How to Make Money On Airbnb Without Owning Property with Jon Bell and Julian Sage: An EOFire Classic from 2021

0:02Who's ready to rock today, Fire Nation? JLD here and welcome to Entrepreneurs on Fire, brought Brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Talking Too Loud. Today, we're pulling a classic episode from the archives and we'll be breaking down how to make money on Airbnb without owning property. To drop these value bombs, I brought to John Bell and Julian Sage into EO Fire Studios. John and Julian teach people how to build a six or seven figure business on Airbnb without owning property. Now, number one, Fire Nation, a lot of people think that Airbnb is a fad.

0:35John and Julian, they talk about this. but listen, things are not easy. They talk about this as well. So surround yourself with people who are successful and where you want to be. And also Airbnb is a place where it's not necessarily a city you have to be in. It's an experience platform. So think about that tree house, tent in the middle of a woods, lakefront home. These are things that can kill it on Airbnb and so much more. And a big thank you for sponsoring today's episode goes to John, Julian, and our sponsors. Marketing Made Simple, hosted by my friend, Dr. JJ Peterson, is brought to you by the HubSpot Podcast Network.

1:07the audio destination for business professionals. Marketing Made Simple brings you practical tips to make your marketing easy, and more importantly, make it work. A recent episode all about how Liquid IV is using marketing to shake up the beverage world dives deep into the strategies that have propelled Liquid IV to remarkable success. A must listen. Listen to Marketing Made Simple wherever you get your podcasts. Ever thought about giving a TEDx talk? It's one of the most powerful ways to share your message with the world. And four-time TEDx speaker, Taylor Conroy from Thought Leader can help you get there.

1:36Visit thought-leader.com slash fire to join Taylor's free training where he teaches you how to land a TEDx talk and spread your message to millions. So what's up, Fire Nation? We have John and Julian joining us today. And we're going to get to hear both of their backstories before we dive into some real detail about Airbnb and all its awesomeness. And let's just start with John. And John, why exactly did you quit buying real estate and instead build a business without owning property? What's the deal with that? Well, it came down to a couple of the very important things where let's talk about cash flow and just being able to generate that cash flow.

2:20Of course, you know, the old way is to go in and buy a multifamily and, you know, rent it out and possibly make four to five hundred dollars a door if you're lucky and go about it that way. Well, I found something, short-term rentals specifically, that allowed me to go out and still do the same thing with the same property. But I can also accelerate it by going out and still renting other people's properties and then pulling in somewhere around$1 ,500 to$1 ,000 a door for that same apartment. And then I would have great tenants, right? I'm not looking at those tenants that are just going to kind of mess up the place.

2:57And they're not there long term. The place stays absolutely great. it was the best thing that I found. And I could 10X what I would do with flipping a home. If I had$40 ,000, let's just say that was four units. Four units,$4 ,000 generated a month. I couldn't do that with regular multifamily leases or rents or anything that way. This is really important stuff, Fire Nation, to think about the new world that we live in right here. I mean, Kate and I went on a 90 day European trip where we stayed at 17 different Airbnbs over the course of those 90 days in various European countries. I mean, we're talking all the way from Italy, all the way up to Scotland and everywhere in between.

3:41And I'll tell you, we went in, they were nice, they were neat. We stayed for four days, five days max. We left the place neat and clean and they got a very high rate for that because again, we were just short-term runners. We were in, we were out. and then I'm sure the person was coming within a couple hours to take our place for the next little short run. And this is a world that we can now live in when you have a tool like this that allows you to really make things happen. But John, I want to ask you real quick before we pass it over to Julian, you know, obviously Robert Kiyosaki, he's still alive, but if he was dead, would he be spinning in his grave hearing you talk about this stuff?

4:17Absolutely not. Or maybe so if he didn't take advantage of it. Right. You know, actually, I did read he's got a new book and he's talking about not owning real estate. So maybe he's already hip. Maybe that's the new message. Hey, one thing I know about Robert, and this is legit, is he is always learning. He's always educating himself. He's always saying, what's the best thing now? And he's not afraid to change his mind when he knows it's time to. So that's cool stuff. Now, Julian, you, as I mentioned in the introduction as well, went from this struggling entrepreneur, and now you've found success through Airbnb management specifically.

4:55So tell us that story. I want to give it a little pre-context. There's two different strategies that we're talking about here. What John is talking about is this concept called mass release investing or rental arbitrage. And the whole idea there is that you don't have to own property in order to benefit from it. And just to give, you know, kind of a little backstory with myself. You know, I, you know, I'm a military guy. We don't get paid a whole lot. And I actually got started in real, in entrepreneurship, you know, listening to guys like yourself, John, listening to Andrew Warner from Mixer G, Pat Flynn, Smart Passive Income.

5:29So that's really what, you know, got that fire in me to even get started on this entrepreneurial journey. But what I realized with entrepreneurship is a lot of, a lot of the things that people talk about or that they tell you to get into entrepreneurship for, it costs a lot of money and takes a lot of time. I actually started and tried to develop a mobile cooking when my dad had cancer. I wanted to create something to be able to help him. And I had no clue. I just listened to shows like yours. I got inspired. I thought, man, I can do this, but it costs a lot of money. I spent over nearly$20 ,000 to develop this cooking app.

6:03And then I was never able to finish it because it just started costing so much. So I honestly, I decided to quit entrepreneurship, just get my degree and stay in the military. But it wasn't until my wife and I bought our first house using this thing called the VA loan. So I didn't require like any large down payment or anything like that. So it's one of the benefits of being in the military. But I bought this house and I was trying to save money because living in D.C., it's really expensive. You know, the rent's over here. It's like over$2 ,000 a month. and my wife said to me, she said, why don't we try to rent out the basement on Airbnb to try to save some money?

6:39And this little entrepreneurial light bulb kicked in. I had that fire come back and we decided to rent it online and quickly realized that it was able to cover the cost of the mortgage. I was blown away being able to make$2 ,000 a month off of a basement unit. And I wanted to find out what are more people, are there people that are doing this at scale? because from what I've heard, when you buy property, you might make a few hundred dollars, but that's not a sustainable way. And it's not an easy way for someone that's not making a lot of money. So I went online, I started looking for people and I actually found John in a Facebook group and I decided to interview him and through my podcast.

7:22So I started interviewing him. I interviewed other people and quickly realized that there's so many people, there's hundreds and thousands of people that are making a living without owning property. One of the models that John, like I said, utilizes is this model called master leasing or rental arbitrage, where you're essentially just leasing apartments, so you don't own the property. But another model that I actually started utilizing to be able to increase my cash flow was co-hosting or property management. So I would actually find other property owners that had invested the money, had the time, and put all of that into property.

7:56And then I would just manage it for them and then get a commission based off of managing the property the same way like I managed my basement unit. And again, that's called co-hosting. And that's one of the strategies that I'm really excited to share as well. Well, I love just talking about new concepts like this and finance. It's not like it's even super new because listen, I mean, Airbnb has been around for a bit, but now you're getting to this place where you're having people like John and Julian who are just really figuring out how to do it right. And as we talk about on the show, success leaves clues.

8:26So listen to their success, follow their clues, and you make things happen. And I love the fact that now that I've been hosting Entrepreneurs on Fire for a decade, I've interviewed over 3 ,000 successful entrepreneurs, I'm getting more and more guests on the show who literally were inspired by the show to go launch their thing. Now we've become massive successes over the years, and now I get to interview them. You know, before it was like in the early days, I was like having to interview people who had been successful five years prior. I even started the podcast doing something completely unrelated.

8:56So Julian, thanks for sharing that part of the story. That was super cool. And I'm really proud of what you've accomplished. And of course, you know, as a fellow combat veteran, I thank you for your service brother. And let's just keep it with you right now. Why Julian is Airbnb changing the entire game for real estate? I think it just goes back to that idea that Airbnb, think of Airbnb kind of like as a platform. So the same way that Amazon is a platform for people to be able to build, it disrupts the e-commerce or it disrupts the retail brick and mortar industry. the same way that Uber disrupted the taxi industry, YouTube disrupting traditional media.

9:36Airbnb is changing the way real estate is done because now it completely opens up a new market of being able to leverage real estate like John was talking about before where you'd have to purchase a property and then rent it out. Now you don't even have to purchase property anymore. You can just short-term rent it. And there's so many different creative ways that you can leverage the power of short-term rentals utilizing platforms like Airbnb. So Fire Nation, we're going to take a break. We're going to thank our sponsors. But when we get back, I'm going to have John answer this same question about why Airbnb is changing the game for real estate.

10:10We're going to talk about where most people fail, like where are people going wrong when it comes to Airbnb investing and so much more when we get back from thanking our sponsors. There are plenty of things to worry about when trying to grow your business. Don't let tech be one of them. If you're looking for the right tools and a platform that connects your team seamlessly, then look no further than HubSpot's customer platform. With HubSpot's customer platform, you can spend less time switching between systems and more time on growing your business. Sounds pretty great, right? HubSpot's customer platform is a single source of truth for organizing and tracking all of your marketing, sales, and service activities.

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13:07Visit thought-leader.com slash fire. Join Taylor for this free training and get your message out of your head, out of your heart, and out into the world where it belongs. That's thought-leader.com slash fire. So John, we are back, brother. And as I teased before the break, I want to pass the same question back to you. Why is Airbnb changing the game from real estate? And maybe even walk us through how you came up with this real estate arbitrage idea that you're now using so effectively. Let's take it to the examples of disruptors in the space. I mean, We got Uber when it came around. People were kind of like, oh, you know, taxis and app and they don't own cars.

13:50Then there was, you know, Lyft that kind of came along and did the exact same thing. Amazon, not necessarily owning any products at first, but still being able to make a lot of money. Airbnb does the exact same thing. They actually list properties, but they don't own them. So that's why I liked rental arbitrage. I can have the property, I can get it listed on one of these platforms or multiple platforms, and I don't need to own it. I'm just taking their model down to the finer level and then using that to compound my cash flow. That's why I think it's the biggest game changer in this space. Just any business that doesn't necessarily have to own things to still generate a high amount of revenue, I think is great.

14:34So how are you finding these owners? Like what strategies are you using to identify the properties and talk with the owners? And what does that communication look like? You know, talking to the owners is probably the most difficult part of the business. I mean, it's conversational. Of course, you want to talk to the right person up front, but it's really just exposing exactly what you're trying to do, full disclosure, and to at least allow them to come back with some of their objections. so then you can kind of come back to them and say, hey, this is how I resolve this objection. Of course, most people, when we talk about Airbnb, they say, oh, that's the party place.

15:12Nope, I don't want a party house. Well, we do certain things to fight against that. Like we make sure we have cameras, we have noise monitors. We are not trying to end up on the news because that hurts our business. We want to provide a space similar to you that you went to when you were traveling. clean, comfortable, where you can cook, where you can really just relax and treat it as if it's your home. That's what we want to do. And we want to focus on that. So what ways or strategy do you use to first identify homes that you might approach? I mean, it's really understanding the market. Airbnb is one of these places where it's not necessarily a city that you have to be in.

15:53It's an experience-based platform. So maybe you have a treehouse. Maybe you have a tent in the middle of the woods. Maybe you have an apartment in the city or a home in the city or a lakefront home. All of these properties can kill it on Airbnb because when you play up the experience, people will come just for that experience itself. COVID has taught us that, hey, social distancing and people wanting to get out of the cities, out to those spaces that are more spread out, those places have seen major growth. And it's still the experience that those people are going for while looking for the comforts of home.

16:34So this is really interesting, Fire Nation. You're looking for unique, special, experiential properties. And John, once you've identified a property, so to say, what is the next step for you? What steps have you successfully taken to identify who owns that property, how to contact them. What does first contact look like? You know, sometimes it's as simple as Zillow. Zillow has a lot of information that you can just find. And if I'm really going to an apartment building, I don't need too much more information than the management company that's there and pretty much try to book a tour. I'm going to try to go talk to one of the managers that's there.

17:11And I'm going to just, again, let them know exactly what I want to do, how I'm going to do it. And I'm going to talk as if I am really interested in as many apartments as they have available. In most cases, I am. We can take them on by the 20s at any given time. So that sometimes is a good outlet for them. It's a win-win relationship when it really works out great. And you fill their occupancy, they get their regular market rent, so they're not charging anything extra. But in some cases, you might work with a smaller owner and they want a little bit extra because they know you're going to be making extra.

17:51It's really about relationship building. I'm going to digest the numbers. We use tools like AirDNA. We also just browse other sites like Airbnb and HomeAway, and we look at competitors within the space. We see what they're charging. We look at their calendars. and we try to set a mark for ourselves on, hey, we know we're going to outperform because this person is lacking in this area or we're going to be right on par with this other person. Maybe we can charge the exact same nightly rate. How do you handle the objection from property managers who might come back and say, well, we can just put this up on Airbnb?

18:26What would you say to that? Absolutely, you can. But I mean, it's also infants can walk really, but they have to start somewhere instead of just kind of standing up and walking from the first date. You got to crawl. You got to go through all these different stages. I've already gone through them. We have definitely experienced almost everything that you can experience within the business with over a thousand reservations and multiple apartments, multiple cities. There's so many things that can kind of happen when you're doing this business. and one of the biggest misunderstandings is one, it's not real estate.

19:06This is more hospitality than it is real estate. And some of those people come in with the real estate mind and they think, hey, I get it listed. People come, they pay me money. It's not quite like that. And that's normally the first failure. I mean, one thing I will say that was pretty cool is some of those better Airbnbs that I stayed at, they literally were offering upgrades. They're like, hey, do you want us to have like 10K cups waiting for you? Like, we'll go pick those up first. Like, do you want me to pick up from the airports? Like, here's my rate. And they were all super reasonable and it all made sense, but you know, they were all making margin on those things.

19:36So people that were really doing these Airbnbs, right. We're opening my eyes up to like, wow, you can really layer in additional expenses. And so now like, of course you're going to be booked out because you can afford to be one of the more reasonable places in the area that still looks great. And then you layer in all these additional hospitality experiences. And now you're, you're making as much or more money as those higher price places that are just getting that one flat rate. So Julian, let's flip it back to you, brother. Where do most people fail when it comes to Airbnb investing? Well, I think maybe just kind of piggybacking off of what John said, or what you said, John Lee Dumas, was that a lot of people, they think like, why don't I just go out and do this myself?

20:18And that's probably where most people fail, where they think that they can just go out and try to do things on their own, whether that is leasing a property and then starting a hospitality business or turning their own property, thinking I'm just going to, I own this property, let me furnish it and then try to manage it myself. I would say that's maybe one of the biggest failures, people getting into this business and not realizing how much systems and how much process is involved. I know John really didn't talk too much about it, but he comes from an IT background. I'm an IT myself. So we're very systems and process oriented.

20:51So trying to reduce a lot of the friction that is in this business. Because again, this isn't a real estate business. This is hospitality. But for the owners that are interested in getting into this business, we do try to make this a win-win situation. So people that are interested in furnishing their property, they want to maximize their rental income by turning them into short-term rentals. They can partner with guys like ourselves who run the business, who operate and manage properties. So that way, they're actually able to increase their cash flow. Just to give you some numbers, because I do like things to kind of be a little bit more concrete.

21:23Let's say a property owner rents out their space for$2 ,000 a month. If they decided to, let's say the mortgage on that place is like$1 ,700, so they might be able to profit, let's say$300. But let's say they decided to short-term rent it, they could potentially make, let's say,$4 ,000. If they're making$4 ,000, we'll charge our management fee. So let's say that's 20 % for managing the property. So we'll make$800 essentially. So$4 ,000 minus the 800, that leaves 3 ,200. That means they made potentially around somewhere between like$1 ,200 or$1 ,400 of profit that they wouldn't have made. Maybe they only made$300 if they long-term rented it.

22:09But as a short-term rental, they're able to essentially three or four times that. And they don't even have to do any of the work themselves, which is why the management model, the co-host model, it's such a powerful strategy. because the landlord is able to increase the revenue. They don't have to put, they're the ones that are investing their money. They purchase the property, they purchase the furniture and then we just take our experience, our expertise and manage it for them. They're able to profit, we're able to profit and it's really a win-win. John, I'm loving this stuff. I know you're loving this stuff as well.

22:38Julian, breaking down the numbers like he is, that's what we'd love to see. Curious though, John, do you have any other areas that you see most people just continue to fail when it comes to Airbnb investing? It's starting out and doing furnishings. Everybody thinks that they can go out and buy cheap furniture and charge a high nightly rate, and that just doesn't work, right? You have a value category that you need to add to every stay, and your value needs to be equal to the interpretation of what the person is gonna pay and what they expect. Of course, using words like luxury or sometimes used so loosely, that it can be interpreted the wrong way.

23:21But sometimes when you walk in the door, you can tell, hey, this is a nice place because they got nice stuff. Or when you sit down on the couch and it starts to wiggle side to side and I paid$500 a night, I'm probably gonna be a little upset about that. So people think in a lot of cases that, hey, I don't need to put a lot of money into a property to get a big result. And in fact, you kind of do. Julian, anything you wanna add to what John just shared? You want to create a brand. And when people stay at a property, I'm sure that there's going to be different categories. So let's say some people might prefer to stay at a Motel 6.

23:57Other people would rather stay at a Trump Hotel. Some people want to stay at the Marriott. Everybody has a different style. Even Marriott in itself has so many different brands because it caters to so many different types of people. So one of the things that I commonly hear is, oh, it's oversaturated. There's too many people in this business. Well, look at hotels. I mean, hotels, all they are is providing a room. They don't have anything else. It's just a square box. But that square box is very different. And hotels have been in business for centuries. They've been around since the beginning of time.