Why This Expert Investor Owns Only ONE Rental Property

0:00Hey, everyone. Dave here. This Thanksgiving week, we're revisiting a few of our most popular recent episodes in case you missed them the first time around. Today, it's an investor story originally published in September 2024, but I think the lessons and insights from it are as applicable today as they have ever been. The story is with Mike Baum, who turned to real estate investing in Idaho when a health condition forced him to retire early from a career in the tech industry. But what's really cool and unique about Mike's story is that his entire portfolio is just one investment property. This story makes for a great example of how you don't need a huge, massive portfolio to make a huge impact on your life.

0:44Enjoy my conversation with Mike Baum from last fall, and we'll be back with new episodes next week.

0:54hey everyone it's dave welcome to the bigger pockets podcast every monday we like to start our week off by featuring a member of the bigger pockets community and hearing about their investing journey and today we're hearing from an investor named mike baum and fun fact mike is actually one of bigger pockets community's top forum contributors he has spent over 10 000 hours on biggerpockets.com, posting and helping fellow investors learn about real estate. So if you're a frequent visitor to our website, you've probably seen his name pop up. But Mike has a lot to share on top of just what he does for the community already.

1:34And in today's episode, I'm going to talk to Mike about how an unexpected life change for Mike, and a serious one, started his journey in real estate. We'll talk about how he selected his preferred strategy of short-term rentals, and also why Mike has chosen to keep his portfolio small and how not investing can be an active and strategic decision. And this is going to be a great episode because I think it provides a really helpful and interesting counter narrative to what we hear most commonly in the real estate investing industry. And I get it. Not everyone wants to stay small. Not everyone wants to scale, but I think it's really beneficial for all of us to learn from people who are doing something a little bit different.

2:16And Mike fits that bill perfectly. So let's bring him on.

2:20Mike Baum:Mike, welcome to the show. Thanks for being here. Thanks for having me, guys. Well, I'm very curious to hear about your journey. And so let's just start with your career prior to becoming a real estate investor. What were you up to? So I was a engineer at Intel for 19 years. I was a product owner and what they call a technical marketing guy. So what I did was work with our IBM or Lenovo with some of those platforms and help them integrate our technology and supported our field sales staff. Plus, I did demonstrations all over the country on stage and show prep and did shows and stuff like that.

3:02Mike Baum:And then I did a ton of videos and how to's and wrote a ton of technical documents. So that was my gig. Wow. Yeah. And I did that until 2011 when I had a huge undertaking, was working 70 hours a week, actually slept in the couch in our lab, just go, go, go, go, go to get a product launch completed. And then one morning I woke up and I couldn't see. the next morning. I was, I could see, but I had one eye pointing up this way and one eye pointing this way. And it was a sixth and a third cranial nerve palsy. So that was the first indication, the stress of the work had put me over the edge. So basically, Intel put me on disability short term.

3:52Mike Baum:And then after about a year, there was no improvement. There never really is a neurological degeneration, right? You can kind of arrest it as much as you can, but you can't bring it back to where it was. So they put me on full-time disability and that's been 13 years now. Well, I'm sorry to hear that. It sounds like quite an ordeal. So did that mean you were left without an income after all that? Yep. For me, yes. I mean, it's not that we didn't have any income. Intel has a very good taking care of their employees. So there's a good, solid long-term disability plan. And of course, it requires that I sign up for social security disability, which I did.

4:36Mike Baum:So yeah, I'm on disability. It was a pretty drastic income reduction. My wife is working, so that is good. So it's not like we're broke, but we certainly went from upper middle class to middle middle class, I guess you could say. We were never rich. I'm sure it was a change financially, but just emotionally and psychologically, that's like a big just life shift to being someone who's working really hard to having to manage your output in a more concerted way. At this point, is that when you discovered real estate or started thinking about real estate? We've had a few rental houses. We've bought and sold some stuff over time.

5:19Mike Baum:Our vacation rental is located in Coeur d 'Alene, Idaho, on Lake Coeur d 'Alene. And I've always wanted to have, I grew up there, always wanted to have a lake house. And a bunch of things kind of lined up for us to be able to afford to buy this house on the lake. And it was a way for us to replace, because I'm not contributing to retirement any longer, right? Because I have no way to, in normal ways. You know, there are certain ways, but for the most part, it's very difficult to when you're on disability because you don't have an actual earned income anymore. So you got to do something for retirement.

5:56Mike Baum:So I figured initially we were not going to rent the house. We weren't going to do a short term rental. And basically, BiggerPockets is what turned me around to that. Because I have three kids. We have three kids and we have three grandkids now. So we figured, oh, we'll have this lake house and we can go and I'll hang out there. And but it's, you know, I came to realize it's going to sit empty 80 percent of the time. You know, it's eight hour drive from where we're at to get there. It's not something you can just kind of bop on over. And traveling with grandkids is certainly not easy, you know, for their age.

6:32Yeah.

6:33Mike Baum:You know, pick up, pack up and drive eight hours across the state to to to get there. It's easier now if they're older. but back then it was, you know, they were very young. And what year was this? 2017. Okay. So you, you, for a while after your diagnosis, you hadn't got into real estate. It took a couple of years for you to start. Yeah. Well, we had a, we had a couple of long-term rentals we had sold. Okay. Yeah. So, I mean, it's not that we were completely green, but never really looked at short-term rentals. And 2017, it was kind of that, it wasn't to say the wild, wild west of short-term rentals, but it was a different world than it is today.

7:11Mike Baum:So, I mean, I got to get to know Luke Carl and Avery Carl on BiggerPockets. We joined, I think I joined a little after they did. And I started hanging out on the BiggerPockets short-term rental forum and was reading everything I possibly could about doing this. And we were a little nervous. I mean, it's a, you know, when you're first thinking about doing a short-term rental, you have this asset as like, you're you're basically handing the keys over. It's not a 1973 Toyota Corona. You're letting your buddy borrow, you know, it's a whole house sitting on the lake, you know, filled with furniture.

7:49Mike Baum:And when we got started, the house was completely empty. So we had to furnish it and get it all ready to go. And that took a long time, not really that long, but you know, it's an expense and trying to figure it all out. But if it wasn't for bigger pockets, I don't think I would have done it. Well, we're glad to hear that. And you've paid us back in spades because as I mentioned at the top of the show, Mike is one of the most prolific members of the BiggerPockets forum communities, which we greatly appreciate. You're always in there answering people's questions. We got to take a quick break, but stick around because later in the show, Mike's going to explain why he's almost immune to FOMO or fear of missing out.

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12:29So what was the learning curve like for you? Because I imagine going from being in product development and software engineering, Are there overlaps between that and managing a short-term rental?

12:42Mike Baum:There is because 50 % of my job at least was creating processes for people that needed to understand how to implement our technology. So you really just take that and you apply it to processes for short-term rental. I'm a huge believer in self-management of your short-term rental, but you have to have all your ducks in a row. You have to have everything working. You have to make sure your maintenance schedule is right on the money because the last thing you want is this X, Y, or Z breaking down. So all your hard systems need to have steady maintenance. You need to hire the right people to be a handy person to come over and take care of something.

13:23Mike Baum:So you have to have somebody there. You have to have a top-notch cleaner. And sometimes it's going to take a while. I've been through four cleaners since we started. That's actually not that bad. I think I've been through way more. It isn't that bad considering we're really rural. I mean, we are 36 miles down the lake from Coeur d 'Alene. It's over an hour to drive down. And it's a tiny little town. And there's very few professionals of this kind. You know, there's another town about 18 miles farther south called St. Mary's that has some, but the cleaner comes all the way from Coeur d 'Alene. It's a whole day job for her to drive down there, clean the whole house, top to bottom, do all the laundry, and then drive back.

14:02Mike Baum:So that's always a key. But getting everything in place and all the processes in place, once those are running, then management becomes a lot easier. I'm a huge believer in personal communication with the guests. I don't rely on automated communication. I don't rely on bots of any kind to answer things. Somebody asks a question, does an inquiry on Airbnb or VRBO, I'm the guy who answers the question. Yeah. I give them my personal cell phone number that they can get a hold of me anytime. And I can count on one hand the amount of times I've been contacted for problems. Really? Yeah. It's been seven years.

14:46Is that because the house is just in great condition or you find great guests? Both.

14:52Mike Baum:I think I vet every guest. We do not have auto book turned on for anybody. Everybody has to talk to me and I got to get a feel for they are. We get a lot of fake bookings. Really? Hi, this is Steve. We are looking at staying at your house. Are these dates available? You can almost hear it. And it's obvious the dates are available. We had one just come in the other day, November 1st through the 26th. I'm like, wow, that'd be a great booking. I've only had two bookings that long ever that were real, but I knew right away because of the wording. And then it takes them about a week and a half to get back to me when I say yes.

15:30Mike Baum:Great. My wife and I and kids are going to be going on a vacation and my business is going to be paying for it. Can I please send you this fake third party out of country check? Oh, gosh. Give me all your personal information so we can make this happen. Dot, dot, dot. Yay. And you're like, nope, only work through the tool. I only take payments through the tool. Sorry. And then they disappear. Good for you. I mean, it sounds like you've got some really good systems in place. I want to take a step back quickly, though, because, you know, you're sort of in your timeline. You bought this house for personal use.

16:06You found bigger pockets. And I think one of the common challenges that a lot of our audience hears is, you know, how long do you research and learn before just jumping in? Was it quick for you to just start renting it out? Or are you more the type that spent a lot of time educating yourself prior to, like you said, handing over the keys to this very valuable asset to people you've never met before?

16:37Mike Baum:Right. So analysis paralysis is probably the biggest hurdle for most folks who have never done anything like this before. It is a gigantic expense for most people, and it's a real risk and roll of the dice. So I'm on both sides of that, what you just stated, because I am not risk averse, but I plan, plan, plan. If you fail to plan, plan to fail, right? You look at everything, you read everything. And I had an advantage being disabled. I basically had time. So I could learn everything there was to learn and being more technical minded. It basically allows me to get a better understanding of the way finance is supposed to work and how insurance is going to play out.

17:23Mike Baum:And, you know, and I have a couple of algorithms that I have written that hunt the web, you know, that are for data that, you know, that's why I can post Mike's deals of the day, you know, because I scrub. I can scrub the internet on my own and find stuff that, you know, takes a while to become public to everybody else. That's why BiggerPockets is, you know, and I hate to keep coming back to that. I'm not trying to be a shill for BiggerPockets here, but that forum is so valuable because there's so many of us on there that have done this and been doing it. And if you have a question, you know, I can answer that question or John Underwood could answer that question or a dozen other people can answer that question.

18:03Well, first of all, Mike, if you want to be a shill for BiggerPockets, you're in the right place. This is the one podcast you're probably allowed to shill BiggerPockets as much as you want. We really appreciate it. But just so everyone knows, what Mike is talking about is a completely free resource to everyone. The forums are free. If you want to learn something about real estate, go ask a question. I think there are a lot of people who listen to this podcast who don't even know we have these forums. Go check it out. Ask a question. Go see what other questions people are asking. I promise you're going to learn something.

18:35And I think you're right, Mike. I wanted to just get back to this idea of finding the right balance between preparation and fear. Everyone's going to have some fear. That's just a normal part of it. But you have to find the right level and the right way to cut it off and say, like, educating myself is not going to help me anymore. Once I've done, you know, spent dozens or hundreds of hours, whatever it is, learning and reading, listening to the podcast, at a certain point, you just sort of have to jump in. And it sounds like you did that. And were you successful right away? Or did it take a while for your business to?

19:14Mike Baum:It's going to take a while. Yeah. How long? The first year was lean. We lost money the first year because I was a little hesitant. I we're getting the house set up. We're filling the house with all kinds of new stuff. And I want to make sure that it works. You know, I went through two different types of sheets before settled on a sheet brand that worked really, really well because the first one really soft, super nice sateen weave sheets that the first person with heels that were kind of needed some work on, because they wear sandals all the time, tore the heck out of the sheets. They were filled up like you wouldn't believe.

19:54Mike Baum:So I had to toss them out after one stay, you know, things like that. So your first year, anybody who's going to do a short-term rental, your first year is probably going to be on the lean side. My area has got low saturation on Lake Coeur d 'Alene. There are not a lot of places for rent on the lake. You know, I have dozens of people in competition, not thousands. So I price everything accordingly. But even then, you can have a rough year. So you just really never 100 % all the analysis and all your thoughts and air DNA and the enemy method and going through and comparing everything, trying to set your prices and figuring out your occupancy and making sure you have the right amenities and the right stuff in the house isn't a guarantee that you're just going to knock it out of the park.

20:40Mike Baum:So you have to go into it with a understanding that this is something that you could do less than break even. But like anything, no risk, no reward. Absolutely. And it sounds like, Mike, you got it together pretty quickly. I mean, relatively quickly in 2017. And by all accounts, from what we've talked about, you've run a successful short-term rental business. But one of the main reasons I was so excited to talk to you, Mike, is that you are clearly very passionate about real estate and about short-term rentals. You're on the forums all the time. I can hear it in your voice. But you've also chosen not to scale your portfolio.

21:24You have one short-term rental and you're happy with that. Tell me why you've made that decision. Okay.

21:32Mike Baum:So we have tried to buy a few other places. Unfortunately, as the farther down the road after COVID is when we started really starting to look, well, the interest rates went nuts, you know, and that was crazy. and property values went up and property values in our area where we were choosing to do our investing in Idaho shot through the roof. I mean, it was one of the highest in the country. Oh, yeah. I mean, for everyone listening, if you're not aware, places like Coeur d 'Alene, Boise just had some of the fastest appreciation in the whole country was kind of going crazy during that time, but Idaho might've been like the epicenter.

22:14Idaho and Austin, I think were like the two places that were just booming even more than the rest of the country. So sorry to interrupt, but go ahead. No, no, that's okay.