have to admit, I would have never thought of this.

And we're going to talk to her right after this. Contrary to popular belief, a lack of funding is not the biggest barrier to starting a business. It's excuses. But don't let a lack of funding be your excuse. We are Epic Fast Funding, and we'd like to fund your business with up to $150,000 in revolving credit lines. If you've got 60 seconds and a solid credit score,

you could have access to your funds in as little as seven days. Go to Epicfastfunding.com to fill out our 60-second application. It's fast, it's simple, up to $150,000 in as little as seven days. Go to Epicfastfunding.com. On the phone, today I'm joined by a remarkable real estate investor, Mrs. Kira Golden. Kira, welcome to Epic Real Estate Investing. Thank you. First of all, thank you so much for having me on the show.

I always like to connect with startup investors. So just by way of background, I've been doing this since I was 18 years old. I grew up an insomniac child who was either fortunate or unfortunate enough to be allowed to have a television in my room. So, you know, I'd watch the subtitles because I wasn't allowed to watch it at night. So it'd be set on subtitles, and I'd be watching Robert Kewasaki on the infomercials back when he was doing rich, dad, poor dad, infomercials. And so I grew up kind of knowing I wanted to do real estate. I started in buy and hold. That is my bread and butter.

That is where I live. Right now, our focus is multifamily. But we started in single family rentals, you know, again, at 18, I didn't have a ton of I didn't have a parent co-sign on a loan. So I had to, like many of your listeners, you know, kind of start with what I had around me and build it up from there. And so now, you know, flash forward, I'm not going to give my age away, but a few years later. And, you know, we have near a thousand doors, mostly multifamily, but also a number of vacation rentals scattered throughout Europe, Puerto Rico and down in the Caribbean. some popular U.S. destinations, including the Puget Sound and Sedona, Arizona.

And we got into the business to address that piece of it. Well, almost by accident. Not exactly, but almost by accident. So in 2006, I was very concerned about the U.S. real estate market. I started to look for other opportunities overseas. I was concerned how easy it was for investors to get into properties who didn't have any experience to over leverage. And I was concerned about the backlash of that. I certainly am not saying that I had the ability to foresee what came next,

but I did know that things couldn't continue the way they were. And so I went over and started investing in Europe where people still had to put 30% down. not everyone was entitled to qualify for a mortgage, and you had 25-year mortgage terms, you know, not 30 or 40 interest-only, you know, kind of crazy products out there. And so I bought some units there in Chamin, France. It's a little ski town right at the base of the Swiss Alps,

and that was my first vacation rental. What I learned from that was that I could actually maximize my main portfolio, my buy and hold portfolio, by leveraging the vacation rental. So if you're perusing Craigslist and you see an ad that reads something like, you know, lifestyle rental where, you know, rent, you know, sign a year lease and pay your rent every month on or before the first, and you will get one week's free vacation at my ski shop. LA in Chamonnie, France. That's me on Craigslist.

And so that's what we started doing, is we started leveraging the vacation rental portfolio to reduce our turn times, bring in better quality tenants, and increase the rents we could charge, as well as drive down our uncollectables, meaning people paid honor before the first almost every time, because they wanted to qualify for that vacation rental. experience at the end of the tunnel. And so that's really how we leverage our vacation rentals. And we co-invest. We work with multiple investors.

And so any of the investors that invest with us, so people who either want to be passive or maybe want to learn the business firsthand, they can invest with us. And we actually allow what we call Golden Circle members, high little members of our co-investment group, to leverage our vacation rentals. so they can actually advertise and use those. And if one of their tenants takes them up on it,

they can book a week at one of our places. And we do that at cost. And this way people can increase their long-term portfolio. Okay, so you leverage the vacation rentals to support the rest of your portfolio. I understood what you said, but can you kind of go a little bit more in detail of that? Sure.

And then how does the vacation, how do you decide what property is a vacation rental or if it's a property that you're going to hold as a traditional buy-and-hold. Okay, yep. So first, going a little deeper in how we, specifically how we leverage the vacation rentals to increase ROI on our long-term buy-and-holds. I'll walk you through the numbers. So let's say I own a single-family house.

I'm going to work through a real-life example. You guys could look this property up. It's 1540 West 6 Drive, Mesa, Arizona. You can pull it up. You'll see my LLC on the deed. I own it. I've owned it since I was a... It was actually my first house I bought.

And so this is walking you through my actual example. You know, I was getting for that place about $1,200 a month in rents. I had a lot of turnover probably once a month. I'd have, sorry, once a month, once a year. Like every time the lease came up, I'd have to get a new tenant in there. And I was having trouble. I mean, I was 18 years old. I was living in Washington, D.C.

and going to school in Washington, D.C., and remotely managing this place in Phoenix, Arizona. And I didn't have a property manager. I didn't, I was suited to the business. I couldn't afford a property manager. I needed every darn penny I could make from that property. And so I'm managing it remotely. And I was having trouble getting the rents in.

I couldn't swing by and just knock on the door. Hey, where's your rent? So I had to figure something out. So when I closed on this place in France, a couple years later, I was able to bake in, if you will, to my rental price, the cost of offering the vacation rental. So my vacation rental cost me roughly $150 a week, hard cost, not opportunity cost, just hard cost, if I don't have it rented out. So I increased the rent. Okay, real quick, real quick.

The France home, do you own that free and clear? Is there a mortgage on that one? There is a mortgage, a small mortgage for about 50% loan to value. Okay, so there's $150 a week. Does that include the debt service? That does. Okay. Okay.

Go ahead. Good question. So, in fact, the debt service is the primary expense of all that. So what we were able to do is increase the rents monthly by about $25, which more than covered, you know, 12 months of rent at $25, more than covers my $150 cost. and I found I was able to do that just because I had this great offering. And the tenants really loved this idea. They're like, you know, most of my tenants were C plus, B minus renters

who were never going to be able to afford a vacation in France. But if all they had to do is get their airfare and pay their rent on time, then they just might get to take one. And that's really cool. So you said you raised the rent of the Arizona placed from 1,200 to 1225. and how does that extra $25 cover the $150 a week? Well, because I'm only actually giving a week of the rental.

Oh, got it, got to, got that. Okay. So for each property, I'm only actually losing a week of rental time if, of course, somebody actually qualifies by the end and takes me up on it, which really only happened about 10% of the time. So that covered, they were basically paying monthly to cover my week when I had to give it up

if I ever had to give it up. And then, so the extra rent comes in. The other thing is that my lease and the rental agreement and the opportunity to use the vacation rental was tied to receiving rent by direct deposit on or before the first of every month for the entire term of the lease. I say the entire term of the lease because it's not always a year. Sometimes it works out better in my business to incentivize someone to do a six-month lease. Sometimes it's better to incentivize them to do an 18-month lease.

whatever gets me what I want, that's when I reward them with the vacation rental. It's a win-win. So whatever the term is that I want, if they pay on or before the first, every time they get access to the vacation rental. So that, first of all, created people, as you can imagine, who I got a lot more foot traffic, a lot more people looking at my units. I got them rented faster. I got a better quality tenant.

Now, those things are hard to really quantify the exact impact on your boss. bottom line, except to say that, you know, if you're making a previous experience. Right, right. Right. So if you're making a six cap on your property, you know, a 6% return on your property, and you're spending two weeks with it vacant every year, if you get it rented, that brings back in, you know, $600, $700, right? Just by not having that vacancy for those two weeks.

If you can get it rented in advance. So, you know, I guess that's the easiest way to quantify that. You can't really quantify a better tenant. And then the other thing was that they were paying on or before the first. Now, very rarely can a tenant do that flawlessly every time. And so a lot of the time tenants disqualified themselves from even being able to use the vacation rental. So I got to put that week back in the rental pool and still sell it. But, you know, I kept it out there in good faith in case someone could qualify and did use it.

And we did have one tenant from my house in Washington, who the young lady in the Navy, who at the end of her term in the Navy, had been renting for me for a couple years. And she qualified. She'd always paid her rent on time. And it was great. She was able to go off and spend a week there at the condo.

And, you know, we got pictures and all that. It was really wonderful to be able to give that to her. She was actually able to take a couple weeks because she had accumulated multiple vacation weeks during her time renting with me. And, you know, so I had very little cost to me, but definitely increased both my rental income, reduced my turn time, and then allowed me to be able to attract better quality tenants. As we've grown our vacation rental pool and added more properties, that's been even better,

because now they have a choice. It's not just, you know, go to our place in France or else. you could go to our beachfront places in Puerto Rico if you want to take off in February if you're a skier and you want to go to Chamonie, go do Chamonie. If you like to boat and sail and go crabbing, then go to the place

with the island. If you want to hike and go meditate in the mountains, go to Sedona. But what we're doing is we're turning our business from selling a product, i.e., come live in my house, to selling a product i.e. experience this lifestyle of being someone who can go take these luxurious vacations. And for most of the tenant pool, that's not something otherwise available.

So it makes it very, very interesting to them. Not to mention, in the meantime, I'm still making bank on my vacation rentals. I mean, those are renting out, and I've got 15% returns coming in on those in addition. Got it. So when the original question is, how are you using your vacation rentals to leverage your existing portfolio, your traditional portfolio, is you're maximizing the rent that you take and you're getting your rent on time more frequently is really the biggie. Exactly. Got it. Okay.

And I guess the third item would be tenants who are staying longer, better quality tenants who stay longer, so you don't have as much turnover. Got it. Okay. So now it makes a total sense to me. Very clever. I'm always interested in the different creative ways that people get involved in real estate. and this is certainly one of them, something I've never heard of,

or not from that perspective or not that angle on it. A couple of questions came up. I have listeners from all over the world, and I get a lot of questions that I just can't answer because they're asking me about investing in places other than the United States, and that's the extent of my investment portfolio is in the United States.

So what does it take or what are the restrictions, what loophole, or loop, not the loopholes, but what hoot hoops? No. What the, what, what, I forgot the metaphor. But what do you have to do to purchase properties outside of the U.S. if you're a U.S. citizen?

Yeah, so the very first thing, I'm a big fan of Glenn, Gary, Glenn Ross. I'm going to try to say this in a PG version because I don't know who your listeners are. Speak freely. Oh, okay. Then I'm just going to go ahead and say, you've got to pull out your brass balls. That's step number one. Because it's a huge learning curve. Step number two,

you've got to be willing to get on a plane and go there. So I lived in France. I traveled throughout Europe extensively prior to making my investment. Before we invested in Puerto Rico, my husband and I got on a plane and went down and spent six months there. So this is not something that you, if you want to be the principal at least, this is not something that's easy to just go do.

In my estimate, maybe there's probably much smarter, much savvier people out there me, but for me it wasn't easy. It took boots on the ground and it took really absorbing what was going on. So that's part of why we offer that Golden Circle opportunity where investors who co-invest with us can just leverage our vacation rentals. They don't have to go out and reinvent the wheel internationally. But if someone wants to do that, then they have to, you know, like I said, they have to not be afraid and they have to go out and spend time on the ground. And then I would say the next most important step is hiring an attorney, a local attorney in that area, and obviously

who speaks to the language. I speak French well enough to read legal documents and kind of navigate through what's going on. But we also did a project in Hungary, which I speak no Hungarian, and a project in Italy where I speak no Italian and I speak no Spanish, which is the primary language in Puerto Rico. So you do want to have an attorney who speaks a language but also speaks English very well. And you want to insist that all documents are translated. I've made that mistake doing some deals where I was simply told, you know, it's kind of a newbie and I was told, oh, you know, this is what it is.

Well, I'm sorry. If you want my money, you've got to wait until I get this translated because I have to be able to read it. I have to be able to know what I'm signing and what I'm doing. So, you know, you want to take the time to get things. translated, invest the capital, spend the time and the money on an attorney, and also a tax professional who understands international tax law. Now, when I did my first project in Europe, I was only in my mid-20s, and I certainly didn't have a ton of capital to go out and hire fancy

attorneys and tax professionals and all of that, but I did it anyway. I mean, it was expensive and it was difficult to swing, and at the time it didn't seem like maybe it made sense to spend money like that, I'm sure glad I did. Because there's just a lot of nuances investing internationally that you need to be aware of, but it's not impossible. In fact, you know, kind of once you do it the first time and you get over it, you get going, and you're feeling better. But there's some basic questions to make sure to ask. I mean, you want to make sure you understand how you take title to a property. Do you actually own the property? Some countries, you know, In our country, not to get too philosophical here, but I'm a big fan of John Locke.

He was a philosopher that this nation's real estate and deed system and property system really was an outpouring of that philosophy that the right to own land, to own property, is a right of the citizenry. And in many countries, it's not a right. they're either long land leases, you know, hundreds of year land leases, or short-term land leases, or you're renting the land from the government. So you want to make sure you fully understand how you take title to the property. That can be done by talking with the attorney and also speaking with a title company.

I give major recognition to Stewart Title, who has done a great job of building their business globally. And obviously, they're a well-recognized name here in the U.S. Our deals in Puerto Rico, we worked with Marisa over at Stewart Title, and she really helped explain to me all of the title nuances in Puerto Rico, what I needed to be aware of. So, you know, understanding how you're going to take title is really, really important. So these are some added complications to what's already there, which is analyzing the deal.

Is it a good deal? And the other big thing that was a huge win for us in Europe was that if you think back to 2006, 2007, when we were doing these transactions, the euro was still very new. And so, believe it or not, people weren't sure if the euro was going to stick around. And so we took a gamble when we did this and we bought over in Europe. We also bought futures in the euro. So we locked in the price of the euro at 93 cents to the dollar. Fast forward a few years, and the euro was closer to $1.45 per euro.

So now, not only are we making money on our real estate, we're also getting a currency hedge. And so that's another advantage, but it's something you have to be aware of because that can go the other direction. What if I had bought all those futures and the euro went down to 50 cents for the euro? You know, now I'm sitting on all this money that I paid 93 cents for and now it's only worth 50 cents. And, you know, I just lost a bunch of money. So there's, you know, you have to be sort of aware of how you're going to manage currency issues. And then the last piece is, you know, what are they going to use the property for? So you brought up the question earlier about how do I decide what properties to do as vacation rentals.

Part of what drives that is the landlord-tenant laws in the respective states or countries. France is a very difficult place to have a long-term rental. You cannot evict anyone in the winter, for example. So if someone stops paying rent in October and November, you can't do anything about it until the spring. By law. Now, property management companies, I'm sure, are very creative and have workarounds. But because those rules were in place,

it just made sense to me that I was better off with short-term vacation rentals where I don't have to do an eviction. It's the same in Puerto Rico. It's not very easy to evict someone in Puerto Rico if they're not paying. So it's a natural place to do vacation rentals. But, of course, the other piece of that is it has to be in a place that people want to go for a vacation. Right. You know, if you live in, well, I'm not going to say an example because I'll insult somebody somewhere.

If I give an example. Political correctness is not allowed on this show, so it's people. We were, okay, don't worry then. I'll give a real life example. We were just in Columbus, Indiana, visiting family. So Columbus, Indiana is a lovely place, mostly because our family is there. But other than that, we did just for a little bit of research. We went on Airbnb and looked for a rental on Airbnb, and there was literally zero rentals.

Nobody is coming to rent in Columbus, Indiana on a vacation rental basis. So that wouldn't be a good place to do it. No matter how bad the eviction laws are, you still wouldn't do it there. Sure. Okay, so you said a lot of great things, and I hope people are listening. And I think there are some great tips there as far as investing out of the country. But there's plenty of places, like maybe it's not Columbus, Indiana, but there are plenty of places inside of the United States where people do want to vacation that you wouldn't have to deal with the foreign purchasing. Right?

Cool. Yeah. Yeah, so I want to just kind of bring that back because I think this is a great strategy. I think you're really on to something, and obviously you are because you're successful at it. So there's a couple other things. So a vacation rental, you're renting this out at a week at a time. What does the maintenance of that property look like? What does that structure look like?

That's a great question. So let me actually address something you didn't specifically ask, but I do want to point out, and then I'll answer that if it's okay. Sure. Is that all right? Yep. So when it comes to doing vacation rentals domestically, there's a lot. couple things to think about. One, your utilization rate will go up. If you have the rental locally and people don't have to buy an airfare or a plane ticket to get there, more of your

tenants will take you up on the offer. So you want to adjust your pricing model accordingly because I only give away about 10% of my vacation rental time overseas. In fact, I've only given away the place in France once to the woman in the Navy I told you about because it's harder to get to. So if you buy a place locally, it will get used more. You need to prepare for that in terms of your operating model. The closer it is to your long-term rentals, the more it'll be used, right? So we live in Denver. If we rent out a condo in Denver and we have a place in Vail, it'll get used all the time. For sure. Okay, I get it. You know, so you want to think about that. All right, so going back to your question, though, about the numbers on the vacation rentals,

and what it costs to maintain. Generally for a vacation rental, you want to assume more like a 50% occupancy, right? So your average vacation rental is going to average about a 50% occupancy. Your goal is to make your rental weeks available to your long-term tenants during the weeks that you're not renting it out. So you're one of first rented as a vacation rental, and then whatever weeks aren't booked become the weeks available

for your long-term tenants to use, right? This way you're not giving away opportunity costs. So vacation rental first, benefit to your tenants a second. That's how I do it, exactly. Because every investment in my mind needs to be self-standing. It needs to be profitable on its own,

and then you can begin to leverage it against other investments on the margin. But you don't want to give away, you don't want to rob Peter to pay Paul, right? You want to give away something that has very little value to you, such as a week that's not already rented, and you want to add value by giving that away, not Christmas week, for example, right? The other thing is, in terms of your returns and your costs, you know, every time a tenant

moves out, you're going to have to get it cleaned. Property management tends to be more expensive on vacation rentals because they are more laborious, more intensive. You also have more damage, you know, so getting things repaired, replaced, there's more wear and tear. You're also going to have to keep them furnished. That's some additional cost. You, you know, you're, you're going to have to pay, usually there's like a vacation rental or a bed tax that you're going to have to pay. You also want to make sure along those lines that you're doing your vacation rentals in a place that legally allows for vacation rentals. So like in Sedona, the county only allows for a month-long vacation rentals. You can't do by the week.

So that has to be, you know, you have to follow the loss. I'm sorry, but how would they know? I'm just curious. You know, you'd be amazed. Like, so New York City, for example, is really cracking down. Since Airbnb came to play, more and more individuals who have a nice apartment in Manhattan are just renting them out by the week, guess who's giving the city grief for that? The hotels.

The hotel industries are livid about. it. And so they're putting pressure on the city. And what the city is doing is they're going on Airbnb and looking for listings. And they actually have, you know, secret shoppers and they will bust people. It's the same in Sedona. So it depends on the municipality. Some places have a rule on the books, but it's not enforced. It's, you know, like lots of places have laws that are just not, they're not really laws in the sense that like nobody does anything about it and everybody's breaking it and it's commonly accepted. And then you've got places where it really is the rule.

And you have to be aware of that and know and be respectful of the rules. Sounds like a new reality show to catch a vacation landlord. Yeah, it is. It definitely could be. There's a lot of drama around it. So you want to make sure you know that. But so those are some of the expenses, the additional expenses with vacation rentals that you wouldn't have on a long-term rental.

The other thing is you have to be good at money management because vacation rentals are seasonal. and so if you're the kind of person who every time it comes in your checkbook, it gets either reinvested or spent, you're going to run into trouble because in the downtime, you're still going to have a mortgage payment and you're not going to have any cash flow. So you want to make sure that you're planning ahead for the year and you're putting hay in the barn for the lean seasons. Also during periods like with the Great Recession, our vacation, a rental occupancy dropped substantially. People were doing staycations, you know.

So we actually converted some of our vacation rentals onto a month-to-month long-term rental until the economy came back. So you have to kind of be thinking about those things. It's not clear-cut. Got it. Cool. So it's just a math equation, though.

You got extra expenses and you put that in your numbers and now you know if it's a good deal for you or not. Exactly. Perfect. Okay. So you mentioned something that you touched on that other investors leverage your property. So I imagine that for a fee, that someone else could help produce or increase the performance of their own portfolio by leveraging your rentals.

Right. So, yes, it could be done for a fee. In general, so our business model is. I was just assuming, so you can say how. Yeah, no, no, absolutely. It can be done that way. Our business model is all built around co-investing. So we really believe in the importance of investing side by side with our investors.

So, you know, we tend to shy away from fee-based or broker-based or wholesaling-based revenues. We get them sometimes because sometimes we have deals that we just pass on to someone and it's the right thing to do. But most of the time we're working together with our investors as partners. We're the active partner. We have our money in the deal and they're the limited partner. What we have in our organization is something called the goal. Golden Circle. So that's investors who have, right now, $300,000 or more invested with us in multiple deals, or in a single deal, whatever, but they have $300,000 or more invested with us. In January of

next year, that goes up to $500,000 to stay a member of the Golden Circle. Those members, as part of their benefit, can leverage our vacation rentals at cost. Basically, whatever our operation cost is, they cover that cost, and they can leverage that in their own personal portfolio as well. because we have a lot of investors who invest with us, but are also active in their own way and in their own deals. And so they can leverage those rentals for their own deals. We also have investors who aren't part of our co-investment group and aren't in the Golden Circle,

and we offer a 10% reduction on the retail rate to book the vacation rental to other investors as a professional courtesy. So instead of it costing $150,000, which is my cost, for the place in France. Somebody could rent that for, usually it'll rent for between $400 and $600 a week depending on the week and the season and all that. They can rent it for 10% less.

So they would just have to factor in that higher cost price into their long-term rental model for it to still make sense. But it can certainly be done and I've helped, you know, I do consulting with investors and so sometimes I can help them underwrite and craft and consult.

a strategy, leveraging rentals in that way. A lot of moving parts in your business. Yep, I keep very busy. So when you say you're investors, people that co-invest with you, is that like, are they investing in your company as a whole, or are you picking an actual property where you partner on? Great question. So our name, direct source wealth, stands for direct investing, right, being alignment with

truth source as the one true way to generate wealth. That's our value. That's our principle. So our investments are direct investments. So when an investor co-invest with us, they pick one or two or three specific deals that they like that they want to get in with us on, and they are on that deal. So they have a lot of control. I'm a little bit of a control freak, and I also allow other people to be control freaks. And so we make sure that investors have a lot of control. over what they're investing in directly. Got it. Got it.

So each time you do that, do they buy into an existing LLC? Do you create a new LLC? Exactly. We create an SPV, a single-purpose vehicle for each project. And so they'll buy into that. It is technically a security. So we clear through a broker-dealer and do all those things by the book. We have a regulation filing and all of that great stuff.

is done to make sure that that's compliant and they can get in that way. So we do have most of our deals because of the securities requirements do require an investor to be accredited. It's amazing actually how many people are accredited and don't realize it. And it's actually very easy to prove your accreditation. You just need a letter from your CPA, verifying your status. And we can help people do that if they don't know if they are or are not accredited. We can help them add up which assets count, which we can.

ones don't and determine if they are. And then if they're not, we do have some strategies in place to help non-accredited investors get to that level. It limits how many of the products they can invest in because, like I said, many of them are limited to accredited investors, but there are footholds that investors can get involved in now up front and then get themselves to be accredited status and then it opens up more deals for them. Got it. It's all very familiar talk. We just set up our own hedge fund and PPM recently. And so I get it. It's all the same stuff we went through. Perfect. Well, it's been an absolute pleasure. Is there anything that I, you know,

we're talking to Kara Golden today at direct source wealth.com is their website. Is there anything that I didn't ask that I should have? I love that question. I always ask that question, too, because I'm, like what you don't know, you don't know. You're so caught up in the conversation, and you're like, a lot of the questions come from my own personal interest selfishly. And I think about my audience and what they might want to know. But is there anything else? I mean, the only thing I would say is that, you know, while we are focusing on how to leverage vacation rentals in this conversation, you know, we basically are, you know, the direct source wealth is basically anything but, anything but stocks, bonds, and mutual funds is really sort of how we,

we structured ourselves. So just to let your investor pool know, you know, real estate's about 80% of what we do. It's our bread and butter. But we believe in diversification. So we diversify across asset class. You know, so we have vacation rentals. We have long term. We have buy and hold.

We have new bills. We have fixed and slip. That provides both geographical and product diversification. But we also have investment opportunities in technology startups. and we're working on an oil and gas investment vehicle. So we do a lot more than just real estate so that, again, it all supports the real estate at the end of the day. That's the true bread and better of wealth, in my opinion.

But these other opportunities give us a chance to, you know, strike a big once in a while. Real estate's kind of slow and steady. You know you're going to get there. If you do it the right way, you build wealth, you'll get there. But in this case scenario on real estate, you might double your money. That's just a great deal as you've doubled your money. In the stock world, you can get, you know, three, five times, you know, it's a private place, you know, angel investing in the technology companies and things.

You can get multiples of your return. Sure. You can also lose everything, right? There's more risk or reward. Absolutely. That's a whole other podcast. Yeah, exactly. It's a whole other topic.

So we do, you know, we do diversify and we, you like to bring multiple opportunities to the table. Super. And all of that, if anything that you'd mentioned on today's discussion, has resonated with anybody or piqued their interest, they can find out at directsourcewealth.com. Is that where they should go?

Right. They can go to directsourcewelf.com and register on the site. That'll kind of raise their hand and put them on our radar. We also have a Facebook page. I'm not very good at updating it, so it's kind of wimpy. but we would love people to go and like us on Facebook. We're trying to build up our community there.

Or they could call our office. Our office number is 720-4-4-5-45-6. That's 720 for Colorado. 4-4-5-45-46. It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so. Flipping houses can make you rich, but holding them will make you wealthy.

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