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BiggerPockets Podcast 476: Using Partners to Scale & Killing it With Airbnbs w/ Tony J Robinson

BiggerPockets Podcast 476: Using Partners to Scale & Killing it With Airbnbs w/ Tony J Robinson

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Normally we have two hosts and one guest, but today we have three hosts, and one of them happens to be a guest as well. We welcome Tony J Robinson, host of the BiggerPockets Real Estate Rookie Podcast, to the show! Tony has grown a respectable following due to his impressive short-term rental portfolio, his ability to scale quickly, and his made-for-radio voice.

Tony grew up with real estate around him. His dad had a wholesaling company, and when it closed down his father relayed to Tony that his biggest mistake was failing to keep any of the wholesale deals as rentals. With this advice in mind, Tony saw an opportunity to fix up some rental properties in Louisiana. This gave him an intro to real estate funding, and after a few successful deals, he decided to dive in head first.

Now, Tony has short-term rentals in Tennessee and Joshua Tree. He’s started multiple partnerships and speaks on the benefits of having reliable, trustworthy partners, plus how to avoid toxic partnerships that will stop you from scaling. He also lets us in on his free and simple method of finding out whether or not a market will work for short-term rentals.

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Listen to the Podcast Here

Read the Transcript Here

Brandon:
This is the BiggerPockets Podcast, show 476.

Tony:
Real estate investing itself is not complicated. The idea of real estate investing is actually quite simple, but people always confuse simple versus easy, or complicated versus hard. And real estate investing, even though it’s pretty simple, it is very hard. It’s not easy, but it is very hard and it takes a lot of work to stick with it long enough to see the result.

Voiceover:
You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing, without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online.

Brandon:
What’s going on, everyone? It’s Brendan Turner, host of the BiggerPockets Podcast, here with my cohost, Mr. David “Short-Term Rookie” Greene. What’s up, man? How you doing?

David:
Short-Term rental, short-term rookie. Very nice.

Brandon:
Yeah, that’s pretty good, right?

David:
I am a rookie in the short-term rental game. Yeah, I’m doing amazing. I’m co-hosting the best and biggest real estate podcast, maybe the best and biggest podcast ever in the world. So how could I be having a bad day?

Brandon:
Well, you could be hosting the newest best real estate show in the world called Real Estate Rookie. But instead, Tony Robinson is hosting that one, along with Ashley. So speaking of Tony Robinson, that’s our guest today. Tony Robinson is going to be joining us today. He’s the host of the new BiggerPockets Real Estate Rookie Podcast. That’s pretty good transition. Did you see how I flowed that?

David:
You flow like a river, I tell people all the time.

Brandon:
Well, I got stuck at the end and it was like a dam.

David:
Every river has one though, right? It’s either a waterfall or a dam, and you never know what you’re going to get.

Brandon:
Or a dam-waterfall. One of the two. All right, we’ve got to move on with today’s show. Like I said, today’s guest is Tony Robinson, who is the host of the Real Estate Rookie Podcast on BiggerPockets Podcast Network. That show is phenomenal. And I did not know Tony’s story very much really at all, I knew he did a little bit with short-term rentals and he’d done a little bit of long-term rentals. So today, we dive into both those, how he got into the long-term rentals for no money down, some no money down deals, recently. This is not ’06, ’07, this is 2019, 2020 stuff. You’re going to learn a lot about that. You’re going to learn why he transitioned from long term into short term.
Whether or not you care about short-term rentals or not, that conversation is so important. You’re going to learn a little bit of how to make a short-term rental business work really well. He’s going to talk about partnerships, how to bring in the right partner, how to find them, how to vet them. We cover stuff on mindset, stuff about how to find a great market, how to learn your market.

David:
Finding the market.

Brandon:
Yeah. That was really powerful about how to learn your market. Long-distance investing, and more.

David:
Tony gives a great example of how to get familiar with the short-term rental market, step-by-step, super simple strategy.

Brandon:
Yeah. And he talks about how to say no, how to focus on your thing and to say no to everything else. And his actual language of how he tells somebody now is so good. That’s something you’re definitely going to pull from today’s episode. So that and more. Enough chatting, let’s get today’s quick tip.

David:
Quick tip.

Brandon:
All right. Today’s quick tip is simple. We need your help. You see, we launched a couple of new YouTube channels here at BiggerPockets Network, we have some new YouTube channels. So now, all the content doesn’t just go to the BiggerPockets YouTube channel, we now have a Money Podcast channel, and we have a Rookie Podcast channel. So what we need your help with is, we have to get to 1,000 subscribers before we can change the name to Real Estate Rookie and Money. So what we need you to do is go to the show notes’ page BiggerPockets.com/show476. And then there, you’re going to find links to both those YouTube channels. We want you to go there and subscribe, because we’ve got to get 1,000 people there. So that would help us out a lot.
And then you’d be subscribing to a channel that gives great information about real estate investing, so it’s good to do it anyway. But that is today’s quick tip. You can also go to my Instagram or David’s Instagram, we’ll put a link in our story or bio or something like that, probably bio, that’ll link to that as well. Anyway, DavidGreene24 or BeardyBrandon or @BiggerPockets. That is today’s quick tip. All right. David Greene, anything you want to cover before we get into today’s show with Tony?

David:
Yeah. If you like this episode, send it to someone that you are friends with, but that is not into real estate investing, just make your own friends. Send today’s episode to someone who might be interested in it, who this could catch their attention, and you can create your own community.

Brandon:
So good. Yeah. Because this is like the rookie show. This is a show I wanted to send people, I even said that before we started recording, is I want to make a show so that when people are like, “Hey, I want to get into real estate, what should I do?” Listen to this show. This would be a good one to get started with. So send it to somebody you know. And last thing, if you’re watching this on YouTube, don’t forget to give that little thumbs up button right now below the video, if you like it so far. And if you don’t, when you start liking it, give that thumbs up button, and subscribe to our channel, of course, while you’re watching it.
I think it’s time to get into today’s show, with Tony Robinson.

David:
Let’s bring in Tony.

Brandon:
Tony Robinson, welcome to the BiggerPockets Podcast. How’re you doing, man?

Tony:
I am doing fantastic, guys. I’m super excited to be here. I feel like the freshman in high school who hanging out with the seniors today, so I’m glad you guys brought me on.

Brandon:
When I was a freshman in high school, there was a senior, I can’t remember his name, but he had white hair and he’s really annoying. I was walking down the hall one day and just from behind, books me. You know what that is? Where you shove the books out of your hand. I had this big pile of books, and they go flying everywhere. And everyone’s like, “Ha, ha.” And like 100 people watched me slowly pick up my books and papers for like five minutes and laughed at me. So this will not be like that, Tony, this will be better than that. We will be kind to you.

Tony:
Okay, good to know. It’s kind of reminiscent because when I was a freshman, all the seniors have much bigger beards than I do, so I’m getting flashbacks right now.

Brandon:
There you go. There you go.

David:
I love how Brandon’s high school was so small there was one senior in it. He said, “The senior in my high school.”

Brandon:
No, this guy was the senior. He’s like the quintessential horrible senior when you’re a freshman. It was awful.

David:
Well, now he probably rents one of your houses in [crosstalk 00:05:40].

Brandon:
He probably does. He probably does.

David:
Who gets the last laugh, Mr. Books?

Brandon:
Well, let’s jump in. I do want to apologize to our audience real quick. Everyone came on here going, “Oh, they got Tony Robbins on the show.” And then they’re like, “Oh, Tony Robinson.” But I want to tell you guys, Tony Robinson is so much cooler than Tony Robbins. Right here, you’re going to hear it today. And here’s why, because Tony Robinson is the host of The BiggerPockets Rookie Podcast and you do a phenomenal job over there. So I thought it’d be a good idea to get our audience a little bit more familiar with you, your story, because it’s pretty awesome. And then maybe they’ll go check out your show afterwards. So that sounds like a good plan today. Tell us, you good with that?

Tony:
Sounds like a plan. I’m excited. Let’s dive in.

Brandon:
All right. Tell us about yourself. How did you get this idea, “I want to invest in real estate someday”?

Tony:
I’m fortunate because my dad planted the seed for me early. I was one of the kids like in junior high school that had to read Rich Dad, Poor Dad over the summer, so my dad started me young. He actually ran a wholesaling business in Detroit. We’re based in Southern California, he had a wholesaling business out in Detroit, and he did it for about five years. And then 2008 happens, his business collapses like so many other businesses. And the one thing he told me after that happened, he was like, “Probably the biggest mistake I made was not holding any of those properties that I wholesaled.” So he imprinted on me early on that if you want to find true financial success, you need some level of passive income.
So I had that seed planted really early. I graduate from college, am doing the whole W2 thing. And then as soon as I have enough income to actually make an investment, I go out and I make it happen.

Brandon:
All right. So what was that very first deal?

Tony:
In one of the most glamorous places on earth in the city of Shreveport, Louisiana. Most of you have probably not heard of it.

Brandon:
Sexy.

Tony:
Yeah. It’s like the number three biggest city in Louisiana, but I ended up in that market, again, I’m in Southern California, because I had family that relocated out there, and I was out there visiting people. And it was actually my mom. Mom and my stepdad moved out there after they retired down here in California, and they bought this house that had been vacant for like three years, they bought it for $25,000. They put another $30,000 into the rehab, and when they were done, the house appraised for about $100,000. And the coolest thing was that they found a bank that funded 100% of the purchase and the rehab for that property. So when I saw that, I was like, “Hmm, sounds like there’s got to be something here that I can tap into.”
So I go out there, I chat the lady at the bank. And I’m like, “Hey, is this like a fluke or is this like a one-off thing? Were you on to anybody for the whole construction and rehab and purchase price?” And she’s like, “Yeah, there was some structures that you need to follow, some check boxes you need to check.” But when she gave me the requirements, I went out there, I found a deal that worked, and I actually bought two properties using that same 100% funding for the purchase and the rehab. So that was my initial foray into real estate investing.

Brandon:
When was this?

Tony:
I got my first property, we closed in October of 2019, and then I closed on my second one in December of that year.

Brandon:
So we’re not talking like pre-2007 bank? This is a modern bank was offering you 100% financing?

Tony:
Yeah.

Brandon:
Now, a lot of people are listening right now going, “This sounds too good to be true. There’s no banks that are lending 100% rehab and purchase price.” So how did you find that? Just because you knew your parents had it?

Tony:
Yeah. So once my mom said that that’s how they did it, I was like, “Well, if they can do it, I’m pretty sure I can figure it out too.” So, but here’s what I’ll say, is that it was a local credit union to that city. I was able to get the loan from them because you have to either… it’s like live, worship or work there, but my relationship with my parents satisfied the requirements. But they had enough flexibility with whatever lending programs they wanted because they were small and local, so I went with it.

Brandon:
Yeah, it’s a really good lesson for people. When you hear things like, “There are no banks lending this way, you have to have this credit score, you have to have this asset, you can’t have this LTV or debt to income or whatever,” understand that those are generally guidelines of the big banks, but you can get a little more flexible at the small banks, right?

Tony:
Yeah. And it worked out great for me. And I’ve referred several other people to that bank as well, so there’s other investments that are doing the same thing. I’ve since talked to other people that invest in other smaller markets, and it’s not that uncommon, if you do the homework, to find a bank that does it.

Brandon:
Yeah, I think a lot of it, especially in the smaller, the credit unions, it comes down to relationship, like the old-fashioned way of banking. When they go before the board of their bank, can they say, “Yeah, this is a good bet. I think we can put some money on this person and lend them the deal.”

Tony:
But I will put the caveat that it had to be a good deal. I found a house where the rehab and the purchase price for about 70% of the ARV, and I did that twice. So it all starts with finding the good deal first, otherwise those numbers don’t work.

Brandon:
So for those who are brand new to this thing, maybe this is the first time ever listened to a real estate podcast, let’s take it to a rookie level. What the heck does that mean, a 70% ARV?

Tony:
When we talk ARV, that means after-repair value. So after you purchased this old, beat up house and you do all the renovations, what do you expect that house will be worth? The requirements of this bank were that you needed to have your purchase price and your rehab be no more than 70% of what that house would be worth once the repairs were done. So at a very basic example level, if that house, after all repairs are completed, will be worth $100,000, it means your purchase price and your construction could be no more than 70% or $70,000. And those are the guidelines that they gave me.

Brandon:
Yeah. That’s cool. All right. So what was this very first property, a single-family house I’m assuming?

Tony:
Yeah. Single-family house, three bedrooms, two bath. Built in, I think like 1955, somewhere around there. Hadn’t been updated since 1955 or somewhere around there. There were shag carpets, really old wood paneling, popcorn ceilings, everything you think of when you think of a 1955 house, this thing had. So we pretty much gutted the entire house and put in new everything. And I’m trying to remember the numbers here. We paid $100,000 for it, spent another 55,000 or so on the rehab, so we were all in for about 155, and the house of praise for 230 after it has all been done.

Brandon:
Nice.

David:
That’s some good equity in there. So can I jump in for a quick second to make a point? I have heard stories like this so many times that are amazing that people never get because they were worried about the interest rate on the bank, like, “Why is my friend getting a 3.2 when I’m getting a 3.4?” We were mentioning that earlier, certain banks will give certain loans to people in different conditions. With a deal that good, your interest rate could have been 8% and it would still be worth doing. And I just want to highlight that the deal itself so far outweighs something as minimal as a couple of percentage points on the interest rate. Don’t shoot yourself in the foot trying to win that battle.

Tony:
Absolutely. I think the interest rate on that was about 6%, but it worked on a draw, so it was only paying interest on the money that I was actually paying out to the contractor. I was spending maybe a couple of hundred bucks a month for like the first two payments that I made, and it wasn’t until the rehab finished that I was paying somewhere close to what a regular mortgage might be.

David:
Yeah. That’s cool, man.

Brandon:
All right. So let’s talk about the distance thing. A lot of people, when they’re thinking about getting into real estate investing, especially in the beginning, they’re a rookie, they’re like, “I can’t just go buy something across the country.” So what are some of the principles that you’ve found work well, because I know we can get in the rest of your story, but while we’re on the topic, what’s worked well for long-distance investing for you? How has that worked? Do you recommend newbies start that way? What’s your thoughts on that?

Tony:
I guess before I get into what’s worked for me, I just want to talk about the mindset piece first. Because so many people, I think, take the emotional aspect of buying their primary residence and try and apply that to the business aspect of buying an investment property. When you’re buying your primary residence, you’re walking through, you’re trying to picture yourself living in this house, you imagine Christmas morning, you imagine your kids’ first steps, whatever it is. There’s all these emotional pieces tied to it. And when you’re buying an investment property, none of those things are going to happen. You’re not going to wake up at your investment property, hopefully, on Christmas morning, your tenants are going to wake up there.
So the paradigm that you need to have when you’re shopping for an investment property is totally different than a primary residence. The approach that I take is that when I’m investing, I want to make sure that I’m surrounding myself with the team of the right people that can give me the right advice, that can support me in the right way. Typically, those people that I have on my team are my property manager, some kind of handyman, a realtor, and then my lending partner. When I’m shopping out of state, for every property that I’ve purchased, I’ve only seen one house in-person before I bought it. Every other property, I haven’t seen it in-person before I purchase it.
And the way that I’m able to do that, it’s because I have the right team. I have my realtor go through the property first, then I have a property inspector walk through the property. I might have my handyman go through and take a look at it as well. And if I have all three of those people looking at the property, how much value can I add? Especially if you’re a new investor, ask yourself, how much additional value can you add on top of what your realtor, your inspector and a handyman have already added to that property? And the answer is probably nothing. You’re probably not going to point out anything of substance that those three people haven’t already pointed out.
So what value do you actually have by being close to the property? What value do you actually add by walking through it yourself? So the biggest thing for me first, guys, is the mindset and understanding that having the right systems, right people in place to fill in the gaps that you don’t have as a new investor is the most important thing. I went off on a tangent, Brandon, I forgot what your initial question was.

David:
That’s okay. This sounds so eerily familiar. Where did you get this information from, Tony?

Tony:
There was this book that I read a while ago, I can’t quite… No. And David, I shared this with you when you went on the Real Estate Rookie Podcast, was, I read Long Distance Real Estate Investing and I read The BRRRR Book when I was looking to get started. And literally, just applying those concepts is what allowed me to feel comfortable and confident investing in a state that’s thousands of miles away.

David:
Well, thank you. I now know you actually did read them, because that was a really good breakdown of what’s in those books.

Brandon:
Well, David, can you explain the analogy? You told me one time this David, and it made a big difference on me, about the analogy of like going to a mechanic or opening up your car engine and going, “Well, this must be the problem.” What is that?

David:
Everybody thinks you need to walk a house because you’re just supposed to, it feels like the right thing to do. And it’s very similar to when us guys are driving a car and it breaks down and we pull over and we pop open the hood while we feel like we’re supposed to. Every one of us feels compelled to do that, but I’m going to assume you guys are like me that when I look at it, I have no idea what I’m looking at. That’s the secret. Ladies, we don’t know. None of us know, and this happens to us in life all the time. We are just playing the role of what we think we’re supposed to do, but I wouldn’t be able to tell you what’s wrong with my car. What I really need is to get it towed to a mechanic.
I could just not open the hood at all, just call AAA, have them take it to the mechanic, have them tell me what’s wrong with the car. That’s when I actually can make a decision that I’ve informed to make. And real estate’s the same way. For us, the mechanic is the home inspector. I could walk through a house and I could look at it and I can knock on stuff, same thing, you’re in the grocery store, we all pick up watermelons and knock. Do we know what we’re listening for? Did any of us grow up with living in the forest, knocking on cantaloupes trying to figure out which ones to eat?
No, we think we’re supposed to do that. And I just probably faster than most people made peace with the fact that, yeah, I don’t know how this thing works. I don’t need to. I need to see that report and turn every problem into a number. That’s what I like to do. “Oh, there’s lead-based paint?” “What would it cost to fix that?” “Oh, there’s asbestos?” “What would it cost to fix that?” “Oh, there’s a foundation problem?” “What would it cost to fix that?” Based on this report, I know the numbers I need to get in. Once I have numbers, I have an apples-to-apples comparison that I can use to decide what my home rent number will be for that property.

Brandon:
That’s really good. That’s really good. We talk a lot about on this show that almost every judgment call that we make as people, it’s really like an algorithm or a formula we are running through our head. Whether or not to pursue a property, we think there’s something subjective in our being, but in reality, we’re just saying, “No, is the next door neighbor’s house completely trashed and there’s a bunch of like broken down cars in the driveway?” If there is, we’re like, “No, we don’t like that.” So what we’re doing here is we’re basically taking what we might say is subjective or we think is just a gut feeling.” In reality, we’re just putting like a math or a number to it. Like, “Does it check this box or not?” And then once we do that, once we can formulate our thoughts into some kind of system or process, then it becomes a whole lot easier.
Or even better, you find an agent who understands that same system, so you rely on them because they’ve got years of experience, you don’t need to build the system because you’ve got an amazing agent or partner or lender or property manager or any of those core four members, they already know that system for you. So yeah, really good. All right, man. So you bought these properties, let’s go back to your story. You bought some of these no money down. I think you said you did two of them. Is that right of the 100% financing? So what happened next?

Tony:
So after those two, we got two more properties under contract in Louisiana. These were really, really heavy rehabs. These were the first two that we bought from wholesalers. We paid cash for them, or we used cash equivalents, we have some line of credits that were used. And while we have both of these properties under contract, my partner comes to me and he’s like, “Hey, I think I want to buy a cabin in Tennessee.” And we’re both in California, had never even been to Tennessee before. I’m like, “What are you talking about?” And he says, “Hey, there’s a very booming market in Tennessee right now for short-term rentals.” And he actually gave me the link to Avery Carl’s BiggerPockets episode. I can’t remember, I think it was 368 or something like that.
I listened to that, I’m like, “Okay, this sounds like something real.” So we end up putting an offer in on a cabin. And lo and behold, it gets accepted. We have no idea really what we’re doing. We’d never ran a short-term rental before, done very little, I guess, educational steps before we put in that offer. But we talked to other investors that were making it work in that market. So we ended up closing on that in August of last year. And since that first purchase, we’ve now bought eight short-term rentals in total. So we’ve got eight right now with another five under contracts. So we’ve gone just head first into the short-term rental space.

Brandon:
Wow. That’s cool. First of all, how did COVID affect your… I know you just got into it, but how did COVID affect your short-term rentals? Did it at all?

Tony:
Not at all. So we bought our first one in August of 2020, so COVID was already in swing. And we bought also in Tennessee, which honestly is a bit more lax of a state than where I live here in California, so we had a pretty strong end of the year. And then we got our first ones up in Joshua Tree in late fall or early winter. And same for those, they’ve been all performing pretty well. I think honestly, COVID except for the first like month or two, March and April of 2020 were rough. But I’d say once the initial shock of COVID wore off, there was like this pent up demand for people to get out and go places, but still be by themselves. And I think short-term rentals have filled that gap that you don’t quite get when you’re going to a hotel say.

Brandon:
I 100% agree. Yeah. I’ve talked about it a few times on the show, but I’m testing out a business idea out here in Maui, it’s called amonthinmaui.com. And the whole idea is, people are pent up, a lot of people now are working from wherever they want. So I’m like, “Why don’t I just offer short-term rentals for a month? No more, no less, you come for a month.” We’re testing the idea, we’ll see if it actually pans out. I think it’s going to be cool, but it’s for the exact same reason. I’m like, “I think there was a growing trend or movement in the world, and I want to capitalize on that.” Was that what got you excited about short-term rentals, or why did you go that route?

Tony:
That was one of the things that got me excited, is that I also saw that shift happening in the marketplace, but I think the biggest driver for us was the cashflow at the end of the day. The first house that we bought, the first long-term rental that we bought, we were cashflowing about 150 bucks per month. And when I looked at the income that I was making my W2 job, I was going to need a lot of houses at $150 per month to replace my W2 income. But when I saw the potential revenues from short-term rentals, I needed far fewer of those active and operating to be able to replace my W2 income. So for me, it was understanding what my long-term goals were, and then deciding on which asset class would help me get there the fastest.

David:
Let me ask you this, and I’m going to have you explain to us what the benefits of short-term rentals are. One of the clear concerns would be that they are a little more volatile, they’re affected by market conditions more. How have you hedged against having such a heavily weighted portfolio of short-term rentals in case something goes wrong?

Tony:
That’s a great question, Dave, and this comes up all the time. I think the first thing that I’ll say is that, when you decide to start investing in short-term rentals, you have to understand that there’s inherently more risk than there are with long-term rentals. You have the risks of the fact that this is primarily driven, at least in the markets that I invest in, primarily driven by leisure. So if there’s a big hit to the travel industry, that you have an opportunity of having your business be impacted. There’s the fact that you’re at the mercy of some of these platforms, Airbnb and VRBO are the two biggest platforms to generate a business force. You have to understand that you’re at the mercy of those platforms.
There’s multiple guests, multiple people going through your property on a monthly basis, there’s some risk associated with that. So there’s definitely more risk that comes along with investing in short-term rentals. But, at the same time, I’m approaching this not so much as a long-term rental investor who’s buying short-term rentals, I’m approaching this as someone who’s focused on creating a hospitality business, because if you purchase the short-term rental, that’s what it is. And I’ve heard some investors say that you should never buy a short-term rental if it doesn’t pencil out as a long-term rental.
And I completely disagree with that because if I’m Hilton I’m Marriott and I’m building a hotel, I’m not going to say, “Hey, we’re not going to build this hotel if it doesn’t work as an apartment complex,” that’s not their backup plan. They’re first and foremost in the hospitality industry and their goal is to create world-class experience for their guests. So that’s the mindset that I go into when I’m buying my short-term rentals. But to answer your initial question, David, about how I hedge some of those risks. First is that I invest in markets where the primary economic driver is travel and tourism.
In the Smoky Mountains and in Joshua tree where we have our other properties, the main economic driver is people come into the national parks, staying overnight, eating at the local restaurants, doing things like that. It’s not Los Angeles where there’s film and television or there’s big business headquarters or there’s universities. The main economic driver is people coming and staying overnight to visit the parks. So that’s the first thing that I do, is I invest in places that financially rely on short-term rentals. It doesn’t necessarily mean that you won’t have some negative legislation passed, but it really reduces the risk that they would completely outlaw short-term rentals.
The second thing that I do is I try and make sure that I buy really nice properties. I try and make sure that I’m not… Some people put up glamping units, and to me, that’s not really an appreciating asset. So I don’t know if I would ever build a glamping unit. Some people buy Airstreams as their short-term rentals, I probably wouldn’t do that either for the same reason, it’s not an appreciating asset. So I still make sure that the underlying business fundamentals of being a real estate investor apply to everything that I’m buying. I think those are the two biggest things. We’re trying to make sure we’re in the right market and we’re buying the right assets. I could go on forever, but I don’t want to-

David:
Well, are you also managing your personal finances in a way that you can weather storms in case they do see more vacancies than you’d expect?

Tony:
Yeah, absolutely. And we can get into this later, but when I made the decision to leave my W2 job, I had maybe two and a half years worth of salary, expenses just stocked away. So if something goes sideways, I know that we’ve got enough cash reserves to handle those kinds of things.

David:
And so that’s what I want to highlight because there are people that say never buy a short-term rental unless it can pay for itself as a long-term rental, and hardly any of them ever will. They’re often in higher price, more expensive markets where the price to rent ratio doesn’t support it. And I just wanted to say it’s not irresponsible to do that in the way that Tony’s doing it if you’ve taken a means to account for worst case scenarios and other areas of your life. By living beneath your means, by keeping money in reserves, you’ve accomplished the same thing as making sure that you could use it as a long-term rental if you need it.

Brandon:
Plus, one other addition there. I got some friends out here, Caroline and Mike, they live here and they own a bunch of… Actually, David, you know them as well, but out here in Maui, they own a bunch of vacation rentals. And I was talking to them recently and I asked them how COVID… Because Maui shut down, there was no travel for like six months here. Nobody was staying. I asked them how they survived, “Oh yeah, we were profitable for the year.” And I was like, “How were you profitable? All you have is short-term rentals.” And they said, “Oh, we were just very aggressive on making sure that the 10% of people who were actually still coming to Maui, that they stayed with us, which means we made our properties nicer and we made sure our price was cheaper. Yeah, we were giving 50%, 60, 70% off sometimes to make sure they were full.”
But they were super aggressive on how they ran their business, versus almost everyone else who just hires some random property manager to take care of their short-term rentals. Well, when everything went to hell, all those just sat empty for six months. So they were involved in it and that’s how they managed to make sure they are still profitable throughout the whole year. Then when things came back, boom, they came back hard, and now they’re just killing it once again, which is really what encouraged me to start buying short-term rentals here. Yeah. Sometimes skill and hard work and self-management can overcome. And not that you’re cleaning toilets and answering phones necessarily, but just being involved in a business is a good way to overcome some of the risks as well.

Tony:
We spent a lot of time just really getting to our market and knowing what works and what doesn’t. And I feel intimately knowing your competition and how you can start edging your bets against them is a way to stay competitive as well.

Brandon:
That advice is so good for short-term rental or long-term, know your market. How can you be competitive in your market? By knowing your market better than everyone else? So you’re like, “Wow. My market, three bedrooms are really, really popular here.” Or, “Hey, nobody has a five bedroom house, but there’s so many people out here that want a five bedroom. Oh, there’s a competitive advantage there. So we could add a bedroom and now we’ve got five, and now our section eight, we can rent out for 3,500 a month. And wow, we’re cashflowing two grand.” Knowing that, it goes back to what David and I always say, you don’t just find good deals in today’s market, today, you make good deals.
And how do you make them? By being smart, by understanding what works, by knowing those little advantages. So I want to throw this at you. How do you learn a market? If somebody is brand new to real estate and they’re like, “I’m brand new, I want to invest in real estate in X town.” What does it mean to learn your market?

Tony:
That is a great question. So I can tell you what I did and what I encourage other people to do. The first thing that I’m doing is I’m opening up Zillow literally every day, every morning, to see what’s coming on the market just so I can start getting a sense for what’s the going price for a three bedroom? What’s it going price for a two bedroom? What’s it going to price for one bedroom? And over time, you really start to develop, “Okay, here’s the average ballpark price I should be expecting for something of this size.” Once you’ve got a decent handle on the prices, then want to start looking at, what are the potential incomes?
On the short-term rental side, there’s different websites that you can use to gather that information. But on the long-term rental side, open up Zillow, check the for-rental listings, go to Craigslist, go to Facebook Marketplace, whatever medium you want to use, start looking to see what are the average rents for different properties. So what I would do is, I would literally take an Excel spreadsheet or a Google spreadsheet and I would just start plugging in all these different listings that I saw so I could start tracking what the rents look like. And over time, you get really, really comfortable with what those different prices are. So to me, it starts with that, really knowing what the average sale prices are and then what the average rent prices are.
And after awhile, after you analyze enough deals, it becomes really second nature to you.

Brandon:
Yeah, that’s really, really good. Yeah. David, did you want to add on that about knowing your market?

David:
Yeah. And that’s something every beginner can start with, that takes $0 and just time. You go on Airbnb and you start looking at what the price range is, everything between say, 180 and 220 a night, and then getting to know which are the ones that are getting 220, what do they look like? What are the ones look like that’s getting 160. Then like Tony said, start looking at the price points and start recognizing where the sweet spot looks like it is. If you’re having to pay 33% more for one extra bedroom, that’s probably not going to generate enough income to pay for itself. I think that a lot of the mistake newbies make is that they think that someone’s going to tell them what to do without putting the time and the reps in of understanding what that market should look like.
And that’s honestly why I think people in our position are a little hesitant to jump in with a newbie and say, “Just go do this,” because we know inherently, I would have to sit with you and go through 100 deals to get you a baseline for what you’re looking at, and I can’t commit to that. So then we ended up just not answering when they say, “Hey, how could you help me with this thing?” I see Tony nodding your head. Do you feel that pressure too sometimes?

Tony:
All the time. All the time. I just want to have one of the thing because you talked about analyzing for short-term rentals. I want to share the process that I go through for myself when we’re trying to see like, “Okay, will this make sense to the short-term rental?” There’s some paid tools, PriceLabs has something called the Market Dashboard. So pricelabs.co. And you can go into their Market Dashboard and they’ve got a ton of data, but it is a paid subscription. So if you want the freeway, I’m going to give everyone the freeway to go do this. Say that you’re looking at a listing and it’s a two bedroom, one bath in the city of Joshua Tree, California.
What I would do is I’d go into Airbnb, I would filter it down to two bedrooms and I’m going to look for every listing that’s comparable to the listing that I’m thinking about buying. And I’m going to look at a few different things. I’m going to look at the 30-day calendar. So in Airbnb, you can actually look at the calendar for all the listings that are there. I’m going to look at the 30, the 60, the 90 and the 180-day calendar for all those properties. And as I’m looking at those, I’m going to see what’s the average rate that this property is charging for each one of those time intervals. And then I’m going to look at the occupancy for each one of those different time intervals as well.
Once you do that for like five or six listings, you’ll have a really, really solid understanding of what that property could potentially do over the course of an entire year, but it’s important to get the six months because what a property charges in January is going to be very different than what it’s charging during July. So you want to get a ride enough range to make sure that your average daily rate average out across the year. So that’s the process that I follow literally when I got it started, that’s what I did to get familiar with markets on the short-term rental side.

David:
That’s a great, great strategy. I love how simple that is, anybody can do it.

Brandon:
Yeah, really good.

David:
Brandon, what were you going to say before that?

Brandon:
Today I was at café this morning and some guy sitting next to us, he turned around, I was like, “Hey, I know that voice.” And he’s a BiggerPockets guy. He’s telling me his story, and at one point he said something that I grabbed my phone, I was like, “Dude, would you say that again?” I just want to play it, I’m going to see if this will work. I’m going to play up to my microphone. Let’s know what he says here, it’s related to what we just talked about. Listen to this.
Will you say that again?

Speaker 5:
We ran 100 deals and literally exactly on the 100th deal that we ran in BiggerPockets is when we got our first investment [inaudible 00:32:05].

Brandon:
That’s awesome.
Could you guys hear that okay?

Tony:
Yeah. That came through.

Brandon:
He analyzed 100 deals in order to learn his market. He was like, “Yeah, I just did what you said.” And he’s like, “I analyzed 100 deal and on the 100 deal is when we finally landed our first one.” And I always say, if you really want to know your market, we’re going to the numbers on 100 deals, by the time you’re done with that, you’re going to have a really good idea, a really good idea what your market looks like. So anyway, just thought that was funny.

Tony:
Brandon, I got one comment on there because we hear so often in the Real Estate Rookie Facebook group that people were saying, “Hey, I’ve analyzed five deals or I’ve submitted three offers, and nothing’s happening. I’m doing this all wrong.” And we have to go in there so often and say like, “If you’ve got to do…” Like this guy 10, 20, 50, 100 before you start questioning your approach. But I think people are so used to that instant gratification of, “Okay, I wrote the book, analyzed five deals, why is this not working?” That they don’t understand that it takes time and it takes repetition, and it takes doing it over and over, and over, and over again.
The thing that I always say on the Rookie Show is that, I’m sure you guys have said the same thing as well as that real estate investing itself is not complicated, but the idea of real estate investing is actually quite simple, but people always confuse, simple versus easy, or complicated versus hard. And real estate investing even though it’s pretty simple, it is very hard. It’s not easy, but it is very hard. And it takes a lot of work to stick with it long enough to see the results.

Brandon:
It’s hard mentally more than it is physically. It’s hard to stick with something long enough. I’d add opener capital when we were analyzing these big apartments and mobile home park deals and stuff like that. And we’ll get rejected, we’ll go two, three weeks with nothing. I’ll go like, “Oh man, should we change our approach?” And the team starts having these conversations and myself as well. And then I always remind myself, “Wait, wait, how many have we actually analyzed and made offers on since our last one went through?” And we look at the numbers, it’s like 13. I’m like, “Okay, let’s just set a number, we make 50 offers, if none of them get accepted, now we have a problem. Let’s talk then. But until then, let’s just stick with the process.”
And guess what, it always ends up getting another one. We went almost a month with no deals and we were starting to, “Oh man, it’s getting a little while.” Then we got two in one day. And those two deals or like 400 lot mobile home park, and we were went from behind our goal to suddenly way ahead of our goal for the year where we needed to be just by that one deal and we got two in one day. And so, trust the process because it works. Get that number, set a number, where do you want to be? How many offers, how many leads, how many whatever, and then trust that process and stop tweaking it. Try to make it better, of course, but don’t tweak it on your third try because you had three rejections.

Tony:
I love it. And the same thing we preach all the time.

Brandon:
Partnerships, let’s talk partnerships for a little bit. Getting into real estate, people are questioning, should I bring in a partner? Should I do it by myself? First of all, you said you do a lot of partnerships it sounds like. And I’m wondering when should somebody partner, when shouldn’t they partner, how do you find a good partner? Let’s talk about that.

Tony:
Yeah. That’s a loaded question. There’s so much to unpack there when it comes to partnerships. I think the first thing that I’ll talk about is why you should partner. I think this comes up a lot as well. And why I partnered was for a couple of reasons. One when I first started, I was still working at W2, so I knew I didn’t have the time that was necessary to fully dedicate. So for me, it was a lack of time, it was the capital. I wanted to make sure that we had enough capital to successfully go into this venture. And honestly, it was just having another brain to bounce ideas off of. Sometimes when you’re new, it’s nice to have that sounding board of someone else’s thoughts to say, “Hey, is this the right way to go?” And to get some of that feedback.
So those are some of the reasons I went into it. And then the fourth reason is just, I knew what my weaknesses were, I know that I’m more of like the visionary big picture, thinker, I want to move at 1,000 miles an hour and I’m not so good at remembering to turn on the utilities or like getting the insurance set up, all those small things, but the guy that I partnered with, who’s actually my wife’s cousin, he’s great at all of those things. So he and I have been talking before, he had an interest in investing in real estate. When I presented this deal to him, he jumped in right away and it’s been a pretty seamless relationship ever since.
In terms of what I think has made our partnership work, first is that I think we do a really good job of communicating and being open and honest with each other. I think one of the fastest ways to ruin any relationship, but especially a business partnership is to not be vocal when one of you feel that something isn’t going the right way. He and I are very quick to call each other out if we feel that, “Hey, I don’t think this is the right move. I don’t think it’s the right thing to do.” And we’re both very open to the other person’s opinion. The second thing that works really well for us is that we stay in our lane. I know the things that I’m supposed to be focusing on, he knows things that he’s supposed to be focusing on. My wife, she’s our third partner for our short-term rental business, she knows what she’s supposed to be focusing on.
So with the three of us being all in our seat, that’s what’s allowing us to move really quickly. And then the third thing is that we’ve got, especially when we bring in other partners because we’ve got our Alpha Geek Capital team that’s like the core of me and my wife and her cousin, but we also bring in other partners. And whenever we bring in another partner, we have a very clear joint venture agreement that we all sign that outlines everything, every single part of the partnership down to how we distribute profits. So when you have that clarity upfront, it removes a lot of the ambiguity, those points of tension that could arise from a partnership if you don’t handle it the right way.

Brandon:
That is so good. We need to take that last clip and throw that on YouTube or something for like, how to have a real estate partnership, because that was phenomenal. What do you see as some of the common mistakes that people make when they’re getting into partnerships? What are the things to avoid?

Tony:
Probably just doing the opposite of what I just said.

Brandon:
No agreements.

Tony:
Yeah. Not having those sub discussions up front, I think is the biggest thing. If you guys both are going into it with some assumptions, but those assumptions are wrong, like you’re thinking that your partner is thinking one thing, your partner is thinking something else, and then when the time comes to make the decisions or the time comes to work through that disagreement, that’s when the partnerships start falling apart because you guys didn’t have those tough conversations upfront. So I think making sure that you guys iron out as many of those sticky, hard to have discussions as soon as possible is going to set you guys up for success.
And then the second thing is, like I said, making sure that you’re staying in your own lane. We didn’t start off that way. There is literally a day where two of us called the set up utilities for the same property, that’s how all over the place we were. So it took us a while to figure out, “Okay, who’s going to do what? This is your role. So making sure that each of you identifies and accepts your role, but then also trust the other person to do their job. You have to trust the other person to do what it is that you expect them to do. Sometimes my wife comes to me, she’s the point person for dealing with the guests. And she’s like, “Hey husband, this thing has happened.”
And I’m like, “Babe, I trust you. You’re the person that does this part. If you make the wrong decision, it’s okay., we’ll figure it out. We’ll make it right the next time. But I trust you to do the right thing or to make a mistake.” So I think trust and having those tough communications, if you don’t do those things, those are probably the biggest pitfalls.

Brandon:
Let’s say somebody finds themselves in an unhealthy or ineffective business partnership right now, what advice would you offer them to get out of it?

Tony:
What advice to get out of it? I think the biggest thing is just recognizing as fast as possible that you’re in the wrong partnership. In my mind, being in the wrong partnership longer than you need to is so detrimental because not only are you now investing your time, your energy into this person, in to this partnership that isn’t going anywhere, but there’s also an opportunity cost of you not doing something else that could be more fruitful. So I don’t know if you’ve got to buy yourself out of that contract, if you just walk away from it and say, “Hey partner, you have everything because I want to be done with it.” That’s a step I’ll take. So whatever steps you need to take to get out of it as fast as possible is what I would do.
Because I think what we see a lot of people do, David, is that when they see these difficult conversations that need to be had, they start shying away from it, and they just hope that the problem gets fixed on its own, but in reality, most problems never get fixed on their own, and someone has to step up and be the person that’s going to solve the problem. And I think you’ve got to have the courage to do that.

Brandon:
Hey, one more tip that I found works on partnerships that I’ve had a lot of success with and a lot of failures with until I’ve learned to become good at this is I no longer partner with someone and just say, “Okay, let’s partner in this business, let’s build a big business together no matter what it is.” Because you never know how you’re going to like working with someone until you work with them. And it’s not like they’re a bad person or a good person, it’s just sometimes you jive well, sometimes you don’t. Sometimes you discover things later that you don’t want to. So now I’m always like, “Hey, let’s do a deal together. Let’s do something small. Let’s see how it works.”
And then do another one. And then another one. And after several of those, “Fine, then maybe it’s time, let’s form a big company together and let’s go take this thing to the moon.” But it’s really messy when you have all these grand plans and you give all this equity and you have this partnership and then you realize like five minutes and you’re like, “Oh no, this is a terrible idea.” It’s a lot harder to back out than it is just to not do another deal together. So that’s the advice I usually give people when they want to partners, don’t think of partnership, just think I’m going to JV a deal, and see how that goes.

Tony:
And that’s how we started too, it was one deal and that’s what we used to scale until where we are today.

Brandon:
That’s cool, man. Where do you see yourself headed? What do you always want to primarily the short-term, you can also go back to some of the longer-term stuff, where do you see yourself going?

Tony:
As I’ve matured, I’ve tried to not have the squirrel syndrome where you’re going after all of these different things. So right now, at least for the next like five years, I don’t want to purchase anything, but short-term rentals. We are adding like a wholesaling arm to our business, but it’s only really to support our short-term rental endeavors. The markets that we invest in, they’re very competitive, so we know that going direct to seller will be beneficial for us and for the deals that we don’t want to keep ourselves, we’ll probably just pass them off to another investor, but for us right now, it’s short-term rental focused all the way.
The short-term goal for us is we want to get to a half a million dollars in profit distributions in a 12-month period. So we’re not there yet, we’ve got to add quite a few units to get there, but that’s the goal that we’re working towards.

David:
I really like that. When you’re learning a sport, like when we were playing basketball, the first usually week of tryouts, they didn’t even bring out a ball. It was just pure defensive slides and running through the offense and these fundamentals that were drilled into your brain. And at the point that they became second nature, they would introduce another layer of complexity, “Okay, now there’s a ball, but there’s no opponent.” And then at the point where you got used to doing that, it was, “Okay, now there’s an opponent, but we’re going to just play half court.” I think there’s something to be said for learning real estate investing that same way.
I really like Tony that you’re saying, “I’m just going to do short-term rentals for five years. I’m going to focus on these fundamentals. I’m going to master this element of my craft, like this movement in martial arts. And when I’ve got this down, I will then consider adding on something else,” as opposed to, “I’m just going to jump in there and immerse myself in an entire mixed martial arts background and be really bad at a whole bunch of different things.”

Tony:
It’s so easy. I feel like anyone that’s entrepreneurial, it’s so easy to get distracted, but I think the hallmark of a great entrepreneur isn’t how often you say yes, but how often you say no. And I’ve literally just told someone this morning, he came to me, he said, “Hey, Tony, I want to build 10 short-term rentals in Joshua Tree, California. Do you want to do that with me?” And initially I said, yes, but after I thought about it, I said, “I’ve got so many other projects going on that if I take on this project with you, I won’t do it effectively. And it’s unfair of me to say yes to you because I know I won’t have the bandwidth to do it.” So not only am I super focused on short-term rentals, but I’m also super focused on the specific business plan that we’ve developed to grow within that short-term rental asset class.

Brandon:
Yeah. That’s really, really good. Saying no is difficult. I like the way you just put that though is like, “Look, I would love to do it, but if I do it, I will not be as effective as if somebody else does it or if I was focused on it. I have to be honest with myself that I’m not going to be there.” So yeah, really, really good stuff. All right. Let’s talk about finding deals. You mentioned off market, is that how you found all the short-term rentals that are in Joshua Tree?

Tony:
It’s been a mix. I think as you start to build a bit of a reputation in a market, it becomes a little bit easier to find the next deal. Our first three purchases in Joshua Tree all came off the MLS, everything else that we’ve purchased has come actually from one person. It’s a builder out there in Joshua Tree. and as soon as he’s done building them, we’re just buying them from him. So that’s been our approach out there. Very similar concept in the Smoky Mountains, our first two came off the MLS, the other four we have under contract over there are also directly from the builder. So the benefit of going that route, having that relationship is that we’re not negotiating with other people or trying to outbid or the people that are on the MLS, we’re getting the straight from the source.

Brandon:
That’s cool. This remind me of a question, you’re in the two areas, Joshua Tree and you’re in the Smoky Mountains area, there’s a pro and con to focusing on one or two areas. The benefit being, you get to learn that market really well, you get to hone your marketing there and all that. The con of course, is that you are all in that market. So if something did happen to that market, you’re just really heavily invested. So how do you balance that risk versus reward when it comes to not just short term, it could apply to long-term as well, but between focusing and being good and having all your eggs in one basket?

Tony:
That’s a good question, and something that we ask ourselves all the time like, “Hey, what is the critical mass that we want to hit, and either of these markets, before we move on to a third?” And the honest answer is we don’t know yet, I think we’re still trying to figure that out. I can tell you why we split off into two markets initially, and it was because we were having difficulties continuing to find deals that pencil out in the Smoky Mountains. So we said, “Okay, what’s another market that has similar characteristics where we can find similar returns that has maybe a better price point. And that’s what drew us to Joshua Tree. We’re having very similar discussions now.
Joshua Tree is heating up like crazy over the last six months. We bought a house in September for $300,000, we could probably sell it today for 450, and it hasn’t even been a year yet. So we’re starting to do the same thing like, “What’s the third market?” I think what’s really going to push us out of the markets isn’t so much that we’ve maybe had too much risk in that market, is more so that the market is heating up and we need to find another market where we can get better returns.

Brandon:
Yeah, really good, man. I got two more things on the short-term rentals. First of all, how are you funding them right now? What’s your current funding process and what’s your long-term strategy going to be?

Tony:
Yeah, good questions. We use what’s called a second home or vacation home mortgage for all of these purchases, slightly different than your typical investment property loan, but there are some major benefits that come along with it. And Avery Carl was the one that turned us on to this when she was interviewed in the podcast a while ago, but the benefits to that it’s for most purchase prices, a 10% down payment, as opposed to the 20, 25% down payment that you get with a typical investment property loan. The interest rates themselves are almost in lock step with like a personal loan. We closed on a property in February at 2.65% for short-term rentals, which is insane.
And the third benefit is that they’re almost always 30-year fixed terms. So every single property that we’ve purchased has been using this vacation home mortgage. And it’s not a secret, it’s not some hidden thing that you’ve got be really cool, they’re like buddy, buddy thing, most big lending institutions have something similar to this. And that’s what we’ve used. There are some limitations though. You can only have one of these mortgages in each market that you invest in. So like the way that we did our first few deals, I got a mortgage in Tennessee and my partner got one in Tennessee. I got one in Joshua Tree and my partner got one in Joshua Tree.
And once we maxed out those loans we could get ourselves, that’s when we started partnering with other people who come in and carry their mortgage for us, and then we’re doing all the heavy lifting and getting the property running, but that’s how we’ve been able to scale. And so use that fable financing.

Brandon:
Nice. So you bring in partners who help you finance the deal and you guys like split it 50/50, or is the deal specific or how do you do it?

Tony:
Yeah, it’s typically 50/50. Yeah. And the partner brings the capital, they carry the mortgage. We’re doing all the work of acquisition, set up property management, so on and so forth.

Brandon:
That is exactly my plan with the Month In Maui thing. That’s funny. We think alike, because the benefit of course, yeah if you’re allowed only a certain number of mortgages, so you just find more and more people that you’re bringing in that can give you the more you put it in there, they help you get the mortgage and the down payment and you split costs, it’s a such a good strategy. I’m really glad to hear you say that.

Tony:
And it’s still a much better return than what they get if they went out and bought like a turnkey, single family investment in their own like it’s a long-term rental.

Brandon:
And because you’re managing the process. You’re going to do well there. That’s awesome, man. All Cool guys. Well, I think we probably got to start moving on. Why don’t we hit the next segment of the show, it’s called our Deal Deep Dive. The Deal Deep Dive is where we dive into one particular deal that you’ve done and get to know some numbers and the specifics. So you got one in mind, Tony that we can dig into?

Tony:
Yeah, absolutely. I want to talk about the first cabin that we purchased out in Tennessee.

Brandon:
All right. Well, that answers my first question, which was what was it and where was it at? So thank you. David Greene, you take number two.

David:
How did you find it?

Tony:
Right off the MLS? So this was before things in the Smoky Mountains got too crazy and it was listed and we put in an offer.

Brandon:
How much was the property listed at? How much did you buy it for?

Tony:
It was listed for $590,000, and we got it for just about that price. I think we negotiated about seven grand off during the inspection process and things came up so right around there, but our total cash investment was right on the nose at about $59,000.

David:
Okay. How did you fund this deal?

Tony:
We used the 10% down vacation home mortgage though, like I said, $590,000 purchase price. It was literally $59,000 for the closing costs, my partner and I, we had the funds available, just from the money we had saved up and took it down pretty easily.

Brandon:
All right. And then what did you do with it? I think we probably know the answer to that, but flip, rental, BRRRR, vacation rental?

Tony:
This was a short-term rental, but what was unique about this property was that it was a preexisting short-term rental, but it was under contract with the property management company. And we had to honor that property management company’s agreements, I think for like six weeks, six or eight weeks after we purchased it. But in the 12 months, in the year prior, so in the year 2019, that cabin had only grossed $85,000 gross. I might be getting ahead of myself here, but we were projecting the same cabin will do about $160,000 in gross revenue in the first year that we own it. So the person who’s managing it and the strategy they employ makes a huge difference.

Brandon:
100%. Yeah. I had that short-term rental, like four years ago, I talk about it a lot on the show here. I went out in my Grace Harbor, Washington. And when I was managing it, it was a pain in the butt and I was having to deal with tenants, constant turnover, and all that said, it was really annoying as short-term rentals can be. And I was doing everything, but I was running it at 100 % occupancy pretty much. It was always filled. And then I handed over this slick property manager that they were promising all of these great things and they could take care of it for me and get my workload down to zero. And occupancy dropped not set like 80% or 60 or 40, it dropped to zero, like zero, not a single person rented it after they took over.
I don’t even understand how that’s possible. I think it was several months. And I’m like, “We’re not making any money.” When I finally looked back into it, it’s amazing the way you manage it, which is why, this time I’m building an in-house team to manage my short-term rental portfolio, I’m going to do it a totally different strategy. It sounds like you guys are doing something similar.

David:
All right. What was the outcome?

Tony:
Outcome is that this is the best investment that I think I’ve ever made in my life. I don’t think we’ll ever get another because this is a five bedroom, five bath, 2,700 square foot cabin, prime location in the Smoky Mountains. We could probably sell this today for $800,000 if we wanted to. So I don’t think we’ll ever get another deal as good as this one. So I hope to keep this.

Brandon:
What’s the night rental on that? What does it cost to rent that for a night?

Tony:
It’s going to vary a lot. Like January, February, when times are slow, we’ll probably rent 270, 300 bucks per night. During the peak season, if you’re talking like November, December, there’s some nights we’re charging over $1,000. So I’d say on average, we’re probably going to get somewhere around like 475 for the entire year.

Brandon:
What lessons can you pull out of this deal to share with the audience.

Tony:
Man, so many, I think the biggest thing that this one taught me was that sometimes you have to take a bit of a leap of faith in your real estate investing journey. Like I said, when we got this property under contract, we had talked to other real estate investors that were doing well in the short-term rental space, but it’s not like we hadn’t taken a course, I hadn’t even read a book about short-term rental investing yet. I’d stayed in some Airbnbs, but didn’t know them too well, but we knew, and I think respected the opinions of the people that were telling us that this would work, that we felt comfortable and confident enough to take that risk.
Now, also, we weren’t putting up our last $59,000 to make this work, so if it did go sideways that wasn’t going to get my house repossessed or anything like that. But I think having the confidence to take that leap of faith is the biggest thing for me, because once it worked, we’ve been full steam ahead ever since.

Brandon:
Well, appreciate it. It was a good Deal Deep Dive. And you get a lot of people’s minds spinning right now in vacation rentals [inaudible 00:52:39]. I want a bunch of those ones.

Tony:
I need you guys to like bleep out the markets that I’m in so no one comes-

Brandon:
Exactly. Don’t go there. But Joshua Tree is horrible. It’s a terrible market, don’t do it. Don’t come to Maui either, it is terrible. Terrible. All right. Moving on to the last segment of the show, it’s time for our-

Voiceover:
Famous four.

Brandon:
This is the part of the show where we ask the same four questions every week to every guest. So Tony number one, favorite either current or all-time favorite real estate investing book?

Tony:
It’s like I’m going to go, Rich Dad, Poor Dad because that’s like the Bible for everybody. I told you at the beginning of the show that my dad made me read that when I was like 14. So those concepts have been ingrained in me for a very long time now.

David:
What is your favorite business book?

Tony:
Can I give a couple because there’s a few that I really love. Actually, just-

Brandon:
We’ll just allow it. We’ll allow it.

Tony:
I just read Profit First earlier this year by Mike Michalowicz.

Brandon:
Mike Michalowicz. So good.

Tony:
Yeah. That was a game changing book for me. We’ve been reinvesting so much of our profits back into the business that we weren’t even paying ourselves. So now, we’re finally structuring the business in a way that it actually supports us as the owner. So Profit First was the-

Brandon:
I got it sitting right here.

Tony:
There it is. That one’s a huge one for me. The other one that I think is really big is the E-Myth Revisited by Michael Gerber, really making sure that you’re being super clear on the seats that exists within your business, putting the right people into those seats and then over time, filling them with people as you start to scale. Those two books, I think, work really, really well in tandem.

David:
All right. What about some of your hobbies?

Tony:
Hobbies? I’m super busy, so I don’t have much time for hobbies these days, but my son is in basketball right now, so I spend, I don’t know, an ungodly amount of time driving him to training and practices and games and things like that. So really just being there to support him in his goals is big for me. And then my wife and I like to travel as well. We’re actually heading off to Miami this Saturday, so we’re going to spend a few days out in Miami. We’re now fully vaccinated, so we can hopefully like high five and hug strangers again without being too worried about it.

Brandon:
Well, my last question of the day, what do you think separates successful real estate investors from those who give up, fail, or just never get started?

Tony:
I think first is having a really, really, really strong why behind you, because everybody that ventures off into the world of entrepreneurship is going to encounter some kind of adversity. And if you don’t have an absolutely extremely compellingly strong why, you’re going to give up. And I can share my why with you guys. When my dad was around the same age as me, he was like in his early 30s, keeping and working at this company for two decades, worked his way up from like a dock worker to the general manager. So he was the general manager of this big facility, without notice, the company goes bankrupt, fires everybody.
So my dad, after two decades of giving his heart and soul to this company loses everything. We end up losing our house, we moved from this big five-bedroom house into this apartment, just a big shift for everything. And what my dad always told me is that you never want to have your way of providing for your family be totally dependent on someone else. And that stuck with me. And I always wanted to make sure that as my family grew, because I became a dad when I was 16. So I learned very early on about the pressures of having a family. So for me, it was always in the back of my mind to know that I didn’t want to be in a position where if the company that I was working for say, “Tony, we don’t need you anymore,” that I wasn’t going to know how to feed my family.
So for me, that’s the why that drives me. I am terrified of not being able to provide for my family. I am terrified of not building generational wealth. I’m terrified of not being able to do that. And that’s what drives me. So to answer the question, I think is having a strong why to drive you.

David:
Last question of the day, where can people find out more about you?

Tony:
Obviously, the Real Estate Rookie Podcast. We put out episodes every Wednesday and Saturday. We just went to a Real Estate Rookie YouTube channel as well so a lot of the contents going up there. If you guys want to connect with me personally, I’m on Instagram @tonyjrobinson. And my wife and I also have a YouTube channel called The Real Estate Robinsons that we give all the behind the scenes shenanigans of running our short-term rental business. So you guys can check us out there. Again, The Real Estate Robinsons, but yeah, those are the places to find me.

Brandon:
Well, I appreciate it. It’s been a phenomenal show. I think people are going to love this thing, get a lot out of it. I’m going to send a lot of new investors when they’re coming like, “Listen to this show with Tony, it’s a great way to go from a rookie to pro.” So you’re killing it, man. Keep it up.

Tony:
Thank you guys. I appreciate it.

David:
Thank you very much, Tony. This is David Greene for Brandon, “Month In Maui” Turner signing off.

Voiceover:
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In This Episode We Cover:

  • The importance of having cash-flowing passive income
  • Why you should never treat a rental like your primary residence
  • Buying in markets that are heavily reliant on tourism 
  • How to make a strong, stable, and reliable partnership 
  • The risk vs. rewards of short-term rentals
  • Long-distance real estate investing as a rookie investor
  • And SO much more!

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