We Study Billionaires - The Investor’s Podcast Network - TIP467: The King of AirBNB w/ Robert Abasolo

Starting point is 00:00:00 You're listening to TIP. My guest today is Rob Abasolo. You may know Rob as Rob Built on YouTube, where he provides educational videos on how to build wealth using rental properties. You may also know Rob as the co-host of the popular podcast, Bigger Pockets. If you've ever considered creating a side business of rental properties or Airbnbs, then this is the episode for you. The basics of house hacking, rental arbitrage, Airbnbs, land hacking, and other strategies.

Starting point is 00:00:28 which characteristics make up a great rental property, the pros and cons of real estate versus other rentals like RVs and Turro cars, how to automate nearly all of the required Airbnb host tasks, how to get started even without a large down payment, Rob's personal journey and a whole lot more. I couldn't imagine a more enjoyable way to learn about real estate, so without further ado, here's my conversation with Rob Avicolo. You are listening to The Investors Podcast, where we study the financial market. and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected.

Starting point is 00:01:15 Welcome to The Investors Podcast. I'm your host, Trey Lockerbie, and like I said, the intro, I'm here with Rob Abasolo. Super excited to talk to you, Rob. Welcome to the show. How you doing, man? I wanted to highlight the fact that you really have built this sort of real estate empire, we'll call it, but you started from Square One, and you took the time to not only educate your yourself, but more importantly, took the early risks. And I would imagine that nearly all of our

Starting point is 00:01:41 listeners have imagined owning their own, say, Airbnb income rental property at one point or another. What advice do you typically give to those people who are on the verge of building their portfolio and are trying to get started? You know, there's a few things that I always say people. You can approach this so many ways, Trey. I would say ultimately, there is no right or wrong for this stuff. There's just what's right for you. And honestly, it really depends on where you are in your life and how much capital you have and all that stuff. But my first piece of advice for most people, honestly, like if they really want to get into real estate, I try to get people to stop paying their mortgage. And what I mean by

Starting point is 00:02:17 that is how can you subsidize your mortgage in a way that allows you to stash that cash to basically allow you to invest, right? So really great example of this. My favorite example of this actually is a house hack. For me, I was house hacking really since the very first house that I purchased. I lived in Kansas the city. I think our mortgage was like $159,000. And our mortgage, I think was like $1,050, which was sizable. That was like 25% of our of our take home at that point. We brought in a roommate and he was paying his $400 a month. And I was like, oh my goodness, we are rich. We've done it. And we moved to L.A. and still relatively broke, by the way. And we bought a house that was four times as expensive. And we still house hacked. We, it had a studio underneath. And then I rented out

Starting point is 00:03:00 the guest room to a buddy of mine. And then I rented out the studio on. on Airbnb. And between that and my other Airbnb that I had just launched, I wasn't paying a mortgage. And my mortgage on that house was about $4,400 a month or something like that, which again, is sizable. I think at that point, it was about the 25% of our income thing. And over the course of owning that house in L.A., I have made between 180 to 200. We're probably closer to like 210 now in rents. And that's how much I would have paid to a mortgage had I not house had. And I've been able to roll that, you know, let's call it $200,000 into the portfolio that I have today. And it's really just catapulted like where I am today. So it's all because I wasn't paying a

Starting point is 00:03:42 mortgage. That's kind of a very practical example. If you can save your monthly mortgage and use that to invest, I always think that's a really great starting point. Now, what's the difference between a house hack and just having a lot of roommates? So for example, my wife and I were married for a whole year and we had like three roommates. Is that a form of house hacking, would you call it? Or is that just simply renting it out? to other people that you don't know. No, that's a house hack, man. I mean, a house hack very simply is, you know, you subsidize your mortgage by renting out a room

Starting point is 00:04:12 or a space in your house. It doesn't even have to be a room if you don't want it to be. I mean, a really popular form of this is having a roommate and renting out your room. Another, you know, the origins of Airbnb was like air bed and breakfast. And the air in that means air mattress. And people would put air mattresses in their living room and rented out for 20 bucks a night. And I really appreciate that. So if you look at my house in LA, for example, that studio that I was telling you about wasn't even

Starting point is 00:04:35 really much of a space. It was like a cross space that the previous owner converted into what's called a bonus room. And we were renting that out and we were able to make, I think, on that one, $2,000 to $3,000 a month just out of the $4,400 mortgage that we had. So there is no technical. I mean, it's not a technical term. No one's really mandating the terminology. But I think someone pays you to live on your property for any amount of time while you live there. that's a house hack. Sticking on the idea of those early days, I was reminded about this book that Damon John wrote and it's called The Power of Broke.

Starting point is 00:05:10 And when you're starting from scratch, it can be a huge advantage in the long run because it teaches you to be scrappy and resourceful. But I'm actually curious if you found yourself in a position where you've needed to relieve yourself of those tendencies in an effort to scale because sometimes it can be ineffective over time. Oh man, this is the struggle of my life. If I'm being completely honest, like this is the thing that really is the greatest bottleneck of my current, I don't know, a life stage. And when I was getting started, I didn't have a ton of experience or money. Like, you know, if you watch the content on any of my platforms and you go to the comments, a lot of people are like, oh, it must be nice to be a trust fund baby and this and that. You know, and I'm always like, oh, man, if only you knew that my parents were immigrants. My dad was a doctor in Mexico. He left that behind and worked minimum wage for most of his career just to support us. So, like, I didn't come for money. And I had to pay for my own college with student loan debt.

Starting point is 00:06:07 So I was really broke. And I was always made fun of by all of my friends. Not for being broke, but for being like, well, for being broke, but in the sense that I was always trying to get a deal. Like, they were always like, oh, here he is, trying to get the free meal. Like, you know, if a conference let out and they had ordered food at that at my company, for example, I would always be standing at the meeting room, like waiting to get like the leftover sandwich or whatever. And so people were just always like, oh, Rob's the deal guys. I was

Starting point is 00:06:31 trying to get a deal, you know? And so now I'm still just so cheap. Like I made a video about this on my YouTube channel, not too long ago called like the world's brokest millionaire. And it's really talks about how if you're a really good millionaire, you strive to be broke. And so what I, what this means is you strive to be broke because instead of spending money on yourself, you're always trying to funnel that back into your real estate business or whatever entrepreneurship ventures you have before that though, before, you know, my income had grown with my real estate portfolio. I was just, I was broke. And then I actually started making money and I just funneled my brokenness right into like all my investments. I feel guilty spending any money on myself.

Starting point is 00:07:11 And it's something that I am working on, to be honest. Like, I don't have to treat myself this way. Like, I can like order the avocado on my on my salad for $1.50 and not cringe so hard. But for some reason, I'm still fighting that, that broke mentality of like, oh, you know, it's 500 bucks. I shouldn't spend that. And so recently I've started making more strides and understanding that, you know what? When it comes to Airbnb, for example, I've got like 16, well, I guess now I actually have 36 units because I just close on a motel. But at a certain point, you don't have time to scrutinize every single expense. And it actually costs you more money to do that than to just pay the first available vendor to get your AC fixed. Because if you don't do that, you're going to have to

Starting point is 00:07:49 refund the guests their entire stay. And it always ends up being a wash. So little by little, I'm trying to work on just spending the money on kind of convenience and spending the money on a quick solution versus trying to get three vendor quotes and waiting a week before I make any kind of a decision. Does that make sense? It does. I mean, they say time is money, right? And that's what I think a lot of people overlook. Sometimes they spend endless amounts of time researching something just to get a discount. And you're like, well, you could have just saved yourself the time. It might be worth more. This just happened to me, man. This is a really great example, okay? I, my pool filter broke. and my home warranty is supposed to cover that. And so I paid the $65 that came out and they said they sent someone out and the person said that it was broken because of a faulty installation, whatever. He didn't even look at it. He just wrote that up.

Starting point is 00:08:38 And so I have spent the last two months like fighting my home warranty company to fix this dang part. And honestly, the part was 500 bucks. And we have not used our pool at all. And we've been very frustrated about not using the pool. And I was like, finally, like literally a week ago, I was like, you know what? I'm just going to pay the 500 bucks. And I felt really dumb in that moment because I was like, well, the result was the same. I paid the $500.

Starting point is 00:09:02 Had I paid it two months ago, then I would have been able to use my pool for two months, which would have contributed to, you know, the happiness of our life because we use the pool like all the time. So that was a lesson for me that I was like, all right, you know what, man, why am I fighting over? Like, if you just value your time and you assign an hourly rate to your time and you start to think about that, I mean, I spent 10 hours fighting this insurance company or the warranty company and I was out a lot of money just in my time. I can relate to that feeling of being broke, especially when you're building your dream. I actually have this memory where I'll never forget, I was driving home and I literally had

Starting point is 00:09:39 zero dollars in my bank account. And I'd really love to dive deep into the trenches here and give our listeners a visceral idea of what it felt like to be in that position when you're just starting. out. Hopefully you weren't as broke as I was at that point. But can you describe a moment in time where you were both, you know, full of hope and then also full of doubt and uncertainty? It was a very long time before I was full of hope from a financial standpoint. You know, coming out of college, I'd worked a few internships in the advertising world. That was a creative copywriter. And my wife's a teacher, which, you know, they make great money. And so I think

Starting point is 00:10:15 when we first started our jobs, I was making, oh man, I want to say like $40,000. and negotiated that up from $38,000. And I was like, woo-hoo, I'm rich. And that was my first real paying job. And my wife was making about 42 because she was a specialized teacher. We thought, oh, you know, like $80,000 roughly, we're good. Like, this is great. But when you start stripping away taxes, you know, I think we were contributing like

Starting point is 00:10:39 1% of our income to retirement savings. You start taking away the $1,000 in student loan payments and the $1,000 in mortgage costs and then anything unexpected, you know, I think we were, left at the end of the month with like $1,000 of quote-unquote discretionary income. We weren't saving. When you don't make money or you don't have a lot of money left over, you can't save it because you're scared to, right? You feel like moving it over to your savings account makes you more broke,

Starting point is 00:11:06 even though it's all in the same place, right? And I remember this one time. My wife was transitioning from being a nanny, which she was right before she got her teaching job. And she went from that, which was paying like $15 an hour or something, to being a a salary teacher. And we were like, okay, this is it. Like, this is what we needed. Thank goodness, because, you know, we had a lot of credit card debt at that point. I think we had like $16,000, somewhere in there. And high interest credit card debt, by the way. And I remember the way that

Starting point is 00:11:36 the financing worked with all that or like with the payroll is they weren't super clear on if my wife is going to get paid in two weeks or in four weeks. And that was a, that was a big deal for us because the student loan payments came in on the 15th of every month at that time. I was like, hey, do you know? Do you know? Like, are you going to get paid in three days? Hey, are you going to get paid in two days? She's like, I don't know. They like, they won't answer the question. They don't really know. And I remember her mom was like visiting that day on the 15th. She flew in to come and see us. And I remember that was the day she was supposed to get paid. And we were laying in bed and she like, like, I had just woken up and she was looking at her

Starting point is 00:12:11 phone and she checked the bank account. And she was like, hey, I didn't get paid. And I was like, oh no. I was like, what are we going to do? We had like, I think we had like at that time, like 100 bucks in our account or something like that. So not quite, you know, what you were going through, but not super far. I mean, it's effectively the same thing, right? We had enough for a couple Chipotle burritos. But I remember that was like the next two weeks were the longest two weeks of my life because I was so petrified. I was like literally, if there's like an auto payment on my credit card or if there's some bill that I have on auto pay that I have forgotten about, we're going to overdraft and we're going to have to pay the $25 fee, which we didn't have. And that's, uh, that

Starting point is 00:12:45 That was, you know, real hopelessness for us at that point, right? Because, yeah, it was just like, how do I get out of this? Like, advertising copywriters make good money as you go up to scale. You know, you can jump up from 40 to 50 to 70 to 90 to 100. But it was going to be years, like a decade. And I remember thinking like, oh, man, the day I make $100,000, I'm going to be set. It's going to be so great. And, you know, that was tough for us. But I think the real shift when I finally was like, oh, this is it. Like, I think I figured it out was when I rented my first Airbnb. apartment. I was doing what's called rental arbitrage. And I don't do that much now, but that's how I got my start. And basically, we had just bought a house in LA and we had our apartment lease that we were in and we were

Starting point is 00:13:26 going to have to pay $2,000 to break it. Just a lot of money, by the way, for us at that time as well. And I was like, we can't afford the $2,000. So we're just, let's just throw it on Airbnb. I was like, I've heard of this thing that you can rent your house to strangers apparently and they'll pay you? And my wife was like, are you sure? Like, are you sure that's going to work? And I was like, no, definitely not, but we can't pay the $2,000. And our first reservation came in and it was for like $1,500. And our rent was $1,800. And that was for like a two-week reservation.

Starting point is 00:13:56 And I was like, oh my goodness. If I get another two-week reservation, I'm going to make like $1,200. That was a life-changing amount of money because that was our student loan, like for the month, our total loan balance on that. And I was like, this is crazy. And then the day before they were going to check in, they canceled their. reservation. And I was like, oh my goodness, we are screwed within an hour or two. Another reservation came in. That was like $1,600. It was like $100 more for that same day. And I was

Starting point is 00:14:25 like, oh, okay. And that was the day I told myself, I'm going to be a millionaire from Airbnb. I love that. Let's go into some of these things you've thrown out there, these terms. So rental arbitrage, house hacking, Airbnb's long-term rentals. You've even talked about land hacking. I've learn from you now about that. And I'm kind of curious where you recommend people would start. If there is any kind of roadmap, I know it's all kind of dependent on preference. But as far as like, you know, any asymmetric opportunities, where do you find those the most? I like people starting in a way that subsidizes their life. And there are a few ways to do this. Like one really powerful way to do this would be through a second home alone. And there are specific like criteria that

Starting point is 00:15:13 that you have to follow. But an example of this would be with the second home loan, you can put down a 10% down payment and you can get into a property. Now, in order to do that, though, the criteria and the guidelines say that you have to occupy the property for a portion of the year. Most underwriters will dig into the guidelines and say that that is going to be between the two and three week mark.

Starting point is 00:15:34 So you have to stay in your property between two to three weeks a year. Now, there are a lot of people that live in an area that travel a lot, right? So, like, let's say you live in L.A. Well, there's mammoth. There's Big Bear. And if you're a skier, you're going to be spending a lot of money on Airbnb's going out there. But hey, what if you could just buy your own Airbnb out there? You can buy your own house. And a lot of people will say, well, I don't want to buy the house because I'm only there for five weekends a year. And it doesn't justify the actual expense of the mortgage. So for those people, they can actually use it as their second home. But anytime they're not there, they can actually rent it on Airbnb and not just break even,

Starting point is 00:16:11 but make a lot of money. I know a lot of people that make between $50,000 to $100,000 a year of gross profit in those towns, for example. I don't have anything out there. But that's just a really good example. Or for me, Joshua Tree. I was living in L.A. And I wanted to build a tiny house in Joshua Tree. So I built a tiny house out there.

Starting point is 00:16:28 It's only two and a half hours out there. I get to visit it. I get to enjoy it. And I can let my friends and family stay there. And that is my second home, right? That is one of my second homes. And I was able to do that. And I can justify buying that home because other people will,

Starting point is 00:16:41 pay the mortgage on Airbnb for me, and I get to make a really decent profit on that property, too. So I think that's a really powerful way to do it. And if you've wanted to buy a vacation home, but you run through that same exact, I guess, dissonance of like, oh, I don't want to have this mortgage over my head. That's a really great example of how to get started in the Airbnb world and start cash flowing and actually get to use it for your own personal lifestyle. Let's talk about cash flow, actually. So a lot of people get into this game, I think, for that exact reason to just have extra disposable income or have it cover your mortgage, as you said, but how do you rank the importance of cash flow versus the appreciation

Starting point is 00:17:16 when you're approaching a real estate deal? Yeah, definitely. So there's a sliding scale on this, okay? So it's not, again, there's no right or wrong. There's what's right for you in the moment that you're in. I think for most newbie investors, for most people getting started, what is 100% the most important thing is cash flow. And there are a couple reasons for this, right? Everyone wants to make a little extra money and that's why we're getting into real estate. So if you, you know, want to make a thousand bucks a month, you want to buy a place. Like you want to buy a place, make a thousand bucks a month. You know, you're not really as focused on like, oh, well, it went up $5,000 in value this year because it's quote unquote paper money, right? It's not really liquid.

Starting point is 00:17:55 It's there in the house. You have the equity, but it's not something you can actually cash in without doing like a cash out refi or a HELOC. We'll get in, you know, we'll possibly get into that later. So cash flow is really important because people want to make that side income. Cash flow is also very important for most newbie investors because most people that are getting into real estate have one dream, right? They want to quit their 9 to 5 job. They want to leave their W2 job so that they can just be their own boss. They can be an entrepreneur. And real estate is a very clear way to do that.

Starting point is 00:18:23 And so when you're making $50,000 a year, for example, like I was at a certain point, well, it's not hard to figure out how you can make $50,000 a year in my niche, on Airbnb. right? My tiny house, the tiny house I was just telling you about in Joshua Tree, the first year, it grossed $83,000 for the year. The profit, after all of my expenses, after all of my property taxes, cleaning fees, repairs everything, $57,000. Now, my management on that is less than an hour a week because it's a new construction. A lot of stuff doesn't go wrong. It's like really, really great. And if I had told younger Rob that, hey, you're going to be making $57,000 a year, you're doing not a lot for this little house that you bought. You're going to make more doing that than this job that you went to college for. My mind would have exploded. I wouldn't even have believed

Starting point is 00:19:15 you, right? It would have to be me telling younger me and being like, I time traveled here, you know, because it's just so like not, it's not something I could comprehend when I was younger. So when you start thinking about that newbie investor, they start dreaming like, okay, how can I make $50,000? How can I make $60,000, $80,000 a year with real estate so that I can quit my job? And so because of that, every time you add a property to your portfolio, every time you add, you know, units, you know, more doors, right, you're starting to kind of math everything out and say, okay, that's an extra $200 a month. That's an extra $1,000 a month. And so you're just focused on how you can get from zero to $10,000 a month. That always seems to be the magic number for a lot

Starting point is 00:19:53 of people because, you know, not only do they want to leave their job, but if they can make six figures, it's a really great achievement. And so $10,000 a month, you can do that, right? But there comes a point where if you're a real estate investor and you're a pretty good one and you're like you're like us, right? You're like me. You're cheap. Then at a certain point, you cover your expenses. Even if you start making more money, you don't necessarily want to spend it because you're a good real estate investor that's cheap, broke, and frugal. And so for me, there came this point where I was like, well, you know, here are my expenses. And I don't really want to pay myself for real estate. And so I did everything I could to now use my cash flows to supplement the growth of my portfolio. And I think a lot of people, that I know, they're usually pretty strict on their budgeting in real estate. Most real estate investors are like, I really respect that we as a community, like we thrive on brokenness because we just want to keep chipping away at the dream. And so at a certain point, what becomes

Starting point is 00:20:45 more important in my mind is appreciation. And that's why I say this is a bit of a sliding scale, because you start off on the left here, a cash flow that's so important. But as you grow in your journey and as you progress, you know, let's say linearly, that little slider starts moving over and moving over to the appreciation side because you quickly realize that cash flow makes you rich, but appreciation makes you wealthy. And I'll give you an example of this. I worked my butt off for the last five years to build my Airbnb portfolio. And I got my cash flow up to about $25,000 a month, probably more now. But let's just use that as the benchmark. $25,000 a month times 12 is $300,000 a year, which is amazing. It's so cool, right? Like I did that. I tripled my salary just with

Starting point is 00:21:29 Airbnb. Now, consider this. In the last year, if you take the appreciation of all of my properties, all 14 of the units, 15 of the units that I had, they all appreciated $400,000. So I actually got $100,000 more added to my net worth from the appreciation of my Airbnb properties than the actual cash flow of it. And so it's not about one or the other. You want both, but there becomes a moment where it's like, okay, 25 grand a month. That's really cool. I'm going to stash that away. I'm going to keep investing it. But then you look over and you're like, oh my goodness, like the actual value of my property is actually, I've made more that way. And if that happens over the course of your portfolio, like your portfolio in 30 years is going to

Starting point is 00:22:11 be worth double triple, right? It's going to be worth so much more. And ideally, you get both, but what's really going to add to that final net worth number, if that's something that you're adding to is the overall appreciation. So it's a little bit of both, but one becomes more important And at the end, once you realize that the generational wealth you're building comes from appreciation. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer.

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Starting point is 00:26:22 sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. I want to touch on what you just said there about not using your Airbnb income to supplement You know, your lifestyle, you chose to reinvest it. And I was talking with this guy named Adam Cecil, and he had these two phrases,

Starting point is 00:26:54 you know, growth mode and harvest mode. And I really liked that concept because it was probably a certain stage where you're building and you're building, you're just reinvesting and reinvesting. And you don't really feel the difference in your lifestyle. And then as soon as you turn on harvest mode where you can kind of let these things kind of auto run by themselves, that's where you kind of see the freedom kind of kick in or the wealth effect go into to play there. Was that kind of your experience?

Starting point is 00:27:16 Yeah, yeah, definitely. I mean, you know, the, this kind of goes into the whole me being like self-imposed brokenness, I guess is the best way to put it. Like, I didn't have to be this way, but growth mode for me for the last five years is kind of where I've been at, like growth mode, like how do I grow? How do I grow? And then, yeah, like the harvesting component of it's like the way you grow is by taking the money and using that to reinvest. I probably could have paid myself a little bit earlier. But for whatever reason it just, I was able to be so frugal and live off of my W2 income that, yeah, just for me, it's really cool to grow your monthly cash flow. That was like a really cool thing for me. And I really like that. And the fact that I could get to $25,000 a month and not ever actually take away from

Starting point is 00:28:01 that, that was like a cool thing for me. Like that to me has been a great joy to be like, yeah, that's a number I'm really proud of. It's funny. You say that because I was talking to Jim O'Shaughnessy and we were talking about that. I think it's a Harvard study about immediate gratification, And the best investors seem to have this gene where they're able to put off the gratification, right? You were staying in that self-imposed brokenness for longer, knowing that one day down the road it would pay off. And that's a mentality I relate to because I was always, you know, my 20 starting my business being like, I don't care how hard it is now. It's going to be easy in my 30s.

Starting point is 00:28:33 Like I'd rather have it be hard now and easier later than the opposite. So when we're talking about the passive income, though, I'm curious how passive it really is. So for example, I looked you up on Airbnb. I noticed all your properties are very highly ranked. You're a super host. You know, my wife doesn't stay in any Airbnb less than like 4.9, you know, a rating. So it seems like it takes a lot of work to maintain that, right? You're getting comments and you've got to be really communicative with your guests.

Starting point is 00:29:02 And talk to us about the actual work that goes into these properties to maintain a status like that. Yeah. I mean, you know, there are some people. and some gurus in the space and stuff like that that are like, yeah, it's completely passive, you know? And it's not. I mean, it's not totally passive, but it can be pretty close. I think it's like at the end of the day, if you hire a property manager, for example, for your long-term rentals, that's completely passive. But you are going to pay a management fee on that. Short-term rentals is the same way. I mean, I could hand my properties over to a property management company. They're going to charge me anywhere from 20 to 30%, which is significantly more than a long-term rental. And it is because there is more work. I'm a big advert. of self-managing because I think that you can automate enough to sort of understand the business and enjoy the business. So when I was first getting started, I was messaging guests. I was

Starting point is 00:29:52 texting my cleaners. I was arranging everything. I was ordering supplies. And that kind of stuff does work when you have one property. But as you start to scale and grow, things start slipping through the cracks pretty quickly. So for me, what I found is there are things I can automate. So I was able to automate, for example, my messaging, right? So instead of sending a message to my guest when they confirmed a booking, when they checked in, to check in on the midstay, to check out, to leave a review, that's five messages that you're going to send to one guest, right? If you have, let's say, 10 guests in a month, that's 50 messages to one property. Now, if you have 10 properties, that's 500 messages that you're going to send.

Starting point is 00:30:31 So what you can do is actually use a property management system that will basically template, you know, like a response or like template like a check-in message or template like a checkout message. And so you obviously want to tweak those to be in your voice and everything like that. That was one thing where I was like, oh, my goodness, I didn't know you could do this. This is amazing. Another component of my short-term rental business that I was really in the weeds on was changing the prices of my property. You know, I was like, oh, you know what? I'm not being booked this week, so I'm going to drop it down to $99 a night.

Starting point is 00:30:57 Oh, hey, you know what? I think there's a festival coming up in a month. I'm going to jump it up to $300 a night. Oh, shoot. Someone just booked my place for $99 a night yesterday for that festival because I didn't really think about the festival until after they booked. could have made an extra $500 there, right? That's sort of the pricing dilemma that a lot of hosts go through. You can actually work with an automated dynamic pricing tool that will give you the optimal

Starting point is 00:31:20 price for your Airbnb given the supply and demand of the market on any given day. So if they see that it's the season where everybody is coming out to L.A., for example, it's the hottest season in L.A., they know it to drive those prices up because supply is probably going to be pretty limited. So that's one way that I was also able to automate my business. instead of having to leave reviews, which is something you have to do with every guest, I'm able to automate that through the same thing, a property management system where not only can it just auto-generate the review for me, but it will also send them a message and say,

Starting point is 00:31:50 hey, if you enjoy to stay, will you please leave a review for me? You can automate your supplies, right? If you set up an Amazon subscribe and save a subscription, you can automate paper towels and toilet paper to be delivered every single month. And so you can also automate communications with your cleaners. If you don't want to be texting your cleaners, do the right property management system or to the right product or service, you can actually pay like, I don't know, $10 a month or something like that. And it will shoot over a calendar link to your cleaners so that it syncs up with their calendar and they know when people check in and check out, they can get an email sent to them, they can get a text sent to them. So really, I don't ever hear from my cleaners

Starting point is 00:32:26 unless something is wrong. If something is broken, if something is super dirty, if something needs maintenance or repair, they'll let me know. At that point, I'll deploy like a handyman to go fix it. So just in all of those things that I talked about, you can cut like 80 to 90% of the time wasted and the time spent doing all of these things. And yeah, you got to have a human element for 10 to 20% right. But it's worth it because then you don't have to pay 20 to 30% to a property management company. On $83,000, I can't tell you exactly what. I mean, $83,000 is roughly at the top of my head, $25,000 in management fees if I was going to pay,

Starting point is 00:33:06 someone a 30% fee. That's a lot of money. I would rather just make that and spend 10 to 20% of my effort managing that property. So it's starting to make less sense for me now. I'll be honest because I have my YouTube channel, I've got host camp, my mentorship program. I've got like my actual properties, bigger pockets, like businesses that I'm starting. So it doesn't really make as much sense for me to be doing that. But when you're starting out in cash flow is important to you, then you better be self-managing because that can make a break how, you know, successful you are in your first couple of years. That's incredible. I had no idea you could automate that much of it. That's fantastic. Well, while we're on the topic, why don't we go through a couple of the characteristics

Starting point is 00:33:46 of what make a great rental property? You've got, what you were just describing there was opportunity costs. And when it comes to real estate, there's endless amounts of opportunity costs. You can look at any state, any country, any city. I mean, it's like, how do you whittle down the universe, you know, how do you zero in on somewhere that you know is going to be a good outcome? So there are four main places that I find myself investing in. There are national parks, state parks, vacation destinations, and eclectic towns. Now, I don't really have to talk too much about national parks or state parks. We all know what those are. But the reason I like them is that they are, their nature's Disneyland, right? You know, like you don't have to market the

Starting point is 00:34:25 Grand Canyon. You don't have to market the Smoky Mountains. Smoky Mountains, it's literally eight hours away from like half the U.S. population. 13, 14 million people visit the Smoky Mountains every single year. That's over a million people a month, just over. There are 3,000 rental cabins in the Smoky Mountains. So if you really look at how many people are visiting every single year compared to the actual supply of cabins, like there's a discrepancy, right? And so that seems to be the case in a lot of these National Park and State Park areas. So that's why I found myself investing in like Spoky Mountains, Joshua Tree, stuff like that. But I also really like Ecclectic towns. I don't have a lot of properties in these yet, but this is kind of like my next strategy moving forward.

Starting point is 00:35:04 But they're kind of these small towns that just have some kind of draw to them, like something magical about them or something enchanting about them, right? Like really great example of this would be Eureka Springs in Arkansas, right? It's like this little small town that's like very touristy. It's like this long one or two mile road and there's all these little shops. I just went to another place in it right outside of Denver. I think it was like Pueblo and same thing, right? It was like pretty much identical to Eureka Springs.

Starting point is 00:35:29 Julian outside of San Diego. It's like this cool little town where people go apple picking. There's like really great pies. You know, the people love taking photos in the fields, all that kind of stuff. Outside of Austin or Dallas, there's like Waco. It's right in between, right? So Waco has like been popularized by the late great Chip and Joanna Gaines, obviously. Like, you know, it wasn't super popular before that show and it's growing and it's exploding from a tourist standpoint.

Starting point is 00:35:54 People go there. They did all the marketing for you. You don't have to do it. So these eclectic towns have some reason for people to go to and you don't have to market them. And then lastly, it would be vacation destinations. So these are going to be your beach towns, your lake towns, your mountain towns, anything where people are just going, right? They're going to hop in their van with their family and drive. Or tourist destinations like L.A. would be a tourist destination because there's Disneyland.

Starting point is 00:36:19 And there's also Hollywood, Orlando, Disneyland. You know, I talked about Mother's Disneyland, but someone would prefer to just go to like the human species Disneyland. So that would be like the four areas that I think determine like a good, like those are good jumping off points, I think, if you want to start getting into the Airbnb or like rental property game. Now, I've been tempted with other stuff too, like RVs or Turo, even where you can rent out your car or I know some people just have a fleet of cars now, right? So what are your thoughts on actual real estate like rental properties versus RVs, Turoes, et cetera? Yeah. So there's a company called Out.

Starting point is 00:36:56 Doorsy. And they're sort of like the trailer RV version of Airbnb. I haven't actually done it. I would like to do it, but I have nowhere to park the RV. But I think it would be really fun. I've been wanting to do it for a while. Not because I have a strong desire to. What I like to do is like make information accessible to people as much as possible. And that's like a big passion of mine, like just being on the bigger pockets platform. Right. Like I get to talk to a lot of people and teach them how I did it or YouTube or TikTok or Instagram. I like to teach people. And so with something like outdoorsy, for example. I sort of want to do it just like, all right, I've failed so that you don't have to. And I think it's a really cool way to do it. I've done Turro before. Turrow was a little bit more of a grind for me because I only had like one car. And like when I rented it out, I was like, you know, having to bum a ride for my wife. And then I'd have to Uber when she wasn't around. It ended up being a wash. And then I got two cars. And, you know, whenever I rented one, I needed the other, I had like a truck and a Prius. I was like, oh, these are going to be great options. But it always landed on times where I needed one or the other. So I figured out to really

Starting point is 00:37:56 scale on tour, you probably want like three cars and just a car outside of it, you know, like your personal car and you can rent them out. And that's where you can really start making money. I think it's a really great business. It's an interesting business. If you're somewhat of a car fanatic and you like to have cars, but you don't want to pay for them, that's ultimately what the sharing economy comes down to, in my opinion. The reason I have Airbnbs is because I like to have properties that I don't have to pay for. You know, I bought a luxury like $3.25 million luxury house with David Green, and it's an amazing dream come true, and I don't really have to pay for it, right? Other people are paying for it. Outdoorsy, if you want an airstream, an airstream is going to cost

Starting point is 00:38:33 you between $50,000 and $80,000 to buy, and if you don't want to pay that, you can just rent it out to people when you're not using it, and guess what, you're not going to be using it for like 99% of the year. So if you can make a little money, great, subsidize it. If you want to buy, if you want to have a truck in a Prius like I did, great. Like you can rent those on Turro and at least break even on those. Or if you want to have a Ferrari or a Lamborghini, I know people that do that too, and they make really great money on Turo because they rent out their stuff for like $1,000 a day. So it's a really interesting way to subsidize it, I think to really scale that. I mean, there's some obvious issues here, right? There's like the depreciation of your car. It's not an

Starting point is 00:39:07 appreciating asset, which is why I always end up going back to my first true love real estate, like buying things that are an appreciating asset. Anything on wheels is not really an appreciating asset. And that's sort of where there's a little bit of dissonance with some of the things I say on my channel and like the tiny home community, you know, I always talk about, hey, look, my tiny home and Joshua Tree is on a fixed foundation. And because it's on a fixed foundation with a fully permitted structure and it's got the certificate of occupancy and all that, it's a real living, breathing piece of real estate. A tiny house on wheels is just a really nice trailer that's going to lose value over time. And that makes a lot of people mad. But, you know, I can't make everybody

Starting point is 00:39:44 happy. But all to say, like, anything on wheels is a depreciating asset doesn't mean it's not a good business, but it's not necessarily something that's building wealth, other than the argument of saying, like, yeah, you use your cash flow to invest and other things. Yeah, I love that point. I used Turro as sort of an excuse or a way to justify the purchase of the car I own today, thinking, oh, well, you know, I'll pay down some of this just by renting it out. And then the first time I had it listed and someone rented it, I freaked out. I was like, I don't want them driving my car. I just pulled off it. I couldn't do it. So, you know, I want to ask you about regulations as well because, you know, Lake Tahoe near me is one of these places

Starting point is 00:40:23 that would probably be a dream Airbnb rental place, but I think they crack down on it because at certain points you don't want the whole town, I guess, all being Airbnbs, which makes sense, right? Sure. Yeah. Yeah. So where are the most like owner friendly areas to invest for Airbnb purposes? I wouldn't say there's like a particular kind of place, but I definitely think like areas that are in the national park, state park kind of category are going to be those places because you got to understand like national parks, they make their money on tourism, right? And so if they limit how people can, like the accessibility people have to lodging, which is usually very limited in these areas, then they know that they're going to be cutting off a large

Starting point is 00:41:05 part of the tax dollars that we pay to them. So the Spoky Mountains is a really great example of this because the entire economy is boosted literally by 13 million people going to. there to visit, right? The handymen there get paid from all the short-term rental operators. The contractors get paid from there. The cleaners get paid from there. Literally, every aspect of that economy is boosted by short-term rentals. Now, of course, there are regular residents there, but those residents are often vendors or subcontractors for short-term rental operators. And so if Severeville, Gatlinburg, Pigeon Forge tried to limit that, they would effectively be, you know, sort of cutting off the income of all of the residents that,

Starting point is 00:41:44 live there and depend on that income. I think these vacation destinations are a really great place to pay attention to because typically, you know, if they do impose some kind of regulation, there will still be ways, not around it, but ways to comply with it. Joshua Tree is a really great example of this. It was kind of the Wild West out there for the last like five years or so, but now they've imposed regulations that only allow a owner to own two properties out there. And so, you know, that kind of cuts back on how much you can do. But now if you know the rules, at least you can play within those guardrails, right? I actually think sometimes it's a little scarier to play in a place that hasn't even regulated it at all.

Starting point is 00:42:23 Because then all of a sudden it might say, oh, you know what? We ban everything. And then you're like, oh, shoot, I have a whole portfolio here. So personally, my investment strategy is I just diversify the heck out of my listings. I've got 14, 15, oh, I guess, like I said, I've got 35 listings or so because of that 20 unit hotel. But outside of those, we'll call it like 15 listings. I live in the same state as one of them, and they're all over the place, you know, like literally like four or five different states. And I've just diversified so that I know, hey, if Joshua Tree really just completely lays down the hammer and they don't want me to be in short-term rental operator there, okay, I've got a couple options, convert to long-term rental, sell it, whatever.

Starting point is 00:43:01 But at least I've got 14 other units across the country that I can rely on to pick up the slack. I just thought of something. I haven't heard this talked about really at all. So I'm curious if you have real estate in the major metropolitan areas, LA, New York, et cetera, just skyrocketed in the last few years. And it seemed overheated to begin with even before that. But, you know, there's a lot of talk of that just being because of the money supply that was introduced, et cetera. Part of me is kind of curious if the amount of Airbnb's out there is contributing as well. One source I found said it was 700,000 total Airbnbs in the U.S. And you've got to imagine most of those are in major metropolitan areas, I would think.

Starting point is 00:43:41 I mean, I'm not really sure, but maybe a lot of them, given that they have the attractions, you kind of mentioned earlier. And I wonder if that kind of takes away the supply and then boost the real estate around it. Have you ever had any discussions about that with your guess? I mean, my TikTok comments have certainly had discussions with me. You know what? I think looking at the numbers, it has a little bit smaller of a, like, a percentage than

Starting point is 00:44:02 people make it seem. Like, I think people, like, no one's really on the same page here, hey, when they're against me, right? Like, half of my TikTok comments are like, you're causing housing prices to skyrocket. And then the other half are like, you're decreasing property values. And I'm like, can you don't just talk and like agree on like what you're mad at me for? Obviously, it's going to contribute to like taking some housing stock out there. But it's a pretty small percentage. Like, the last report I read was, I mean, closer to like a one to three percent mark, which is obviously like not in significant because 1 to 3% of the housing stock is like really, really, really high, but,

Starting point is 00:44:36 you know, relative to the amount here. But it's not really quite as, I don't know, I think there's a little bit of a agenda there sometimes with bringing down hosts like, you're like, you're ruining neighborhoods and taking things. I'm like, I don't know, man. My neighbors, like, they kind of like like it because they all Airbnb 2. Because when you think about like the common person in a neighborhood like mine, for example, in L.A., we were just trying to make an extra a couple thousand dollars a month. And like, that's literally what both of my neighbors are doing. They both also have bonus spaces under their house. And it's like they make a couple thousand dollars a month from it and they love it.

Starting point is 00:45:07 And I think that most Airbnb operators are doing that. For me, I don't invest a lot in metropolitan areas. Honestly, sometimes for this reason, because I think it's just easier to say like I invest a lot in glamping stuff, for example. No one can really get mad at me for opening a glamp site. Like it's a cool tent out in the middle of the desert or like a cool tree house or whatever. I'm not really taking any supply away from people. and so people are usually less mad at me for starting like a glamping site. And same thing with new constructions.

Starting point is 00:45:36 Like I built my tiny house in Joshua tree. I guess you could argue that like quote unquote it was taken from here, like taking that stock, but I built it for myself. And so for me, like the niche that I'm always trying to target is what can I build so that I just own it and like I'm not going to rile too many people up over? And then I also try to be in a place where there is already like a needed. It's like a need for more short term rental housing, like the Spoky Mountains, for example. There are 3,000 cabins, million people go every single month.

Starting point is 00:46:02 There's just not enough supply. So for me, I'm always like, okay, can I like invest there and contribute to the tourism economy there? And that economy is very friendly to it because that's how they make their money. I don't know if there's like really a right or wrong answer here, but I do at least give it thought. That's really interesting. All right.

Starting point is 00:46:18 So I have a silly but deceptively serious question to ask you. Perfect. When it comes to Airbnb's, how important is adding a hot tub? I feel like you know my POV here and you just want to rile me up. But it is important and I hate hot tubs because they are just the thing that everybody wants that everyone gets mad about that causes the most issues. So look, reports say, all right, reports do say you make more money every single year with a hot tub. You can add as much as $39 to your ADR, your average daily rate. If you have a hot tub. With that said, you must ask yourself, how important is that extra $39 a night? Because oftentimes the hot tub, Tub's going to break. It's going to flip the breaker. It's not going to heat up fast enough. It's going to be a little green. There will be one leaf in there. There will be a guess that doesn't know how to use it and they break it. And a lot of refunds will come out of it, right? But most of the time, it's like a net positive thing. But man, if you kind of like look at the side of my head

Starting point is 00:47:14 here, I've got a few gray hairs and they've all come from hot tubs, like from the maintenance and the mitigation I've had to do with hot tubs. I love it. All right. So I want to shift gears a little bit and talk about the financing side of real estate. I want to ask you, what are the most common or actually maybe least common hacks when it comes to financing a rental property? One of our co-host, Robert, I know, has bought a property with zero cash down, I guess after refinancing some appreciation. There's some kind of these workarounds that some people find in it, I find it fascinating. Do you have anything like that that already experiences doing something like that? Yeah, I've got a few kind of creative solutions. One way,

Starting point is 00:47:55 would be similar to what you were talking about. I'll use my LA house, for example. I've got a home equity line of credit on that thing for $120,000. If I actually redid the application or whatever, I think my home equity line of credit would be closer to like half a million dollars. So if I can't qualify for a home, I know that I could take out a helot and just use that to buy a property, rehab it, and then go and do a cash out and get that money back. That would be like one way to do it. Another way to do it would be what's called a DSCR loan, a debt service coverage ratio. And that's where they basically, instead of qualifying you based off of your DTI, your debt to incommatio, and qualifying you off of your income, they're qualifying you based on the projected rental income of that property. So if I am self-employed, like I am now, it's a lot harder for me to get a mortgage from a bank conventionally. But with the DSCR loan, they don't even look at my self-employment. They look at the projected income and they say, okay, this property will cover the debt service. So we'll lend to you on that. Another way would be what my favorite way, how I was able to scale up pretty quickly. And that's OPM, other people's money,

Starting point is 00:48:58 partner with people, and they can pay and acquire the property. And your payment to the partnership is sweat equity. You know, my first two partners that I ever worked with, you know, I used to put myself out there on Instagram and say, oh, I'm doing these Airbnbs. Like, look at this. I make, you know, this money, this Airbnb made $2,000 this month. It's a dream come true. And like, I was, like, very proud of, like, the small successes I was having in short-term rentals. And I would have people reach out and say, hey, I see that you're making good money. I hear this is very lucrative. Like, how can I get involved with this? And I'd say, well, hey, if you can buy it, I'll help you find it. I'll do all the communications with the realtor, the appraisals. I'll furnish it and I'll manage it. And I won't

Starting point is 00:49:35 pay myself back until you get paid back fully. That was back when I started. The terms of that are a lot different now. But a lot of people, they really like that. And so I was able to get into several properties from those types of agreements. And it was just using other people's money. Now, Now, if you're starting out, you may not be able to negotiate a 50-50 equity split on that. You might have to start small. You might have to take 25% equity and they take 75 and you have to pay them back first before your equity invests. That would be one way to do it.

Starting point is 00:50:03 But for me, I've really found partnerships and joint ventures and other people's money to be a very successful way for me to scale up pretty quickly. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up. and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together

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Starting point is 00:53:53 Yeah. I mean, look, everything is very cyclical, obviously. And historically speaking, we have peaks and then we have dips, right? And the only way that you can ever circumvent that, right? Or like, the only way you can ever really beat the dips and, you know, like, I don't know, be successful in real estate is to invest consistently and not have a two to three year trajectory. A lot of people think real estate is a get rich quick scheme and it's like, oh, I'm going to make money so fast. I'm going to be a millionaire overnight. That's not true at all. Like, you have to think of real estate as the long game, just like your stocks, right? Just like your 401k portfolio, for example, if you invest a thousand

Starting point is 00:54:31 dollars a month, every single month for a year, and you make a 10% return on that, like, just a perfect, you know, like, let's say an average great year, whatever, you're going to make $120 on that. That's not really a lot of money. It's not going to make you super, super rich. But if you do that for 30 years, that is going to grow into millions of dollars, right? And real estate is exactly the same way. You can't really get into it expecting, oh, man, I'm going to make so much money like today

Starting point is 00:54:59 and then in two years. I'm going to triple it in four years. it's not bad at a goal set, but if your exit strategy is three to five years from now, you've already lost the game. You have to think of your exit strategy 20 to 30 years from now because that's the only way to ever quote unquote time the market, right, is by having more time in the market. So I think for people that are looking to invest right now, there are a few ways to do it. But at the end of the day, you just have to work a little harder for your deals. You know what I mean? Like interest rates right now, I think they're finally, I think they came

Starting point is 00:55:26 down recently and they're around six, six and a half percent for investment ones, for investment ones down from like seven. I'm sure it's going to go back up here pretty soon. But with that said, you just have to work harder for a deal and you have to negotiate harder for your deal and you can't overpay. If you really kind of examine the behavior of people, it ends up being awash in a sense. And I want to clarify that a bit. Like two or three years ago, there are a lot of people that were saying like, oh, we're in a bubble. Like, I'm not going to buy now. It's the top of the market. Well, interest rates were three, four percent. And now home prices might be softening a bit, but now the interest rate is higher.

Starting point is 00:56:04 And because the interest rate is higher, you'll technically spend more money in interest. But you paid less for the house. It's kind of the same thing. Like if you had just invested both times, it's the same thing. And so instead of trying to like time the market and really be like very precise, the best thing you can do is never overpay, never spread yourself too thin, have reserves to cover any kind of storm, and just do it consistently. consistently forever. That is it. That's the secret. That's the really obvious secret that a lot of

Starting point is 00:56:31 people just don't really think about. It's like you might have a good deal. You might have a bad deal every so often. But if you really strategically think about it consistently, the good deals will typically help kind of mitigate the bad deals that you might have over the course of 30 years. I want to provide a little math breakdown here because just to add some context. So I heard that the average home price now in the U.S. is $500,000. So if you're looking at a $500,000 home and you had a 2.8% interest and assuming you're financing $400,000 because you're putting 20% down, you'd end up paying around $200,000 in interest over 30 years.

Starting point is 00:57:09 So a total of $700,000 at the end of 30 years. Now, at a 5.8% interest, now assuming you're still putting 20% down, the home price would have to be $375,000 to get that same $700,000 net cost. over 30 years or a 25% decline in the home price. Do you think we're nearing something like that? It's a similar question, but I guess what I'm trying to ask is this isn't like a 2008 scenario where the market is overheated and there's going to be a big collapse, but we are seeing interest raises rise. And do you think there's going to be that kind of decline? Or does the demand and the lack of supply kind of keep propping it up? Yeah. I wish I knew that answer 100%

Starting point is 00:57:53 simply because, like, you know, if I did, then I could really make some very smart decisions. I rely on, you know, the fact that understanding there are dips and there are peaks, and I've invested a lot in the peaks, right? But I'm actually looking to invest more right now. And I think that, honestly, the number breakdown that you just gave us sort of exemplifies my point. So like you said, if it goes down 25% to 375, the interest is still basically the same, right? that's one component of looking at this equation is, okay, the interest is, you know, you have to have a better deal here for it to like, you have to have a better deal today at

Starting point is 00:58:31 the higher interest than, you know, like a year ago, right? The first interest rate you gave. But that's kind of looking at it one way. But I think the other way to look at it is less than the interest that you're paying overall in what that house is going to be worth in 30 years. And so it seems scary when you put it that way, right? Like, oh, my goodness. I have to spend $125,000,000 less in order to pay the same amount of interest.

Starting point is 00:58:53 Like, oh, man, this is a bad deal. But the question you have to ask yourself is, what will that house be worth in 30 years? Is it going to be worth double? Is it going to be worth triple? Probably. Like, the equity will still be favorable, no matter kind of like the difference there in price. As far as where we're heading, I'm not really sure. I mean, I would like to think that, A, like the actual pricing is softening.

Starting point is 00:59:15 Because we did get into a moment there where people were just paying, like, especially in the smoky. like $50,000 to $200,000 over because they just, they were like, this is it, like the glory days. And I was like, no, man, don't ever pay $200,000 over that rarely makes sense in any economy. But kind of where I think things are going right now is at the end of the day, like, there's one really big problem in the U.S. And it's supply.

Starting point is 00:59:38 Just straight up, it's supply. We're not making houses fast enough. The houses aren't there. People are buying houses. And so that makes me feel a little better because if I felt, like we had a housing overage, I guess, instead of a shortage, then it'd be like, uh-oh, like, what are we going to do? The fact of the matter is, everyone is still competing pretty aggressively just to get into an investment property or just even like their own primary residence.

Starting point is 01:00:02 You mentioned bad deals a minute ago. I just have to ask, have you ever had a bad deal? And if so, what, what did that look like? You know what, man? Not really. Actually, let me clarify. A lot of my properties have been acquired over the past five years and the cash on cash returns on a lot of those properties have been between 30 to 100%. Like, it's really crazy. Like, my tiny house is a really great example of it. Glamping is another great example of it, spending $3,000 on a tent and making like 80 grand on it. Like, that's, it's insane, right? Nowadays today, like, I am targeting deals that are 20% cash on cash return, which is a lot less than what I was getting before in like the glory days.

Starting point is 01:00:38 Right now with the way interest rates are, I might be getting like a 15. And then in an apocalyptic scenario, like a 10% cash on cash. And so in my mind, if I had told younger, me like, oh, it's a 10%, I would have been like, oh, God, don't show me that. That's a horrible deal. But now that I'm a little bit more seasoned in the investing world, 10% is still really good. 10% is like, if I can get that, it's like, that's the gold standard, right? But if I can double it with the short-term rental or 1.5 with like a 15%, I'm so happy with that. Younger me would have said that's bad. Today, I'm like, it's not as good as I had it, but it's still a relatively good return. So that's what I consider bad. Anything less than a 10%? I haven't had any of those yet.

Starting point is 01:01:18 That's a really interesting point because you often hear the stock market's performance on averages, I don't know, anywhere from 6 to 10%, depending on if it's adjusted for inflation, a number of other things. So it sounds like in your worst case scenario, you're kind of coming down to that stock market level performance or settling for that, which is kind of interesting to me because you would expect that you would want to be striving for those 20 or 30 or even greater percentage yields because it's an illiquid asset, right? So you don't have that luxury of being able to pull your money in and out.

Starting point is 01:01:50 It's like, say, like you do with the stock market as easily. Is there a consideration there? So in an environment like this where we're getting into that 10% range, does part of you at all kind of start thinking about the stock market a little bit more? Only because of the dip in the stock market, because right now would be a great time to get into, you know, like the S&P 500, which I'm maxing out my 401k because I'm self-employed. I got an S-Corp, you know, and I have a retirement account through that. I max that out, right?

Starting point is 01:02:15 I pay as much as I can to the S&P. 500 is the only one I really care about. They've done the due diligence to get all the best numbers there. So I'm like, yeah, I don't have to research it. Same thing with crypto. I want to buy a lot of crypto right now because like Bitcoin is like so cheap. So to answer your question about like, should I be thinking about it? Yes, in order to just like diversify a little bit, but no in the sense that the stock market is really illiquid in certain capacities. Sure, you can sell your stock and get that money back. But the capital gains that you have to pay. on that are going to be crazy. Whereas on real estate, there are a lot of tax strategies that

Starting point is 01:02:51 you can enable to where you may not have to pay taxes because you can defer them through like a 1031, for example. And so there's just so much more tax gymnastics that you can play, I guess, with the real estate game and how you do things. Like, I think that enables me to grow my wealth a lot faster through leverage. You can do a cash out refy with real estate, right? You can, if your house appreciates a million dollars, you can go out and get 75% of that if you own it outright. You get a $750,000 home equity line of credit. You can do a cash out refi and do the same thing. You can't really do that with stocks and crypto in the same capacity.

Starting point is 01:03:25 You can stake your crypto, I guess. But then if it goes down in value, I think it's called being liquidated or something like that. You could lose a lot of that crypto. That stuff's not really going to happen in real estate. If I go out and take out, if I do a cash out refi and there's a correction, the house is no longer worth that. I mean, I still have the money that I took out of it, right? So personally, yeah, I mean, it makes sense to diversify and I am.

Starting point is 01:03:47 But there's just so many more tools available to me through real estate that I'm really putting a significant amount of my time and effort in that. I have a question around the 1031 you just mentioned. Is that the thing where you sell a house and you have like a year to reinvest it in order to not pay capital gains on that or any kind of tax on it? Is that what you're referring to? Yeah, yeah. It's a little less than that.

Starting point is 01:04:09 It's like 45 days, I think. Okay. So basically, like let's say you buy a house. We'll call it like, let's say buy it for half a million and then it appreciates to a million. And then you sell that house, you have a profit of $500,000 and you would have to typically pay capital gains on that $500,000 profit. Now, with a 1031, you can take that $500,000 profit and basically go and reinvest it in another property and defer that tax that you'd have to pay. Now, if you sell that property, then you would have to pay those taxes unless you use the profits

Starting point is 01:04:40 and the money from that to go in 1031 again. I don't want to talk. too much about it because I'm not a tax expert. Make sure you consult your tax expert. There are a lot of limitations. There are definitely things that you have to keep in mind when you do it. But from a simplicity standpoint, it's basically moving your tax bill down the line through real estate. I'm curious about this. We won't go into details necessarily. But generally speaking, when you're setting out to acquire all these properties and create a portfolio, is it best to set up some kind of trust or some kind of, you know, you can get LPs or GPs involved and create your own LLC?

Starting point is 01:05:15 Or is that typically how you would think about entering it, almost like setting an entirely new business? Is that kind of how you think through this kind of portfolio? Yes and no. There are a lot of legal strategies there. I will say if you're interested in learning more about this, we did a podcast interview on the Bigger Pockets real estate show with an attorney named Brian Bradley, I think. And he talks about all the types of trust.

Starting point is 01:05:39 There's like domestic trusts. There's international trusts. and then there's like hybrid trusts. And there's just different ways to register your properties to give you different levels of protection depending on how much you want to spend to protect yourself. Yeah. So I don't know. There's a few different strategies there that I am not legally qualified to answer.

Starting point is 01:05:54 But yeah, I mean, I've got a trust from my personal situation. That typically doesn't apply to a lot of people as well. I want to go back to what you said earlier about loving to teach. What is it about you that makes you want to teach other people all these things that you're learning and kind of learning as you go. You're sort of teaching as you go as well. I didn't have anyone to teach me. There wasn't a YouTube channel called Robill at that time. And I was listening to Bigger Pockets. And the reason I know so much about real estate is because of what I learned from the podcast, right? When I learned, like as a listener, not even as a host, just as a listener, what I learned in like the forums and getting in there and connecting with people. But there wasn't a lot of literature on short-term rentals. A lot of the real estate world and education out there's just general real estate education, long-term rentals, multifamily syndications. And so I really struggled.

Starting point is 01:06:42 I had to learn stuff the hard way, man. I really did. And so I always tell people that I learned the hard way so you can learn the easy way. And so I'm really transparent on my channel about how much money I make. If I've lost money, what kind of properties I have, where I buy them. I'm transparent to a fault. And I probably will be a little bit more protective of certain information because it's becoming more of a privacy issue at this point. But I try to teach everything.

Starting point is 01:07:08 Like I wear my portfolio on my sleeve, if you will. will because I just know what it's like to be a lonely short-term rental operator. And, you know, I had my business partner, but aside from us, like, in the trenches together, there weren't a lot of people to communicate with. There weren't a lot of people to learn from. Short-term rentals are a little competitive. Everyone's nice to each other, but they're like, don't worry about where I'm investing. I'm not going to tell you anything. Like a lot of people keep stuff close to their chest. And for me, I just think that there's enough out there for everybody. And if you win, I win, you know what I mean? So it's a really great testament to me to just teach people because it's also

Starting point is 01:07:40 just very touching and moving that people reach out to me and say, I've had people reach out and say they've quit their job because of starting their short-term rental business that they learned from like my program or my channel or anything like that. And when people send me those DMs or emails, I'm like, I'm really moved by that because I'm like, great. I'm so glad I could do that for somebody because I didn't have someone to really do that for me in the short-term rental space. Now, obviously, real estate like Brandon Turner, David obviously influenced me a lot. But I didn't have a mentor. And so if I can play that role for somebody, then I think that's pretty gratifying.

Starting point is 01:08:13 That's amazing. You mentioned Bigger Pockets, which has become this massive show. What was your story about becoming a co-host of Bigger Pockets? To my Super Bowl bucket list, right? Like, if you could send Rob to the Super Bowl in his respective world, what would that be? And it was to be a guest on the Bigger Pockets real estate show. And when they reached out to me, I want to say it was about a year ago, I am a dude, I was like through the roof.

Starting point is 01:08:38 I was like, oh my God. Like, I'm going to be on the bigger pockets show. This is crazy. Because I already had my YouTube channel and it's relatively established, but this was just such a new level of pride that I could possibly be showcased on a show like that. I was really excited and I had all my things prepared. And I was like, if they asked me about YouTube, I'm going to say this. And if they asked me about that, I'm going to say this.

Starting point is 01:08:59 And I had it all prepared and it didn't go anything according to plan. And I remember being like, wow, man, I really beef. it on that one. And at the end of that episode, Brandon Turner was like, you know what, Rob, this is an amazing episode. And I think some lives will be changed based on what you said. And I was like, oh, okay, thanks, man. And I was like, no, he's just saying that because I really, I didn't do a good job. And I had a lot of people that reached out to me immediately after the show aired. A lot of people followed me. A lot of people sent me nice messages about like, man, I didn't know you could do this and all that stuff. Tony Robinson, like another co-host on the rookie show was like,

Starting point is 01:09:32 bro, you killed that. And I was like, oh, man, really, thank you so much. I really needed to hear that. So that was like my story, right? I was like, okay, I guess that's my thing. Maybe they'll have me on some other time. And I was shooting a pilot for HDTV back in October. And we were kind of in the final negotiations for that. And I was just like, yeah, okay, it'll be cool to have a show. But, you know, there were some complications there, I think. And then, yeah, I got a phone call like that same week. And they were basically like, hey, would you be interested in becoming the, you know, like possibly filling in for Brandon Turner? And I was like, me? Like, what do you mean? What do you mean fill in? And are we talking about the same Brandon Turner? And then we're talking about me.

Starting point is 01:10:12 Like, I don't understand. Can you just give me a little bit more context? And they're like, ha, ha, you know, yeah, we like this and that. And like, I was just flabberg after. I had no idea what was in store. I just couldn't believe it. I got that phone call. And I was like, I don't want a show. A show would have been cool, obviously. And they didn't end up picking it up, by the way. So that's fine. I wasn't really bummed even 1%. I actually didn't want it.

Starting point is 01:10:36 After they called me, I was like, oh, my God, if I could do bigger pockets, like, that is truly, that is better than a show. Because it's like I'm actually talking to people that like need the advice versus people that are just, I don't know, watching my show on some random Southwest flight. Of the guests you've had on that show to date, does anyone stand out to you that's made the biggest impact on you that you've learned the most from? Have you walked away from an episode yet being like, wow, that was really something. Yeah, there were a few.

Starting point is 01:11:03 We did a show with Ed Milet not too long ago. And I just thought that that was, oh, man, that guy is smart, man. And he had a lot of great wisdom to say. He was kind of one of those people that, you ever have like a podcast, like, guess that's so good that like you sort of forget that you're doing a podcast and then they stop talking and it's your turn to talk. And you're like, oh, that's right. We're doing a podcast.

Starting point is 01:11:22 That's kind of how it was with Ed Milet where I was like, oh, that's right, I should talk now. That was a really, really, really great one. This actually will sound very cheesy, but it's genuinely very, very true. We did a show with Brandon Turner. That one just came out. And that was like my first real, like, in-depth conversation with him. And it was all about social branding and, like, how to use that in your benefit in the real estate world and stuff. And I thought that was really cool.

Starting point is 01:11:43 And I was like, wow. And he is exactly who I had hoped he would be. And it was just very, like, I don't know. It was really cool to just see to be in the room with Brandon who, like, helped pioneer the space. You know what I mean? And I thought that was really cool. We've had a lot of guests on the show and really, I would say half of them have that effect on me where I'm like, oh, that's right. I should talk. But they're just so good. Everyone is so good that comes on the show that it gives me a little imposter syndrome, if you will. You just described my exact experience as well. Yeah. Imposter syndrome through the roof. Man, Rob, this is so much fun. I could do this all day with you. This is so fun. I've learned a ton. I really know very little about real estate and I've really enjoyed this conversation. Scratch a lot of itches I've been curious about for a long time.

Starting point is 01:12:25 So I know our audience is probably the similar in some way, and they'll get a lot of value out of it as well. So before I let you go, you did share a couple of resources already, but I'd love for you to share maybe your favorite books, maybe the services. You mentioned the property management system. If you have any recommendations of stuff like that, or any other resources, obviously bigger pockets, any other your YouTube channel, any other resources you want to share. So I would say real estate books would be David Green's book, Burr, the buy rehab, rent, refinance, repeat. is really great. That one actually applied to me a lot as an Airbnb host because it talks about building systems and how to do it out of state and how to hire contractors and everything. And it's actually more applicable to Airbnb than you'd think considering it's a remodeling book.

Starting point is 01:13:08 I don't read a lot, to be honest. I watch a lot of content. So if you want to, you know, follow me along on my ADHD entrepreneurial journey, you can go over to the Robbilt channel on YouTube. You can follow me over at Rob Built on Instagram. HostCamp is my Airbnb mentorship program if you're interested in learning about that. HostCamp.com. Some of the tools that we talked about today, Price Labs is one that I use for pricing, dynamic pricing. Guestee for hosts is one that I use that property management system that I use. And obviously, the bigger pockets forums, if you actually want to connect with people and learn about what other people are going through, you can go and talk to people, connect with people there, bigger pockets on Instagram and on YouTube. And yeah, I mean,

Starting point is 01:13:49 oh man, I don't know. I may have over-promoted literally everything on this planet, but ultimately I think if you're looking for a foundation in real estate, consider listening to the Bigger Pockets Real Estate Show. I mean, that's, we talk about everything and everyone and we talk about all the different asset classes and niches and everything like that. So I think if you're looking for a way to dip your toes in the water, that podcast will do it. Fantastic. Well, Rob, congratulations again on all the success. I'll be following along. I love the YouTube channel. It's highly entertaining. I highly recommend it. And let's do this some other time. I appreciate it. Please have me back on. I'll be on anytime you want. All right, everybody. That's all we had for you

Starting point is 01:14:23 this week. If you're loving the show, don't forget to follow us on your favorite podcast app. And if you be so kind, please leave us a review. It really helps the show. If you want to reach out directly, you can find me on Twitter at Trey Lockerby. And don't forget to check out all of the amazing resources we've built for you at the investors podcast.com. You can also simply Google TIP finance and it should pop right up. And with that, we'll see you again next time. Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by the Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision

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