How Many Rental Properties Do You Need to Quit Your Job? (Rookie Reply)

Tony:
Let’s get your questions answered. What’s up guys? I’m Tony j Robinson, and today I’m excited to be joined by Garrett Brown for the short-term rental focused rookie reply. Now, if that name sounds familiar, it’s because Garrett recently joined the BP team as a full-time content creator, so you’re likely seeing him across all of the different BiggerPockets channels. Now today we’re diving into the BiggerPockets forums to get your questions answered. Now guys, the forums are the best place to go for you to quickly get all of your real estate investing questions answered by experts like me, Garrett, Ashley Care, and all the folks in the BiggerPockets community. Now let’s get into the show. So today’s first question says, I started getting into cabins in the Smokies about five years ago. I’m now happy to say that I own six cabins, four in the Smokies, two in Blue Ridge and manage another cabin in Blue Ridge.
All of this is being done remotely now. We’re working on building our seventh, which will be a one bedroom tree house in this Smokies. The income has really changed my family’s life and given us a security blanket that a W2 never could. I just wonder how far could I actually take it? We have one long-term rental, so I’m wondering if I should start focusing on more long-term rentals to balance things out. I’m also considering switching from W twos to going out on my own. I do currently, I do taxes and accounting in the next few years. Is there a metric or rule of thumb someone has that is good when it’s time to make these kinds of moves? So a lot to unpack here, Garrett. And first I just want to say to the person that asked this question, congratulations, six cabins plus one that you’re managing plus one that you’re building. To do that in five years is remarkable. But there are a couple of questions here, Garrett, that I think we should kind of pull apart here. The first question is, should this person diversify out of short-term rentals into long-term rentals to balance things out? So what are your thoughts on that first piece, Garrett?

Garret:
I’m always a fan of diversifying your portfolio. I have a couple long-term rentals myself, and I think a lot of that will come down to what their goals are If they are looking for different areas that they’re trying to get into, some long-term rental areas might do better with appreciation if you get into a particular market, and a lot of that’s going to come down to what their goals are for their own portfolio. It seems like if they have that much momentum in the short-term rental space that they already have a lot of systems and operations in place that scaling that a little more might not be as hard as other people trying to go from maybe zero to one or one to two properties. So I personally, as a short-term rental advocate, I would lean into, since you’ve already established a lot of these systems and operations and in a certain area, I would lean in more into that and even really maximize it since you’ve already had so much in place. But there’s nothing wrong with having diversification, especially if you’re looking with the long-term rentals into a market that is probably going to appreciate much more than some of these vacation rental markets. So you can get a mix of a cashflow mix mix with appreciation. That would be my personal thought on it, but a lot of it is their long-term goals in the end.

Tony:
Yeah, you hit the nail on the head, Garrett. I think I agree with you completely that this person’s goals are probably the deciding factor in really being able to navigate which decision makes the most sense. There’s obviously a benefit being in different asset classes long-term versus short term, but I think there’s other ways also of balancing things out within the same asset class that you’ve already built a foundation in. So maybe instead of your eighth cabin also being in either the Smokies or the Blue Ridge, maybe you go to a different market and maybe that’s how you start to diversify is that you’re spreading your portfolio out across different locations. So I think there are different ways to diversify aside from just going into different strategies. Now the other part of this question is that this person is considering switching from their W2 to kind going out and doing this full time. What are your thoughts geared on kind of timing out that transition?

Garret:
So I mean, he said he does tax and accounting, I think, right? I think he would be able to probably be able to answer that even better if the benefits of having the W2 are helping in the tax area, which short-term rentals, that’s one of the, they call it the short-term rental tax loophole, even though it’s not necessarily a loophole, it’s the IRS code, he would probably be able to answer that portion better for him if it makes sense in a tax way. But if you’re ready to take that leap and you feel like it goes back to your goals, I think there’s never going to be a one size fit all because somebody like me, I like working my W2 while also having my short-term rental portfolio and other things like that because I like my job. Some people, if you’re looking for something different and you’re looking to really escape what you’ve been doing normally, I think that’s always a good step to take if somebody’s really trying to expand, but he’s the tax guy, so I would let him make that decision of the cost benefits there if it helps.

Tony:
Yeah, I mean the tax implications is one piece, but I think just generally speaking, if you are going to make that leap, I feel like you got to make sure that you’ve got enough runway to give you the confidence to do that. So when I transitioned from W2 employee to full-time real estate investor, it wasn’t by choice. I lost my job and we had been fortunate enough that we had saved up a good chunk of cash to where even if we didn’t do anything for a year, maybe even more, we would’ve been fine. So we said, Hey, let’s give ourselves a year and see how far we can take this thing and if we’re happy with where we’re at at the end of that year, okay, cool, then I don’t go back. But if we’re not happy, okay, cool, Tony’s got to go dust off the resume and figure something out.
During that timeframe, we were able to scale the business up pretty quickly. So I think given yourself that runway to say, Hey, even if this goes to zero over the next 12 months, can I still survive? Can I still keep the lights on? Because your worst case scenario if you do take that leap is that you just go back and get another job and then you’re living the life that you were already living, right? That’s the worst case scenario. And the best case scenario is that you give yourself that time, you really kind of get the flywheel in motion and you’ve kind of unlocked this new version of life. But I think making sure you’ve got enough reserves to last whatever timeframe you feel makes the most sense, that’s kind of the barometer that I would set in place first. And the second piece is just understanding how much cashflow is actually coming off. If you need 10 KA month to sustain your lifestyle, maybe look for 15 K per month in profits from your real estate business, right? Because just in case you want to have some extra cushion there, but I don’t know if I’d leave at eight K when I got to get to 10 K and say, I’ll just make up the 2K difference.

Garret:
The runway is a great example way to put it.

Tony:
Yeah, it can be a scary leap, but I think you put in a lot of hard work to get to seven properties in five years. That’s something that a lot of people don’t do, and I think you’ve almost earned that, right, to at least have that conversation with yourself. But yeah, congratulations again because I think you did a phenomenal job here.

Garret:
That’s amazing. Definitely. And now you can even take it, scale it further with co-hosting, other things like that too. So there’s ways that you might be able to really rapidly scale and you don’t even necessarily have to put the extra capital down if you don’t have it coming in from your W2, you could scale and show your proof of concept that you’ve already had in the area that you’re working well in.

Tony:
Good. That’s a great point. We actually interviewed Olivia Tati on the Ricky podcast. So Ricky said a listening, go back and look for Olivia’s episode, but she was able to leave her W2 job as an engineer healthy six figure salary, and she had a few rentals both short term, but the way that she supplemented her income was that in addition to the cashflow she was getting from her house hack and her short-term rental, she was also offering design services to other short-term rental investors. So she kind of built this ancillary business that both supported her own short-term rental, but then also was a way to generate some active income aside from the cashflow from her portfolio. And that’s what kind of gave her the confidence to say, okay, let me jump in and do this full time. So I love the idea of adding those.

Garret:
Yeah, if he scaled that far, he definitely has the tools that other people may want to utilize too. So he just needs to lean into that

Tony:
1000%. Well guys, before we jump into our second question, we want to thank you so much for being here and listening to the podcast. Now, as you may know, we hear every episode of this podcast on YouTube as well as original content like my co-host Ashley’s new series, Ricky Resource. Now guys, we’ve got a really big goal, hit 100,000 subscribers on our YouTube channel, and we need your help. So if you aren’t already, please head over to our YouTube channel at youtube.com/at realestate Ricky and subscribe to our channel. Alright guys, welcome back. Let’s jump into our second question here. So this question is, my wife and I have a rental property in Southern California that has appreciated a ton. We’ve owned it for about six years. We have close to $650,000 in equity, but the current is only 1300 bucks per month. We have two young kids in the suburbs of Chicago.
I’m considering a 10 31 exchange to buy a vacation rental closer to where we’re based. We would look in a desirable area of Wisconsin, Michigan, or Indiana. There are several lake areas that have winter repeal and summer repeal. Now being local, we could use it with our family as well. So a couple of questions here. Number one, what’s the outlook for vacation rental markets in the Midwest? Number two, how realistic is it to net 50 K to 80 K on a property worth 500 to $600,000? Number three, how challenging is it to create and self-manage a highly rated vacation rental? Number four, how many hours of work is it to get set up and how many once systems are in place? Number five, is it true Airbnb and VRBO fees are between 3% and 5%? And number six, what else am I not thinking of or considering with this property and this strategy?
So a lot to unpack here. We’ve got six different points that we want to hit. Firstly, before we actually jump into answering these questions, you say you got about six 50 in equity. I would just make sure you really dial that number in and where are you getting that from? Are you getting that just from a estimate? I dunno if I’d trust that number, but if you’ve talked to maybe an agent that told you, Hey, we think we could list for this much, or maybe your neighbor next door sold for that amount, and then you kind of know what your equity is, but I wouldn’t make any big wild decisions, so I’ve really solidified what the actual equity amount is. But with that, let’s actually get into the questions here. So the first piece is what’s the outlook for vacation rental markets in the Midwest gear? Do you have any insight or just what are your thoughts in general there?

Garret:
That’s such a broad question. I would say because the Midwest is so fast, there are some extremely hot markets in the Midwest like Castle Rock Lake and Hawking Hills, and there’s some really, really good ones, but there’s also some really bad ones. So that would be something that we really need to dive into, see the data for what are some of the particular areas that you’re looking into, and if it goes back to will the tourism numbers coming in there or the demand for that area really support what you’re trying to do there and is the supply outpacing the demand? So the thing about short-term rental and when you’re analyzing markets is they’re all very, very specific. You could have one market that is a perfect area to go into and then 40 minutes away, an hour away or even 20 minutes away, you’re in a market that probably isn’t the one you want to dive into. So that would be something that we really need to identify and niche down on a couple of the markets that you’re really interested in. And then we can get a little more granular on what some of your goals are, the property type you’re looking for, and is that market going to be the best one for what your long-term goals are? It’s a short-term rental, but we’re looking for long-term successes. We always try to preach about.

Tony:
Yeah, I think you hit the nail of the head on that one as well, Garrett, that there are 20,000 plus cities in the United States in city’s probably got a different profile in terms of whether or not it’s a good market for vacation rentals. But just in terms of what you should look for. So there’s kind of two different sets of criteria when you’re evaluating a market on a short-term rental basis. The first set is somewhat personal based on your unique goals and situations. And then the other set are specific to the city. So when you think about the personal side, one is what is your purchasing power? How much cash do you actually have to deploy and what kind of loan amount can you get approved for? So there’s that piece. Your own personal purchasing power, there’s your desire to actually use the property yourself.
There were some people whose maybe entire motivation for buying a short-term rental was simply because they want to subsidize the cost of owning their own vacation home. There are other people like me who buy Airbnbs and cities they would probably never vacation to, and they’re just really driven by the economics of it all. So you’ve got to decide for yourself kind of where you fall. So your own personal purchasing power and then what’s your actual desire for using that property are two big things. Now for the market itself, the things you want to look at are first policies from a regulatory standpoint, can you actually legally rent out a short-term rental in that market? Because I think a lot of people get fixated on, man, this city looks great and there’s this and there’s that. And they start doing all this research and lo and behold, there’s a cap on short-term rentals and there’s a thousand people on the waiting list.
So if you bought something, maybe you could rent it out in five years. So understanding the regulations I think is super important. And then going into what you mentioned Garrett, about the underlying just health of that market from a short-term rental standpoint, how is the number of listings today compared to a year ago? Are you seeing maybe a lot of people leaving that market maybe because demand just isn’t there, or are you seeing the inverse of that where maybe you’re seeing 30% growth year over year, which that may not be sustainable either. Is there too many people coming into that market? So what does the supply look like? And then on the demand side, how is occupancy looking year over year? How are daily rates looking year over year and is there healthy growth in both of those numbers as well? So I think those are some of the things from a market perspective that I would look at. Garrett, I don’t know anything to add to that.

Garret:
All very valid points. I think the one thing that kind of jumped out to me as you were talking is if you’re looking at the markets too, once you’ve checked out regulations and things, is your desire to how much you want to use the property and how much you can actually spend to get it up to the standards that have the top performing properties that are there. If you’re in a market that is, they are all the properties there are decked out and they’ve got, in Texas, I’m speaking of, they got pools and hot tubs and saunas and game rooms and theaters, and you don’t have that financial money to go in and do something like that, and you’re really wanting to compete at that top of market, that might not be the right market for you with your affordability and your buyability, I guess is the word I would use there.
So you got to just really look at some of the properties that are there and see if it’s something that I don’t like using the word compete, but to see if you want to compete against those properties. That’s essentially what you’re going to be doing. And if it comes down to, if it’s really a lot about personal use, then that’s going to factor in a lot too of the market you’re in and where exactly you’re going to land in with what type of amenities you need to put in and how you’ll be able to compete with those other properties there.

Tony:
Now the second part of this question is how realistic is it to net 50 to 80 K on a property that I buy at 500 to 600 K? So let’s just do some rough numbers here. If you can get a 20% yield on a purchase price, meaning if you buy a property for 500 K, if you can do about a hundred K in revenue, that’s going to get you a decent cash on cash return, that’s revenue, right? So you’re probably going to net 50 to 40%. And again, super ballpark numbers here. So if you do a hundred K in revenue, maybe you can net 50 to 40 K on that property. Is that like a fair ballpark, Gary? I dunno. Do you feel like that’s a realistic number, right?

Garret:
Yep. I usually eat about 40%.

Tony:
Yeah, I feel like 50 K on a $500,000 property is possible. But again, a lot of that comes down to the market that you choose because a $500,000 property and the Smokies is very different than a $500,000 property in Des Moines, Iowa. And the revenue potential in the Smokies, you’re probably getting a two bed at 500 K, whereas as in Des Moines, you may be getting a five bed. So in Des Moines possibly you could do a hundred k on a $500,000 purchase and the Smokies maybe you’re going to do 70 or 80. So I think a lot of it comes down to choosing the right markets that actually support that level of revenue given that purchase price. And that’s where we kind of ties back into the first question of like, Hey, what markets did you actually land on?

Garret:
And the other thing to pay attention to with that is the property may be worth 500, but it goes back to the amenities and how much you might actually even spend on that too. So those factors can add up very quickly that your net starts to drop a lot if you’re having to put a ton of work in. If you’re buying something turnkey with all the amenities there and they’re selling it as a short-term rental, you’re probably going to be paying top dollar on that. And so that’s something you’re going to have to really, really analyze and see. People are hip to it now when they’re selling a short-term rental, they’re going to be able to get a premium if it’s furnished, has all the amenities and is basically ready to go. So you might need to be dependent on what market you’re in in the area. You might need to be looking for something that either needs a little work or doesn’t have all those things already supplied and is still able to be rented as a short-term rental. So turnkey properties are probably a little harder to hit that, but all of them are definitely, it’s all doable and can happen, but it goes back to that market research and seeing what your end goal is going to be.

Tony:
Alright, next question here is about self-managing. So it says, how challenging is it to self-manage a highly rated vacation rental? I’ll kick to this one to you first because I know you’re self-managing all of yours. How much time do you say it maybe goes in on a weekly basis to manage your portfolio?

Garret:
I co-host quite a few too as well that are more just general style single families. And then I have some unique stays. Some of my unique stays maybe take a little more when I first started on the maintenance side just because there’s some nuances to ’em. But now I work full-time job, I spend a lot of time with my girlfriend and going out, I probably only spend at this point now because I’ve built such good systems and operations probably maybe an hour a day, five days a week I would say. And that’s me optimizing listings.
I’ve built out the team, I have virtual assistants, I have people that I always did all the marketing myself, but now I have some people helping me with the marketing side. But that took, when you’re first starting, it’s going to take a little longer. You got to work on your business and not work in your business. So it’s going to take a little longer when you first get started. But if you build those systems and using tools like property management software like Hospitable or something like that, there’s going to be so many time saving tools within it that eventually you can get to kind of where I am that I could probably spend four or five hours a week on my eight short-term rentals if I wanted to. And they’re all going to run very smoothly if something goes wrong here and there maybe a little longer. But for the most part, my team, the fact that I took that time to really build it out and build the systems for them, it kind of works itself a lot of the times

Tony:
1000%. I typically tell folks, especially if you’re talking about your first one, you’re doing this by yourself once it’s set up, it really shouldn’t be more than a few hours a week if you’ve done it the right way. But I think the mistake, and Gary, you kind of touched on this with your response, but I think the mistake that a lot of new short-term rental investors make is that they miss certain steps during the setup that then make the management more difficult. I was talking to someone the other day that, gosh, she was a property manager and she had, I dunno, 10 plus listenings, but no PMS, she didn’t have any type of software that she was using. It was just Airbnb and like, man, there’s so much work that goes into doing that and doing it effectively. So just setting up the right tools from the beginning can save you so much time. Your property management software is a must have. A dynamic pricing tool is a must have. I very much believe that having a good digital guidebook is a must have because that’s how you can preemptively answer a lot of questions from guests without them having to reach out to you to get those answers. They can just click a link and get the answer, see a video, watch ’em, whatever it may be. But I really do feel that it’s the wrong setup that typically leads to more headaches during the management side.

Garret:
I think two tips that I have been very successful for myself, and I always tell people that always resonate well with them is you need to stay in your property. I stayed in any property I get, even if it’s a co-hosting property, I try to stay there at least a couple days or as long as I can to figure out that every property has nuances to it. So figure out one, what needs to be fixed and if there’s a problem in front of you that guests keep having. For example, one of my single family homes, they kept having issues with the keypad for the automatic door and I had to spend some extra money to change out this lock, do some things, but now I’ve solved that problem, I don’t have that problem anymore now. And then the other thing I always recommend too is if you do a walkthrough, and this is what I do for every property.
I do a video walkthrough and I put it on my YouTube of me walking through the property showing different nuances like how to work the hot tub really quickly. How do you turn on this AC unit? Or it’s something like that. It’s only four guests, but them seeing one, a real person that I’m not some big corporation out here, they see me being the owner walking through. And then they also are able to visually see different steps within the property. You can use QR codes if there’s something nuanced like at our sauna, one of our properties, we have a QR code right by it, people can scan it. It takes ’em to a YouTube video of us showing how to use it. Some people are visual learners, some people like to read when they learn. So I like to be able to hit different ways that people are actively looking how to learn about the property. So staying in your property and then making a quick walkthrough video of you as the owner is always going to make the guest feel more comfortable and avoid you having to answer the same question over and over and over again.

Tony:
Our first short-term rental in California was in the desert and it’s in Joshua Tree. There’s no streetlights in the city, and we would have guests who would arrive late at night, and because there’s no street lights, the property sits back pretty far from the road. It’s a paved road, but the property just sits back from this road. So when we first launched, we kept getting guests that were calling and saying, we can’t find your house. And they’re upset because they’ve been road tripping for eight hours. They don’t know where it’s at when they get there. So we literally jumped in the car. I’m driving, my wife is recording, and we’re driving down the street where the property is and we say, Hey, if you’re coming down this road, look for this mailbox and there’s a number on the mailbox. Look for this mailbox and go down that driveway and then the lights will turn on. You’ll see the property.

Garret:
I did the same thing. Yep, all the time.

Tony:
Yep, because it’s something happens all the time, but you get zero complaints once you solve that issue. So I think a lot of the management piece comes down to listening to where the sticking points are for your guests and then creating a solution, giving it to them before they need it. That’s how you prevent those issues from popping up. A

Garret:
Hundred percent. Couldn’t agree more.

Tony:
I think what really it comes down to from a management side is just managing expectations. Because typically a bad review doesn’t necessarily come from the experience itself. It comes from the expectation of the experience being here and the reality being here. So I’ll give you guys a real life example. We added a cowboy pool to one of our properties. This is a few years ago, and we were filling it up for our guests. We had the cleaners do that before the guests got there that way it was sparkling clean water when they got in. But what kept happening was that it’s the summer in the middle of the desert. So by the time the guest actually gets to the property, the water’s warm and there’s dirt that’s flown in from the dust that’s in the desert. So we kept getting people complaining about this amenity saying, yeah, it was great, but when we got there, the cowboy pool water was warm and dirty and it’s like, man, it’s like we added this amenity that’s supposed to increase the guest experience, but because the expectation wasn’t the same, it was harder.
So what we did was we stopped filling the pool and we just told the guests, Hey, the cowboy pool is there if you want to use it, there was a hose you can fill it up and just drained if you do decide to use it. So now it’s less work for our cleaning team. They don’t have to fill it up and the guest’s expectation is that it’s going to be empty when they arrive. So they’re not looking for ice cold water that’s sparkling clean when they get there. So we’re always looking for opportunities where we can, and I don’t mean this in the right way, but where we can manage those guest expectations so they know what they’re stepping into. So one of the last questions that’s here is, is it true that Airbnb fees are between 3% and 5%, so not quite. So Airbnb will charge you 3%, but they charge that gets about 12. So total fees are about 15%. I want to say vrbo ISS around the same. So yeah, the fees are actually a lot more, but it’s just that you as the hoster aren’t eating all of those costs. However, Airbnb does give the option. I think they’ve actually forced it in other parts of the country, but Airbnb does give the option for you as a host to eat all of those costs. Really hasn’t caught on here in the states. None of the hosts ever really know are doing that, but the fees are 12 to 15% depending.

Garret:
I think one thing to talk on that too is people always talk about the fees, and I’m a big direct booking advocate, but when you’re doing a lot of direct booking, the thing that people don’t realize is they’re going to charge you a payment processing fee that I have to pay 3% on. I have to pay some extra marketing. There’s fees that come into direct booking. So Airbnb and VRBO fees are not all bad. There’s definitely pros and cons to it, but you’re going to pay fees any way you’re booking something. So just bake that into your performa and you’ll be fine with it.

Tony:
Last part of the question here is what else am I not thinking of or considering properly with this potential strategy? So I dunno, just kind of hearing that person’s story here, IUs, any last pieces of advice as they look to make that transition?

Garret:
I would just really hone in on what are your real long-term goals with this property. I know you’re really, there’s a few things you’re thinking about and if you’re long-term being in that area, then there’s a lot of positives that you’re looking into, but this might be a short-term solution for a couple years. You don’t want to just bit off more than you can chew and then not really see the vision for what you want to do within five to 10 years with, and that’ll also help you make your decision on the property you’re honing in on. But they’re thinking about a lot of things in the right way, I think.

Tony:
Yeah, I think the only last thing that I’d add is that six 50 and equity, that’s a good chunk of equity and I think if you’ve got it, I mean you say only 1300 bucks a month, but 1300 bucks a month is still 1300 bucks a month in cashflow from a property in California that will probably continue to appreciate over time. So it’s like do you really want to get rid of an asset that’s cash flowing, that’s appreciating for a property in Indiana and does that actually make sense? And I wonder if maybe there’s other ways that you could potentially tap into that equity without actually giving up the home. Could you get a heloc? Could you get some other line of credit? Could you refinance? Are there other ways to leverage that equity where you can still keep this asset that’s cashflow positive in an appreciating market to still go out and fund your purchase of this next property.
So just something else to consider is selling it the only option for you. Alright guys, look, we love talking about real estate. We love answering questions just like this for you all and we’d love it if you could hit the follow button on your podcast app or wherever you’re listening. Now we have to take one final a break and we’ll be back after this with our final question. Alright guys, welcome back. We’re getting to our last question here. So here is that question. It says, so I’m looking to buy a property in a ski town. It’s currently being used almost exclusively as a short-term rental. The counter is pretty full through the end of the ski season already my realtor told me that they have an agreement, the seller has an agreement with the property management company that says we have to honor all bookings.
Is this actually true? While we are excited that the calendar is already full, we would like to get up there and stay there once or twice and also make some minor changes to the property. Lastly, I think given the fact that the calendar is already fully booked through the ski season, this means they’re pricing it too low. That’s a lot of words to ask. Do we actually have to honor all of the bookings? That seems strange that we would have to honor the bookings that far out or in Colorado thinks in advance for any advice. So two questions here. Number one is do they have to actually honor all of those? And the second piece is they believe that the pricing is maybe too low. Let’s hit that first piece about honoring those Garrett. Have you ever purchased anything that was an existing Airbnb that kind of had a situation like this? Actually the first one that I bought was,

Garret:
Yeah, no, I haven’t purchased one and taken it over directly. And even in my four co-hosting ones, they all were not Airbnbs before I got involved, but I’ve heard of a lot of people being in this situation with different property managements out there and a lot of ’em will create another listing and not get it live and then mark off the calendar a certain amount of dates in advance. But I’m sure you can probably answer this better done it firsthand.

Tony:
Yeah, so the very first one that we purchased, very similar situation. It booked out that far in advance, but I want to say there was maybe 60 days out. There were some bookings on the calendar. So as part of the purchase agreement, we did have to honor those bookings. And the reason why is because a lot of these, especially the old school property management companies, they’re very, very draconian almost with their property management agreements where it’s like if you break or make them lose bookings, it just gets all kinds of crazy. So when we purchased our very first Airbnb, what we did is exactly what you said, Garrett, where we spun up our own listing when we then blocked the old listing, right? Immediately. So no new bookings could come in, but the existing bookings stayed there and then we just blocked out on our calendar whatever dates were booked by the property management company.
So we didn’t interact with those guests, we didn’t really do anything. The PM still handled those reservations, but we were just the owners at that time and we still got the payouts for those as well. So it’s not like the previous owners isn’t getting that revenue, you are getting that revenue. So it is common, we’ve gone through it. And again, depending on how strict that property management agreement is, maybe you can get around it, maybe you can’t. Now the second part of that question is do you believe their pricing too low? Now I feel like that’s hard to say because there are some markets where that booking lead time could be super high and maybe it is normal in that market for the ski season to be booked out halfway through summer because there are some markets that are that way. So I dunno just what are your thoughts? Would you see that say, man, they’re price too low.

Garret:
You hit it on the head with the market situation there, especially in a ski area, there are some markets that they thrive in this a few months a year and people are booking out months and months in advance and some of the best, if it’s one of the better properties in the area, there’s a reason why it’s probably booked that high. I personally don’t like seeing my properties booked a hundred percent of the time all the time because then I think I’d rather be in that 90, 95, 80 5% range depending on the property. Then I feel like I’m minimizing a little bit of wear and tear while also I know I’m hitting the exact price point that I want to hit, but that a lot of it’s going to come down to market. But I personally think it may be priced just slightly under where it needs to be.
But you need to look at the whole calendar from a holistic view and see for the whole year, is this the trends for the area? Is this typical for look at the other properties, are all the other properties booked out a hundred percent that are the top performing ones there? If not, then maybe there is a little bit being left on the table, but that’s why you use a really good dynamic pricing software and you really get ingrained in the listing optimization and checking in with your rates like that. And a lot of those things can kind of work themselves out and that data and the automation they have within, it’s going to tell you a lot more than you could just guess off the top of your head.

Tony:
I think the only other thing I’d add, just what else to look out for in this transition, and this was a challenge that we had because we actually bought two properties that were previously with managers and they had a lot of little signs throughout the property that had their phone number and we didn’t catch all of these signs. So there would be sometimes when a guest would see the sign and they would call at the old PM and they would have to reach out to us. So just make sure you do a full thorough sweep, remove any semblance of this other PM company just to make sure that as these bookings move over to you that you’re not dealing with any of that. The second piece is make sure to get your own photos. I think it can be tempting if the property photos look good, just get your own photos because when we bought our first one, we were still trying to figure out the professional photo, Hey, let’s just use the old ones.
And then we get a very angry email from that PM saying, Hey, we own these photos and you can’t use them and we’re going to sue you if you don’t take ’em down. So again, very, very draconian, some of these PMs, but just make sure you do a full sweep of anything that’s lingering from that old PM and get rid of it and just super clean slate for you as you kind of get it live. Cool. Well guys, thank you so much for hanging out with us as we answer these questions. And Garrett, thank you for stepping in for Ashley while she’s out. And dude, I really enjoyed our conversation talking about short-term rentals today, man.

Garret:
Yeah, likewise. I’ll always love to chop shop with y’all about some short-term rentals and looking forward to what we’re both going to be cooking up next.

Tony:
Awesome guys. Well look all of our Ricks that are listening, if you enjoyed today’s podcast, I’ve got one small favor, whatever podcast player platform it is you’re listening on, be sure to subscribe and follow this podcast. Again. We’ve also got a goal of getting to 100,000 subscribers on our YouTube channel, so you’re not following us there. Just search real estate rookie, subscribe, hit that little bell for notifications. Guys. I appreciate you all hanging out with us. I hope you got some value from today’s episode and I’ll see you next time on Real Estate Ricky.