Cold open

SPEAKER_00 0:00

Welcome to Live Let Thrive, a podcast about the Airbnb life, the share economy, and everything in between. Here are your hosts, Micah and Steve.

SPEAKER_01 0:11

Hello, hello, hello.

SPEAKER_05 0:13

And welcome back to another exciting episode of Live Let Drive.

SPEAKER_01 0:21

Episode 121? Yeah, 121, man. We had some Micah uh quickie episodes in in between, but yeah, official episode 121 of your favorite Airbnb VRBO, Home Away, Turolib, Share Economy Podcast in the world. And we're back, you know, to give you all that knowledge. And we have a special guest.

SPEAKER_05 0:44

Yes, we have a special guest, Ethan Cook, on today. And we are bringing Ethan Cook on from, I believe, the Bay Area, right?

SPEAKER_02 0:52

San Francisco. You got it.

SPEAKER_05 0:54

Cool. All right. So, Ethan, um, first, let's just get your backstory before we hop into the badness that's going on right now. So, how how did you get involved in short-term rentals,

Ethan's path from HR director to 25 Bay Area rental arbitrage units

SPEAKER_05 1:06

corporate rentals? How did you get involved in that?

SPEAKER_02 1:08

Yeah, so I uh I worked in corporate America for like 25 years as an HR director, and that stopped working for me. And uh, while I was working my day job, my wife and I had bought a couple investment properties here in the Bay Area. And we also um would Airbnb our house for like a week at a time when we went on family vacations, and it was it was awesome because you know, if you have a house in San Francisco and you're renting it out, you can basically go anywhere without a plane ticket and like make money during your vacation. So uh that was a really nice way to just pick up some extra income and and uh take advantage of the uh kind of the early days of the sharing economy. And then when I got out of corporate America, I thought, I love real estate, I love investing, I don't mind being a landlord, I love hosting. What can I do with this to really make a career out of it? And so working with a mutual mentor of ours, Al Williamson, and another guy named Jay Martin, who had really successful Airbnb rental arbitrage businesses, I rented a home down the street from me because I knew the market and knew what I could get from my own place renting it out, and uh, you know, started renting it out fully furnished to business travelers, was successful with that, and then just started picking up uh about a unit a month after that. And and it's it was history from there, and that was about two and a half years ago. Wow. How many units did you get? Uh I'm up to about 25. Nice.

SPEAKER_05 2:43

And are you are all your 25 still all in the Bay Area?

SPEAKER_02 2:47

They are, yeah. Um, I have a handful in San Francisco, a couple in San Jose, and then the rest are all in between in San Mateo County within about 10 miles of SFO Airport.

SPEAKER_01 2:58

And what can what kind of units do you look for? One bedroom, two bedrooms?

SPEAKER_02 3:03

Uh, you know, my biggest, my most successful units, and this is kind of part of my secret sauce, which I'll share with anyone who will listen, is uh I go for typically two and three unit

The in-law unit secret: renting two-unit homes as a single property

SPEAKER_02 3:16

homes. So like I'll look for a home that has an in-law unit. Because a lot of landlords, a lot of mom and pop landlords, to them it's just like a five-bedroom property with a with three bathrooms. To me, it's two or three units, where there's maybe a main unit with three bedrooms, two baths, and then one or two studio units. Um, and I find that I I make the biggest margins on these kind of small multi-units, if you will.

unknown 3:45

Okay.

SPEAKER_01 3:45

Nice. See, Michael's always been talking about that, getting a bigger house and renting it out, you know, kind of separating it out room by room and stuff like that. And that would kind of even help make it recession proof, that's even a thing.

SPEAKER_02 3:56

Yeah, yeah. I mean, certainly kind of my core philosophy in real estate is that everyone always needs affordable housing, right? Whatever that means. I'm I'm not talking about low-income housing per se, but if you own affordable housing and you can rent it out to people, whether it's furnished or unfurnished, you know, affordable housing in San Francisco means that four people live in a house and pay $1,000 each for rent. And that's really affordable around here. As crazy as it sounds, and you you know, you just use the same principle with Airbnb. So if you can rent a place for uh at or below market value, split it into a couple of units, furnish it, then you're adding natural value on top of already having a place which is above market rent, unfurnished. So I'm I'm kind of just now, we can get into this later, but I'm just now having to fall back on kind of that fundamental uh fundamental belief and fundamental strength of having rental properties at or below market value.

SPEAKER_05 5:02

So you're operating 25 units and probably one one of the most expensive areas in the United States right now. How did you go about automating those 25 units and automating the process of it?

SPEAKER_02 5:15

Uh I will be really honest, automation

Automating with channel managers: Guestie and listing syndicators

SPEAKER_02 5:18

is not my strength. I'm kind of a one-man show, and it's really only now that I'm needing to market the heck out of my properties and take and not just kind of rely on a lot of easy Airbnb bookings, but needing to market all over the place and needing to automate my accounting and stuff like that, then I'm really getting into it. But I'll tell you some of the things that I'm learning now that I'm really diving into it are use channel managers. So if you've got a bunch of short-term rental units, you know, use something like Guestie or Your Porter. You pay a guestie's a little more expensive, but they're great. You pay a little bit for each unit per month, you blast it out through one website, and then they post it automatically to 20 different furnished rental websites, all the big ones like Airbnb, VRBO, HomeAway, Booking.com, and so on. And then they synchronize the pricing, synchronize the calendars. So that's a huge time saver that I'm just now implementing. And then if you have long-term rentals that you want to rent out, there are long-term rental syndicators, you know, property management software like um Rentlinks and uh the one I'm just started using TurboTenant, um, which basically does the same thing across many long-term rental websites. So you post listing once, it goes out to Zillow, it goes out to Trulia Hotpads, uh, you can even cut and paste some stuff onto Craigslist and cover uh you know apartments.com and cover most of those long-term rental websites. So that's been a really new and but very important part of my new uh coronavirus marketing strategy.

SPEAKER_01 7:00

Yeah, you can you got to step up your game in this environment.

SPEAKER_05 7:04

Yeah, what was what was the name of that?

SPEAKER_02 7:07

Of which one? The the oh, the uh so one of them that I'm using is turbotenant, and that's that that's free. And then another one that uh some some colleagues of mine who run actually a very automated uh Airbnb business, they use one called Rentlinks.

SPEAKER_05 7:21

Okay.

SPEAKER_02 7:22

Yeah, it's R-E-N-T-L-I-N-X.

SPEAKER_05 7:25

Okay. Now, so you brought it up, the coronavirus. So uh I'm happy you brought it up because I know that's what everyone wants to hear about.

SPEAKER_01 7:34

Yeah, yeah.

SPEAKER_05 7:34

People are really it's taking its toll on a lot of people.

SPEAKER_01 7:37

A lot of people could I ask them something, one thing first before we dive into corona.

SPEAKER_05 7:40

Oh, go ahead. Go ahead, Steve.

SPEAKER_01 7:42

Because I want to ask, because I know that San Francisco was was really um hit y'all strong with some strong

San Francisco's 30-day minimum and focusing south near SFO

SPEAKER_01 7:47

anti-Airbnb laws. So that was uh obviously your first challenge before this corona thing. How did you how did you handle that one?

SPEAKER_02 7:54

Yeah, so San Francisco has a one-month minimum rental unless it's your primary pro unless it's your primary home, and then you can get a short-term rental license for it. So I have a short-term rental license for my own home, but I only rent it out you know four, four or five weeks a year. For the other properties, I'm doing a I've always been doing a one-month minimum here in San Francisco. So really my San Francisco Airbnb strategy hasn't changed much. I'm still looking for those medium to long-term renters for at least 30 days. What's changed is the marketing strategy because I need to push out my properties in a lot more places to get better visibility because I'm competing for a much smaller pool of travelers and tenants right now. Uh, and then that the because of the 30-day minimum in San Francisco, that's really why I've chosen to focus in San Mateo County, just south of San Francisco, around the airport, where most of those small cities don't have the same short-term rental restrictions that San Francisco has.

SPEAKER_01 8:57

Oh, nice, nice. That's good to know.

SPEAKER_05 9:00

So we we could since you'd been doing that. Uh you how how how dependent was your business upon like an OTA like Airbnb?

SPEAKER_02 9:09

Oh, extremely dependent. I was getting like 85% of my bookings through Airbnb, and I was at 90 to 95% occupancy. So yeah, I I had a I had a good thing going there. Uh I did have a bit of a horror story, which I'll just touch on. And I'm I'm a real optimist and I don't really dwell on horror

$32,000 Airbnb account hack and waking up to platform risk

SPEAKER_02 9:32

stories, but I did have someone hack my Airbnb account and divert $32,000 of payments into an overseas bank account. Um, and my my listings were shut down for a whole week, and I didn't even know about it until several days into it when I noticed I wasn't getting inquiries. So fortunately, Airbnb made it right in terms of the money that had been diverted. I couldn't make up the lost revenue for a week not having any of my places advertised. But uh, you know, I got through that one, and that was kind of my wake-up call just four or five months ago, as far as not being totally dependent on one platform.

SPEAKER_01 10:16

Man, I didn't even know they could do that. Yeah.

SPEAKER_02 10:19

Hackers are pretty smart these days, I tell you.

SPEAKER_01 10:21

So how do you protect yourself from getting hacked again?

SPEAKER_02 10:24

Uh you just have to have really good, unique passwords for all your accounts, change them, you know, change them frequently. And uh I was I was pretty complacent with with passwords.

SPEAKER_04 10:37

Yeah. Use a couple of password, uh, password generators and uh vault accounts. That's what I've been doing. So yeah, do that often, especially if you have VAs.

SPEAKER_05 10:48

Um so with the that 85 to 90 percent, and you said that that's that's a huge number right there. Um when Airbnb announced, hey, that we're gonna be refunding

The refund wave: 85% Airbnb bookings gone overnight

SPEAKER_05 11:00

everyone, how did that have an impact on your calendar?

SPEAKER_02 11:03

And what yeah, that had a big impact. Uh, I mean, I I knew we had to do something anyway, and I was, you know, figuring out how I could loosen my own cancellation policy on Airbnb, and then they unilaterally allowed guests to cancel all their bookings that had been made, you know, uh between a certain range of dates. And so, yeah, immediately I was getting a lot of cancellations and uh my bookings kind of dropped off a cliff. Um, but that wasn't necessarily Airbnb's fault. I mean, they made it easier for people to cancel, but the alternative would have been people wouldn't have been able to travel and I'd be keeping a big chunk of their money, which I don't really feel good about anyway. I mean, I I know a lot of friends of mine who are Airbnb hosts, they're like, I just take advantage of the cancellation policy. If they can't make it and they tell me, you know, 20 days before they're coming, I'm keeping that first month. And I'm like, nah. I mean, so you know, I was all I was already kind of client-friendly in my approach to running my units, but um, and but that kind of just took it out of my hands. And Airbnb is like, we're gonna be, we're gonna go 100% on the customer side, on the the you know, the the guest side, and uh and give carte blanche refunds. So that was that was really tough. And the refunds that Airbnb is now issuing to hosts in as compensation, that'll cover a fraction, you know, like maybe one eighth of what I would have made on the actual bookings. Um, but you know, it's uh it's better than nothing, and I appreciate what they're doing in the in the crisis.

SPEAKER_01 12:40

Yeah, it's something, right? Throw uh throw a Sabone or something.

SPEAKER_02 12:43

Yeah, and it's and it's it's gonna be extremely expensive for them. I mean, they're spending you know ten million dollars or something, so it's not insignificant.

SPEAKER_01 12:54

Yeah, that's true. Um I was gonna ask. So so I guess you just started you just started down that path of collecting them and you got up to 25. I mean, what was there uh was there a particular reason you were trying to get so many? You just loved doing it, or what what happened?

SPEAKER_02 13:10

You know, my my vision was to create a business doing furnished rentals that would restore my corporate income, basically. Like, I mean, I didn't I didn't necessarily need to be wealthy, but uh I I wanted to be able to take vacations when I want to take vacations with my family, be able to pay for my daughter's education eventually, um, and also save for retirement. And it was really just being motivated to run a successful business that would help me to support my family. And uh, and I, you know, and I I I am uh a go-getter, and I thought if I could get up to 20, 30 units, then I would achieve that. Um and 20 2020 was going to be the year that like I had this killer summer and I had all kinds of profit and I would, you know, wave the victory flag at the end of the year, and that's not gonna happen, but maybe 21, 2021 can be that way. So, you know.

SPEAKER_01 14:15

Yeah, as Mike Tyson says, everybody has a plan so they get punched in the mouth, right?

SPEAKER_02 14:21

That's it. I think I think we're all I think we're all taking uh multiple punches to the face right now.

SPEAKER_01 14:27

Exactly, exactly. Um I mean I was lucky enough in a way because the city because the cities over here in North Texas were starting to shut down Airbnbs, like completely shut down. No, no, you can't do it at your house or nothing like that. And so they um so I shut down I have three rentals now, now they're all long-term. But then the coronavirus hit, and I'm like, well, you know, it's kind of bittersweet. It kind of like because now I just um I have my long-term tenants rent locked in and they're paying, and it's fine. And it could have been, you know, everything happens, you know, for a reason, but but yeah, that's um because I was I was I was dipping my toes into the into the arbitrage thing. I really wanted to do that, you know. I just own my own units, and then um, but we interview

Shifting from short-term to long-term furnished rentals

SPEAKER_01 15:09

a lot of guys, like you said, Al Williamson, and um we interview Jay Massey, he's a big you know, over there in California, yeah. And they do um, yeah, they talk about arbitrage this and that, and I was like, man, I gotta get into it. And uh, I was trying, I almost I almost locked in at least right before this whole thing went down. I was like, oh shit, never mind.

SPEAKER_02 15:26

Yeah, yeah. Well, you know, I mean, one thing I'm really getting into now, and this is I think a good tip for your listeners who are all focused on Airbnb and furnished rentals, if you're in an area in like a metro area where there is normally a good amount of business travel, um, uh, or even people like remodeling homes that want to live somewhere for several months, you can still do rental arbitrage longer term and you can still make money at it, right? You rent out a place at or below market rent, furnish it nicely, and there's always a value to furniture, right? If someone can just step into your place, it's all nicely furnished and they don't have to move in, they can just keep working, and that's a real money saver and a time saver for people. So what I'm looking at now, and I'm kind of just transitioning a lot of my units over to long term, is maybe making half the profits, but less than half the work, is so that I'm not cranking out new guests every week or every month, get people in there for three months or six months or 12 months on a furnished rental contract, and uh, you know, and and it's it's more like traditional property management.

SPEAKER_05 16:43

So, question for you since the coronavirus has hit you and you have 25 arbitrage units, how have you had to negotiate with any landlords about cheaper rent or anything like that?

Negotiating with landlords: revenue-share property management deals

SPEAKER_05 16:55

Or and then how does that how has that worked for you?

SPEAKER_02 16:58

Yeah, I mean, this is where your relationships with your landlords are so important. Um, I've made calls to most of my landlords because um many of the properties have short-term trends leaving this month and next month and no one else coming in yet. And um basically what I was telling landlords starting in mid-March is hey, I'm gonna pay April rent. Like, that's no problem, even if it's vacant all month, like I'll I'll take that. I'm not gonna leave you in the lurch. But going forward, you know, I may have to pull the lease effective May 1st or negotiate something with you where I'm not at risk for the full rent payment. So, what I've been proposing to my landlords, and I'm still ironing out these agreements, is if I can't get their place booked for May onward, um, at least month to month, that I would do a revenue share where it would be more like a traditional property management agreement where I'm taking 10% of the revenues just in for managing and marketing and getting the tenants in there and handling all the bills and so on, and they take 90%. And that way, if if I can just book something starting mid-month in May, and then for a month, you know, say mid-May to mid-June and nothing before and after, I'm paying, you know, giving them 90% of the revenue for that one-month booking. And uh and they understand, I mean, I'm marking now, I'm marketing the hell out of their properties with these long-term rental websites, short-term rental websites, and they know that if I can't rent, if I can't find tenants, they're not likely to be able to find tenants either. So they're pretty flexible. And and you know, because I have really good relationships with my landlords, and most of my new units come through landlords referring other landlords to me, um, they're they've been very understanding. They're like, we're gonna get through this together, you know, it's a great relationship, and and uh, you know, we'll come out the other side. So I'm I'm ironing those things out case by case um based on the vacancies.

SPEAKER_01 19:03

See, I like that. Uh I like that on two fronts because first of all, I mean, it's kind of like the art of negotiation in a way you always give them options, you know. And you did that. You said, you know, I don't know what the other option was. Uh oh, I ain't gonna I can't pay it. Or we'll we'll we'll do partners, I'll I'll get the thing rented for you, and I take a chunk. Plus, the second thing is it takes the risk off of you by doing it that way. That's that's that's the biggest thing. You can sleep at night, you know, without having that lumen um and whatever, $2,000 a month payment or what I don't know. San Francisco's expensive. Yeah, yeah. That's cheap. But yeah, yeah. For one bedroom, right? Uh for um, but anyways, I think that's that's cool because yeah, no risk, plus you give them the options and you say, hey, we're partners in this, you're hurting, I'm hurting. Let's let's figure something out. That's that's how you do it.

SPEAKER_02 19:47

Yeah, and uh, you know, I I'll be honest, I kind of had my head in the sand for a little while in the beginning because I was like, oh, this thing is gonna blow over, it's gonna get better, I don't want to have these tough conversations. And eventually I just surrendered to it, and I'm like, I've got to communicate with these guys. They're my partners, you know, they're my lifeblood. And uh, if I if I could give up units, I'm giving up future revenues. So I just started having the conversations, and they were actually a lot easier uh than expected.

SPEAKER_05 20:18

Yeah. Yeah, and and then I'm I'm like Steve, man, that's a great strategy. You're you're showing the will to survive, and how with that mentality have you have that's how you're gonna survive and make it through this. So, because you're saying, hey, if they can't find people, if you can't find anyone, they can't find anyone. So is there a particular crowd that you're now targeting with everything going on?

SPEAKER_02 20:41

Yeah, um traveling medical professionals are still

Targeting traveling medical professionals and hospital recovery housing

SPEAKER_02 20:46

traveling more than ever. Um, I've also considered contacting hospitals directly, both to access those traveling medical professionals, but also to offer up some of my units as recovery places for people that have the virus. You know, I if if you've got a four-bedroom place, you know, the government will typically pay $50 per night for a hospital bed, you know, you know, various types of programs. For so you got four bedrooms and you're getting 200 bucks a night, that'll cover costs and then some. I mean, that's like that's like better than winter rates right there. So for larger places, especially, uh, the numbers can work with uh with even government payments. So I'm trying to figure out how to access that. And then there's always people, families in my case with my larger homes, three and four bedroom places, that are looking for housing. You know, people that have just sold a house, they're gonna buy a house, they've just moved to the area, there's something happening with their work relocation, and they just need to slide in somewhere for a few months and make it easy. And if again, if you've got your if you can rent a place fairly cheap and then you're offering it furnish for just like 10% more. 15% more, it's really good value for people. So I've I've just kind of fallen back on the housing fundamentals, you know, who needs long-term housing, who needs medium-term housing, really targeting the medium-term stuff to traveling medical professionals, and some construction workers are still working, and then targeting longer-term rentals to you know families and people who are just looking for a place to live for a while and prefer it furnished.

SPEAKER_05 22:27

Wow. So another question, because to go off that, because you were saying, hey, you still have people coming in, you're you're finding ways to find the people. Where are now, where are you getting most of your leads from at this point?

SPEAKER_02 22:40

Zillow.

SPEAKER_05 22:41

Wow.

SPEAKER_02 22:42

Yeah. I mean, I'm still getting I'm still getting Airbnb inquiries because I've dropped my Airbnb prices really low. And so if you search the peninsula in, you know, around SFO Airport for like three-bedroom, two-bath houses, I've got some nice units out there and they're some of the cheapest on the market. But I, you know, I'm I'm not here to plug, but I'm just saying, like, if you've got the fundamentals right and you can drop your prices to a point where they're not that different than unfurnished homes, then you can keep them rented even through Airbnb. So it's not fail-proof. I'm getting uh, you know, a steady trickle of inquiries through Airbnb, a steady trickle of inquiries through Zillow, and just and I've also got a newly hired virtual assistant in the Philippines who's marketing on uh Facebook Marketplace and Facebook housing groups, travel nursing groups, uh Bay Area housing groups, and just being really proactive and in putting the listings out there.

SPEAKER_01 23:40

Now I love that strategy because I mean, like you said, it's compared to like renting out just against uh versus another long-term rental that does that is not furnished. I mean, if you as long as you could beat them out and getting a renter, even if you're making the same amount or just a little bit more, you're fine with that. And that that automatically makes me think what 90% of the rentals out there are unfurnished. And so you're gonna have just by having throwing some furniture in there, I know it costs money, whatever, and time, but just by doing that, you I mean, that you're canceling out a big chunk of your competition.

SPEAKER_02 24:12

Yeah, that's true. If if people want that, and you have to kind of sell them on the value of having a furnished home. And so, like, I provide free internet, even though I've I'm now I'm now handing off the utility cost to the tenants, I'm still offering free high-speed internet. Um, because it's it's just kind of a nice amenity. Um, and as far as like a tip for people that want to get into this business, this is a really good time to rent a place from a price perspective, because it's not just the hospitality and Airbnb industry that's suffering, it's also traditional landlords because people aren't moving a whole lot right now. And so I was out there on Craigslist the other day. I found like a really nice three-bedroom, two-bath property here in the Bay Area, not that far from the airport. It would normally be priced, I swear, at four grand a month. It was like $3,000 a month. And I'm like, if I went out and rented that place today, it's it's more exposure for me, but I could just rent it for $3,000 this week and then re-rent it for you know $3,800 next week without even throwing furniture in there. So, you know, it's it's not a get-rich quick scheme. But if you're committed to doing uh rental arbitrage, Airbnb, or property management in some form, uh you can pick up inventory right now. You can pick up units at really good rates because landlords are desperate to rent them out. And uh, you know, you sign a one-year lease and get someone in there as quick as you can. You need to have good marketing on the front end. But then when the coronavirus lifts and you've got that one-year lease in place, you're gonna have some nice margins coming in. So it's not for the faint-hearted, you know, you've got to be able to really get people in there once you rent the place out, but you can certainly negotiate a couple weeks' lead time to start furnishing the place or just start marketing it, even if you're gonna re-rent it unfurnished. Um, you know, it's just something to consider for folks who are entrepreneurial and wanting to find some uh opportunities right now.

SPEAKER_01 26:20

I guess that that makes me think because

The landlord pitch: rent on time, free minor repairs, professional tenants

SPEAKER_01 26:23

I've been out, you know, like I said, before this whole thing hit, I was looking for arbitrage. And then of course, and a lot of people I was pitching it to, I was doing my little sales pitch or whatever, trying to tell them if it's better to do it this way and I could rent it out, you know, um, short term or or corporate. And um a lot of them they they didn't know what that is and they didn't want to do it, so okay, they said no. But now I mean after this whole thing hit, I was like, okay, I backed off. I'm not I hadn't been searching, you know, because of this the coronavirus. And uh a lot of those houses are still for rent. And I bet you if I went back to them, I'd said, hey man, you know, I could rent it, I can get that rent it for you from you. And um, and they probably go for the deal now, like you said. I mean, desperate times, you know, call for desperate measures.

SPEAKER_02 27:04

Right, right. And and the pitch is important. I mean, I think if we can just step back for a minute from coronavirus, because really that's my whole all of our lives have just been changed incredibly. It's like it's like the pre-apocalypse and post-apocalypse. And right now we're in the post-apocalypse, and it's it's bizarre. But um, if you know, to just step back for a minute, like how do you approach a landlord to convince them to rent a property to you? And to me, it's really understanding what the landlord's pain points are and what an ideal tenant is for them. And most landlords hate doing property maintenance, they want to make sure the rent's paid on time every month, and they want to make sure that the place is kept in good condition. So when I pitch landlords, again, pre-apocalypse, and this is just to keep in mind if and when you want to get into this, use Craigslist, find the good deals, look for the two-unit places or the places you can carve up into a couple of units, go out, meet the landlord, and you know, what I'll usually do is like look at the place, compliment it, uh, ask them some questions, like, where do you live? Did you used to live here? Um, are you actively managing the property yourself, or do you have a company that you use? Just try to get them talking about their experience as a landlord and what they're looking for in a tenant, and then they'll always ask, well, what's your situation? How many people in your family? And that's when I'll say, you know, I'm a little different than the typical tenant that's going to be looking at this place. I'd like to rent your property and use it as a corporate rental because I think it's a really nice place, and I think that business travelers would really appreciate being here. And um so what I would do is rent it from you uh on a one-year lease, pay you the full rent that you're asking. I'd pay rent early every month through an auto payment. I'd also offer you free property maintenance so that anything that is going to cost $200 or two hours of my time or less, I'll just cover it whenever those things come up, and I'll I'll just tell you about it afterwards, you know, just so you know that everything's being taken care of. And if there's anything major, I'll get bids for you from plumbers, electricians, or whatever, make a recommendation, and then I'll oversee the repair and just consult with you, make sure you're okay with who I'm recommending, and then send you the bill. Um and they love that. Um, you know, and then I say in between corporate tenants, it it's going to be cleaned professionally every time, and I'll get to inspect it, or at least my cleaner will inspect it, and we'll make sure that your property is kept in terrific shape because every new guest coming in, every new tenant coming in, it has to show really well because that's what they expect. Uh, and then the last thing I'll usually say is many of these people, their companies are paying for their housing, which is true, and um, it's in their best interest to take really good care of the place because they want to stay in good standing with their employer. You know, and that they're hard workers, they work 10 hours a day, they just want to kind of crash at night and relax, make something quick to eat. They're not partiers, and you know, it's really kind of a unless you just have a bad feeling about furnished rentals, short-term rentals, Airbnb, multiple tenants living in your house over the course of a year, unless you have a real like aversion to that, most landlords really are intrigued by that. And um, I I've probably got maybe a 30, 30 to 40 percent close rate when I actually go and meet with landlords in person. And some people just send out a bunch of emails, some people make cold calls and they find that more efficient because it takes time to meet with landlords, you'll just have a much lower close rate if you do that. And I like to go and look at the property, determine is this really a place that I want and what's it worth for me, and then and then have the conversation with the landlord. And I think that's really important. Just I I didn't mean to spend so much time, but I think that that script is really helpful for people.

SPEAKER_05 31:28

I I think that's very, very helpful, especially in a time like now, you know, and people who are scared to hop in and don't realize, hey, they can still go out there and do it. Even the people that are looking to bring on more units, you know, I think they can still do it. Because it's a lot of people throwing in the towel, you know. That's that that's where the opportunity is going to come in for the new entrepreneur, you know. Um so with this whole coronavirus thing, and like you said, I think a lot of traveling nurses are traveling right now. What do you think the when do you think this will end? And what do you think the effect will be after all this is done?

SPEAKER_02 32:02

Oh boy, I'm I'm not a great uh you know uh fortune teller, but I based on what I've heard and read, uh, I think probably I'm anticipating that the summer, which is usually haymaking season, just about anywhere if you're running a short-term rental.

Summer will feel like winter - planning for six-month recovery

SPEAKER_02 32:22

I I'm just assuming that's gonna be like the winter. And that it at best, at best, like to me, that's kind of trying to be cautious. I think best case scenario, like summer is still gonna be like winter, meaning I'll be getting bookings, whether it's medium term, short term, long term, but at much lower rates than what I'm typically used to during the summer, more like winter rates. And I'm hopeful that by fall, let's say six months from now, you know, September, October, that um the curve will have flattened, that the new cases will be going down, and that um there's gonna be a pent-up demand for travel. I mean, I know there will be, it's just a question of when. And then people start traveling again and um and things return to somewhat more normal. Uh, but as far as the fallout, I think you're right, Micah. A lot of short-term rental operators are getting out of this business and um either getting out or you know, doing what I'm doing, which is tying up a lot of short-term rentals into medium and long-term contracts to remove the risk. And so I think initially for the short-term rental operators that are still in business, when we get that early surge in travel, I think there's gonna be a real profit opportunity for people that are still running the units because supply is gonna be so down. And even though the barriers to entry to like set up an Airbnb and launch and get going are not that high, it still makes a big difference if you've been in business consistently, you've got those five-star ratings, you're a super host on Airbnb, you've got a lot of recent reviews, then people are gonna want to book with you. So I do think if this is an opportunity for businesses like mine to um hire virtual assistants, really pump up your marketing efforts, start advertising on a bunch of different websites, ship some of your rentals long term, get your books in order. My books have not been in order, and now I'm getting them in order. And you know, just kind of strengthen the fundamentals that you're you need for a business like this to run it efficiently and to scale it, and then those that are left standing six months from now are gonna be the victors who can then really, you know, profit into the future.

SPEAKER_01 34:46

Now, something that just crossed my mind when you were saying that uh the summer could be the could be like winter because things are kind of gradually getting back to normal. I see, and you said that people are gonna be itching to travel. I think I think the group that's gonna be itching to travel the most is these are these young, the young generation, the young live my best life generation, who see all these plane tickets for cheap and all these Airbnbs, you know, discounted prices. They're like, ah, I can finally go to San Fran, I can finally go to New York, I can finally go to Europe, you know. Yeah. It's just like uh I think they're gonna be hitting it hard getting all these discounted airfares and and just want to go see the whole world, man. I think you're right.

SPEAKER_02 35:22

I think you're totally right. I mean, I uh this is a quick little side story, but my family and I were gonna go to the East Coast for spring break because I I grew up in Boston. My family's never been to New York, and I thought, oh, this is gonna be great. And then of course this whole thing exploded and we couldn't go anywhere. But uh I was looking on Airbnb because I'm like, Airbnbs are so cheap right now, like our house is no less safe than some other house that's twice as nice, like an hour away. So we're looking on Airbnb, and I find this villa in Marin, like right on the bay. This place has a swimming pool, a hot tub, and like a little dock out the back with this canal and like a couple of kayaks. And and then you could like kayak down the canal and into this lagoon and look, check out all these five million dollar houses. I mean, it was crazy. So we rented this place for like 180 bucks a night. It's like the price of a nice hotel room. It's 2,200 square feet, and I'm there with my family and my niece, and we're just like playing board games and enjoying the sunshine and you know playing croquet. And so I I mean, I'm just saying, like for those who are willing to travel right now and travel safely and jump in your car and drive somewhere 30 minutes, an hour, two hours away, you can sometimes find some really great last-minute deals. So, just a tip for people who don't mind venturing out past their zip code right now. That's awesome.

SPEAKER_05 36:53

It's funny you say that. I said, um, okay, because the markets that I didn't take a hit on are the markets that people drive to instead of fly to.

SPEAKER_03 37:02

Yeah.

SPEAKER_05 37:03

That's a good point. People will still hop in a car and go take a quick vacation, you know. So it's it's it's it's uh people are still traveling at this time. Uh the reason I asked about the travel thing is because me and Steve were talking the other day, and I think Steve just answered the question. We were like, I think the media has created such a scare around travel. I wonder if travel's gonna bounce back right as soon as we get the hey, it's all clear. And I think Steve's right, you know, I didn't think about the millennials. That that might be or the Gen Z. So I mean, yeah, that might be it.

SPEAKER_02 37:35

That's it. That's it. And even the old folks like me are gonna be traveling, you know.

SPEAKER_01 37:43

Living your best life.

SPEAKER_02 37:44

That's it.

SPEAKER_03 37:45

That's it.

SPEAKER_01 37:46

Um going back to real quick uh the whole um talking to the excuse me, the the landlords, because I that's one thing I was trying to do. I was trying I always send out my email on Zillow, you know, I'll send out my little spiel. It started out this long. I got it, I got it like, man, they're not responding. I got it down to about this long and started getting more responses, right? And um, I was explaining a lot of things that you had said, and um, you know, and the cool and the cool little um trick that that that um Micah taught me in doing my pitch was that tell them that you'll do the repairs, you know, $200 or

Finding mom-and-pop landlords on Craigslist, not property managers

SPEAKER_01 38:18

less. And I and he said, but then you know if something does get broke, you can just hit up Airbnb, say they broke it, and then Airbnb will pay for that repair. So that's a cool little caveat right there. But um I never did um a face-to-face with any of them. I never did a face-to-face, but a lot of them, so here's the here's the problem. A lot of them here in this area in north in North Texas, they use uh they use uh uh what's it called? Someone's property manager. Property manager, yeah. And um, and so I I would see the property manager and I'd explain it to them and say, oh, okay, uh let me let me run it by my client, you know, and see what they say. And that's what that's what was tripping me up. I never got to to meet directly with the with the one-on-one with the landlord, you know what I'm saying?

SPEAKER_02 39:01

I think you'll find that a lot with larger buildings, you know, big multi-unit buildings, they've almost always got a property manager, and the property manager doesn't quite get what you're doing, and they might perceive it as competition. And um so I think right now my strategy that's worked for me, and everyone I know friends who who have lots of apartments in multi-unit buildings, but my strategy is to go for single-family homes, little two and three unit homes. I've only got a couple of apartments. Um uh and I do think though, in the current environment, vacancy is vacancy, right? And if you if a property manager is posting several units for rent in one building, chances are they're gonna be a lot more willing to talk to you than they would have been three months ago. So uh yeah, I I generally steer clear of property managers because I just have not had luck with them. I've had way more luck with with the actual landlords. So you have to understand your market. You can also network with realtors, you know, because they know who the landlords are, who the property managers are, and um, and they can sometimes connect you to someone. And if you go to uh virtual meetups with property managers, virtual meetups with realtors, uh you can sometimes get referrals that way. Uh every market's gonna be different, but obviously, if you can talk directly to the landlord, the homeowner, that's the best way to go. If you check Craigslist, you can often tell by the listings if it's put up by a professional property manager, because it'll say managed by such and such properties. It'll have a really nice organized description, sounds like something out of good housekeeping. You you look at something that a landlord puts up, and it's just kind of mom and pop, you know, and and it's like contact Joe. And so, and Craigslist also has lower rents than something like a Zillow, um, even for the same product, because it's it's like Craigslist is like the every man's, the every person's listing forum, you know, where Zillow is more polished and it's more like for real estate professionals. I mean, anyone can use it, but it really started, it was started by real estate professionals, and Craigslist is just like it's like you know, the virtual yard sale. So you can also get the best rents through Craigslist.

SPEAKER_01 41:28

That's that's that's a great point right there. And um when you said that about you know Joe Schmoe putting up uh, hey, uh my house is for rent, call me, you know, kind of that's that's I never thought of that until I I I thought about stuff like that one, like looking for my next you know house to purchase to be a rental because I'm like I'll I'll I'll open up a uh Zillow and I'll see, oh okay, you know, professional pictures, crap. They're gonna want a lot of money for this, then it's staged and everything. Ah, they're gonna want top dollar for this house. Yeah, and then uh then I see one where Joe Schmoe gets his camera, his his phone and starts taking snaps and toilet seats up and all. It's like, oh man, I'm gonna get it, I'm gonna get a good deal. That's the one I want to get talked to.

SPEAKER_02 42:08

It's all it's all dark. You're like, is it the living room and the bedroom, you know? Like the pic. Oh, that's great. That's great. When you find a place that just got terrible marketing, you're like, I'm gonna rent that place up, because I bet it looks a whole lot better in real life.

SPEAKER_01 42:22

At least open the curtains, right? When you take the pictures, geez.

SPEAKER_02 42:25

That's it.

SPEAKER_01 42:25

But that's that's some brilliant advice right there. So look for bad, bad listings, and then you can get a great deal that way. That's awesome.

Painting and minor upgrades pay back fast in cheaper rent

SPEAKER_02 42:32

It's just like the flipping, it's kind of like the flipping philosophy, right? You look for the places that don't show well. I mean, I've I've put I've put like an extra few thousand dollars into an apartment that was in really bad shape because the landlord gave me such a good deal on rent that I was like, I'm just gonna paint this place from top to bottom. I'm gonna fix the closet doors and put in new hardware and new light fixtures and make it look like a nice rental. And so I got it for dirt cheap in terms of my rental rate, put in another couple thousand dollars. And over the course of a year I made it back, right? And I'm still I'm still managing the place. So I do kind of I do have that fixer mentality when it comes to rental properties. Now, some of the places I've rented are beautiful, turnkey, moving ready, remodeled, but I don't mind the ugly places as long as the rooms are big and I can paint them and clean them up and make them look nice.

SPEAKER_01 43:28

See, that's what I was gonna ask you too, because there was this um this house I was looking at and before this whole thing hit, and I was, I mean, it needed some paint. I mean, they did a paint job that was terrible. I mean, the walls are the same color as the ceiling, it was just it was a mess. And I was um I was wondering if, like, man, I mean, they even said I can get a discount if I wanted to do some touching up. And I was like, Man, I never this is my first arbitrage. I don't know, should I do that? Should I go in there and paint the paint the rooms and paint the house? And and now that that you said that, I was like, man, that actually that's a good deal. I mean, if If I can get $100 off a month on the rent or more, if I just had to paint the walls, I mean that's a damn good deal. That's right. That's right. Paint is cheap.

SPEAKER_02 44:08

And you know, painting labor is fairly cheap too. Like paint is the paint is probably the best investment you can make in a place. I mean, it's just so simple and it makes a big difference.

SPEAKER_01 44:20

Sweet. Now, what about appliances? Do they usually leave appliances for you?

SPEAKER_02 44:24

Uh usually, yeah. I mean, I'll I'll invest in nice mini appliances, you know. So my places have the little like stainless microwave and like a stainless toaster oven and a curing coffee maker and really nice fluffy spa towels, and I mean all that stuff is just a tiny bit more than the cheap stuff. So when it comes to what I call like mini amenities, I make I invest in you know, brand name stuff, stainless stuff, and um, and that way you can advertise that in your listing, you know, like ooh, they're 10-inch thick memory foam mattresses. Well, yeah, it was only 200 bucks. You know, it's not like you can still make it sound like a luxury hotel, even if you're not spending that much. So yeah.

SPEAKER_01 45:07

That is awesome. We we interviewed a guy one time who he knows he does, he knows how he's a contractor, but he you know he sets up his own Airbnbs. And one thing that he that set his place off, he knew how to put that the waterfall um shower head, he knew how to install that himself. Oh yeah. But most people are like, holy crap, that's like a rich people thing, you know? Yeah, right. But he said, No, it's easy. He just go, he goes, a regular person, it might be a little a lot of work, but for me, I just go through the ceiling, stick it there, boom, boom, boom, few pipes, and it's just like this this waterfall, and people, I mean, it just sets off its place. So, I mean, yeah, these little things that don't cost a lot of money really, I mean, they can make you some big money. Absolutely. Yeah, that's great.

SPEAKER_02 45:45

That's great.

SPEAKER_05 45:46

So, well, my next question for you is because you were saying about picking up units. Do you do you plan on picking up units during this time, or are you kind of being conservative?

SPEAKER_02 45:56

I'm being conservative, and the reason for that is that I've got like over the next month or so,

Being conservative on new units until existing inventory is stabilized

SPEAKER_02 46:04

I need to fill half my units, you know, because I've got a lot of them that are coming vacant uh now or two weeks from now or a month from now. If I had already figured out my marketing and I was ahead of that and I was kind of getting, if I let's say three months from now, if I've got 90% of my places booked on medium and long-term contracts, then I will seriously consider picking up extra units. It's just that I and many others like me were not prepared for this. And if you're running on short-term bookings and they're coming in, you know, every every week and then they just suddenly stop, then pretty soon you know the vacancies start expanding each week on your calendar. And so, yeah, I'm in a position now where I'm just trying to make that shift to uh to longer-term rentals, and then when I stabilize, I'll definitely look around like what's available now, and can I get stuff for cheap? And um, because the if the fundamentals are there, if I can pick up the one of these nice two-unit houses here in the Bay Area for like four forty, five hundred dollars, and I know that I could turn around and rent an unfurnished for $5,500 and furnished for $6,500, you know, like that's kind of a no-brainer. It's just uh it's just a question of timing and like having my own house in order to be able to do that.

SPEAKER_01 47:31

Man, I mean, even if you could just guarantee that you're gonna break uh break even throughout this time period. Yeah, then you'll lock in and then get past all this. Ooh, you'll be sitting pretty.

SPEAKER_02 47:40

That's my goal, really, is just to break even. And I'll I just want to expand the conversation for a minute and talk about uh assistance right now, right? So I'm I'm a little late to the game as far and and you know, I don't know exactly when this uh podcast is gonna air, but I've just shifted my whole philosophy from like, I don't need any handouts, I've got this covered, I'm gonna manage through it, to like take advantage of what's whatever's out there. If you can push back your primary mortgage on forbearance

Pursuing PPP loans, mortgage forbearance, and home equity lines

SPEAKER_02 48:11

for three months, do it. And generally you can. I haven't heard any banks pushing back on that. If you've got investment properties and your income is affected and you can push back your uh you know your mortgage on those for three months, do it. If you can get the PPP loan because you have employees and you know you get the grant for that, do it. Um, emergency relief loan. So I'm I've just in the last week, um it's now what early April, I've just in the last week kind of shifted my thinking around um how aggressively to go after those things. And and right now I'm feeling good about it. Also pursuing a home equity line of credit, basically just trying to create as much capital as I can so I can hang on to my business and not only that, but be prepared to both invest in new rental units, but also make a uh buy something, right? A like a real estate investment um coming out of this thing.

SPEAKER_01 49:07

That's that's interesting. Um that's that's a great way to look at it because and another thing I was thinking too was uh you know, trying to get the best deal right now and and being able to rent a spot at a great price, but even I know you've probably thought of it already too, because you think of everything, but but even trying to even talk to them, hey, listen, it's a little rough right now with everything going on, but I'll I'll rent your place for a year. But can you give me a break on the first month? Maybe first two months. Are you are you throwing that out there or what's going on?

SPEAKER_02 49:36

You know, if I were looking for you new units, I absolutely would. And I mean, one thing that I've always done is, hey, listen, I'm willing to you know sign this contract with you right now on the lease, and then you don't have to worry about finding a tenant anymore. I'll give you first month's rent, deposit, and so on. But I want to start the actual rent, I want the rent payment to be effective two, three weeks from now. And in the meantime, I need that time to furnish the place because I can't I can't launch this unit losing revenues for two weeks while I'm furnishing it. And it would take you a two or three weeks to get someone in here anyway. So, you know, and they generally say yes, and they're as long as I've signed a lease and I'm legally liable for the property effective today, most landlords have no problem saying, Yeah, sure, um, you can move in today, April 7th or whatever, but the first rent payment you're making is for May 1st for the month of May. And and and and I'm not using the place. I'm also very clear like I'm not gonna be living here. I'm not asking for free housing. I just need to like move in the furniture, and this is a business for me. So give me two weeks to do that, and then we'll have the rent be effective two weeks from now.

SPEAKER_01 50:55

Even though hopefully you'll knock it all out in one or two days, right?

SPEAKER_02 50:58

Well, well, yeah, I'm I am not that efficient, I'll tell you. I I I run around with my minivan, and there are certain things. I am cheap, I'm telling you. I pick up certain things on Craigslist. Like, I'll go get nice dressers, um uh sofa beds, dining sets, because they don't necessarily need to match everything. You know, like I always order all my beds on Amazon. I order all my end tables on Amazon. But when it comes to like a dining set, you only need one, right? And it comes to like a sofa bed, you always want to put sofa beds in your places because more beds, more heads. And uh, and and so, yeah, so sofa beds, dining sets, they're expensive. If you buy good quality stuff, you can get it for half price if you buy it used. And if you have a minivan, you have some time, you can either get it yourself or pay someone to get it for you, and you'll you'll still end up getting a much better deal in terms of time and money than you would if you buy something cheap from you know brand new.

SPEAKER_01 51:59

That's a good point. That's a good point. So, yeah, a little bit frugal, huh?

SPEAKER_02 52:03

Yeah. Oh, you you've got to be. I'm telling you, you've got to be scrappy. Like I've never ever targeted the high-end and um as much as possible when it comes to investment properties, when it comes to I mean, buying in the Bay Area by definition is high-end, but I've always bought fixer properties, right? And I've always bought places that had kind of a bunch of bedrooms but small properties because by the bedroom, right, the price is cheaper. And it's like that with my rental properties too. I don't have any huge two-bedroom houses. I've got compact three-bedroom houses, compact four-bedroom houses, little studios. I don't even have any one-bedrooms because to me, like most people don't differentiate that much between a one-bedroom and a studio, and studios are a lot cheaper for me. So um I'm I'm learning more than ever in this COVID crisis that if you invest for recession-proof things like affordable housing, uh, whether it's uh a purchase or a rental, where you're trying to turn around affordable housing and offer it to someone else furnished, um, you're in much better shape than if you're in the luxury market or in like the tourist-only market where you're really kind of screwed uh when something like this happens.

SPEAKER_01 53:22

Now, here's here's a question. Now I know the Bay Area, uh, you know, real estate's really high. So they build they build up, right? They build up because it's it's uh the land is so expensive. Yeah. Um so and most of those places have what, three flights, maybe three flights of stairs, or maybe well the houses, a lot of houses are two-story.

SPEAKER_02 53:43

There's still a bunch of one-story houses. So yeah, I mean, you're you're thinking probably of like kind of the traditional Victorian in the city, and some of those are a full three stories. Um my homes tend to be in slightly more suburban areas, like you know, within 10 miles of the airport, a few in San Francisco, but even my San Francisco places, none of them's bigger than a couple of stories.

SPEAKER_01 54:06

Because uh, what I was getting at is um is finding furniture cheap. I know someone like on a third story, they they're gonna want to get rid of that crap. Come pick it up, kind of thing, right? You gotta take it down three stuff, three three flights by yourself, kind of thing, right?

SPEAKER_02 54:18

Yeah, yeah. That's um yeah, you can pick up a lot of good stuff on Craigslist if you have the time, right? It's always a time versus money trade-off. And I I spent I've spent a couple of years in this business doing 90% of it myself. I mean, all that I was outsourcing was cleaning, and then I would get help and outsource maybe 70% of the setup when it came to moving furniture. I would get helpers when it came to assembling furniture, I would use get friends, and and now I'm finally at that point where I'm really wanting to scale the business and automate the business. And so I've got a uh a virtual assistant in the Philippines, and I've got a really sharp marketing guy in the Philippines who does awesome online marketing for like six bucks an hour. So um, you know, I've just tried to get a little bit smarter and let go a little more and focus on the stuff I need to do to build capital right now so that other people can market my business and and increasingly run it a little bit for me.

The co-living bedroom rental model and when it works

SPEAKER_05 55:29

Awesome, man. That is because I'm huge on automations, I love it. So has has bedroom rentals been effective during the COVID-19 or have you transitioned to it?

SPEAKER_02 55:39

You know, I haven't. I've um I haven't I tried it once early on, and it wasn't successful for me. It may have just been the the season, um, it may have been the unit. Um, it is effective though. I know people and I've seen units recently, including a couple that I was potentially going to take over and manage for the owner. So I've seen kind of dormitory style, you know, co-living places where each room has its own separate smart lock, and there's and some of the rooms have their own private bathroom, and then there's a common space with like a living area and a kitchen. And those can actually be very profitable. I mean, if you just again, if you take the numbers here in the Bay Area and just knock off a zero in some other places, you know, and you're and you can rent out an individual bedroom in like a co-living situation for $1,200, $1,300, that's probably 10% more than if you were to rent out the whole house as a four or five bedroom place. Now that works when you have compact places with lots of bedrooms in them, right? If you've got a huge common area or really big bedrooms or whatever, it's just not going to work unless you put a bunch of beds in the bedrooms, right? But and that gets a little crazy as far as the number of inhabitants. But if you've got a kind of a compact four or five bedroom place and you're willing to manage the different tenants, right? It's more work if you're managing multiple tenants under one roof. But you can definitely make, you know, uh 15, 20% more than if you're renting or more, maybe 40% more, depending on the building and and the market, than if you're renting it out as a single unit. But I've always I've personally I've just always had more success renting out whole units, and um and I've still been able to make money that way, and I've just only had to deal with one tenant per property.

SPEAKER_05 57:36

That's awesome. That's awesome. It's almost like especially the since it's I guess the Bay Area, it has a lot of travelers, business travelers, things like that. So I guess you probably don't even have to really worry about that. That that that that's a blessing.

SPEAKER_02 57:50

It is, it is, yes. Oh, hey, you're on mute.

SPEAKER_01 57:59

Yeah, yeah. Sorry. What's cool about how you were um how you're you're doing all this and even the you know, handling, like you said, 90% of it yourself. Even if you do move away from, you know, you put it into more into automation or whatever. And and it's it's it's it's great that you know how to do all this stuff, how you how to set it up yourself, how to find the stuff, how to put it together. You're not just saying, oh, let me get uh let me see, let me get someone that does that, that puts the like interior decorator, let them do it. Here, here's five grand, ten grand, do it, and this and that. And um, but what's cool about it is that when it does get into a crunch like this, like when the coronavirus hits, and this, you have to find ways to cut corners. And if you did automate it, like you learned to automate 100%, you you could you have something to fall back on. You say, well, shit, I'm not gonna pay someone 10 grand to decorate a place anymore, I'll do that. I'm I'm not gonna pay someone to fix sinks or a toilet anymore. I guess I gotta get on my knees and do that. And uh, and then you there's ways to save money, and then even I mean, you could even clean a unit if need be. You know, there's there's ways to catch some of that money that's always been going out because we've been making like five grand a month on a spot easy. Then all of a sudden it tightens up. You're like, crap, I gotta cut corners, and you know how to do all that stuff already.

SPEAKER_02 59:08

Yeah, it it definitely um pays if you're gonna start a business, it pays to know how to do most of it yourself so that when you outsource it, you know how to do it right and you know how much time it takes, and you know the value of the work and you appreciate the people who are doing it, but they're also not gonna overcharge you, right? And you can kind of oversee the work just to make sure you can hand it off uh successfully and really be able to trust the people who are doing it for you. So I'm a huge believer in understanding all the aspects of your business as you build it so that you can then hand it off and trust the processes and know how it's done right, and then let someone else take it to a whole new level that you never did because that's maybe not your expertise. Um, the one thing I don't really care to learn and I'm in trouble is accounting. You know, I gotta just like get that off my plate. I I was cheap in that front, and that's really not smart. Like if you don't know how to do something and you're not willing to do it, you can't be cheap about it because you gotta be able to act, you actually have to do something if you want to be cheap about it. But if you're ignoring it and blowing it off, then like you have to pay someone else. So I'm you know, I'm uh hiring a few professionals

Learning the business before automating and outsourcing

SPEAKER_02 1:00:28

in different arenas right now, including a very expensive accountant, but it's gonna be well worth it in the end.

SPEAKER_01 1:00:34

Yeah, it'll pay for itself, I'm sure. Amen.

SPEAKER_05 1:00:37

Yeah. If you can go from active passive income to active income, you can always stay afloat. That's a quote I heard the other day. Uh, because like you said, if you have to, and I think we've said it before on this podcast, before you automate something or outsource it, you should know how to do it once so you can train someone efficiently, efficiently and effectively on it. And then times like this, like Steve said, you can go clean a unit and do all that and bring that money back in.

SPEAKER_02 1:01:02

So yeah, it's that's it. You know, yeah, uh rental arbitrage is really nothing more than like glorified property management. But I'll tell you, like, I'll tell you the thing I love about property management is you can add a ton of value to the property. You know, like as a property buyer, I have in my life bought a total of like four homes. And in each case, I was able to buy something that was not in good shape and improve it, not not necessarily do the work myself, but have it improved and renovated and add a ton of value to it. And I just applied that same thinking to the rental arbitrage business where you rent an unfurnished place. It might even need work in terms of the paint and the light fixtures and the smart locks, the stuff I mentioned earlier. But then you you either put the work in yourself or get it done and pay for it, and then you've added value to it, and you add the furniture, and that adds value to it. And so the reason I've I've always liked real estate more than like the stock market is it's a tangible asset, and I can I can directly add value myself, and I can oversee that with a company. I just have to make sure that I'm picking a company that's really well run, and then I kind of watch it from afar. I I don't I don't really care for passive investing. I know that's kind of sacrilege, right, in the world of real estate, because that's like the holy, that's like the holy grail. Like most people want to just sit back and press a few keyboard strokes every day and just watch their millions grow in the bank. That would bore the heck out of me. I like to, you know, I like to get in there and manage the the hell out of something and and add the value and and base my you know, see my my fortune grow from there. So, you know, it's different, it's a different philosophy, you know. Not you know, some people like to be active and others don't.

SPEAKER_05 1:03:02

I actually like I actually like that concept because I I I don't touch stocks. I do a little bit, but I don't touch stocks because of that reason. I think it's because I guess it's like how you say I think it's just a lack of control.

SPEAKER_03 1:03:15

Yeah.

SPEAKER_05 1:03:15

Like you said, I can add the value. There, you're investing, but you have no control, and that's my thing. I'll I'm 100% with you on that.

SPEAKER_02 1:03:23

That's it. That's it. Control freaks unite.

SPEAKER_01 1:03:30

Oh man. So you're not returning back to corporate America, right?

SPEAKER_02 1:03:34

No, I'm not. I'm not. I uh I don't think I'll ever go back. So I, you know, I'm gonna have to I'm gonna have to be successful in real estate one way or another, or you're gonna find me on the street in no time.

SPEAKER_01 1:03:47

So you consider yourself financially independent?

SPEAKER_02 1:03:50

Um you know, I'm getting there. I um I still have to work, but I do have a lot of flexibility in how I work and when I work. Um, I mean, certainly right now, I don't feel financially dependent at all, financially independent at all because I'm putting so much work into stabilizing my business. But I could see how, you know, a year from now, if I've got a bunch of my units into long-term rentals and I'm doing more of a traditional property management role, and I've still got some really good units on running on short-term rentals that I could get to a place where I'm uh let's just say financially flexible. Um and um yeah, it'll be it'll be a while. And again, I like to manage things. So financial independence to me is like you don't really have to work, and I I do need to work to keep my business going. Um, but I I'd like to be in a place a year, two, three years from now where my business is strong enough, the systems are strong enough, it's automated enough that I can step away as much as I want to. And and and this COVID thing has really kicked my ass to do the automation, to find the marketing experts, to uh get the books, get the QuickBooks running really, really well, you hand that off to an expert. And I think uh it's kind of a blessing in disguise just as far as um building the business. It's it's obviously tragic what it's doing to public health and people's lives and the economy as a whole, but um I do feel like it's forcing entrepreneurs who have been affected by this to really pivot and shift and kind of reinvent themselves. So that you know, for those of us that are still at it when you know, on the other end, uh I think we're gonna be a lot stronger.

SPEAKER_01 1:05:48

Yeah, I think it's really gonna separate the contenders from the pretenders, right? Yeah. And so, I mean, if you if we just hang in there, you know, our audience included, just hang in there through this. And just find a way, you know, to scrape and fight and just find a way to get to the other side. I mean, everybody there's a lot of people that are gonna be sitting pretty because so many people are just gonna drop out and give up.

SPEAKER_02 1:06:12

That's it. That's it.

SPEAKER_01 1:06:13

Yeah.

SPEAKER_05 1:06:14

And I think I think there's an opportunity to take over those leases for the people that are dropping out. You know, that's another opportunity. That's a huge opportunity.

SPEAKER_02 1:06:22

You know, you're right. I mean, for anyone that has some capital and wants to get into rental arbitrage, Airbnb management, look around in your local market. I'm sure there are people just like me and you that are saying, I've had enough of this. I don't want to, I don't want to manage long-term properties. You know, I I it's too much work, it's too uncertain. I want to just have someone buy the furniture and take over the lease, and you know, I'll I'll cut my losses and you know, sell it for what's what I paid for it, and not, and then there's no premium on the you know, the labor and the time that someone's put into building up a five-star property or whatever. So, yeah, I think from a business acquisition standpoint, you can definitely take over businesses like this now if you're if you've got the grit and the marketing savvy to um to to fill the vacancy.

SPEAKER_01 1:07:18

Now, you've you've you've been so hands-on in your business, and um, so obviously you you've discovered a few uh workarounds or shortcuts or little hacks, you know, and I always like to ask a guest, and I know you've given us so much, you know, so much great information today already, but is there like a an Ethan Cook hack like when doing um short-term or corporate or something like that? Something that pops out that you like figured out, you're like, whoa, that's kind of cool, you know? Yeah, yeah.

SPEAKER_02 1:07:45

The the the best one hands down is this multi-unit strategy. I'm telling you, if you can find a single family home that

The hack: search Craigslist for 4-bed/3-bath to find hidden in-law units

SPEAKER_02 1:07:55

someone is marketing, or let's say a a couple of units in one, like a single family home with an in-law, and someone's basically marketing it as a single family home on Craigslist, you can that's where your profit's coming in, right? And and just as like a simple, if you want to like a real uh tactical hack here, go on Craigslist, do a search for homes with at least four bedrooms, three bathrooms in your area, and then look at the pictures, read the listing, and figure out is there like a like an a second master suite, or is there a uh you know a downstairs unit or an in-law unit or something, you know, an au pair unit. There's they call them different things, but a lot of older homes, especially here in the Bay Area, and I'm sure this is true in a lot of areas, they are set up that way. There is a second unit either carved out already or something you can carve out yourself because guess what? There's a sliding glass door that comes into this master bedroom, and you can just close the door and throw in a wet bar for 1500 bucks, and you've got a kitchenette and a bathroom and a bedroom all in one. You've got your own little studio unit. And you know, and most landlords, if you say, I'd like to add a wet bar, it's you know, some people will negotiate that. They're like, and you're like long-term, you can rent it out as two units. It's gonna add value to your property, it's gonna boost your rental income. And you might not do it in year one. You might rent a property and run it as a full property. I have landlords now, they're like, oh yeah, you want to block off that wall, add a door there, and and add a uh add an uh, you know, a uh a little a sink in that room. Like, that's cool. Yeah, go ahead, you pay for it, and I I trust you. So um if you can just carve out those two units in one and find properties that lend themselves to that, because just think about the math. And I'll I'll just take kind of a more of an average math uh rather than focusing on Bay Area. But let's say you can find a single-family home in your metro for $2,000 a month, right? Three bedroom, two-bath, and you find one that's got this little in-law unit. And let's say that that $2,000 place, you could also rent out a studio in your market for $1,000 a month, right? So now you've just found a place for $2,000, but the value for you in the three units unfurnished is $3,000. And now you had the furniture and you rent out the studio for $1,500 a month and the single family for $2,800 a month, and now you're making $4,300 on these two units that you're paying $2,000 for. And I mean, and maybe that's generous. Maybe it's only $33,000, $3,500. And maybe your costs are $2,500 because you've got utilities and you've got internet, but you're still making a thousand bucks a month on this one home. So, and maybe it's only $500, but that's great, right? You you rent, you're paying one rent check, it's $2,000, you're paying $500 for utilities, and you're still clearing $500 a month for a single property. Like it's not bad. And you probably have to spend $2,000 on rent, first month's rent, $2,000 on the deposit, that's four grand, and then maybe another five grand to furnish the place. So you spent nine grand, but that extra five grand, you're gonna make it back in in 10 months. Right? 10 months, you're gonna make back 500 bucks a month, and that's conservative. And then after that, that 500 bucks a month is profit. Um, now your time your time is worth something, so hopefully you can find medium or long-term renters to get in there so you're not having to turn it every month and deal with vacancy during this really uncertain time. But you know, there there are that's the best way I've found and the easiest way in my market to make money uh doing rental arbitrage.

SPEAKER_01 1:11:58

That's great advice, man. That's great advice. And another thing that I that I got from all that is I'm about to start hitting up Craigslist like it's 2005 again.

SPEAKER_02 1:12:07

That's it. That's it. Yeah, I'm telling you, Craigslist, it's a double-edged sword, right? Because it's like full of scammers, it's full of bottom feeders, like people are gonna contact you and be like, oh, will you take half the rent that you posted? Because you know, I'm a nice person and I'm broke. And you know, like the reality is, but the reality is like you can find really good deals on Craigslist. And imagine as a as a renter or a buyer of used furniture, whatever you're using Craigslist for, if you can present yourself as credible and professional and you know, high integrity, and like you're gonna pay the rent and you're gonna manage the property really professionally, you're gonna totally stand out from 80% of the people who are contacting that person about their home, or at least 50%, right? Because it really is like it's just such a spectrum of people that use Craigslist. And so if you can stand out as like this really professional person who's contacting them, you know, you're gonna like make their day because they don't want to deal with all the you know, all the the like the the scams and the the the lowballers either.

SPEAKER_01 1:13:19

So there you go. Hit up the CL, Micah.

SPEAKER_05 1:13:25

I might start hitting up Craig's. I'm definitely I definitely post on there. So I don't hit them up. I definitely post my properties on there, but I'm definitely hitting up rent links and turbo tenant. I'm like just to get on that now. I'm like, whoa, okay, because I'm I'm all about automation, so if it makes it easier where I can just go to one-stop shop, they do it for me, I'm good.

SPEAKER_02 1:13:44

Yeah, oh yeah, you can get all your listings out to all those long-term rental websites. And depending on what you want from the platform, they can do you know, background checks, they can you can collect your rent through the platform. Um, so you can you can kind of automate a lot of your operations on there, too.

SPEAKER_05 1:14:05

That is definitely what I need.

SPEAKER_01 1:14:08

Well, Ethan, thank you so much for hopping on with us. It's been a pleasure. You've been dropping so many gold nuggets left and right, man. It's been insane. Um, where can folks find you?

SPEAKER_02 1:14:18

Uh folks can find me for sure on Facebook. Uh if you just look me up on Ethan Cook, you can find me on LinkedIn if you just uh type in Ethan Cook, HR consultant. Uh I'm embarrassed to say I don't have an Instagram account, but you know, I'm I'm it's just like one generation behind me. So but yeah, you can find me on Facebook, you can find me on LinkedIn, you can Google me. Uh yeah, I I think I'm the only uh Ethan Cook with an E on the end in San Francisco HR consultant, and you'll you'll find me.

SPEAKER_01 1:14:50

I thought you were gonna say, I'm embarrassed to say, but you can find me on Craigslist.

SPEAKER_02 1:14:55

Oh, you can, yeah. You can find my properties. Oh, and my company website, which I'm still building out, is baypillow.com. It's one word, baypillow.com, so you can contact me through there too.

SPEAKER_01 1:15:06

Baypillow.com. You got it. Awesome. Well, thank you so much for hopping on. Mike, I got any more questions?

SPEAKER_05 1:15:13

No, man. I I learned a wealth of knowledge. I've been over here typing up notes left and right of everything you've been saying. Um, I would like to say thank you for coming on and thank you for showing having our listeners realize that you can still push through this. Uh, just you can always push through adversity. Uh it just takes commitment and you just have a have a mindset of never failing, you know. So I'm happy you brought that to them because it's a lot of people out there struggling right now.

SPEAKER_02 1:15:37

Yeah, you've got and tap into your network, man. I mean, I've been calling people every day who have more experience in these things than I do and asking for help. Uh and I even I even organized a little forum of people running this same kind of business so we can meet every week and talk about how are we taking advantage of relief packages, how are we getting forbearance on our rent, how are we building our businesses for the future. So whoever your community is in your kind of corner of the real estate market, find those people and you know, share like never before. Because uh we, you know, we really will get through it together. Um, and if you know, if if you keep your head buried in the sand the way I had it buried for a couple of weeks, you know, then uh it it's not gonna serve you. But I, you know, for me, just throwing my hands up and being like, I need help in these three, four different areas, and here's what I can offer. Um, it's really been uh refreshing for me.

SPEAKER_01 1:16:30

That is awesome. Together apart.

SPEAKER_02 1:16:32

That's it. That's it.

SPEAKER_01 1:16:34

All right. Well, thanks, Ethan, for hopping on. Another great show, Micah.

SPEAKER_05 1:16:38

Yes, it was. Thank you for hopping on. Listeners, thank you for continuing to listen to us. Uh, we hope if you are surviving during this time. And remember to be sure to follow Live Let Thrive on IG, Facebook, Twitter, YouTube, subscribe on Apple Podcasts, YouTube, or wherever you listen to podcasts. We appreciate the love and thanks for being listeners. We are out.

SPEAKER_02 1:17:02

Later. Thank you, guys.

SPEAKER_00 1:17:04

Thank you for tuning in to this week's episode of Live Let Thrive. Be sure to tune in next week for all the latest in the world of Airbnb and all that entails. Bye-bye.