I Built a Rental Portfolio That Gives Me “Boring,” Steady Cash Flow

0:00Our guest today is a digital marketing director in Los Angeles by day, but by night she's been secretly building a rental portfolio that now spans house hacksawaiting house. ADA accessible vacation home. In just two and a half years, she's gone from zero properties to a cash flow portfolio. Today's guest, Esther Simeone, proves that you don't need to start with a ton of capital to build purpose-driven cash flow. And she's walking us through exactly how.

0:32This is the Real Estate Rookie Podcast, and I'm Ashley Kerr. And I'm Tony J. Robinson. And with that, let's give a big warm welcome to Esther. Esther, thanks so much for joining us today. Thanks so much. I've been a longtime listener, so I'm really excited to be here. Now, Esther, you live in Los Angeles, which is one of the most expensive and competitive real estate markets across the country. Can you take us back to 2022? You submitted 15 offers in this hot market and you lost out on every single one. What was this like for you and how did it not discourage you from continuing your journey? For sure.

1:07If you guys remember the market in 2021-2022, the interest rates were at record lows at 3 % to 4%, which meant that everybody was trying to buy a home before the rates potentially went back up. And we kind of had the same thought. We thought that the most straightforward and least daunting way, at least, to get into real estate was to purchase a primary home for ourselves and potentially house hack. And so we were just really looking for a property where we could do that. At the time, open houses were just absolute chaos. There were lines down the street, rooms were crammed with people, and you could just really feel that competitive energy in the air.

1:50My husband and I did end up putting in about 15 offers, and they were all pretty solid offers, but we lost out on every single one. It was just bidding war after bidding war. and I remember one house that we were we submitted an offer on actually went for$400 ,000 above asking so that just kind of shows you the type of market we were in yeah and by the 10th or 11th offer I just remember thinking to myself is this what real estate really is it just seemed pretty cutthroat. And it just seemed like people with the deepest pockets were the ones that were winning. And it actually all ended up working out in the end.

2:36We were able to actually purchase the perfect house that really did help kickstart our real estate journey. Esther, let me ask, because 15 is a big number, but it's also not 1 ,000, right? Or like you hear about Colonel Sanders and it took him like, whatever, 10 ,000 people reject him, whatever it or Edison with the light bulb, right? You hear about all these massive failures, but I think a lot of people start to lose their motivation after the second or third or fifth time that it doesn't work out. And they start questioning, oh, is this even worth it? And a lot of people just kind of fizzle out at that point.

3:09What was it about you or your mindset that allowed you to not give up after the fifth no or the 10th no or the 14th no, right? Because had you not gone through those, you wouldn't have gotten that first deal. So what was it that allowed you to keep pushing forward? Yeah, I knew that real estate would just be more of a long-term goal for us. So we thought, you know what, hey, if it takes rates creeping back up for us to be able to purchase a home, as long as it's something that we can house hack in and it's something that will help kickstart our real estate journey, we were willing to be patient and prayerful and just waiting for that perfect property.

3:45Now, what ended up being that property? Can you break down that perfect property for us? For sure. We actually did end up purchasing a property and we call it our SoCal cabin and you'll learn exactly why. But basically when we were house hunting, we were, you know, 12, maybe 13 offers in. We were feeling a bit hopeless, but my husband one day sent me a random listing that looked like a Montana cabin in the middle of Los Angeles. There were giant logs on the ceiling. There was a huge antler chandelier, taxidermy on the walls. We really just laughed at the listing and just kind of forgot about it.

4:29And over the next couple months, we started getting notifications for this property saying that there were price drop after price drop on this property, which was really unusual in that state of the market. Um, but with these price drops, um, the property was now within our buy box. So we ended up going to the open house that Saturday. And as soon as we stepped on that property, we just fell in love. Um, it was on a pretty big lot and a lot of the stuff that made it cabin like were truly just cosmetic. There were things that we could change out. And I think the most important part about this property was that there was a recreational room that was about 900 square feet that was above the detached garage.

5:16So this was basically a duplex. Well, you could make it into a duplex, but it wasn't listed as one. And none of the listing information stated that there was this amazing space above the garage. And when we walked into that recreational room, we just knew we could transform it into a livable space, make it amazing and also rent it out. And don't get me wrong, the house was pretty hideous still. But I think this is exactly why other people dismissed it. And I didn't care that it was quirky. I just really cared that it made, you know, it gave us a way to house hack in a market that where that's very hard to do.

5:57And we made an offer that day, and it was accepted the next day. And that moment really did make me realize that what a lot of other people see as flaws, an investor can really come in and see that as a real opportunity. Ash, I think that there's a lesson there for all of our rookies that, I guess I'll frame it this way. I've seen before, I've heard from other rookie investors that when a listing sits for too long, that gives them maybe this false negative that, hey, there's a reason that that property's been sitting so long. I shouldn't even waste my time I'm looking at it. But you took maybe the opposite approach, Esther, where you said, hey, this property's been sitting so long.

6:38Now it's within my reach. Let's go see if we can make this deal work. And you stumbled upon this extra 900 square feet that wasn't even listed, which would make this a great deal for house hacking. So I think the point or the lesson in Esther's story for all of the rookies that are listening is that the age of a listing, how long it's been sitting, is not a direct result of the quality of the deal. It could be just that maybe they overpriced it to begin with, and that's what made it sit long. Maybe the listing agent was a poor listing agent and wasn't returning phone calls or had terrible photos or poor descriptions.

7:14Or to your point, Nestor, maybe there were some cosmetic things that scared off other buyers, but in the grand scheme of things, could be fixed in an afternoon. So I think it's focusing on the deal and what you can find. And I guess, how did it feel to go from 15 rejected offers to within 24 hours, this deal actually getting accepted? We were just ecstatic. We were like, this is the property that is going to help us get started in real estate. And it was a little daunting because there was a lot of work to be done on that property. but we just like we envisioned what it could become and we just kept our confidence and we knew that we could make it work.

7:54So with that property, once you buy it, what is actually the plan for the full transformation to make it into what you want? How did you actually start out with juggling your rehab while also working full-time as a digital marketing director? For sure. It was a grind. And I was working as a digital marketing director during the day. And then all of our nights and weekends were dedicated to transforming this recreational room into a livable space. I think it was the most exhausting six months of my life. and my husband and I had zero professional experience but my husband is generally handy and thankfully we had YouTube and we had determination and a willingness to just figure things out so along the way we learned how to demo, we added a full bathroom with a shower, we installed kitchen cabinets, we learned how to lay flooring and tile, we at one point took out I think it felt like a thousand nails that were keeping all the brown paneling up on the wall.

8:59And we just freshened and lightened up the space. And it was exhausting, but I love that we could see the progress we were making from week to week. By the end, we had not only created a beautiful guest house, but we also proved to ourselves that we were capable of doing much more than we thought. Esther, let me ask. I want to know a little bit about the financing. how did you guys fund the actual purchase of the home? And then once you guys owned the property, how did you fund the renovations of the 900 square feet rec room? For sure. We went with a primary home loan. So it was just a 20 % down standard loan.

9:41We had been saving for a while just money from our W-2 as well as some other side hustles we were doing outside of that. The guest house that we did end up renovating now does cover about 60 % of our entire mortgage payments. So in Los Angeles, yeah, in Los Angeles, that's pretty big because we're essentially paying less than we were now to live in a 1900 square foot home with a huge backyard as we were when we were living in an 800 square foot two bed one bath apartment before this. So it really did turn what felt like a crushing financial responsibility into something much more manageable. And more than that, I think this, this property just gave me a lot more confidence.

10:30And it just gave me permission to dream bigger and just keep going. Plus that money that you're paying, you know, rent is just going to the landlord. But now your mortgage, it's paying down, you know, the principal balance, which is just adding the equity into your property too. So lots of benefits there. So as you successfully house hacked and proved you can do this. But how do you grow when you still have a full time career? We'll go over that right after word from today's show sponsors. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of the smartest ways to protect and even improve your property's cash flow.

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12:54Communicating with guests, preparing your space, managing reservations, everything runs smoothly while you're off making memories. Your home might be worth more than you think. Find out how much at Airbnb.com slash host. After that first house hack, Esther didn't stop there. She started asking, how do I add more doors without taking on more debt? So you actually turned to rental arbitrage. So can you explain what exactly rental arbitrage is? Sure. Rental arbitrage is basically when you rent a property from a landlord and then you re-rent it as a short-term or mid-term rental. You don't actually own that property.

13:33You're just making the money on the spread between what you pay in rent to the landlord versus what the guest is paying you. So how did you find this property that somebody would actually let you do this strategy with? Yeah. So after we purchased our first home, I knew I wanted to keep scaling my real estate portfolio, but I obviously didn't have the capital to go out and buy another property right away. And that's when I did discover rental arbitrage. And my first two arbitrage deals actually came through networking with a BiggerPockets member. He had been doing arbitrage himself, but he wanted to transition more into a property management role.

14:12So he kindly connected me with a landlord who was open to working with Airbnb operators. and that introduction led to two units near LAX. And that location has been perfect because being near the airport and being really central to Los Angeles, there's always demand. Business travelers, interns, travel nurses, it really just gave me the consistent bookings without the seasonality that a lot of other markets deal with. And I also think my experience in finding these units and being, sorry. I also think my experience in getting these arbitrage units is just a testament to how important it is to network, especially with other BiggerPockets members.

15:01Everyone I've connected with have been so open to sharing their knowledge and their resources and their connections. And I think it just really showed me how much further you can get when you're surrounded by the right people. Yeah, I couldn't agree more. And you mentioned networking And I think that's my question. You said it was another BiggerPockets member, but how did you actually connect with that person? Did you just go onto the forums and say, hey, my name's Esther. I'm looking to do rental arbitrage in the Los Angeles area? Or what steps did you take to connect with that person? Honestly, in the beginning, I was just going to a lot of the BiggerPockets.

15:36There were a lot of pop-up networking events. And I remember this one was hosted by Rob Aposolo and David Green at the time. It was in Los Angeles. And so I ended up going there and met a bunch of people. This BiggerPockets member stood out to me because he said he was from the same town that I live in. So we just kind of got to talking. He's run multiple short-term mentals and mid-term mentals. And so I just wanted to pick his brain. So I got his number and I called him afterwards. And that's when I learned that he had some contacts that I could potentially reach out to for operating an Airbnb through arbitrage.

16:18How did you balance scaling two arbitrage units while still leading a marketing team full time? Like, I feel like I'm really hitting this home, but I think a lot of listeners are working jobs and have no intention of actually leaving right away to become full time real estate investors. So what have you been doing to keep yourself organized or using certain systems and tools? For sure. Honestly, systems saved me. In the beginning, my husband and I were doing the cleaning ourselves. And we just realized that that was not worth our time. And we were also not doing a very good job at it either. And so we invested in really good property management software.

17:00We hired professional cleaning crews that we could rely on. and we just documented everything so that the day-to-day operations didn't eat up all our time. And I just really focused on the things that did require my personal touch, like guest communication and pricing strategy. And then we outsourced everything else. And I think that balance really did let me grow my portfolio while still being able to work my W-2. And of course, it wasn't without sacrifice. There were a lot of days where we just had to kind of troubleshoot on the fly. But I think the trade-off was definitely worth it because I just, I knew I was building something for myself in the end.

17:38Esther, you know, I'm in Southern California as well. What city were you in near LAX and were there any issues with regulations in those markets? Yeah. So the city we're in is El Segundo, which is a tiny coastal town right near LAX. Yes, so we aren't able to do short-term rentals because that is against the Alpha Gundo laws over there. But we do do midterm rentals, which is 31 plus days of guests staying in our unit. And that's actually allowed. That's similar to all other long-term rentals. So that's how we got around being able to rent this on Airbnb and Vrbo and other properties. Got it. And what did those midterm rentals teach you about consistent cash flow compared to the short term rentals or traditional house hacking?

18:29For sure. They taught me that consistency can be just as powerful as high nightly rates. With midterm rentals, I wasn't chasing bookings every week. I had interns staying three months at a time, travel nurses on assignments and business professionals who were on extended projects. And so the occupancy rate has been hovering around 90 to 95%. And I think that kind of predictability gave me a peace of mind. And it was a reminder that sometimes boring cash flow is the best kind. It's steady, it's reliable, and it just really freed up my mental energy so that I can think about the next deal. I know that this market, SoCal, is obviously one of the most expensive markets in the country.

19:15What is your rent on these units? And did you have any fear about the rent amount and signing a 12-month lease to say, man, like, am I actually going to be able to cover this rent on a monthly basis? Yeah, it was very daunting, but I did start with smaller units. So they are studios. So they go for about$2 ,100 in rent per unit. And that was still a very big burden because when you have two, that's, you know,$4 ,200 out of your pocket every month. If you don't find someone to live there, you have to basically fund that yourself. It was extremely daunting at first, but I did my research and I just took a leap of faith and they ended up doing really well.

20:00So I'm really, really happy about that. Here I am in Buffalo, New York, getting ready to rent a studio for$6.50 a month. $2 ,100. Oh my God. And I was like, oh, that's actually not too bad. Esther, how long of a lease did you sign when you first took these units on? Yeah, they were a one-year lease, and then it rolled over to a month-to-month basis. So we felt like we just needed to make it through one year, and then if we did want to pivot, then we knew we could. So at this point, you're really starting to see a path from employee to entrepreneur, especially after giving up the cleaning and outsourcing that.

20:43Did you still feel like change to your W-2, though? Did you feel like you couldn't shift out of that? Honestly, I wouldn't say I felt chained to my W-2. And in many ways, I saw it as a vehicle to kind of help me achieve my real estate goals a lot faster. It provided the stability and the income that I could leverage. And I've always viewed real estate as a long term strategy for building financial freedom. I just I knew it wouldn't be quick. and I've always had an entrepreneurial spirit going other e-commerce businesses but this was the first time that I really treated real estate as a business and seeing myself as a true investor and what I also love is just how the tax benefits from real estate complement my W-2 income it makes me feel like both worlds are actually working together and not against each other which has only motivated me to continue to scale One last question for me on the midterm rentals, Esther, you mentioned you're at like 90 % occupancy.

21:44Where are you sourcing most of these guests? Is it just through Airbnb and Vrbo? Are you doing Furnish Finder? Are you reaching out to the businesses themselves? What strategies are you using to keep it filled? For sure. A good portion of them actually came through Facebook. I posted them on Facebook marketplace. And I also posted in a lot of housing groups, even just like our local community groups, you know, also also going to community groups saying, hey, if anyone has family coming to town for a couple months, like, I have these units that are fully furnished has a full kitchen, really central to that coastal town.

22:24So that's how I found a lot of people outside of just the standard platforms of Airbnb, Vrbo, and Furnish Finder. I actually stayed at a midterm rental in El Segundo in college. Now, I'm like, I don't know, 50 miles east of El Segundo, but that's like, I don't know, it's like almost a three-hour drive home during rush hour traffic. And I was interning in El Segundo. And I stayed in a midterm rental. I was there for, uh, I think 12 weeks during the summer, you know, so I can only imagine all the different businesses that are down there. Like there's probably a pretty healthy demand of people in that specific market that are looking for, for midterm stays.

22:59So, man, I never thought about midterm renting and El Segundo, but now I've got, you know, another, another shiny object, maybe go chase right now. Cody, I have to laugh because recently I shared my college experience of, um, living in a frat house over the summer for 12 weeks. And here you are in a fully furnished midterm rental. Slightly different life experience there, because I think Sean, my son, he was already like in preschool. He was actually going to school in El Segundo during that summer. So I think that the frat house wouldn't have worked as well. But now, Esther, we know that your most meaningful deal wasn't even necessarily about the cash flow.

23:35It was about creating a space for someone in your own family they could actually use. And we'll get into that deal right after a word from today's show sponsors. If you own a short-term rental, here's something worth knowing. Not all landlord policies are built for your type of property. And with holiday bookings, chilly weather, and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short-term rentals, covering property damage, liability, lost rental income, and even unexpected issues like bedbugs. Steadily works exclusively with real estate investors, so they understand the details that make short-term rentals unique, and they build coverage to match it.

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