SPEAKER_04 0:00

The following month I had some guests that came in and there was actually a shooting at my Airbnb in one of the units.

unknown 0:08

Oh shh.

SPEAKER_04 0:10

So nobody got killed, but somebody did get injured. I believe they got shot because there was some blood all over the floor. And uh like in the main living room. Luckily it's a wood floor, it was a carpet, but um my cleaning lady was able to clean it all up. There wasn't any permanent damage, but it was it was pretty crazy.

SPEAKER_00 0:29

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_06 0:40

Hello, hello, hello, and welcome back to another exciting episode of Live Let Thrive. What's up, Micah Mann? Hillman, man, what you been up to? Uh, too much to go into right now, and we got uh we this is episode 95, dude. We're we're serious mysterious territory right here.

SPEAKER_03 1:04

95, man, we're almost to 100.

SPEAKER_06 1:06

Yeah, we've changed over a hundred lives, I think.

SPEAKER_03 1:09

Yes, sir. Definitely have. But yeah, we have uh special guest on today. We have Mr.

SPEAKER_06 1:20

Dang, did I Martin Potter, yeah. How's it going? Can we call you Impot?

SPEAKER_04 1:29

Yeah, if you want. Call me whatever you want, just pay me.

SPEAKER_03 1:35

I like your mentality.

SPEAKER_04 1:37

You just got to pay me.

SPEAKER_06 1:40

So, yeah, we have uh and Martin. We're talking uh off air, and you're an arbitrage specialist. Specialist. Specialist.

SPEAKER_04 1:49

I'm not a specialist, but I am a specialist.

SPEAKER_03 1:55

Let's hop right into it. How many how many arbitrages do you got?

SPEAKER_04 1:58

Just two right now for short-term rental.

SPEAKER_03 2:00

Okay.

SPEAKER_04 2:07

Depending on depending on what how long this thing goes, I I might get into why I dropped from four to two. It was definitely for the better.

SPEAKER_03 2:15

Why did you go from four to two?

SPEAKER_04 2:17

Okay, well, I guess I brought that on myself, didn't I? Uh so I like to target two unit duplexes for uh my short-term rental business. And I had a duplex that was in a suburb of Denver. Um that uh it it was doing pretty well. And we had one month where several things happened to the house all at once. Uh the electrical box got screwed up and when uh uh like 90% of the power in the house was down for like a week. And you know, running a short-term Airbnb type business that hurts. You know, that hurts a lot. And so um, you know, I had two or three guests that it affected. I was out of the country at the time on vacation. I had a business partner of mine just sort of looking over things, making sure it was working. You know, it was he was maintaining it for me and um because I managed my listings and um he did an okay job, but I mean there was no way around it. You know, it affected reviews and kind of kind of spiraled everything and um got some pretty bad reviews from it, and then uh when I got back, you know, I tried to tried to revive it and it was sort of heading down, and you know, we had one month where it was just it wasn't good, it didn't profit like it was supposed to. And the following month we had this is crazy, just when it rained before, I guess. The following month I had some guests that came in and there was actually a shooting at my Airbnb in one of the units.

unknown 3:53

Oh shh.

SPEAKER_04 3:55

So nobody got killed, but somebody did get injured. I believe they got shot, um, because there was some blood all over the floor. And uh, like in the main living room. Luckily it's a wood floor, it was a carpet, but um my cleaning lady was able to clean it all up. There wasn't any permanent damage, but it was it was pretty crazy. I got a call in the morning a couple days after I got back from uh from vacation and um was a police officer, and he was like, Yeah, you know, are you the host of this Airbnb? Blah blah blah, and I was like, Yeah, what's going on? And he kind of gave me the lowdown and was like, you know, the people that are staying here, they had there was like a home invasion issue and all this stuff, and I'm like, seriously? And he's like, Yeah, and you know, I'll I'll I'll give you the details later. And so I figured, okay. And he oh, one of the things that I that I just forgot was uh I guess the guy, like, one of the guys staying there, he injured his foot, and there was that's why there was blood on the floor. This was in the morning. And so he said, Yeah, there's quite a bit of blood, but it doesn't look like there's any major damage. This was the cop telling me. And I was like, okay, cool, like these guys check out later this afternoon, so I'll go over there when they check out and like figure out, you know, see what's going on with it. Didn't didn't really think anything of it. And then I get over there in the later in the afternoon after they had checked out, and I had no idea that there had been something else that had happened between the time that I spoke to the officer and the time that I actually showed up. A second incident happened. Whoever showed up before and was messing with these guys or whatever, um, came back, and that's when there was a shooting, and a gun went off, and there was a bullet hole in the floor. And I actually didn't see all this until way later because when I showed up at the property, they had it, they had the whole corner of the block, the house is on a corner, they had the whole corner of the block taped off. I could they didn't let me anywhere near it, and they had a huge dude, a huge cop standing in the in the doorway, in the open doorway, because it was a crime scene, it was a crime investigation. And I found all this stuff out like just in pieces. I had to talk to the detective that was assigned to the case, like it was just ridiculous, and I was like, man, what what's going on? Like this is nuts. And um, so basically, you know, long story short, I spoke to the owner um that I'm doing arbitrage with, and we decided to uh uh just turn it back into long-term rentals. It kind of freaked the owner out a little bit, um, what had happened. And so I was like, okay, yeah, no worries, because this this one's because of this past this last month, it was kind of going down anyways, and not making me the money that I wanted it to make me. So I figured it was probably better for everyone to just drop it and you know focus on um the other ones that were actually doing well.

SPEAKER_06 6:39

That's that's a hardcore version of the 80-20 rule right there, man.

SPEAKER_04 6:43

You can't win them all, you know. Yeah, that's probably the worst, the craziest story I have.

SPEAKER_06 6:49

I I guess that's the beauty of the whole arbitrage model. If something like that happens, you could always just say peace out and stop doing that one, you know what I'm saying?

SPEAKER_04 6:56

Yep, yep. And actually, this is kind of cool. Um I don't know if you guys I don't know what you know about the different uh ways that you can arbitrage, but most people think of the arbitrage model as uh sandwich leasing, right? So you're you're leasing from the owner and then you you're not really subletting because you don't have a lease, but you're essentially running an Airbnb business out of a leased property. Um so after that happened, I really didn't like the fact that I lost money that month because I had to take about two months of previous profit to cut to make up for the fact that I lost money. You know, you had you're on the hook.

SPEAKER_02 7:33

Yeah.

SPEAKER_04 7:33

You gotta make you gotta make that rent payment every month. And so I thought about it from an outside perspective, and I'm like, I just lost three months. Like I didn't technically make any money for three months because I had to take the previous two to make up for this most recent one. That did not sit well with me. And so I thought of a uh way that I could avoid that, and so what I did was I came back to the owner, and this was only for a month because we shut it down, you know, that same that next month. But then I I applied it to my my current ones as well, and I did away with the whole sandwich leasing thing because I didn't want to ever be on the hook. And so what I did was I created a um a partnership agreement with the owners, with the seller, well, not the seller, the owner of the property from from now moving forward that um we essentially do the same thing. So let's say you know you owe the seller two thousand dollars, or the owner, sorry, I do real estate investing as well. You owe you you owe the owner two thousand dollars a month, and instead of doing that, I said, okay, we're gonna run this as a partnership. The the minimum amount is two thousand dollars. So all the money that the Airbnb business makes up to $2,000 goes to you as the owner. If it makes less, just whatever it makes goes to you. Now, the incentive for you is everything beyond that, the profit, we'll call it, you and I will split 50-50. And I'm gonna run it, I'll, you know, I'll still continue to do everything so you don't have to do anything. I'm hosting it, I'm managing it, I'm I'm, you know, it's all my resources, my cleaning stuff, I'm talking to the people, like I'm doing all the work. And in return, everything beyond $2,000, you and I split 50%. So I gave up some of my profit, but I also removed all of my liability. So now I either make money or I don't. But I never lose money.

SPEAKER_07 9:26

Nice.

SPEAKER_03 9:27

And I never do it that's a good thing.

SPEAKER_04 9:29

Yeah, and since then I've never lost money on a month anyways. It's never been negative, so I think that was sort of a one-off. But I also, I mean, I think I made the scalability a lot better. Because, I mean, how many of those can you do when you don't have any liability?

SPEAKER_06 9:42

That's cool. We had we had guests before that did something like that. They they're they're co-hosts. So that kind of sounds a little bit like the co-host model. Because they don't like signing, I mean, they they did they started off like you signing the big long leases, and they're like, and they don't want to do that no more. Because like, you know, an HOA would shut them down, they'd be out of, you know, they'd be out of a whole year. And so um, so that's what they they shifted to co-hosting, which is uh yeah, it's it's like insurance on on doing Airbnb. Right.

SPEAKER_04 10:10

So is that the same thing they're doing then?

SPEAKER_06 10:13

Yeah, they they um they co-host their they they help people run their Airbnbs. Well actually they they pretty much run it for them on the as a co-host, and they take twenty percent of whatever of whatever it makes. Yeah. Oh, twenty of whatever it makes. Well, because yeah, you take fifty of the profit. They take twenty out of everything that the that they that it makes. That's yeah, I think similar. Similar.

SPEAKER_03 10:34

I like the way you do it because your your your your your liability is less it may cut into your profit, but your liability is less.

SPEAKER_04 10:40

Like yeah, my liability is nothing.

SPEAKER_03 10:42

So what about furnishing it? Are they furnishing or are you furnishing it?

SPEAKER_04 10:45

So that's really always negotiable. Um the original two that I shut down because of the shooting I furnished, but the new ones that I just right off the bat we did the partnership or the co-host style. Um, I actually was able to negotiate splitting the costs of the furnish furnishing. So we actually we have a running account that I I just keep accounting. It's really easy if you just keep every time you buy something, you just you make a note of it. So we keep accounting and then we meet up once a month to do to figure out you know how much we actually made and then how much each of us gets for the 50 cents split, the 50-fifth split. Um, and then anything that is like for the business, um, I call it uh consumables, you know, like toilet paper, paper towels, soap, stuff like that, coffee filter, whatever. All that stuff is paid for out of the operating account. So the the money that the Airbnb generates. So we just deduct that, you know, from each of our, you know what I'm saying?

SPEAKER_03 11:41

Yeah.

SPEAKER_04 11:42

Each of your yeah, exactly. So it's it's pretty cool. So I just use the profit to pay for that stuff, so I never have to come out of pocket. So I actually did initially come out of pocket like I think like five or six hundred bucks to get this thing up and going. That's the other thing, is like I don't know about a lot of other people that do this, but I have some business partners that do this too, but they do like luxury rentals, which is cool, and you can make a lot more money doing it, but they also have they spend like 20 grand to furnish the place. Jeez. So they're buying all new stuff, like new everything, like and they partner with private individuals, you know, private capital investors as well, so that they don't have to come out of pocket um to front that 20 grand. And um, and then the the private investors are getting they're getting a lot better returns than you could normally get with a lot of other things. They're getting like I remember now, they're trying to get like they're getting like 40% returns on their money, but they're also not getting paid for like two and a half years. Like they get paid, but they're not getting their full return doesn't come back for a couple over two years in this model.

SPEAKER_03 12:43

Yeah, because I was I was gonna wonder how how long is the lease?

SPEAKER_04 12:47

Yeah, that well, I don't have a lease.

SPEAKER_03 12:50

No, no, no. With the in vet you said if if they're they're you said they partner with investors, they don't have a lease. How do you how does that work?

SPEAKER_04 12:57

Oh, so you just set up like a joint venture agreement or you can do like I mean any type of equity partnership. Well, okay. You could do like a JV, like a business venture, like a joint venture.

SPEAKER_03 13:09

Oh. And there's no lease, they just go on and on with this, okay. Yeah, good idea. Okay.

SPEAKER_04 13:14

Yep, you could do that, or I mean, it really just depends on how you structure it. If you're doing sandwich leasing and you're leasing the owner, so like, okay, I'm the I'm the guy running it, and then I meet somebody and I do well, let's say I do it the way I'm doing it now, but I want to do luxury stuff, so I need $10,000 or $20,000 to furnace this house that I just negotiated. And the owner's not gonna split it with me, and I need $20,000. I would go to one of my private investors that I've, you know, a relationship that I've cultivated at some point, and I would say, hey, you know, let's do this joint venture. We're gonna go into this business together. I'm gonna run everything, but we're gonna use your capital to buy everything, and I'm gonna give you uh, you know, 20% return on your money. So every time I make my my 50% split with this owner, you know, a portion of it's gonna go to you every month. I like that. You could do that. I've done that a couple times. Not with 20 grand because I don't I'm I'm like that's what I was gonna say. I don't I don't do luxury stuff because I want I want to see like profit a lot sooner than that. Um and so if I'm gonna front the money myself and not use private individuals, I'd I'll just get thrifty. I just do like middle of the road, average Joe Airbnbs. So functional is more important than um you know the way it looks.

SPEAKER_03 14:36

So you said you're doing this in a suburb of Denver. Now I've heard Denver and the Denver area is a little strict on the Airbnbs.

SPEAKER_04 14:48

Well, that's the thing. That's why that's why I do it in a suburb because Denver proper is the one that's strict on Airbnbs. I don't have any Airbnbs in Denver. They're in a they're in a sub the the two I shut down are in a western suburb called Lakewood.

SPEAKER_02 15:01

Okay.

SPEAKER_04 15:01

Um, and then the two I still have are in Centennial. It's a southern, it's a suburb just south of Denver. They're all within 20 minutes of downtown Denver. And they're within 25 minutes.

SPEAKER_06 15:11

And there's no strict r strict regulation in those areas. Nope.

SPEAKER_04 15:15

Denver's the only one that has that that ridiculous uh regulation where you gotta get a business license and it has to be your primary residence and all that stuff. Wow. So if you just stay out of Denver or just have one in Denver that's your primary, and you know, if you want this business to be scalable, then uh you just go elsewhere.

SPEAKER_06 15:35

I I guess like we see it over here as like um let's say for example a major city here is Fort Worth. Fort Worth banned Airbnb a while back. A lot of people still do it. But um, yeah, you could go, you know, and it was safe. Okay, as long as we're out in the suburbs, you know, Arlington, Hearst, Bedford, Ulyss, Grapevine, whatever. We're cool, because then, you know, we're little bitty, you know, we're little bitty cities. But then they just started falling like dominoes, you know. Arlington, grapevine, abandoned, um, uh, South Lake, you know, all first of all, the the higher, the richer places, then like the more touristy Arlington, and then they just started falling like dominoes all of a sudden. Do you do you fear that happening? And what do you put in place to in case? Oh, we you know what? You probably don't have to worry about it too much because you're you're not even on the lease or nothing.

SPEAKER_04 16:24

Exactly. See? Exactly. This there's so many benefits to this doing it, structuring your your setup this way. It's just if something like that happened, something catastrophic happened, and they were just like, no more Airbnbs and they all got shut down. Or let's say Airbnb became with a fad and it just it just stopped, or they got sued for uh 200 million dollars. You know what I mean? Like there's so many ways, there's nothing set in stone. If it went down tomorrow, I'd be fine. You know, I would just I would just continue doing other real estate investing strategies.

SPEAKER_06 16:57

How old are you? It's not a big deal to me. How old are you, Martin? I I'm 29. 29, okay. Yeah, you seem really young. Micah just um hopped out of the 20 club uh the other day. He's 30 minutes.

SPEAKER_03 17:10

Oh nice. Hopped on that 30 train. Yeah. So you said because you said hold on, the laws wouldn't really affect you. So like, are you doing it out of apartment complexes, or this is someone owns the property?

SPEAKER_04 17:23

Yeah, so uh it's a single family owner. So um there it's technically a duplex, but yeah, it's just a it's just a private individual. Yeah, so I I I I tend to I like to target, I mean, you could you could figure it out with apartments. I just feel like there's more logistics with apartments. Um so I just target just single family homes or you know, obviously multifamily homes, but I just target, you know, I just target homes.

SPEAKER_03 17:49

Man, I'm I'm on the same route as you, man. I'm uh I had all this furniture sitting in the storage from like these one-bedroom units. And I was like, man, I'm I think I'm gonna arbitrage a house.

SPEAKER_04 17:58

Nice.

SPEAKER_03 17:59

I think I might do it, you know. So that is a smarter thing if you go straight to a landlord, not enough doing it a while, it's it is a little bit easier.

SPEAKER_04 18:06

Yeah, and if if you know what to say and how to incentivize them to to let you do this this Airbnb situation, I mean it's pretty easy to get get another one. I'm not I'm honestly I probably would have a lot more running right now if that was my focus. Um, but I I also do you know some other things.

SPEAKER_03 18:26

So what are your other hustles?

SPEAKER_04 18:29

Well, it's all real estate related. Here's what's interesting about Airbnbs, uh at least doing it to the at at this level. Um it's not technically real estate. Did you know that?

SPEAKER_03 18:41

Yeah, it's software.

SPEAKER_04 18:43

Well, actually it's it's the hospitality industry.

SPEAKER_03 18:46

Correct.

SPEAKER_04 18:47

So we're not using real estate strategies to maintain it anymore. It's not even related to or similar to a long-term rental. It's hospitality now. Long-term rentals, you just get somebody in there and they pay you rent every month. And if something's broken, they still pay your rent, you just fix it when you get around to fixing it. Right? With this, with short-term rentals, it's completely hospitality. It's like running a hotel. It's all based on feedback, it's all based on customer experience, it's completely different. And I wish I had thought about that more when I got into this. It still pays well, don't get me wrong, but you know, I I I like I like stuff that I don't have to deal with people constantly. Um, you know, customer, retail, all that kind of I don't like that um necessarily if I had to choose. Uh but it pays so well I just can't not do it, you know.

SPEAKER_03 19:39

So you letting me right into my next question.

SPEAKER_04 19:42

Okay, nice.

SPEAKER_03 19:43

What systems do you have in place to automate your business?

SPEAKER_04 19:47

Nice. That's a good question. Um, so that's the other thing. Because I don't want to be in a hospitality industry, I do as much as I can to automate my business. So literally the only thing that I do is, and I could even I could uh give up a little bit of my profit to um leverage this out as well, but I don't, is uh communicate with inquiries and uh communicate with guests just on some basic things. Um but everything else, I mean I don't I go to my properties probably once a month. I don't have to do much. I have everything set up. I have a cleaning lady who I've sort of turned into almost management. Um, you know, she does laundry too. Like it's all about what you can negotiate, you know, and and and I've before I got into this, I I spent $20,000 on an investing program, and it's it's more of a financial literacy program. So they teach you all kinds of cool stuff. So I I've been learning before I got into Airbnb, I feel like this I was kind of like bred, you know, I was made for this. Like all my all my foundations was you know raising private capital and leveraging and negotiating and you know building communication, um, you know, building networks and cultivating relationships with people and just understanding how to how to how to move, how to move with this. You know what I mean?

SPEAKER_03 21:08

Yeah, man. It sounds like uh I was actually um I was with a meeting this weekend with um you guys might have heard of Airbnb Automated on YouTube.

SPEAKER_01 21:15

Yeah, yeah.

SPEAKER_03 21:16

Sean Rikidich, and I hope I said his name right, but uh, I was talking to him, and that's what he pretty much said. He he owned a media company, and he used a media company inside of Airbnb, and it it grew. You know, I like how you use your 20,000, you invested in something else, and then you use that in your Airbnb business.

SPEAKER_04 21:34

Yep, yep. I mean it's so crazy when you know, thinking about that from just think about that. Somebody comes to you and says, Hey, I have this financial literacy program, or you find it in some way, and they're and it's supposed to teach you how to make a million dollars, essentially. I mean, how do you you can't really put a number on it, but let's just say it's worth a million dollars and they say it's 20 grand. The way that we're programmed, the way that we grow up, spending money, especially that kind of money, on something outside of traditional school. Most people are like, no. You know? Or they're like really skeptical, it's cause it's a scam, it's BS, like whatever. Which is what I was originally that's how I I I saw it. I looked at it. Um but after I got involved long enough and exposed to it, I realized that it was like it really was going to teach me what I needed to know. You know, and I've made my money back times 10 already from it. So it's been well worth it, but it's just interesting the way that we look at things and it's I really think it's because of the way we're programmed, the way with the way we grow up, the way we're taught sort of how to look at things. You know, we're taught to go to college so that we can get a job worked for someone else. Like there's just it's also that you can continue to you know work for the man and continue the rat race. You know what I mean? Yeah just run in the rat race. But there's some of us that are outliers that refuse to follow that. And that's it's definitely me. I mean I ha I haven't had a real job in five years.

SPEAKER_06 23:00

So you've been doing this for five years?

SPEAKER_04 23:02

I haven't been doing Airbnb for five years but I've been a real estate investor full time for five years.

SPEAKER_06 23:06

Oh nice nice.

SPEAKER_04 23:07

Yeah so I started doing fix and flips and uh some rental a couple buy and holds uh wholesaling a little bit and um and then Airbnbs this last like year year and a half. So you got a you got a couple buy and holds? I do, yeah.

SPEAKER_06 23:23

And where are those at?

SPEAKER_04 23:24

Those are in Colorado Springs so they're like an hour from my house.

SPEAKER_06 23:28

And you haven't thought of putting them on Airbnb?

SPEAKER_04 23:31

No, because then I'd have to do some work. I haven't I haven't been to that property in probably two years. Um I have a property manager again I have it all automated. I have that one even more automated than my Airbnb's that's the one good thing about long-term rentals, buy and hold stuff is you can have that thing completely automated so that money just hits your bank account every month and you don't have to do anything for it.

SPEAKER_03 23:56

That's that's how you scale that's how you scale yeah exactly gotta get your Airbnb business to do the same.

SPEAKER_04 24:02

Yeah right but that's the thing is like I could pay somebody to manage it I just don't think it's worth it. I mean I only have two maybe if I have like ten minimum ten maybe then it might be worth volume wise to like pay somebody to manage it for me. But I don't want to give up that much profit. Then I I might as well you know just continue doing long term rentals if I you know what I mean? Because a lot of the Airbnb managers out there they don't they don't charge the same as if you pay like a property manager to manage your long-term rentals.

SPEAKER_03 24:31

So how many I know you have two Airbnbs right now. Do you plan on getting more and if so how many?

SPEAKER_04 24:37

Yeah so that's kind of like I'm I'm open to having more but I'm not actively pursuing them. So you know my the the $20,000 program that I told you I got involved with it's um it's a national organization. So there's a group of people hey quiet there's a group of people that uh all across the country even in Hawaii that are part of it. And so a lot of people that get involved are newbies which is fine because I was a newbie when I started I mean you gotta start somewhere. And so a lot of people have they have a uh a problem with finding the money if they don't know how to find the money. That's the biggest challenge for new people so I always just tell them like you know once you get past that it'll be easy but until then just find some deals. You know? Just focus on finding some deals and uh the money will show up and if it's a good enough deal I'll buy the I'll buy the the deal from you. You know I'll buy the house from you or I'll I'll go into partnership with you and I'll bring the money. So you don't have to worry about that part. And so people bring me deals like constantly. And so that's actually how my most recent the ones that I still have the Airbnbs I have that's how those came around. I didn't I didn't actually go find those. They just came they fell in my lap. There's a a gentleman in my group in my real estate investment group who was like hey you do Airbnbs and I was like yeah because I had those two other ones and he was like hey I want to I want to turn my house into one but I don't know how to do it. Do you want to partner on it? And I was like yeah sure. So I just ran him through you know the partnership situation that I told you about and he was like cool let's do it because he wanted to learn and understand how it works and so it's a win-win. I'm all about making win-wins it's gotta be you know good for everyone. Being ready to pull the trigger I like that yeah I'm ready to pull the trigger because I got access to capital.

SPEAKER_03 26:29

There we go. So like okay another question I have for you since you're in the Denver market or like I know you're not actively pursuing Airbnbs but would do you know what would you consider a good market for Airbnb right now?

SPEAKER_04 26:43

Like a good market to invest in uh like if you're gonna buy the property yourself? Yeah buyer arbitrage for Airbnb Denver's great I have I mean I have like 95% occupancy. I have like three two three days out of the month every month. I mean last month. Yeah I think last month we had three three days vacant on the one unit and I think maybe four on the other unit.

SPEAKER_03 27:16

So are you are you doing all your pricing by yourself?

SPEAKER_04 27:21

Yeah so that was another thing that had like a bit of a learning curve. I started with like smart pricing and then that was crap so I got rid of it and then I started manually doing it and there's some other like kind of cool websites that'll do some more more um complex and smarter pricing. No pun intended um there's one called Beyond Pricing that was pretty good. I was using them for a while. But yeah I don't know I I I kinda got to a point where I've established a strong enough um you know baseline with my listings and so I took all that stuff I got rid of all that stuff and I just have a baseline now and then um I decrease it a little bit if I have like you know a couple days open that week.

SPEAKER_06 28:06

You know you know what I'll I'll say um because Micah preaches from the mountaintops about um about um price labs and it's yeah I'm I'm have you tried it before I have yeah okay yeah they they they have a bunch of intricate stuff I'm learning it I'm just trying it out right now because I'm I just setting up uh an Airbnb right now and I'm I'm trying to use it it's you know 30 days free. And so um excuse me. So with but what I but I was trying at first I was like you know and I hadn't done Airbnb well since like um early this this past year and and I will I was still doing the the beyond pricing before that and so because you know I Hearst got shut down I had Airbnb there so anyways I'm setting one up now and and just from just in the last few months um it seems like um smart pricing has gotten a lot better. And I they were they were asking me to raise my prices. I was like damn you know smart and and plus they have it where you can do that far out you know different far out pricing and and you could um you could you can do like you know set it up for um longer minimum stays farther out. I mean it has a lot of stuff that that um smart you know maybe not as intricate as um as the um price labs but they're getting there man and I think that's what I think they just want to be a whole self-sufficient thing and it's kind of cool.

SPEAKER_04 29:29

Yeah I agree.

SPEAKER_03 29:30

Yeah I think I think what smart prices is starting to do is look at how many people you offer like if you offer six people eight people right it gives you a price based on that eight like hey you should charge 150 250 a night you know what I mean so yeah smart pricing has gotten a lot better like I'm looking at one of my calendars now and it's told me to wait raise my price so it's pretty good.

SPEAKER_06 29:54

And I remember the early days of smart pricing like you put a whole a three three bedroom two bath house on there and they and you put it out there in a hundred bucks a night whatever starting off and they're saying ah why don't you put it at twenty you're like what the f Yeah yeah I remember that I guess now I guess I haven't messed with it since okay so you just do your own like you said baseline prices.

SPEAKER_04 30:13

I have like a baseline price and then if I continue to maintain you know in the 90% occupancy range after a month or two months or so I let it ride and then I'll and then I'll kind of up the prices I'll just kind of creep the prices up a little bit at a time. So I'll just raise the baseline price you know by five bucks if I if like I think we just raised the prices uh we did it more more than five bucks so uh I'm trying to remember now. We were getting ninety like ninety five percent occupancy for like three months straight and I I wasn't messing with the baseline and so I decided to raise it like uh I think I raised it like twenty bucks just to see. And um you know and you can always drop it back down if it's not looking so good. But I've still been getting some pretty good reservations so I don't know. Nice we'll see.

SPEAKER_06 31:02

And um one thing I came across today was um and I and I had put it out there on the forums I asked Micah too but he's a busy dude but as I said for example I I woke up this morning to uh a a booking for Thanksgiving a one day booking on Thanksgiving and for for a Cowboys game because you know the Cowboys play every Thanksgiving I was like oh shit I didn't you know luckily it was see I didn't I I haven't gone that far in setting it up yet I wanted to make the holidays like Micah does you know make it you have to rent the whole week if you want that holiday. And so and I I I hadn't got to that point yet and I was like crap but luckily it was um it was someone with no reviews and just you know they started their Airbnb probably yesterday and so I I didn't have to accept them you know and the um instabook so I rejected them and then I went instantly went over there I I tinkered around and I figured out how to put like a four day minimum on Thanksgiving a four day minimum on Christmas you know and like a couple hours later I got a five day booking for Thanksgiving. I was like oh damn there you go I dodged the bullet there. So do you do you do that also? You put like um uh three day four day minimums on holidays?

SPEAKER_04 32:11

Yeah I have that too um I also don't have are we even do you have Christmas available already? I only do a three month extent like extended period out. I only do three months rolling.

SPEAKER_06 32:21

Okay yeah I have it available. I mean does you you find it better just to do three at a time?

SPEAKER_04 32:26

Well it's I mean it's different for me because I never know if it's going to be my last month.

SPEAKER_06 32:31

Oh that's true. You know what I mean?

SPEAKER_04 32:33

Yeah yeah yeah um not that it would be but uh you know things can change and I don't want to be too far out um and if your prices are right I mean people will book so you don't have to worry about like making sure you're all you're all booked up you know five months from now like it's not a it's not a big deal if your prices are right. That's really what it's all about is pricing.

SPEAKER_06 32:53

Some good tips right there. Good tips. Yes sir how about you Micah how far out do you book oh it depends on the unit.

SPEAKER_03 33:01

Um like actually it's funny y'all ask I'm out here um changing up my um one of my little rock places now uh so if it's like a whole house I'll just do all future dates and then I let price lab run its magic. Nice where if it's twenty nights out far out you have to stay a minimum of four nights and you also have a minimum pricing so if like during the week if it's twenty days out yet it's a minimum of $75 and then the weekends are like a minimum of like $105, $110 average play with it all the time.

SPEAKER_04 33:31

Yeah yeah how many do you have how many what how many how many Airbnb units do you have or short term rental units?

SPEAKER_03 33:40

Um up to about active probably like 60 plus but like it's like 400 plus oh awesome yeah they're making timeshares and I have a few arbitrages and then I have uh a whole house and then I'm trying to get I have a few corporate one corporate rental right now and then I'm trying to get I'm thinking about getting another arbitrage. Yeah sweet you're making good money then yeah but I need to increase it because I need to because most of my stuff's coming from like timeshares so I gotta work on getting my other stuff up and going.

SPEAKER_04 34:14

Right.

SPEAKER_03 34:15

Cool man congrats yeah yeah gotta keep growing how much more money you need Micah a whole lot more so I gotta keep clocking in.

SPEAKER_04 34:25

How much are you making Micah?

SPEAKER_03 34:27

What?

SPEAKER_04 34:28

How much are you making?

SPEAKER_03 34:29

How much was I making how much are you making are you right now with all most of my listings being shut down because I'm threw all my money into software Mike making probably 11,000 a month.

SPEAKER_02 34:41

Okay.

SPEAKER_03 34:41

But I'm gonna try to get it back up to where I was last summer where I was making like forty eight fifty thousand a month.

SPEAKER_04 34:50

Nice.

SPEAKER_03 34:50

Yeah that's awesome.

SPEAKER_06 34:52

See Mike has done it from all different angles. He even rented rooms out of his own house. Yeah so he's he's done every single way he could kill it right there.

SPEAKER_04 35:01

If you can do that that like saves everything right you can house hack it househack's the best if you I just talked to somebody who's doing that he he's got a place in Telluride uh Colorado.

SPEAKER_03 35:14

Tel what part?

SPEAKER_04 35:15

It's called Telluride. Telluride okay it's where all the like celebrities buy like their million dollar mansion estates outside of California.

SPEAKER_03 35:24

He went for he went the high high end route huh?

SPEAKER_04 35:26

Yeah I mean he's he's not a celebrity but he's in the snowboard industry. Uh he's from Australia. I was just talking to him today actually and he got he he got in right at the right time I think he bought his house like five years ago or five years ago? Yeah I think it is five years ago um and he bought his house on foreclosure and it was just a one bed one bath house and he took like an entire year off of work and built uh you know add added on and turned it into a 3-2. Um and so now he said uh he rented out one of the rooms he he had a a bad breakup with his with his girl and so he just lives there alone now so he's like I'm just gonna rent the rooms out now. Um and so he rented one of them out and then he just rented his second one out and said with those two people renting rooms in his house and sharing the uh the second bathroom he still has his own spot he still has a one bed one bathroom place and then um he's gonna actually not only make his mortgage payments but also cash flow a couple hundred bucks a month which is huge in Telluride I mean yeah the average home price in Telluride is 1.7 million dollars average that's the average price isn't that crazy dang it's like Frisco now well Frisco's half a million average that's crazy he's making yeah if he makes money like that man because I remember when I was renting out my rooms I'm thinking about throwing some more back on there yeah I was making killing then you ain't gotta pay your mortgage that's like the biggest thing if you can live for free and and the the kicker is those are long term renters. So I'm thinking I talked to him today about it just kind of put the bug in his ear I'm thinking like I told him I'm like dude if you turn that into an Airbnb like if you Airbnb those two rooms like yeah it's gonna require a little bit more of your time but I think it could be worth it.

SPEAKER_03 37:14

You could probably double what you're getting easy I I did a hybrid model I was doing corporate rental and Airbnb with it. If you do a hybrid model man it kills it nice hang some cool snowboards on the wall it'd be nice yeah exactly yeah he works for like one of the prominent snowboard companies so he's like a manager for them and like a sales rep or something I don't even know it's funny you said that about putting the snowboards on the walls because I think that's where Airbnb really like where people who have like one or two or three make a whole lot of money I think it's they put like they do those like unique spaces like the the tree houses the airboard the the snowboard something you you do something unique and different you can make a whole lot of money now.

SPEAKER_06 37:58

Oh yeah. I'm following um on Instagram uh the the hashtag Airbnb thing and man there's some beautiful houses the way they set them up and a lot of it is like man I could do that you know I'm saying but it's just like it's so different. It's not just the regular HGTV crap you know which which looks good but it's I mean they're doing all kinds of crazy stuff. Like I said snowboards on the wall kind of thing surfboards on the wall or a bicycle hanging from somewhere. I mean I don't know just like like different stuff that that's just unique and it just it just grabs people because we're all still kids at heart you know I'm saying so we go somewhere on vacation and wow this this is fucking cool. But um let's get to the the elephant in the room man yeah we we had alluded to the to the uh marijuana earlier and uh so how does that work I mean do you you of course I mean you're rent you're renting near Denver you have to you have to let the guests do their thing right yeah um yes and no um so at my old units I didn't have a problem with it I mostly just defer to the owner what their preference is if they have a preference uh because it's their place you know I don't own the property um and so the old place was it was fine and we had a few issues here and there's some cleanup involved sometimes people aren't respectful or they'll leave you know they'll leave wax like wax on the table like just like stuff that's just not cool and or they'll smoke up in the house even though we say please don't smoke in the house you know um but this new place the the the the owner he's he's very conservative and doesn't he's really strict he doesn't want any type of smoke um so we just we just have it in our house rules like no smoking that of any kind uh people still do it every once in a while you know I hear different things and sometimes guests will rat each other out you know upstairs will tell on the downstairs and vice versa and sometimes the cleaner will go in there and be like yeah it smells like smoke a little bit when I came in here.

SPEAKER_03 40:00

Little things like that but nothing major luckily have you ever dealt with like a place where you would tell them hey this is 420 friendly whatever and are you able to charge like a premium on that?

SPEAKER_04 40:11

Hmm I don't believe you can do a premium on 420 friendly. I mean maybe some people try but I I think a lot of places they'll do they'll have 420 friendly. Although now that I think about it I had somebody reach out to me not too long ago and they were like hey we're having trouble finding a place that will let us smoke and I was like really because they were trying to get me to bend my rules and I was like no sorry like it's not even up to me. Um so maybe not maybe not so much. I mean I don't I don't travel in my own city I don't stay Airbnb so maybe that's something I need to look into just to find just so I have that knowledge so I I know. But as far as I knew there were several places that'll do they say MMJ friendly or 420 friendly. But maybe not so much lately. I don't know.

SPEAKER_03 40:58

Yeah because I I was uh I consulted one a person out in Portland to start their Airbnb. I was like I was like uh see if you could do that you know I'm saying see if you could which she she ended up getting shut down because they said it was illegal whatever what she was doing but I was I was trying to test the market on that like hey if you could make it you know World 20 friendly maybe you know get a little extra paper.

SPEAKER_06 41:19

Oh yeah I wonder if that's a major reason why the um the edibles business over there is exploding because a lot of spots in Denver don't let you smoke you know major hotels and stuff like that.

SPEAKER_04 41:30

Right, right.

SPEAKER_06 41:30

That's true. Yeah. So and and one of y'all spots that'd be no problem just to bring some brownies in and just hang out.

SPEAKER_04 41:36

Yeah for sure. Yeah I don't care about that. I don't think the owner cares about that either he just doesn't want smoke.

SPEAKER_06 41:42

No smoke. Yeah smoke smoking sucks anyway so screw it. It does yeah it's gross it really is just just eat a little bit of a brownie you'll be alright for hours maybe a couple days yeah we've interviewed um what's his name out of Denver um what's his name we interviewed early on James Carlson James Carlson you're familiar with Tyler work we've interviewed a few people out of Denver okay cool yeah James Carlson I haven't met them James Carlson's uh yeah he's he's next level he he uh he's a real estate agent too so he'll and and his big selling point he puts people in houses with like these finished basements and he tells them look you're gonna you can you can afford this house and you can rent the bottom out and pay for the whole thing you know because it's it's your prop your primary residence we're allowed to do do it there. And so he was he was showing us because he has a couple spots of his own and he said man he said him and his um his wife they never have to buy buy anything again because some the guests leave so much stuff behind.

SPEAKER_04 42:45

Oh yeah yeah that yeah that happens to me a lot too oh nice kind of nice you just pay you just get stuff up and running and then a lot of the times you know they'll buy their own or bring their own body wash or buy their own shampoo or whatever and then they just leave it. So you got like a rolling you know I don't have to buy creamer for my coffee anymore because there's always a bottle of creamer in the fridge. You know, because people buy the big creamer bottle because that's all you can buy and then they use it twice and then they just leave it. Just make sure it ain't gotta get on a plight.

SPEAKER_06 43:14

Marijuana infused creamer on accident.

SPEAKER_04 43:16

Yeah right yeah exactly I mean if it was I wouldn't I wouldn't care it's not it's not smoked creamer. It's not the the creamer's not smoking out of the bottle so who cares?

SPEAKER_06 43:28

Million dollar idea right there.

SPEAKER_03 43:31

Man liquid marijuana to you because you said you said you do real estate what other real estate ventures are you into?

SPEAKER_04 43:39

Um so currently I'm still doing fix and flip. What? Um and then uh I have those long term rentals and then I've been slowly slowly getting into some multifamily stuff. Um but I do things a little different. I I'm like very averted to using bank products and um Well, not all bank products. I'm averted to using mortgages.

SPEAKER_02 44:04

Mm-hmm.

SPEAKER_04 44:04

I don't like using mortgages because you pay way too much in interest um and it's front loaded, it's amortized interest, and so uh again, just back on my leverage game, I I've done about ten deals in the last couple years and I've never used my own money.

SPEAKER_03 44:22

So do you do a hard money loan and then refi out or what are you doing?

SPEAKER_04 44:26

So I do a a private money loan, not hard money, private money, um, which is way better because you can negotiate the terms. So I don't I don't meet a lot of uh private investors, I create them.

SPEAKER_03 44:40

Go into how you do that, I like that.

SPEAKER_04 44:44

Um well one really simple explanation is did you know that you can use a retirement account to invest in real estate?

SPEAKER_03 44:55

Yeah.

SPEAKER_04 44:56

IRA turn into IRA 401k or an IRA. So a lot of people don't know, or if they do know, they don't understand how it works. You know, it's involved uh the way that you do it is a self-direction, self-directed retirement account. A lot of people know that word now, but they don't really understand what it is. And so I'll uh lately I've been coming across a lot of people that are like, oh yeah, I'm my my account self-directed. I'm like, great, so can you use it to buy a house? And they're like, well, no. I'm like, what do you mean? Then how is it self-directed? And so what's happening is these money managers, Fidelity and uh, you know, Merrill Lynch and Charles Schwab, like all these companies that are that are um financial advisors, they've caught on to this wave of self-direction, of true self-direction, and so now they've created these accounts that they call your self-directed retirement account, but it's still being managed by them. Which isn't a self-directed retirement account. So a self-direct self-directed, a true self-directed retirement plan is quote unquote managed. It's held by a TPC bank, a third-party custodian bank. And so what those companies do is that's all they do is they and they create an account for you, they help you roll over your monies from, let's say, Fidelity, they roll it over penalty free and tax-free into your self-directed account, and then it just sits there, and you pay like an annual couple hundred dollar fee, it depends on the balance, to let it sit there. And they don't so they don't take commissions, there's nothing like that that goes on. But the caveat is you then have to use it to direct it where you want it to go into what investments you want it to go into. And so once it's in that environment, then you can use it for real estate. You can use it for anything. There's only three things that are not allowed by law when it's in a self-directed retirement plan, and that is um buying shares of an S corporation, um, investing in or funding life insurance, and um buying collectibles. And that's the most recent rule that they added was buying collectibles because people were buying like um collections of wine and then drinking the wine. Because you're not allowed to personally benefit from a retirement account without without paying a penalty.

SPEAKER_06 47:12

Oh, I see, I see, I see.

SPEAKER_04 47:14

And if you if you you if you invest in a in a in a collection of wine, but then you drink the wine, you're personally benefiting and devaluing the collection you just bought.

SPEAKER_06 47:21

So if you bought some Mad Dog 2020 and then you drink Exactly. You know, it's funny you said that because I I've heard uh that's rich people actually, you know, they invest in art and they they mention wine. They actually invest in wine. I was like, that's that's some rich people crap right there, but they found a way to kind of you know they got rid of that. Yeah, yeah, that's that's not allowed.

SPEAKER_03 47:45

That's yeah, but Braun James invests in wine.

SPEAKER_04 47:48

He does. So that's so that's one of the main ways that I raise private capital is you know, I I I meet people all the time. There's $27 trillion in in retirement accounts in this country. If you break that down into 300 million people that live here, 320, whatever, roughly every man, woman, and child would have 250 grand in a retirement.

SPEAKER_03 48:08

You pretty much go baby boomer hunting, huh?

SPEAKER_04 48:11

I mean, I you'd be surprised who I meet because uh there's tons of people that aren't even of close to that age. I mean, I have I have a guy that's 26 years old. That's uh one of my private lenders. He's got like a hundred K. His dad passed away and left him some money.

SPEAKER_03 48:27

Oh, yeah.

SPEAKER_04 48:28

You know, like you just never know, and so I just treat everybody equally, and I talk to you know, I talk to people all the time. I think every time I meet somebody, I I end up on this tip, and then I I talk to them and I ask him just a couple quick questions, and one of them is that first one I asked you, did you know you can invest in real estate with a retirement account? And they usually say no, and then I'm like, Yeah, well, then I kind of tell them what I just said, and then I say, Um, you know, what's what's been your average rate of return on your retirement account like over the last couple years? And the most common answer is I don't know. Right? Yeah. So the at the average across the country is like three or four percent, maybe five percent, depending on who you ask, um, in the market, which is crap. I mean, what's inflation?

SPEAKER_03 49:10

Exactly. Yeah, exactly.

SPEAKER_04 49:11

Three three or four or five percent, depending on who you ask.

SPEAKER_02 49:13

Yeah.

SPEAKER_04 49:14

So if your money is barely keeping up with inflation or not even, are you really making any money?

SPEAKER_02 49:18

Nope.

SPEAKER_04 49:19

I mean, how are you expecting to retire off of uh a system like that in 30 years if it's just barely keeping up with retirement? I mean, retirement goes up and then your account, you know what I mean?

SPEAKER_02 49:29

Mm-hmm.

SPEAKER_04 49:30

Like your money is worth less every year, but it's only gaining in interest the amount that it's being worth less. You know what I mean? So it doesn't make a lot of sense, and now that's you know, with proof what's happening lately is all these baby boomers that are not able to retire. I mean, there's there's two-thirds of the baby boomers right now don't have the money to retire.

SPEAKER_06 49:55

That's true. It sucks. So walk us through walk us through a deal. Let's say uh tell us like, I don't know, give us an example. You find a property for whatever price, and then you go find what, two or three people to how how does it work? Walk us through like a uh a you know a make make up a deal.

SPEAKER_04 50:13

Um, okay. Let's say I'll keep it simple so I won't do it with multiple people. I've done I've done it, I've had up to five, I think I've had five lenders on one deal before, but then I've also done it with just one. Obviously, it's better and easier and simpler if you can get all the money from one person.

SPEAKER_02 50:29

Okay.

SPEAKER_04 50:30

Um so let's say you buy a house for a hundred grand or you find something that's a hundred grand, um, you negotiate the price down to a hundred grand, let's say it's worth like uh I don't know, let's say the fair market value is like one forty, one fifty.

unknown 50:44

Right?

SPEAKER_04 50:44

I'm always getting it's always getting a discount. It's important. You don't buy stuff at retail value if you're gonna invest.

unknown 50:50

Okay.

SPEAKER_04 50:50

That's just good sense. So if you don't know how to do that, you gotta learn how to do that. You gotta learn how to identify properties that are under market value. Um, you know, at a discount. And then, so let's say we're buying it for $100, it's worth $150,000 so we're getting a pretty good discount on it. And then it needs, I don't know, let's say it needs $50,000 to fix up, and when it's fixed up, it'll be worth $200.

unknown 51:17

Okay.

SPEAKER_04 51:18

Are those are those typical? I mean, am I exaggerating too much?

SPEAKER_06 51:22

That sounds good. Yeah, that sounds good.

SPEAKER_04 51:23

Does that sound okay?

SPEAKER_06 51:24

Yeah.

SPEAKER_04 51:24

So we're buying it for $100, we're putting $50, into it, and it's worth $200,000. We'll sell it for $200. Now there's some hard costs that go along with that, like realtor fees and holding costs, closing costs, like all that stuff. Let's just say this guy I'm borrowing the money from, I need $150 total, right? I need $100 to purchase and $50 to fix.

unknown 51:40

Right?

SPEAKER_04 51:41

$50 for rehab. He's got it in his retirement account that I just helped him uh roll over into a self-directed account. So I say, look, Micah, you've got this $150,000 in your retirement account. I will give you 12% return on your money. What were you getting before? You don't know. That must that means it wasn't good, right? And then we looked into it and it was getting 3%, which is pretty typical. Okay, so you're getting 3%. I'll give you 12%. I'll give you more than triple what you're getting right now. You're like, okay, well, give me the details. How am I how's my money secure? Like, what's the risk involved? Well, there's always risk, right? So I don't want you to think there's not. However, if you're working with an educated investor, the risk is very minimal. It can be. One of the reasons is because I got the property at discount. So we're gonna use your money, a hundred grand, to buy this house. I don't actually ever see that money. So the money gets transferred from your retirement account to the title company. The title company puts it in escrow and closes on the on the house. Right? I'm taking title in my comp my LLC. My business is buying this property. So I own the property, you own the debt. Your retirement account, rather, owns the debt. You're like the bank. You have the mortgage. It's not a mortgage, but you have the mortgage.

SPEAKER_03 53:03

Well, Mr. Potter, I just invested in VTSECs and they said I'll be retired in 15 years. How many flips have you done?

SPEAKER_04 53:14

Enough. This is my portfolio. You know what's funny? I've never had No, I'm I might have had one person ask me that.

unknown 53:23

Really?

SPEAKER_04 53:24

Yeah, because when I talk to people and they uh they see how much I understand and how I how much I know about this process, that's never a question that comes up. You know what? It's clear to them that I know what I'm talking about.

SPEAKER_03 53:37

I 100% agree with you. Because when I talk about Airbnb to people, like if I'm talking to them into doing it or partnering on a deal or anything, they usually are like, cool, what do I give how do I start? I'm like, oh, okay. But like you said, if man, if you have confidence and you know what you're talking about, people throw you some money.

SPEAKER_04 53:57

Yep. You just have to understand it. It's just repetition. All right. I had to go through the process and learn the process, like, you know, over a certain amount of time before I understood it. And when I understood it, it's really easy to talk about because I understand the ins and outs.

SPEAKER_06 54:10

Okay, okay. So back to the so back to the deal. He's like, Alright, man, I trust you. I'm gonna give you the money, and then you go ahead and what what happens next?

SPEAKER_04 54:19

So hold on. So he he funnels the money to title, and in return, this isn't just like, hey, give me this money and I might pay you back. In return, this is secured by two security instruments. The first security instrument is called a deed of trust, and the second security instrument is called a promissory note. So the promissory note secures the uh borrower or uh secures the money from the borrower to the lender. So it says, um my LLC, um, I my one of my LLCs is called Absolute Investments. Absolute Investments is borrowing this money to buy this property um from Micah's retirement account and is going to pay 12% interest over a six-month term, whatever, whatever, right? Whatever we negotiate. Whatever the time period is. Lump sum, too. That's the best part. It's it's all it's all what you're willing to negotiate. It's all what the other person's willing to do. And so I don't ever want to make monthly payments like a hard moneylender would charge, because that's just more money I gotta I gotta borrow. I gotta borrow over borrow to make my monthly payments while I'm letting having this deal get worked out. So I don't like I don't like that. I just say, look, you know, this is this is where it's going, it's going here. So I'll just it'll it'll pay back when we sell the house for six months. It's really just when we sell the house. Um, it'll get paid back in a lump sum. So the principal plus the interest will all get paid back all in one chunk. Back to your retirement account, right? It doesn't go to you if you're lending out of your retirement account. You're lending out of your own money, obviously it'll just go back to you. So then you have to consider that income.

SPEAKER_06 55:51

Yeah, yeah, that's what I was gonna say. So if it goes directly back into their into the retirement account plus 12%, you know, profit profit. Um they don't get taxed on that?

SPEAKER_04 56:02

Nope. So this is what's really cool. An IRA in this country can be in two different there are two different ways you can structure an IRA. There's a traditional IRA and there's a Roth IRA. You might be familiar with this. A traditional IRA, you don't pay taxes for any contributions, right? There's a limit on contributions as well, I think uh, what is it, 5,500 or something a year. I always get 401k in IRAs mixed up. One of them's 5,500 and one of them's like seven grand now. Uh it's not a lot of money, but that's how much you're allowed to contribute every year to it. Um and that's all tax-free. However, when you initiate distributions, meaning when you start pulling money out of the account, when you reach 59 and a half or whatever the retirement age is now, you do take you do pay taxes, you pay income tax on that money. Right? The reverse for a Roth account. A Roth account, you pay money on or you pay taxes on any contributions you make. And when you go to for distribution, when you start pulling money out or taking money out at retirement age, there's no tax on that. So when people are sort of asking me, like, when they're gonna roll over their account and they have monies in different areas and whatever, I'm just like, well, what do you have? You know, sometimes people already have traditional accounts, and then I'm like, okay, how much is in there? And we kind of discuss it, and they're like wondering, what should I do? Should I keep it in traditional or should I do raw? And the best analogy that I've heard is do you want to pay um taxes on the seed, or do you want to pay taxes on the harvest? Right? Because if you're interested in growing your retirement account and it's gonna be bigger down the road, if you're in a traditional setup, you're gonna pay more taxes because there's gonna be more in the account at the end. Right? You didn't pay taxes going in, but you're gonna pay taxes going out. Coming out. So most people are like, okay, that makes sense. And so a lot of people will end up converting their accounts to Raw. I'm not a financial advisor, so there's nothing that I can specifically recommend. I just tell, I just give them the information. I'm like, it's up to you. Like, it's not my I'm not a financial advisor. Um but anyway, so and then the other thing is growth, right? So we're talking about growth, like uh, this would be growth. Like if you lent if you lent money out of a retirement account and it made $20,000 in interest, that's not a contribution, so it doesn't it doesn't hurt the limit. It's called growth. And growth is 100% tax-free, and there's no limit on growth. That's beautiful. Are you familiar with Mitt Romney? Yeah. So Mitt Romney, when he ran for president a few years back, I guess it's been a decade now, I don't remember exactly. Uh, when he ran for president, he released his tax returns, and he made he had $10 million in retirement accounts. Do you think that he got $10 million by contributing $5,500 a year? So there's two there's two games being played in this country, and one of them's the wealthy way, and one of them's the other way. And the problem is, is everyone else that's not a one percenter don't under they don't know the rules. They don't understand the rules, so they're not playing by those rules. Same board, but somebody's playing checkers and somebody's playing chess. Yeah, uh OJ.

SPEAKER_06 59:19

O.J. used some real estate stuff to uh to keep a lot of his money, didn't he?

SPEAKER_04 59:23

Yeah, so that's the other thing. Retirement accounts are unsuable. You cannot sue retirement accounts.

SPEAKER_06 59:28

He went out in Miami or to Florida and bought him a big ass mansion from his retirement funds, and there's no way they could touch it because that's considered part of his retirement. Yeah.

SPEAKER_04 59:37

Exactly.

SPEAKER_06 59:37

That's insane.

SPEAKER_04 59:38

There's some rules and regulations and things to understand about you know revolving around retirement accounts. But yeah, once you know the rules, like, man, it's so awesome. And there's there's actually a better system than that, which might have to be another conversation, but it has to have to do with um overfunding a life insurance policy.

SPEAKER_06 59:58

Oh, nice, nice.

SPEAKER_04 59:59

That's that's the new wave. You don't even need retirement accounts anymore if you do that.

SPEAKER_03 1:00:03

So it's self-directed IRA. You can it's a certain it's a cap on how much money you can put in there that you can personally put in there, right?

SPEAKER_04 1:00:11

Yeah, you can personally contribute, but if you're using the money to invest and that the investments produce returns, there's no cap on that.

SPEAKER_03 1:00:19

Gotcha.

SPEAKER_04 1:00:20

Yeah. If you're just giving it if you're just putting cash into it, then there is a cap, and it's pretty small. But if you're savvy and you're using you're leveraging that money to make more money, that's not a contribution. That's called growth.

SPEAKER_03 1:00:34

Gotcha.

SPEAKER_04 1:00:34

And there's no tax and no limit on growth.

SPEAKER_03 1:00:37

Maybe Martin means we're all gonna have to have a conversation after the cast.

SPEAKER_06 1:00:42

A part two for sure. Um So so could you do this with buy and buy and hold properties? Could you put some buy rules? And and what so what happens to the cash flow? Do you have to leave it in your retirement account, or can you I don't know.

SPEAKER_04 1:00:56

I'm just um so so this is what's really cool. Imagine this. So now that we've had that conversation, that's a short-term example, right? I sell the house for $200, I I pay you back, let's say it accrued $10,000 in interest over a four-month period, whatever, however long it took to fix and sell. And then uh so you make your hundred and fifty back plus another ten, and you didn't have to do anything. That's pretty sweet.

SPEAKER_05 1:01:17

That's awesome.

SPEAKER_04 1:01:18

Then what do you what do you think you're gonna do after that? You probably lend it out again, right? And then so whatever was left after broker fees and holding costs and closing costs, all that stuff, there's probably twenty or thirty grand left. That goes to me. Just because I engineered the whole transaction. Yeah. Right. That's pretty cool too. That's no money out of my pocket and I just made twenty or thirty grand.

SPEAKER_03 1:01:39

Oh yeah. So with your twenty or thirty, you have to reinvest, right? No. Pay tap you're paying tap cap Momba. You're paying capital gains on that?

SPEAKER_04 1:01:49

No, you don't you don't pay capital gains on a twenty thousand dollar profit. Really. Again, it depends on how you're structured. Hold on a sec, I gotta plug my phone in. It's losing battery. Hold on. I'll just have to hold it. So this is another part that's important to be set up correctly. There's four pillars of um four pillars of wealth, and it's important to have all of them in check. You know, real estate is just one of the pillars. The other three are taxes, which is huge, which is kind of the answer to what you're what you're asking, making sure you're set up tax-wise and you're taking advantage of everything you can. Um, and then the other two are business and banking. Uh understanding banking is huge too. I mean, everybody knows what a business is and how to create a or you know, that having a having a uh income-producing business is is key. But if you don't have the other things in check, using real estate to build your wealth, using taxes to maintain and save your wealth, you know, and using um what is the other thing I said? Business taxes, real estate, and banking. If you're not using the proper banking elements, that can be hurtful too. That's why I don't use mortgages. So that's a whole nother conversation that we could talk about. Um there's a strategy called velocity banking where you're basically replacing all of your amortized interest loans with simple interest lines, line of credit, and you're eliminating hundreds of thousands of dollars of interest and paying off your stuff faster. Nice. So you don't use that again, that would be a whole nother conversation, but what's that called again? What's that called again? It's called velocity banking.

SPEAKER_06 1:03:40

Velocity banking?

SPEAKER_04 1:03:41

Velocity banking, yeah. It's just a strategy. It's just a it's a debt uh acceleration strategy.

SPEAKER_03 1:03:50

So you said velocity banking and you don't use so when you say you don't use a mortgage, you use private money only, right?

SPEAKER_04 1:03:58

Yeah, so I'll I'll quickly walk you through how I got my rental. I used private money to buy the rental. Yep, so I used private money to buy it. I made sure that it was the numbers were good, right? You can't just buy any old rental. The numbers have to be really good. So my numbers need to be, if I'm gonna do this this type of structure, my numbers need to be uh 1.2% gross rent yield. So the monthly gross has to be at least 1.2% or better of the overall purchase. So if I'm buying something for 100 grand, it needs to it needs to rent for 1200 or better in order for my strategy to probably be working.

SPEAKER_02 1:04:32

Okay.

SPEAKER_04 1:04:32

Right? And so that's like some people hear that and they're like, what? Those don't exist. They do exist all over the country. If you're just trying to invest in a huge city like Denver, you'll buy something for 400 grand that rents for 1800 a month. That doesn't work. And you could barely make a uh mortgage leveraged situation set, you know, work work well with that, those numbers. But if you know where to look, you can find deals like I'm talking about all day. Mostly in the Midwest.

SPEAKER_03 1:05:04

Yes, sir.

SPEAKER_04 1:05:06

And in the South a little bit.

SPEAKER_06 1:05:08

Okay, okay. What I really wanted to know is because I'm a buy and hold guy, and I'd like to I'd like to know how how you how to put these into your into your IRA and what happens to the cash flow.

SPEAKER_04 1:05:20

Okay. Um sorry, I keep going off on tangents because there's so much to explain.

SPEAKER_06 1:05:24

No, it's a lot of info. Thank you. We appreciate it.

SPEAKER_04 1:05:26

So let me go back to what we were talking about with the retirement account so I can answer your question. So imagine you had um $500,000 in your retirement. No, imagine you had $100,000 in your retirement. Let's just say you bought one property with it. Let's say you bought a property that that um rents for a thousand bucks a month. Let's say it nets actually a thousand bucks a month after all expenses. Is that not realistic? Okay, let's say eight hundred a month. Let's just say it makes eight hundred a month after all bills paid. So eight hundred a month. Month is is your return, right? That's your income from the money. Now, if your retirement account put the money up and you're holding this thing, your retirement account owns it. So that $800 a month goes back into your retirement account as cash flow, as growth, as tax-free growth. Now, let's say you're happy with that. You're happy with the $800, it doesn't have any more, it's not making enough, you know, because you have a hundred grand sunk into it. Let's say you reach retirement age. Or let's say you want to retire today. There's a form you can fill out called the 72T early distribution. A lot of people don't know this either. If you fill this form out, you can start retirement. You can initiate distributions and there's no penalty on it. You don't have to wait till you're 59 and a half. So that's kind of cool. So let's say you did that. Let's say you did that and you were like, cool, I'm I'm fine with this 800 bucks a month. This is what I want to live off of. I know that's not realistic, but just for example terms. Um today we file the 72T because we're not 59 and a half. Early distribution, we want 800 bucks a month. The rental property that my your account owns is profiting 800 bucks a month. So 800 bucks will go into the retirement account, and then your distribution amount will come out and go to you. Tax-free if it's a runoff account. So you're living off of 800, you're you're creating $800 a month in income, tax-free income every month for yourself, for as long as the retirement account owns that property. Now, the only caveat to that situation is as soon as you initiate distributions in the retirement account, it is not allowed to bring on any more investments. It's not allowed to do any more investing. So you couldn't sell that property and buy another one with it. Uh if you had more in it, you couldn't buy another property, you couldn't um contribute to it anymore. There's no more contributions allowed. It kind of just, you know, it turns into from taking money to now giving money only. Does that make sense? Yeah. Um yeah.

SPEAKER_06 1:08:12

And and so what if you want what if you're right now trying to accumulate buy and holds? So i as I that was my main question. So I guess until you're ready to start making withdrawals, all the cash flow has to go back into the IRA.

SPEAKER_04 1:08:28

Correct. Without being penalized, yes. If you personally benefit from the uh from the cash flow and you haven't initiated distributions, you haven't decided I'm retiring from this account and I want the money from it. Um if you take if you personally benefit and you take, let's say you take $800 cash and then the IRS finds out about it, they will immediately penalize you. Penalize your account, right? So some whatever value it's at will be penalized, and then they'll initiate distribution for you.

SPEAKER_06 1:09:01

Ah, so what I understand. So you tell your renters to just pay, you know, $1,000 a month and give you the rest in cash. I'm just kidding. I'm just messing up.

SPEAKER_04 1:09:11

I mean, I suppose you could try that.

SPEAKER_06 1:09:14

Just kidding. Everybody don't do that.

SPEAKER_02 1:09:17

Yeah.

SPEAKER_06 1:09:18

I guess that's my main thing. Because right, you know, right now, starting off, you know, I got four houses right now. And, you know, I I like the cash flow, and so if I can't touch it and I have to keep it in that retirement fund, that's kind of uh, you know, it kind of sucks.

SPEAKER_04 1:09:30

Yeah, it's I mean it's that's why they call it a retirement account because you're building for the future.

SPEAKER_06 1:09:36

Yeah, yeah.

SPEAKER_04 1:09:36

You know what I mean? Like if you're cool with what you're making now, but you want to keep bringing on properties, then maybe this this strategy could work. Because if you're if you're okay with not receiving the income right away and sort of building it up in a retirement account, you could do it that way. I mean, imagine if you had enough properties in your retirement account making you 10 grand a month and it was a Roth account and you initiated distributions and you were making 10 grand a month tax-free for the rest of your life, or as long as the properties are producing cash flow. I mean, that's huge, man. Like, technically you wouldn't even need any value in the in the account. Like, imagine you spent all the money in the account to buy these properties, and 10 grand comes in, 10 grand and 1 dollar comes in, and then you pull 10 grand out, and there's only a dollar in the account every month, but it's cash flowing every month, so it's just going from the rentals into the account, and then to you, all tax-free.

SPEAKER_06 1:10:31

That sounds awesome. That sounds awesome.

SPEAKER_04 1:10:33

That's a life, that's a life hack, baby.

SPEAKER_03 1:10:35

No, we are so nut. I'm Googling that rule 72T now. I'm like, Yeah, man, check it out.

SPEAKER_06 1:10:43

Well, we've been going at this for a long time now. Um, and I do want to do an episode two, man, because we I mean we're just we're just this is the tip of the iceberg right here. But um we appreciate you coming on. Martin Potts. I'm sorry. Potter. Martin Potts. Martin Potts.

SPEAKER_04 1:11:01

There's a famous a famous surfer from Hawaii named Martin Potter, and they called him Potts.

SPEAKER_06 1:11:05

Oh, there you go. Potts. Pottsy. I'm not him. Like 50 years ago. Well, man, you've been um enlightening us today, and this has been uh one of my favorite episodes. We appreciate you coming on, man.

unknown 1:11:18

Yeah.

SPEAKER_04 1:11:19

Absolutely. Thanks for having me, guys.

SPEAKER_03 1:11:20

I'm about to be all up in your DMs asking real estate advice now.

SPEAKER_06 1:11:24

Uh same, man. What what um okay, where can people find you?

SPEAKER_04 1:11:30

Where can people find me? Let's see. Uh my Facebook is just my name, Martin Potter. Um and then if you're watching this, find the one that has my face, I guess. Okay. Um I'm not wearing glasses in the picture. And then my Instagram is let's see, it's the underscore traveling Jew. The what the traveling Jew?

SPEAKER_06 1:11:58

Is it the traveling Jew or oh the underscore traveling? The traveling Jew. The stuff. The traveling Jew.

SPEAKER_04 1:12:09

The underscore traveling Jew.

SPEAKER_03 1:12:10

Oh, yeah, yeah, I'm following you now. There we go. Oh yeah, I got it. Oh, you know Chance the rapper, huh?

SPEAKER_04 1:12:17

Yeah, that's my pro my DP is me and Chance. Yeah, like that. So not for Bennett.

SPEAKER_06 1:12:25

No wonder no wonder you know much uh so much about banking, by the way.

SPEAKER_04 1:12:31

Shout out to Chance. Chance big day in stores now.

SPEAKER_06 1:12:35

Oh, nice, nice. Well, thank you so much for hopping on with us, man. And um, yeah, you've you've blown our minds today. This is real this has been a really great episode. And um, yeah, we we look forward to episode two with you, man, in the near future.

SPEAKER_04 1:12:50

Absolutely, appreciate it. We'll talk about velocity banking and uh paid up life insurance next time.

SPEAKER_06 1:12:55

Hell yeah. Yes, sir. Alright, man. Thanks for coming on. Take care.

SPEAKER_04 1:13:01

Alright, gentlemen. Thank you. Appreciate it. Bye, man.

SPEAKER_03 1:13:04

Thank you.

SPEAKER_06 1:13:05

Bye.

SPEAKER_03 1:13:06

Peace.

SPEAKER_06 1:13:07

And that and that was Martin Potter, the great Martin Potter. And um, did you get anything from this episode, Micah?

SPEAKER_03 1:13:14

Man, a lot of real estate stuff. I need to step my real estate game up. Yeah, man. But yeah, that's 72T. It's real, that's real legit. I just looked it up. Yeah, they they I'm I just gotta look at the implications of it. But yeah, that's something I would consider doing. People should definitely look into the 72T rule if you're trying to get your money out your 401k. 72T. Where can people find us, Micah? Yeah, you find us at Livelet Thrive.com. Find oh follow our IG. We always got the surprises popping off on the IG. Uh, you can follow us on our Facebook pages. If you're watching on YouTube, all the links are below. Promotions. Uh, if you want money off your first Airbnb trip, all that stuff, just click the link below. But yeah, thank y'all for listening.

SPEAKER_06 1:14:01

All right, this is uh Live Let Drive. Peace out.

SPEAKER_00 1:14:04

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