84. The Secretly Lucrative $2.4M/Year Rental Strategy

19:49So in 2018, I realized I got another booking, very similar thing, but somebody reached out to me via Furnish Finder, which is also a place where you have travel clinicians searching for properties as guests and they're looking for landlords. So for those of you that might want to look into that, I got this reference from Furnish Finder and it was another person from ALE Solutions and I created a relationship with them. We ended up getting a booking for a four bedroom, two bath home. Same situation, a family lost their property. They were staying in three different hotel rooms because they had seven people in their home.

20:19They had four adults, two children that were over the age of 18 that were living with them and then two kids that were younger, plus the husband and wife. And just so you guys know, the nicest hotel in that market at the time was a double tree and it was$200 a night. So 200 times three, right? That's$600 a night times 30 nights. So you do the math on that. They were spending quite a bit of money to stay in these hotels. And that's where I realized like these agencies, when folks lose their properties, insurance companies need to pay, you know, they need to pay quite a bit of money to have these families, you know, relocated into a house that's same and similar.

20:49And a lot of the times these insurance companies will take a percentage of what their house is worth that is lost. And part of that income, it's called loss of D coverage. That coverage will now say it's$7 ,000,$10 ,000. Again, they take about 10 % of the portion of the property that's lost and they'll allocate that to them staying in homes. So for me, I realized that the insurance agency adjustment relocation claims paid 2x what the nurses agencies were paying. So instead of getting$4 ,000, we are now getting $8 ,000 of property. So I started creating relationships with these insurance companies like ALE Solutions, Dan Housing, there's CRS Housing.

21:21I started creating relationships with the relocation specialist, the same exact thing that I was doing before. And now instead of getting paid$4 ,000, we're now getting paid$8 ,000 per property. And just so you guys get context to this and going back to the initial conversation that we had, my mortgage payment, let's just say I was all in at$2 ,000. We're getting an$8 ,000 claim. I was making$6 ,000 and I'm making$6 ,000 and plus some change per door. And that's where everything really changed for me, where I'm just like, holy smokes, there's so much opportunity here to build in this space. And it's just by being creative, by connecting with companies, by looking at how I can house people.

21:53So over those years, I've really started looking at different ideas on how I can connect with companies. In fact, I don't know if you've heard of Extended Stay America. Have you heard of that at L. Alex? Yeah, yeah, I have. Yeah. So I started driving. This is going to sound creepy, but I want everybody to listen to this real quick. So I started driving by those places at night, 7 p.m. at night, and I would take a picture of every single work truck that was outside. And the reason why I did this is because these companies are paying thousands of dollars to have these folks staying in these properties.

22:19And I'm giving an example here in a second. You know what Dave & Buster's is, Alex? Have you heard of that? Yep. So there was a Dave & Buster's being built in my market. And I went and I saw a work truck that was out there and had plates from South Carolina. And I took pictures of the truck. I called the company and I said, Hey, I saw that you guys are, there's a work truck out here. You guys are from out of state. Can you tell me where your folks are staying? I own multiple properties. We can help your folks stay in a place that's comfortable and literally three minutes from the job site. And this lady named Misty on the phone, she had told me that they were staying in a hotel and they had six engineers that were going to be there for six months.

22:52Going back to the same situation that we talked about with the insurance carrier, the family, they're paying $200 a night for six guys. So now we do the math on that. So they're paying literally$30 ,000 plus to have these guys staying in a hotel. And that's when I said to them, like, we can house all your guys. I have a six bedroom house. You know, our premium is going to be$10 ,000 a month without even batting an eye. She said, great. Like we'd love to do it. We'll have one of the foremen go walk the place if they're okay with it. So that's when I realized like, I can now go to these extended stay Americas because they have the biggest contracting companies.

23:20They're the biggest contractors in the US with these agencies that do construction and engineers. So I started that same exact formula, which is the same thing that we talked about in the healthcare sector, but now with the construction side. And that's how I was really able to dive in and find all these individuals, all these companies and start building an actual business that's based off of, you know, connecting the businesses. And again, at the end of the day, how we talked about Jeff Bezos and Elon Musk, how they solve a bunch of problems. Well, I'm niching things down and solving problems specifically for these companies.

23:46And again, all of us, most of us have an extended stay America in our backyard. A lot of us have healthcare clinicians that are in our backyard through to hospitals and things like that. So it's really just focusing on the business and creating a niche and finding that idea and then really capitalizing on it. And that's how it's evolved since travel nurses. Now we have multiple different sectors. In fact, we have contracts now with a company called Gallo. They have the biggest wine industry in the US and they're based out of Modesto, California. So we have a contract with them. So anytime they have any folks that are coming from Europe or from other places in the US for their wine or their engineers that come in, they stay at our properties because we have a contract with them now.

24:22So again, it's just thinking outside the box, think about different ways and ideas on how you can help companies save money. And that's how you build a business. So this is going to bring us to a section of the show that we call our Fan Blitz questions. These questions come from our YouTube community. Listeners, you can join the YouTube community by go to youtube.com slash upflip and you can post questions to future podcast guests. I have five questions for you here, Jesse. We're going to try and do them in like a minute. Are you ready? I'm ready. All right. First one from Danny boy. What type do you recommend as your first rental property, townhouse, single family, et cetera?

24:52I would do it backwards. Like we were mentioning before earlier, I think if you're able to get a multi-unit, like a duplex or triplex or something like that, that's how I'd start now. So I'd really focus on that. But again, if you find a deal, it's a single family. I do think that those are a lot of opportunity in single family as well. But personally, I would probably start with a duplex with one or more bedroom. In fact, if you can get a two bedroom split duplex, that's like the perfect scenario. The more heads in beds, the better. Danny Boy is asking if he should start with his dad who has traditional residential landlord experience.

25:18And so I guess I'll frame that question as, is it useful to bring in a partner who has that landlord experience? I don't necessarily think so because again, I mean, it's going to help no matter what, because that landlord experience I believe is helpful. But the business, I think the business side of things is way more important, is being able to connect on the business level. So if you have somebody that has any sales experience or business background, I believe that's going to be so much more helpful than just traditional landlord experience. Because again, at the end of the day, getting forms and all that stuff, that's pretty easy to do.

25:46But building a business, that's a different kind of acronym that you're going to have to understand. I feel like that would be more important. But yes, anybody with landlord experience is great. You're going to want to have that. Saiji Hatch would like to know how you would go about finding your first property to MTR in the current economy and interest rate environment. Yeah. And this is one of the things, Alex, I'll be short with this. I think right now, the midterm space is probably one of the better ways to be able to cash flow positive in the interest rate environments. In fact, right now we're still buying property and cash flowing, you know, over 15 % cash on cash returns based off the midterm model.

26:18But here's where we need to make sure that we're careful. You have to make sure your numbers pencil in that are at least going to cover your long term. For whatever reason, if you have to pivot out, you would do that. So I would personally be looking on the MLS for properties that are sitting over 30 or over 90 days or getting ready to expire, reaching out to owners, seeing if you're able to subject to or get creative financing or see if there's a way that you can work the rates, work the price of the property lower. Because again, you want to have the lowest possible price that you can, you know, principal interest, all that stuff.

26:43So acquiring the property now is going to be important at a lower price point. And this one from Lashana Jackson, can you pull equity out of your current home to MTR a new property? Yes. Yeah, we've been doing that. The thing with pulling money out right now is that the interest rates are so high. So we've been actually doing a lot of HELOC loans on the existing properties that we have. But yeah, you can do that just right now. Like if you bought a property a couple of years ago, your rates are low. You probably don't want to refi out and pull cash out at a 6 % rate. And last one, if you could change one thing about your business, what would it be?

27:11If I can change one thing about my business, it would be to have incorporated into a business model earlier. I was a sole proprietor for until 2020. So for five years, I operated by myself and I didn't necessarily create a business out of it. Again, granted, I did have a W-2 job and it was very, you know, taxing to do both. But I would say that I wish I would have started earlier and created like a COO to help me earlier, especially when we started making, you know, six figures in the business, which is a couple of years after opening up. And I was doing a lot of it myself. So I think we would have been able to grow a lot faster if I would have brought somebody else in to help.

27:42Those are our fan blitz questions. Listeners, let us know what you think of the Upflip podcast by leaving a rating and review on Apple Podcasts. It helps other people find the show and unravel how great businesses are built. Jesse, just a few more questions for me before I let you go. I want to talk about the properties themselves and finding those properties. How do you go about sourcing the new property that you want to buy and determining that it is going to be a good investment? Yeah. So the buy box that I have is typically in a B minus neighborhood or B plus or C plus neighborhood. So I look for properties that are within a 15 minute drive and that's including traffic to a hospital.

28:18So I typically like to be, you know, one hospitals. They are typically what you see on like Grey's Anatomy, where they have multiple different clinicians that are on site sleep at the hospital or on call at the hospital. Those level one hospitals typically have a lot more beds, a lot more high acuity patients, which typically has a lot more travel nurses. So I try to formulate myself or put myself into a property that's nearby one of those types of hospitals. So again, just a B class neighborhood near a hospital. Usually I look for three bedrooms or more. I do believe that having bigger bedrooms allows you to have more flexibility.

28:52And granted, I don't want to just put all my eggs in the healthcare basket. So just as we talked about a minute ago, housing clinicians is fantastic. Housing companies and folks who have lost their properties due to fire flood, that's the typical home is a three bedroom, two bath. And then again, for the relocation of these folks that are working for construction companies and things like that, they have more than one individual that's working at a time. So being able to house more people gives you more flexibility and also offers an exit strategy. And I think for me, that's where it's really important is having multiple exits.

29:18The flip side of that, what are some red flags of a property if you're looking at it that make you kind of go, oh, we are not going to do this deal? Yeah, some of the flags are, this is why I like to buy in B-class neighborhoods. So if you are in a market that has a lot of like transient folks that are walking by, if you're housing clinicians, a lot of them will get worried about, you know, they leave at 7 p.m. at night and arrive at 7 in the morning, they typically work 12-hour shifts. So if they're uncomfortable or don't feel safe, I've had a property that was in a probably a C-plus area, but it was near a bus stop, which had a lot of transient folks that were walking by and the clinicians didn't feel comfortable.

29:50So for me, that's a red flag is really understanding the market, really knowing what times and this is where you drive by at certain times at night and kind of see what's going on there. You know, you want to make sure you piggyback on a realtor to give you insight on what that area is like. And I think those are really important for especially for housing travel nurses and things like that. That's going to be important. So again, they need to feel safe and comfortable in the environment they're in. And then looking for a little bit of advice for somebody who wants to get into this, what's something that they should be thinking about that they're probably gonna miss as they look at getting their first property?

30:19Yeah, I think the first thing that somebody should think about when they're getting into this business is really understanding this is a business at first. I think when I talk about this or people watch me on YouTube, it sounds easy, but in reality, it takes a lot of time and energy to build these things. So you really have to have that four set of understanding that this is gonna take time and energy. But the great thing about this, Alex, is that when you create a business like this and you're buying real estate, you have two separate businesses. So I can eventually sell my real estate and I can sell my business.

30:46And that's the thing that's the most valuable to me is that that's an exit strategy. So everybody getting into this, like it's going to take time and energy. But trust me, if you do it the right way, it can be very lucrative and it can help you. In fact, leave your W-2 job if that's what you're looking to do. I mean, imagine just having, you know, three properties that are cash flowing you 3K each. I mean, that's 9K a month that you could potentially use to live off of. You've talked a lot about the ways in which you've gone about building relationships with the various recruiters and agencies and other businesses.

31:13What kind of marketing are you doing for the business kind of on any side of the equation? Yeah, so we're doing a lot of outreach, outbound phone calls. We're on LinkedIn a lot. We are scouring Furnish Finder, as I mentioned a little bit ago. Furnish Finder is a, well, it used to be a market specifically for housing travel nurses, but ever since probably the last couple of years, it's evolved and changed a lot of people like digital nomads, people that are traveling all over the US that are now searching for it. In fact, I just had a midterm rental summit in San Diego in April and the CEO of Furnished Finder, his name is Brian Payne, mentioned during that summit that 50 % of folks looking on there are not in the healthcare sector.

31:48So we will actually call, they're called unmatched leads. So you can actually see all the people that are searching for properties on there. So we'll reach out to those individuals on there, find out where they're coming from, what agencies are working with. We really understand by keeping our ear to the ground what's happening in our market. So that gives us better flexibility of knowing like, okay, hey, here's who we can serve. Here's the type of clients we can go after. Here's what we're seeing right now. Here's the trends. So again, like it's a lot of detail, just like if you're searching for a property, but this is what it takes to build a business is understanding all those little nuances that will eventually pay off in dividends over time.

32:18I do want to ask you about the midterm rental summit. What kind of made you want to put that together? And what were some of the bigger challenges of making it happen? I'll break this down as simple as possible. There's regulations that are happening to folks on the Airbnb side all over the US. In fact, in Modesto, where I have a lot of my property, we all received a cease and desist letter, which obviously means we need to shut our Airbnbs down. And right now you're not allowed to Airbnb in 3 % of the US. More and more states, Dallas just got hit with short-term rental regulations. They're not allowed to short-term rent single family homes anymore.

32:47So we're going to start seeing more of this happen. A lot of those folks bought property just to specifically short-term rent. And now the other pivot to that is midterm rentals. So for me, I just realized that there's such an opportunity here. And again, COVID hit, it really shed light on midterm rentals. And And just to give a little bit more context to this, so you guys understand this, Alex, you know who Blackstone is, I'm assuming, right? It's a big, big, giant company. So they just raised, and you guys can all Google this, they just raised$30.4 billion for their latest real estate fund. And what they're doing is they're actually focusing on midterm rentals.

33:16They're focusing on getting away from traditional assets like commercial buildings, which aren't doing well at all. When you start seeing smart money, which is Wall Street money, make moves like this, typically the general public doesn't take notice of this for three to five years. But luckily now we have the internet, right? We can see what they're doing. When you start seeing smart money make moves like this, we know that the writing's on the walls and that's where we skate to where the puck is going. So I think in the next three to five years, we're going to see a tremendous uptick. So everybody that's listening to this right now, you're going to want to get into this space now because again, in the next three to five years, you're going to have a tremendous opportunity to build a business.

33:46In fact, I look at it like short term rentals are, you know, Airbnb is like in the seventh inning in baseball terms, right? I'm a big baseball fan. So imagine there's not really many places for Airbnb to go. They've created experiences. They are now focusing on rooms and the midterm rental space is going back to baseball terms, I feel like we're just chalking the field. Like the umpires are barely just getting out, grounds crews out, they're barely taking care of stuff. So if that gives you context to even if midterm rentals become half of what Airbnb is, imagine getting in in 2007 and being able to ride that way for years.

34:14I do believe that there's a lot of opportunity that will be coming to people. In fact, I think that smart, intuitive investors will start looking at contracts more because real estate, Alex, has been easy for the longest time. It really has. For the last 10 years, real estate, you just buy a property, fix it up, put it on the MLS or put it on the, you know, for rent and you can make money from it. Now, that's not the case. We have to be creative. And I think this is where investors are going to start thinking we need to figure out additional ways to make money. And then it would be difficult to have a conversation about the rental industry without talking about tenants and dealing with tenants.

34:43And I guess to start that conversation, what types of problem tenants have you run into and how do you avoid having problem tenants in the first place? That's a really good question. So typically when I work with these agencies, they're the leasees on the property. So no matter what, these are multimillion dollar companies. These agencies are the leasees. So whoever's there, they're actually, we have a lease agreement with these companies. So those companies are assuming responsibility for the guests. And just so you guys know, just to give everybody context, most travel clinicians and most people that are working, they're there for an assignment.

35:13They're not there to stay. They're not going to eventually get evicted or not move out. I've never had that happen to me one time. I have had like, you know, say construction guys like drinking beer and leaving beer outside and being loud. Those are simple things that we've had before that we can address very easily, but never had any tenants that, you know, extended their stays or anything like that. Again, these agencies are majority of the time taking responsibility for the tenants that they have in our property. So I feel comfortable knowing that these multimillion dollar agencies are going to be footing the bill for these folks at the end of the day.

35:39And I think that that's where you really want to make sure that you have your leases tight. You have, you know, letters of intent and letters of responsibility stating that that's what's going to happen, that if these tenants were to ruin the property or whatnot, these agencies that are worth literally millions of dollars are going to cover the losses. In fact, Most of the times that does happen where they cover anything. But again, most of these folks are business travelers. You know, they're for assignment. They're not there to mess around. Have you ever lost faith in the hosting business? You know, I mean, listen to the way you tell the story and it sounds like it's all just been up and to the right the whole time.

36:05What have been some of the low points for you and how did you get through those? Yeah, some of the low points. I mean, sometimes you're going to have vacancy. I think for me, you know, not underwriting properties with vacancy, especially when I first started off the first two years where, you know, we'd have people stay for, you know, I got that first contract for a year and then I ended up getting a contract again, but they did a month to month, a month, whenever they had clinicians that were staying. So we'd have vacancies for say 30 days or even 45 days. So for me, you know, that's where it became kind of cumbersome.

36:31And that's where I actually got into Airbnb is to fill in the gaps between the folks that were staying midterm. So I didn't necessarily lose confidence in it, but I just started realizing that I have to make sure that I underwrite these with vacancies. So right now we still underwrite properties at a 15 % vacancy rate, which can happen. And again, granted, you have to make sure that you're paying attention to, you know, what the markets are doing. If If there's clinicians that are coming, like I know now about seasonality with travel nurses. And then when it comes to the insurance relocation claims, those are very sporadic.

36:57It's kind of like you have to be in the right spot at the right time. It's very circumstantial. If somebody is a loser property, you know, you have a place that's nearby and in your zip code or a family wants to stay in the same school district is where their kids are going. So it's very circumstantial. But that's also why I talk about going deep in a market. And this is one of the things that I wanted to bring up. Instead of buying property that are just sporadic all over the place, I think it's most important to, if you're focusing on one market, to buy property that are in multiple different zip codes in that same market and go deep in the market.

37:22And I think for me, when I first started, I only had one property. I was on one spot, one zip code. But now I realize, like, you know, over time that you want to spread your properties out. That gives you more potential to bring on, you know, relocation claims and things like that. So definitely underwrite with a 15 to 20 percent vacancy rate. What's the most valuable piece of business advice that you've ever gotten? The most valuable piece of business advice that I've ever gotten is don't think that everything I had one of my really good mentors. His name's Aaron West. You know, he had said to me, you know That you don't want to necessarily worry about what other people are thinking And the reason why i'm bringing this up is because when I first started this business My family didn't agree with me.

37:58Nobody agreed with me They're like, why would you buy a property to house travel nurses? Granted, I bought my first property Not even to live in it but to house people to start a business And everybody was telling me out that I was an idiot that I was dumb and this is stupid and I was by myself So I think the best advice I ever got from him early on was to, you know, focus on what you believe in, surround yourself with people that are going to encourage you and uplift you. And granted, a lot of times our families aren't necessarily going to understand that. In fact, everybody now in my family is like, oh, my God, you're a genius.

38:23Like, that was the best move ever. But in 2015, they were like, what are you doing? We're going to be bankrupt. We're going to be losing everything. So I believed in what the ideas that I had are. And again, if I didn't have mentors that were, you know, encouraging me, I probably wouldn't have continued to push forward. If you could pick the one thing that people take away from this interview, what would it be? Yeah, the one thing that I would want somebody to take away is I'm positive this is happening, that people are looking at real estate in a different way. And I think right now is the most important time.

38:48As I mentioned a little bit ago, real estate has been the same for, you know, hundreds of years, right? For hundreds of years, it's been the same. And now, you know, these concepts and these ideas, things are changing. You know, COVID kind of revamped the way that people are staying in properties. You know, when you start seeing smart money make moves like this, we know that there's ability to look at things in a different way. And there's always going to be people traveling. There's always going to be healthcare clinicians that are looking for jobs. I talked about earlier how we're expecting to lose more clinicians, and that's going to be a bigger detriment to folks here in the US on the healthcare sector.

39:18So I really am banking on, and I think that this is going to happen where people are going to start looking at real estate in a different way. And that's what I'm looking for, is that people to have a different idea and a different way of viewing real estate. And again, the great thing about this is that you're able to build a pretty substantial book of business with not a lot of properties. And I think that's where the gold is at, is being able to build something that's going to pay you dividends that you're building relationships with. And for me, relationships are the new currency. They're going to go a lot further than a dollar today.

39:44And I'm just happy to be able to express what I've been able to do over the last... I'm not a super genius guy. I'm a pretty humble, regular, normal guy. I think anybody can do this. It's just putting yourself in the right spots, being around the right people, surrounding yourself with community, and really building ideas and creating something outside of what we're traditionally used to. What's your favorite business book and why? Favorite business book, I'm going to have to say, I don't necessarily know if it's a business book, but this is more of a mindset book. It's called The Gap and the Gain by Dan Sullivan.

40:11I'm not sure if you've read it or not, Alex. But for me, that book really opened up the idea of, I've always been chasing something. This is me maybe opening up. Alex, you're my therapist right now. But I want everybody to realize this. When you become successful in something, especially for me, I'm a former athlete and I've always hit a certain thing, a certain level, and I've always wanted more. You know, the next thing, the next thing, what's the next thing? So you hit your first hundred thousand. Okay, now I want two hundred thousand. And the gap in the gain really defines the gap mentality, which is always wanting something more.

40:39And then the gain mentality is like, look at how far I've come. So it really shifted my mentality to being an entrepreneur, being thankful and grateful for where I am and the opportunities that I have. And, you know, really looking at how far I've come rather than the next milestone to hit. So for me, that's a book that if anybody is an entrepreneur or wanting to get into something or is always looking for the next success that are not necessarily getting fulfillment from, that book is fantastic to help you in your mindset and also talks about business quite a bit. Jesse, where can people learn more about you and AirVenture Hosting?

41:08Yeah, so you can follow me. I have a YouTube channel. If you just type in Jesse Vasquez, I should pop up there. And I also have an Instagram channel that's pretty active. So at The Real Jesse Vasquez on there. And you guys can find me on Facebook too, which is at TheRealJesseVasquez as well. That is going to do it for this episode of the UpFlip Podcast. Listeners, you can find more advice for how to start or grow a business the right way on the UpFlip Hub. And if you like this episode, make sure to let us know by leaving a review on Apple Podcasts or wherever you're listening right now. Jesse Vasquez, thank you so much for joining us.

41:37Yeah. Hey, thanks, Alex. I appreciate it. And hope everybody has a wonderful day.