How to Buy Profitable Short-term Rentals

26:12Like that was what I had to break all that stuff. And it wasn't until I became a salesman that I was like, oh wait, like if I work harder, if I work smarter, if I make more connections, I can make more money. And then that was that, I think that's wonderful advice. That's exactly how I launched my own entrepreneurial career. So that's great. So, okay. I want to get out of mindset and that kind of stuff and move into, uh, uh, short term rentals. Okay. Because, um, I'm, I'm very fascinated by this space. I'm petrified of owning property because of my mistakes that I made earlier. So some of this is going to be like free consulting for me that you didn't realize that you would have to do.

26:50But so my early mistakes were I owned a very old building. It was built in 1905. I'm not handy at all. I can fix basic stuff, like basic dad stuff, but I'm not a handy guy necessarily. So I'm not doing mechanicals or, you know, the number of times that I've taken, you know, one 10 right into my body and drop the screwdriver or whatever I was doing. I'm a moron and don't know how to do electrical, like all those mistakes. And then what, you know, we weren't, we were only cash flowing a hundred bucks a month on the property, which was tough. And then what broke my back was I got a call on Christmas Eve that the, uh, we had a, um, an oil furnace.

27:34Cause again, old as hell, middle of an old ass city, that went poof on Christmas Eve. So now I'm trying to find a furnace guy who also can handle an oil unit on Christmas Eve and we had to pay 5x rate in order to get someone there because we live in upstate New York and it's cold as hell and you can't have your tenants not have heat on Christmas Day in the middle of the winter in upstate New York. So there's a lot of mistakes in there that I believe I made, building age, whatever. So if someone is, you know, tune in the podcast and like, okay, I've been thinking about real estate for a while. Short-term rentals seem like something I might be interested in.

28:14Like, what's the first step to get into this game? Like, where do you start? What are the, what's the pre-work you need to do before you step in and take on something like this? Well, you can read my first book. Yes. Short-term rental, long-term rental. You guys know every resource that Avery discusses and feel free to share all the resources you have, your books, courses, anything like that. We'll have links in the show notes for you guys. So wherever you're listening or watching, just scroll down and you can find all the stuff that Avery talks about. I just want to make that clear. Yep. So I would start there.

28:49You could start your search with my company, The Short-Term Shop. So we have offices in 20 markets across the country that are all very vacation rental friendly and mature vacation rental markets. so you don't have to worry about regulations, things like that. We'll help you find the right one. We'll teach you how to manage it for free. And we do that while you're under contract. So we make sure you know what you're doing before you even close. We'll teach you how to use all the property management software, how to set up your listings, et cetera. But if you want to take the hard road, then I would say think of a place that you went growing up with your parents or maybe now with your own kids or your spouse or whoever, where you went on vacation and you didn't stay in a hotel.

29:27You stayed in a beach house, condo, cabin, something like that, where you've been a tourist and start there. I think a lot of people, the biggest mistake they make is they go Google best place to invest in short-term rentals. And they get all these lists from the big property management companies, from the data companies that say these are the best places to stay to invest in short-term rentals. But a lot of them don't, like, either they're looking at just strictly numbers. and so they'll tell you to buy somewhere that's weird and cheap like I don't know Indianapolis super cheap you can make some decent money there but it's not there's a reason that it's just not desirable real estate you know it's not growing and I'm just Indianapolis is a very arbitrary pick but you know like somewhere in the Midwest where those cities aren't really growing which is why the real estate is really cheap which is why it looks better on paper I got my ass handed to me in the Midwest buying apartment buildings because I'm like, oh, great.

30:23The cash flow looks great across the board here. And then, you know, one thing happened outside my control three years after I owned my property. I wasn't planning to flip it, wasn't planning to sell it, was planning to hold it forever. Guy across the street let his property completely fall apart. It's condemned by the city, full of people in there doing drugs, squatting, all these things. Now people don't feel safe in my property. And I ended up having to sell it for a loss because that real estate is not desirable. It's not growing. So there's not a lot of appreciation. So when you're looking at short term, you want to make sure that you're buying desirable real estate in terms of there's a lot of tourism that comes there, beach markets, mountain markets, national park markets, places like that.

31:01But make sure more than anything that you understand as a tourist who goes there, what it is that tourists want when they go there, where they want to be, what they're trying to do so that you make sure you buy in the right location. The location is almost more important than the property itself. I saw a lot of people get in trouble in 2020 when it was 100 offers on every single property, buying properties in good markets but a little too far away from the attractions, like 45 minutes out, thinking, oh, well, you know, people will pay less to have to drive into the attractions. Those people were the first ones who had to sell when the market settled down because when the tourism settled down after COVID, people only really want to be really close to the attraction.

31:46So understand the market that you're choosing, understand where and what the tourists want to do there, who's coming there and when and why, and then start looking at the data from like AirDNA, Price Labs, it tells you the income history of these types of markets. Start with those two things. Also, most importantly, when you pick a market, make sure you check the regulations by calling the local county or city and asking what their regulations are. I've seen very experienced investors buy a bunch of properties in a market and not check the process for that before they bought them and then be incredibly shocked when they run into roadblocks with actually getting the permit.

32:27So make sure you check all that before you get under contract. So, and I apologize for my naivety in some of these questions. No.

32:40So I live in Albany, New York area. Does where I buy matter? Like, let's say I, so my girlfriend's from Colorado, right? She's from Durango, right? Great ski town. Yeah, there's, you know, tons of skiing, tons of hiking, mountain stuff, right? like let's say we wanted to buy a short-term rental that you know in Colorado right so many many states between us and Colorado multiple time zones is that an issue non-issue like am I should I be looking like within a couple hours of my home like I guess the first thing that I would be nervous about is am I what are my exposures if I can't drive there in a reasonable amount of time about zero so it does not matter there's really no reason other than to just do like an annual checkup on your property like people are like well what do i do in an emergency like what are you gonna do if it catches on fire what are you gonna do go insert yourself into the situation no you're gonna hopefully they've called the police already but like you're gonna call the police if something breaks like a toilet are you gonna drive over there and fix it no you're gonna to call somebody to fix it.

33:57Like if a toilet breaks in my office back here, I'm not fixing it. I'm calling somebody to fix it. If a toilet breaks in my place in Tennessee, I live in Florida, I'm calling somebody. So it's just, it's the same process. It's just further away. So you do want to go visit your properties at least once a year, just to make sure. But in terms of where you want to invest, I think, for example, you like Durango is a great place to invest. It's since there are a lot of short-term rentals there. What is it? Purgatory Mountain that's up there by Durango. That's a big one, yeah. You're going to have, there's going to be a lot of infrastructure already in terms of cleaners and handymen.

34:32It's going to be easy to plug in. But if you're somebody that just, it's going to keep you up at night to not be within driving distance of your property, that's okay. It's not wrong to invest closer to you, like maybe the Finger Lakes. That's not wrong either. But don't let driving distance limit you if you do want to invest across the country. I I would say 99 % of our clients at the short-term shop, so there's 5 ,000 of them, don't live within three or four hours of their properties that they own. Oh, that's wild. Yeah, you can do it all remote. What about international? So we just went to Turks and Caicos, stayed in Vrbo, texted with the woman, have no idea who she is.

35:17You know, she was very kind, but then whoever her onboarding person is met us at the gate, handed us the keys. Have a nice week. I'll be back at the end. Boom. Right. I mean, that was pretty straightforward. I mean, is there are there I'm sure there are additional risks. What would they be? And I'm assuming you don't want to start international, but like, is that an option? Have you done that? I have not done that. I know several people who have. Really, you just want to make sure that you as an American are allowed to buy property in that country, that you're allowed to finance property in that country.

35:51Some countries require you have a citizen of that country buy it with you. So it really, I might not start with international just because there's that extra layer of crap to deal with when you're already learning a new business, but it's doable. People do it. It's just not something that I've done. what about these like obscure or uh that's not the right word um we'll call them eclectic properties uh tree houses uh ergs like some of the i don't really get down with some of like the the mountain hippie-ish culture so i don't always know what all these buildings are but i see them sometimes and they look they look interesting but crazy at the same time like you know where do those fall and and you know i got a buddy who has who bought this i thought it was a ridiculous piece of property it was just outside of the anoronic state park and he put like four like pop-up a frame homes on them and they're like almost like little tiny homes and they're separated just enough that they can't really see each other and he does like phenomenally well but they're kind of like odd structures like does that entice people is that like a niche market do those come in and out of style and there's a risk there?

37:03Or is that the kind of thing that you may want to over index on because they do draw more people in? That's a really, really good question. So unique stays can be something that really works well, but you're right. They do kind of come in and out of style, especially if you're doing like tents or structures that are not truly real estate, like not with a foundation, a permanent foundation. You kind of miss out on a lot of the tax benefits that you'd be able to get if it were real estate. Tents are going to be depreciating or domes or any of the above. And you're going to have to replace those eventually.

37:39Whereas a piece of real estate, you can redo it and remodel and things like that. But it doesn't just completely lose its value. It appreciates. So those can be, there are a lot of people who are really successful with that. For me, I like to go with tried and true. so a lot of the markets that I'm in I'm not going to be able to convert anything that I own to a long-term rental like I'm not going to be able to convert a 1.8 million dollar 4 ,500 square foot beach house into a long-term rental that's just not in a in a vacation market so for me instead of an exit strategy I look at the past well Destin Florida where that property is has gotten 10 million tourists every year for the past I don't know how many years they've had that many but I know my grandmother came here and rented rented vacation rentals in the 30s so i i just like to see a lot a lot of tourism and i like to stick with the thing that we know works which is buying a beach house people are always going to do beach houses i do feel like you have a little bit more of a pool of tourism to draw from with a standard not standard but like more traditional piece of real estate than like the the teepees and the huts and the domes and the yurts.

38:51I think with those you're looking at probably single people younger couples traveling together whereas you know we get a lot of families in our bigger ones. So I prefer the traditional vacation rental route to the unique stays thing but there's a lot of people who are super successful with the unique stays. That's the cool thing about real estate investing is there's not really a wrong way you can screw it up really easily, but there's not a wrong way to do it. Yeah. We, uh, we stayed in a, uh, Verbo in, and I don't know why I always use Verbo. Just that's the way it's been the last couple of times, but, um, in Woodstock, New York, which is only about an hour from where I'm sitting, but it's a cool little cheeky town.

39:27And it was the winter time. We were just looking to get away from the kids for a couple of days. And what was funny is I was looking at the properties and they were all like literally just outside of town. It's cool. And, and I got a standard, standard house kind of what you described but the three houses that were like on the other side of the road or whatever they were all owned by the same person and they were pitching like bathe in the creek uh we have an outdoor shower and I was like looking at it I'm going I I feel like that just limits your like I'm I have no desire unless I'm at a beach and I'm just rinsing off if your only shower is an outdoor shower that is not like you got to be a pretty specific type of person that looks at that and goes, that's where I want to stay.

40:11Yeah. I'm not that person. Yeah. It feels like it limits your market a lot. And as you said, you just have to be, I guess it all depends on how you market it and who you're trying to attract and what type of people come to that community. But that's very interesting. So obviously you've done this a tremendous amount and you now, like you said, you've helped 5 ,000 people with, with your business. what is the most common and i hate this question but i just want to start here but as we build what's like the most common thing that you see them trip over um before they come to you obviously once they're working with you you have a template and all that kind of stuff but like i'm assuming for a lot of them they try to do it themselves they hit some roadblock and like i need help with this let me go i need avery's help like i you know let's let's come see what these guys are doing What is usually that thing that they run into that just kind of pushes them towards, I need someone to really walk me through this process?

41:06Yeah, that's a great question. So I think right now, and they've been different main problems over the years, but right now people get really hung up like when they're Googling or looking at different influencers that talk about this stuff. They get real hung up on, oh, I have to go, I have to buy in a market where nobody's talking about. I have to do this thing that nobody's talking about. I have to be in this place that nobody is. I don't want to have competition. When really, you know, a big, I call them mega markets, like the Panama City beaches or Myrtle Beach or Smoky Mountains in Tennessee, where there's a lot of rentals.

41:38There always have been a lot of rentals. And the reason for that, you know, some people will say, oh, it's saturated. Well, places get, quote, saturated because there's a reason. There's enough tourism to support a lot of investors being really successful to where other investors are trying to do it too. so I actually prefer investing in those mega type markets because it's very very easy to get up and running especially as a new person there's plenty of designers there's plenty of cleaners plenty of handymen people are used to giving you the door code and the vendor goes in and sets up the furniture or whatever whereas if you're trying to like trailblaze and do what has not been done before you're going to have to go find a regular housekeeper who cleans primary homes and teach them how to turn a vacation rental as a new investor.

42:25Do you know how to turn a vacation rental? No, you don't. Uh, and it's just harder to find the right types of vendors to learn how to do the vacation rental model and not the primary home model. So I think, I mean, you can be successful in going where no one's gone before, but like, why, why would, why not just plug into something that's easy? So, and you're never really competing with an entire market. You're competing with your bedroom count and then further still if you look up like Dustin for example there's thousands of rentals but a good 45 I mean maybe even 60 percent of them when you look at them they've got terrible pictures and they're painted like pink from the 90s it looks like the golden girls live in there with wicker furniture and stuff so if you're doing it right and managing well and you have good decor you're really only competing with a very small fraction of the market So I think people being afraid of competition of those good, heavy tourism markets makes them make bad decisions sometimes.

43:23I love that take because I think the most important point for those listening in there is the support industries are have good infrastructure in those places like that. That's a that's a really good point that I think a lot of people probably wouldn't think about is and guys, if you didn't pick up on this, Essentially what Avery said is that the handyman knows how to use the punch pad, knows that you're a short-term rental host, knows that they need to come in and punch out or whatever the structure is. They're used to it. You're not explaining it to the first time. They probably have 100 other short-term rental customers that call them as well, so they probably have good references and they're known in the community.

44:02These are all things that are really important. Like you said, if you're states away from that person and you need to call them because a pipe burst or something happened, you want to know that they understand the process. You're not, I can't figure out how to punch this code in or whatever the process is. I think that's a wonderful point. So do you, like, obviously, especially since COVID, it seems like short-term rentals have really skyrocketed. They've become ubiquitous. Like oftentimes if I'm not going somewhere for a work event, I go to either Airbnb or VRBO. Like if we're vacationing most often, we'll look at those places first.

44:40So it's – and I think there's a lot of people from a cultural perspective that that's what they do as well. Do you see that turning? Where do you see us, I guess, in the curve? Are we at peak short-term rentals? Are we still on the upswing? is there do you ever wake up and go oh shit what if no one wants to stay in a short-term rental again like I guess where where are you from a growth or maturation of the market I think that we're in a stabilization I think we've got I mean the vacation rental industry is a 10 billion dollar industry so I don't think we're ever in danger of nobody's ever going to stay in a short rental again, but I do think you have to choose your markets wisely.

45:25That's why I only invest in vacation markets. So I don't buy in metro or suburban markets, areas that aren't dependent on tourism, because those areas tend to end up with anti-short-term rental regulations that are pushed either by the hotel lobby or by primary homeowners. And like, dude, I get that. I live, If I chose to live in a vacation market and I make my money on vacation rentals and I still don't really want one next to me. So I totally get that. So we try to stay in vacation markets for that reason. And I think that a lot of people try to make short-term rentals versus hotels. So, again, I make 100 % of my money on short-term rental income.

46:08but there are certain trips I'm going to stay in a hotel and certain trips that I'm going to stay in vacation rentals. It's not either or. So if I've got to go speak at a conference, I'm staying at a hotel. If I don't have my kids with me, I'm staying at a hotel I want to be waited on. I'm staying at a hotel that has room service for sure. But if we're going somewhere with the kids or my parents are coming, anything like that, it's going to be a vacation rental because we all want to be together. We don't want to be in separate hotel rooms. and so it's just it's a different choice for different purposes not uh oh you're only gonna people only are gonna rent hotels are only gonna rent short-term rentals yeah that makes a lot of sense um i guess you know where like when you're when you're looking at it and i know you said vacation areas.

47:00But is there anywhere else besides vacation spots? Are there like, is it, you know, so take, what about like, like small micro towns or like sprawling cities? Like, I have a buddy that only, he refuses to stay in hotels. He's kind of a nut job, but he refuses to stay in hotels. So he only goes short-term rentals when he travels, even to conferences. And, you know, he, he actually prefers like some Texas cities and stuff for conferences. Cause they have like, they're kind of sprawling and the houses tend to be very accessible to downtowns, et cetera. Like New York city feels like it might be tough.

47:38I don't know because one, I do know that there, there is some regulation there against short terms in certain buildings, et cetera. And there's so many options in New York. So like, like, let's say maybe for whatever reason, vacations spots made me nervous or I didn't understand them or I don't do vacations, so I don't know what they are, et cetera. Is there a secondary spot? Can you look into some communities if you know a community very well? Do you see that market starting to build? Is that a trend that's moving into communities or you think it's just never going to work? Well, no, it just depends.

48:15So there are markets that I've very eloquently named them vacation-ish markets. So they are metro markets, but they're areas that there's either like a ton of conferences like Scottsdale for an example we have an office there and there's like 300 conference spaces there's more conference spaces in Scottsdale than anywhere else in the country that's an area that vacation rentals do awesome and if you decide you don't like it or you know what have you you can convert it to a long-term rental and it'll be just fine same thing with like the Sarasota Clearwater area or like Austin then those can totally work.

48:51It's just you're going to have to navigate some regulations in those markets. Not Scottsdale, but the other ones. Yeah. So, you know, I kind of want to wrap up with your projecting out into the future with property in general. It doesn't have to stay just on short terms. Okay. I think, you know, I recently bought the house that I live in. Do you see interest rates coming down? Do you see, like, where do you see, property feels very tough for me. And a lot of the conversation with guests, both guests I've had and some of the people that I follow has been around the idea that right now young people are struggling to get into homes, right?

49:30The rates have gone way up. I know where I'm at in upstate New York, when COVID happened, all these New York City people just flooded our area. And literally the price of homes doubled. Homes that were going for$250 ,000 to$300 ,000 were selling for$600 ,000 in the same exact community in under two years. And we really haven't seen those prices recede too much. They very much have stabilized. But we certainly haven't seen them come back down. And I know a lot of my younger friends who are in their mid-20s, early 30s who are now looking to buy their first home, they're just frustrated as all hell.

50:03because they're looking at, say, what their friends who bought earlier or that are a little older and the mortgages they're in and the prices they paid and they're struggling to make it work. Do you see the market turning back a little bit? Where do you see opportunity for those individuals to own property? Is it worth renting and having a vacation property like a short-term rental? Is that a way to go for people? Like, should we always focus on our getting a primary home first and then looking to get into the rental game? Like, just maybe do some prognostication over the property market in general and where you see things going.

50:43Yes. So a lot of people don't realize this, but 2023 and 24 are statistically the worst real estate market that we have seen in the history of recording the real estate market. worse than 2008, worse than all of that. Fewer homes were sold in 23 and 24 than, you know, the whole 2008 debacle because those rates jumped. It's not that they jumped so high, they've been much higher years ago, but because they jumped so much so fast that it really kind of stopped everything. Everything has ground to a halt. So what, and everybody was calling for this big crash and thinking that all these prices were going to go down and the crash happened.

51:24And guys, I think we're at the end of the crash, but the prices didn't do what everybody was hoping. They kept increasing. The reason for that is because we have a big housing shortage. So in terms of interest rates, I don't see how they can not have to come down in the next couple years because there's so many industries that depend on that housing market, whether it's finance, whether it's not just the real estate agent industry. and people can't afford to get into homes. It's crossed my mind a number of times in the past two years. Like, are my kids going to be able to afford to buy houses when they're old enough?

52:03And I don't have an answer to that. But I don't follow your short term rental buying strategy, then they certainly will. But yes, yes. So we're hoping to, you know, kind of bring them into the family business at some point. But here's my thing. And I'm by no means an economist. I believe I had a C in economics, macroeconomics in college. C is good enough for this show. C's get degrees, right? So it's going to have to. Something's going to have to move because they can't just have the entire general public unable to buy houses. And I don't know what that's going to look like. Maybe it's interest rates.

52:42I don't think that, you know, giving a down payment assistance, which has been talked about, I don't think that's going to help. I think that that's just going to make things more unaffordable because more people are going to use that to buy houses. And I just, I don't know what the future holds, but I do know that rates are going to have to come down. They're going to have to get things moving again. Past that, it's hard to say. If you're able to buy a house right now with rates the way they are, I would go ahead and use this window before all the buyers come flooding back in when rates inevitably do go down.

53:17I think a bunch of people that are sitting on the sidelines are all going to bum rush the market. We're going to be back to multiple offers on everything. I don't think it'll be as bad as it was in 2021. But I think that if you can get into something now, you've got a better chance of getting a discount off of the asking price. And you can refinance later. Don't say I told you to buy something that doesn't work and bank on refinancing later. Buy something that you can swing now. Hopefully, when rates do go down, you can refinance later. But in terms of being able to start real estate investing, there's always going to be less competition on buying duplexes, triplexes, and fourplexes, quadplexes.

53:57So you can use a primary home loan to buy one of those, live in one unit, rent out the other units, sell it in a year. You do have to live there a year and go buy another one. And you can keep doing that and you can put down as little as 5%, it might be 3%, 3 % to 5%. You don't have to save up a 25 % down payment to buy these things. and you can have 12 units in three years by doing that. So that's a really great strategy that I would probably use if I was getting started today. You could short-term the other units or long-term the other units, or you can be renting your primary house and still get a 10 % down payment vacation home loan on an Airbnb that has to be over 50 miles from your primary.

54:41So that's another way too. If you only have one down payment and you don't want to do the multiplex thing. You could just keep renting, buy that short-term rental, let that income start accruing, and then do it again somewhere else. I absolutely love that advice. And I think you're 100 % right about if you can swing it now, now is the time because what's in between the lines there is that when people start bum-rushing, being that the fact that prices have not receded as much as we thought, they're only going to go up. when there's multiple offers on these properties, when rates come down, the prices are only going to go up.

55:18So maybe they've pulled back 10%, 5%, whatever, depending on your market, they're only going up. So waiting too long and waiting for the right interest rate is kind of like trying to time the stock market. It just simply doesn't work. So I love that advice. Obviously, Avery, you are an incredible wealth of knowledge. Tell people where they can go to get more from you, where they can get involved with your organization. You're coming in. I know you've got a great podcast. So tell everyone where to go. All right. So our website, if you want to work with us in any capacity, is theshorttermshop.com.

55:49You can follow us on YouTube at the Short-Term Shop, Instagram at the Short-Term Shop. We've got a low-ticket course. We feel like information should be available to everyone, STS, short-term shop, STSplus.com. We have a new book coming out in February called Smarter Short-Term Rentals, and you can get that, uh, the bigger pockets bookstore. I'll get the exact link for you. I think it's bigger pockets slash smarter STR, but I'll get that for sure. I love it. I appreciate your time. I appreciate you. Thank you so much. Thank you. Let's go. Yeah. Make it look, make it look, make it look. Thank you for listening to the Ryan Hanley show.

56:34Be sure to subscribe and leave us a comment or review wherever you listen to podcasts. It ain't been a thing for me. I never switched to no change in me. The only thing.

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