How to Build Lifestyle & Financial Freedom Investing In Vacation Homes with Shawn Moore: An EOFire Classic from 2022

0:01John Lee Dumas:Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire, brought to you by High Level, the all-in-one sales and marketing platform. And on today's classic episode, we'll be breaking down how to build lifestyle and financial freedom, investing in vacation homes. And to drop these value bombs, I brought Shawn Moore into EO Fire Studios. Shawn is founder and CEO of Vodacy, the leading vacation rental investing education company helping clients build lifestyle and financial freedom through vacation home investments. And today we talk about how you can't limit what's possible before you explore it, how saturated markets signal strong demand, stand out instead of copying others, and oh, so much more.

0:42John Lee Dumas:And a big thank you for sponsoring today's episode goes to Sean and our sponsors. Fire Nation, meet Hotworks, the number one boutique fitness franchise with 850 plus locations. They pioneered virtual workouts inside infrared saunas with recurring membership revenue, a low labor high tech model in a proven franchise system. Entrepreneurs gain a scalable business built for growth. Visit hotworks.net slash franchising to learn more. If you are building a real business, you need real infrastructure. High level gives you website hosting, funnels, email marketing, automation, calendar booking, payments, and course hosting all on one platform.

1:17John Lee Dumas:Plus award-winning 24 seven support. Get a 30-day free trial and my full bonus stack that includes a 15-minute private call with me and much more at highlevelfire.com. Highlevelfire.com. Sean, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. All right, John. Thanks for having me on. What's up, Fire Nation? Appreciate you all spending your time with us today. I know how valuable it is. But I would say one of the things that has been kind of a recent change for us is really focusing on how important when you're scaling a business, how important your customer experience and your product matters.

2:01I think a lot of times as business owners, entrepreneurs, we get into these games and it's always about the minimum viable product. And what can we do? Is there somebody that's going to buy our product? And we just we have this tendency to just kind of barrel through all those problems. Right. And what I started to realize is how few people actually focus on and myself included in my first few companies was how important that product, customer experience and those results are to really scale what you're trying to do. So I don't know if that's something that most people don't believe, but I don't think we think about it a lot of times in the beginning stages of building a business as much as we think about how are we going to sell it?

2:42How are we going to market it? How are we going to get paid? And all this stuff. And really to get paid and get paid the big dollars as we scale, it really comes down to that customer experience and the results.

2:51John Lee Dumas:Well, speaking of building, that's our focus, Fire Nation, talking today about how to build lifestyle and financial freedom investing in vacation homes. So let's get right down to brass tacks because owning vacation homes, it seems a little bit like a dream and frankly unattainable for a lot of people I know that are listening here today. So let's talk about how realistic it is to build passive income by investing in vacation homes. And to your point, like we, a lot of times we look at this stuff and think, that's not for me. Right. And, and I really try to help people think about when we're trying to build lifestyle and financial freedom, that seems really daunting, right?

3:31It seems like, well, what does that really mean for all of us? If we really think about it, like I always tell people, write down your top three bills, right? Write down the top three bills you have. It's probably your mortgage, vehicles, maybe some, you know, utilities, entertainment, whatever it is. A lot of times that number is not as big as you think it is. You don't have to always have millions of dollars coming in to be financially free. And you can build, now when we talk about investing and particularly I've been investing in real estate for over 22 years now, the holy grail of real estate investments are that they spit off and create passive income for us, right?

4:08There's a lot of like fix and flip, wholesale, things like that that get you paychecks and they get you lump sums of cash, but they're not really passive income. So now you have to talk about more of the long-term investments like multifamily, commercial, long-term rentals. And now we talk about short-term rentals. Short-term rentals are becoming this new asset class. They've been around for a long time, but they're becoming really mainstream at this stage. Well, short-term rentals are like the single-family rentals of the world that have been around forever, the entry point to get into them versus a multifamily deal or maybe a commercial deal is smaller.

4:45And so do you have to have some earned income that you can create some passive income with? Yes. Right. We don't, we're not going to say, okay, you're going to go buy a whole bunch of properties with no money down. And even though you can do that, that's not, you have to say, is it realistic that you have a little bit of extra income that you can start putting away and start to think about what do I want to do with my earned income to start to create that passive income down the line. And I love real estate in general. I love that every asset class has its pros and cons. I love vacation rentals because so many people can play the game.

5:20And it satisfies my entrepreneurial spirit because we treat them like little businesses. Even when I was talking about that customer experience, it's how we maximize each one of our properties. And it becomes really a fun asset for me personally to be able to treat them like a little business. The entry level to get into the game is a lot lower than a lot of people think. There's markets out there that you can dive into the short-term rental game. And it might be a little small college town that you've never heard of that makes a great short-term rental market. And you're buying properties for$100 ,000,$150 ,000.

5:53Most people think, well, I've got to buy a million dollar property on the beach and it's unattainable. And that's just a limiting belief to say, okay, I just need to understand the game and peel back a few more layers of the onion to see what works for me in my current situation and what I can do now to start to plan out and say, okay, what can I take? What resources do I have and how can I apply them to whatever road I'm going to run down? And in this case, vacation rentals.

6:16John Lee Dumas:Well, a lot of people would come back and say, but Sean, the short-term rental market, it's saturated. I mean, there's just so many people that are doing such similar things. So how could our listeners today stand out on, let's say, Airbnb? Love the question because you're exactly right. These markets are getting really, really saturated. And I always tell people I love saturated markets. One thing about a saturated market is it means that there's a lot of demand. And when you have a lot of demand, your job now is to go out and figure out how you're going to get your unfair share of business. How are we going to go out and stand out in this crowded marketplace.

6:54You're not going to do it by just relying on the market and doing what everybody else is doing, right? You're not going to do it by going out there and putting your property on Airbnb and having a listing that looks like everybody else is listing and offering the same thing that everybody else is doing. You're going to get your unfair share of business. And as markets get more and more saturated, that slice of the pie continues to get smaller and smaller. And by the way, properties get more and more expensive. So that ratio is not really looking good for us, right? Like to your point. And that's, this is a multi-billion dollar industry that is not going away anytime soon.

7:27Huge demand on the backside where people prefer this as a travel, a way to travel and enjoy vacations. And it's, but it's a whole bunch of mom and pops that are buying properties, supplementing grandma's vacation home and trying to get paid for it. Their listings look like they would be the same listing on Zillow. Everybody looks the same. Everybody's getting their small slice of the pie. What's really fun is if you understand how to play the game and you understand, and this is where it comes into really understanding customer experience, understanding how to develop and put together an amazing guest experience, but then also being able to articulate it to the masses through your listing, through different marketing channels, different ways that you can get eyeballs on your property.

8:09The fun part about that, John, is when you're talking about the game we're playing right now, and this is going to change, but right now the professional operators at the top doing it and playing this game, that's kind of rarefied air. There's not a lot of competition up there. You're in a category of one right now. And so there's a lot of competition in the middle of the market where everybody's doing the same thing. When you understand how to create a customer experience, this is our product, right? People travel to experience, they don't travel to go stay in a nice house. We have to have a house that also is part of their travel experience.

8:47And then we have to be able to articulate what we have. So it's really understanding. And this is why I get really excited about it for myself because I've got two real passions. I love building businesses and I love real estate. And this kind of helps me merge the two. And really, we treat these like a business. It's a real estate asset that has a customer base. It has repeat customers. We have to worry about the customer experience. And when you can do that and you know how to articulate it in a marketing channels and in online and being able to stand out in these crowded marketplaces. I mean, John, a lot of listeners on this are in, you know, they might be in the Internet marketing space.

9:24That's a pretty dang crowded market as well. The successful ones understand how to really articulate what that experience is going to be like in the results that they have for their customers. And we do the same thing with short term rentals. And you're exactly right. The saturation is not going to go down. It's becoming more and more and more popular and more and more people are getting into the game. But there's also, it's happening because there's so much demand on the backside. So our job is to figure out how we get our unfair share of that business.

9:51John Lee Dumas:Well, I also want to talk about external forces because as we speak, inflation is high. How does that affect real estate investing at the ground level? Yeah. At the ground level, just fundamentally, real estate is a great hedge against inflation. And really to simplify it, the reason is because you have leverage involved with real estate. Tangible assets in inflationary times typically are going to go up in value. They're going to cost more, even if they're not appreciating. Just for the nature of inflation, they're going up in value. If I buy, and with real estate, and this is why so many people with money flood to real estate during inflationary times and why we see such a huge demand for real estate right now is because of the leverage aspect.

10:36Even though rates are really high, because if I can go buy a$500 ,000 property, I put$100 ,000 down. If I've got 10 % inflation, if I leave that money in the bank, then I'm losing 10 % a year. My buying power goes down by 10 % per year. If I go buy a$500 ,000 property, and let's just say there's no appreciation, but just because of inflation, it goes up 10%. Well, my 10%, I just made my$500 ,000. That property went up by 50 grand. So that property in a year is worth 550 because the buying power of the dollar is going down. So$550 ,000 asset, I put$100 ,000 into it. So I actually gained, I didn't lose$10 ,000.

11:16I gained 50. And so I got a really nice return on that investment. And I got a really good return on my, because it hedges, you're basically hedging your bet against inflation when you're talking about real estate and tangible assets because of the leverage aspect of it.

11:34John Lee Dumas:Now, Fire Nation, you do need to be taking in the internal factors, the external factors, and that's why we're going to be talking about a lot of cool things when it comes to timing, location, and dollars when we get back from thanking our sponsors. Some businesses make money. Some make a difference. The best businesses do both. Imagine owning a business where people leave feeling better than when they walked in. That's Hutworks. Hutworks is the number one boutique fitness franchise, combining infrared workouts, virtual instruction, a recurring membership model, and a scalable proven system that's helping entrepreneurs grow successful businesses while making a difference in their communities.

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12:39John Lee Dumas:With Hotworks, you can have both. Visit hotworks.net slash franchising to learn more today. That's H-O-T-W-O-R-X dot net slash franchising. Fire Nation, if you are building a real business, you need real infrastructure. That is why High Level is Entrepreneur on Fire's featured partner. High Level gives you a website builder and hosting funnels and landing pages, email marketing, appointment scheduling, payment processing, course and membership hosting, and so much more. Everything you need to succeed all under one roof. No duct tape, no juggling five platforms, just one clean system for your business.

13:15John Lee Dumas:and their award-winning 24-7 support has your back when you need it most. When you sign up at highlevelfire.com, you also get my exclusive bonus stack, a 30-day free trial, a private 15-minute call with me, JLD, access to my weekly live office hours, a digital copy of my book, The Common Path to Uncommon Success, my 50 Days to Something Execution Roadmap, and more. Visit highlevelfire.com and start building your something today. Sean, we're back, And I want to talk timing because prices for homes are at all time highs. And I mean, actually, as we're talking, there's actually been a little bit of a pullback from that.

13:54John Lee Dumas:But of course, there's fluctuation, you know, who knows what the future holds. Wouldn't it be better to wait for homes to come down in prices before purchasing? It's a great question. And it depends on what your property goals are. I can tell you, when I invest, the least important metrics, the metric that I look at the least that bears the least amount of my decision-making is the actual price of the home, whether that's really high or whether that's really low. Because the reason for that, John, is when I underwrite a deal, I'm underwriting it for the long-term and I'm underwriting it for the cash flow potential that it has and the cash flow that we're creating right now.

14:31So does buying a property at a high price and a high interest rate affect my underwriting and how much I'm owing the cash flow on that? Absolutely. You have to still underwrite the deals very diligently to make sure that your property is going to cashflow, that it's going to be positive cashflow. You have to underwrite the market. You have to underwrite the property. And does it get harder and harder to cashflow as property prices go higher and higher and interest rates get higher and higher? Yes, it does. There's no question. But if you're just trying to time the market and buy at the bottoms, it's one, that's really, really difficult.

15:03Two, your bottoms are usually, I mean, historically, you've got about seven to eight year cycles. So you're buying a property, one property. If you're trying to buy at the bottoms, you're buying a property every 20 years on average, one property every 15, 20 years. And you're just speculating, hoping that the property goes up in value. Our goal with our properties is to get somebody else to pay for them and make sure that I can cashflow the whole time I have them. And so when I underwrite the high price that I'm paying absolutely makes a difference in that underwriting, but I'm not buying it thinking, okay, is this going to be, if the property drops in value, does that hurt what I'm doing?

15:42Because you're looking at two different markets. One is the backend market of the users, the demand for your short-term rental or your long-term rental or your multifamily private, whatever it is, is that's your cashflow situation. The other market you're talking about is our prices higher low when they fluctuate up and down. If you're going to buy and resell, that makes a big difference, If you're going to say, okay, I'm buying and property prices are dropping and I need to resell in six months, well, I need to look at that on my property goals. But I bought a property in 2006 and it went, I mean, it tanked in value the whole time that I had it for the next, until 2010.

16:18So for five or six years, I was upside down on that property. But the whole time I owned it, it was a great asset because somebody else was paying my note and I was making money the whole time I had it. So it depends on how you're underwriting it, what your property goals are. versus the, you know, and that comes into play. Absolutely. But for us, we're underwriting for cashflow.

16:38John Lee Dumas:I want to talk next about locations. I mean, you did mention small college towns, maybe even out of the way towns, because there could be some really affordable places there for people that do have specific budgets. So in your experience, where are the best locations to purchase short-term rentals? Anywhere that you have a profit driver. And what I mean by a profit driver is something that is bringing people and visitors into the area. So that means there's a lot of options, right? So I love little, I call them backyard resort communities. I love little secondary towns, like little college towns.

17:14Those are profit drivers. You can have, when you have a college town, there's parents and visitors coming in to watch games and visit, graduations and things like that. You could have the obvious ones like the beach and the mountain, like national parks, like state parks. There's so many different things that bring people to an area. So any area that has a profit driver that brings people in, we can look and underwrite. And so I always tell people because the list is so large, one will start with what your means are, like what is your budget, right? If I have a$150 ,000 or$200 ,000 budget to go buy a$250 ,000 home, I'm not buying on the beach in Destin, right?

17:52That's not a market that's going to be viable for me. So I always tell people, start with where you'd love to own a vacation home. And then let's start to peel back some layers of what those markets look like. Because any market, we have one of our members who's a traveling nurse. He built his entire portfolio around major medical centers. So people assume that it only works in these class A resort towns and these vacation towns. And those work really well. But there's a lot of other secondary profit drivers that bring people in that they work really, really well for.

18:22John Lee Dumas:Fire Nation, I really hope you're kind of going over in your mind what these options and opportunities are as Sean's going through these, because maybe something is coming up for you when he's talking about this. You're like, oh, remember that place that we visited or this X or this Y or the Z? That can be great opportunities. And now I do want to talk dollars and cents. How much should we plan to invest for our very first vacation rental investment? It's all based on the average price of the home you're going to be buying. So when I tell you these numbers, consider it based on the property that you're going to be buying.

18:55So if you're brand new and you're like, man, I would really love a property in, you know, let's say Omaha, Nebraska. I love, I want to, you know, it's going to be built around the school and everything else, not a vacation down. I'm going to go on Zillow and I'm going to look at what my average price point I'm going to be buying in. And the way I'm going to calculate that is you're, you've got three things that you need to budget for. One is your down payment. Your down payment, if you qualify for traditional financing, you go get full doc loan, it's going to be around 10%. If it's more of an investment type product, you need to budget about 20%, maybe 25 % for your down payment.

19:29So first budget for your down payment. It's always a percentage of your acquisition cost. So if you don't know what you're going to be spending, just guess or go look on Zillow and get an idea. The number two thing you need to budget for is these properties need to be furnished and set up. So if you buy a property that's not furnished and set up and ready to go, you need to budget some money to go do that. I always budget around eight to 10 % of my acquisition cost to get a property fully furnished and fully set up and fully launched. And so again, if it's already furnished, you can deduct from that.

20:00The third thing that you really want to plan on that I think gets people in trouble more often than not is you want to be conservative about how long it's going to take before you really start making money with a vacation rent. It doesn't happen right away. You're going to have a little bit of time where you're establishing yourself, you're getting those first reviews, you're adjusting your pricing. So I always tell people budget about six to nine months of property expenses until you start to hit the ground running and you start to get your stride where you're actually making money with these properties.

20:27So those are the three things that I tell people to budget for.

20:30John Lee Dumas:So those are three budgets, Fire Nation. But Sean, if you really wanted to step back and share the one most valuable takeaway with Fire Nation today about everything that we talked about, what would that one takeaway be? The one takeaway is don't limit what you think is possible before you look into it. And what I mean by that, John, is like to your point, there might be areas, I talk to people all the time and they're like, man, I really like this little area, but I don't think anybody goes there. But we love to go there. And I always tell them, well, if you love to go there, other people love to go there.

21:04If you would love to get into short term rental investing, there are so many avenues to get into it. There are so many different markets that make so much sense. In fact, some of those little markets like that we talked about that you might assume don't work actually probably get some of the better returns. And so I would say, don't limit yourself to say, well, I just could never do that. I don't have a million dollars to own a property on the beach, or I can't buy in the ski mountains that I like because they're so expensive. And so it's not going to work in some of these other markets. So just like anything else, don't limit the possibilities of what you think is possible until you really dive into it.

21:41John Lee Dumas:Sean, how can we connect with you? If we want to learn more from with what you have going on, give us that call to action, and then we'll say goodbye. Awesome. Love it. Appreciate it, John. And the easiest way is just to go to vodacy.com, V-O-D-Y-S-S-E-Y. And we've got a lot of free trainings. You can find me on all the social platforms there. We've got YouTube channels, podcasts, all those different things to really a lot of free resources where you can dive in to see if short-term models would be a good fit for you. That's what we're there for. We'd love to be able to point you in the right direction.