Why Vacation Rentals Beat Traditional Real Estate | Avery Carl DSH #1176

Summary

Digital Social Hour - Episode #1176: Why Vacation Rentals Beat Traditional Real Estate

Host: Sean Kelly
Guest: Avery Carl
Release Date: February 12, 2025

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Introduction to Avery Carl

In this episode of Digital Social Hour, host Sean Kelly sits down with Avery Carl, a seasoned real estate investor and top-producing agent at EXP. Avery shares her remarkable journey from bartending to building a robust real estate portfolio, emphasizing why vacation rentals outperform traditional real estate investments.

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From Bartending to Real Estate Investing

Avery begins by recounting her initial foray into the workforce post-graduation. After earning her degree in communications, she found limited opportunities and resorted to bartending and playing in bands to make ends meet.

[05:13] Avery: “Running the hospitality business of having short term rentals and we've got a lot of long term rentals too. We've got 250 doors across the country.”

As the job market improved, Avery pursued her master's in marketing, landing what she believed was her dream job in Nashville. However, dissatisfaction led her to explore real estate investing for greater flexibility and financial rewards.

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Vacation Rentals vs. Traditional Real Estate

A key focus of the discussion is the distinction between vacation rentals and traditional real estate investments.

[01:02] Avery: “Vacation rentals in true mature vacation markets. So beach markets, mountain markets, lake markets, things like that. Not going into, you know, your grandmother's residential neighborhood and turning everything into party houses.”

Avery differentiates vacation rentals from standard Airbnb listings by targeting mature vacation markets with consistent tourism, such as the Smoky Mountains in Tennessee and Destin, Florida. This strategic choice ensures a steady stream of guests and minimizes regulatory risks.

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Challenges in Vacation Rentals

Avery discusses the complexities of managing vacation rentals, highlighting the need for treating them as true businesses. Unlike traditional rentals, vacation rentals demand active management and hospitality skills.

[02:14] Avery: “I like to call vacation rentals kind of a gateway drug to both owning a business like being an entrepreneur, and also, you know, getting into investing in real estate.”

She warns against the pitfalls of the COVID-19 boom, where many inexperienced investors entered the market without proper planning, leading to oversaturation and financial strain.

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Scaling the Vacation Rental Business

Avery shares her impressive journey of scaling from a single property to managing 250 doors across various asset classes. This growth was entirely self-funded, relying on reinvested profits rather than external capital.

[16:38] Avery: “All self funded. So back to active income.”

Her approach emphasizes systematized management, utilizing local teams for cleaning and maintenance to efficiently oversee multiple properties with minimal weekly time investment.

[10:08] Avery: “It's like an hour a week for one property. It's... Yeah, that's not bad at all.”

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Financing and Tax Strategies

Avery delves into financing options unique to vacation rentals, such as vacation home loans and DSCR (Debt Service Coverage Ratio) loans, which allow for lower down payments and leverage based on property income rather than personal income.

[25:29] Avery: “There's something called a vacation home loan or a second home loan where you only have to put down 10%.”

She also explains the short term rental loophole, enabling high-income earners to benefit from cost segregation analyses without needing to qualify as a real estate professional. This strategy allows for accelerated depreciation, significantly reducing tax liabilities.

[28:03] Avery: “The cool thing about a cost segregation analysis is it allows you to take accelerated depreciation on the property, which basically means that instead of extending that out to taking it annually for 39 and a half years or something, you can scoot all that depreciation to the front.”

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Real Estate Market Insights

Comparing the current real estate climate to the 2008 financial crisis, Avery asserts that while the market faces challenges, it hasn't experienced a price crash. Instead, reduced inventory and cautious buying have created opportunities for savvy investors.

[29:38] Avery: “But the difference is everybody expected a price crash, but that just didn't happen.”

She advises that now is an optimal time to buy, especially in markets with limited competition and motivated sellers, allowing investors to secure properties at significant discounts.

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Advice for Aspiring Investors

Avery emphasizes the importance of market selection, patient investment, and maintaining strict operational standards to ensure success in vacation rentals. She discourages the pursuit of rapid expansion across multiple cities without established systems.

[10:21] Avery: “You got to be careful trying to go too fast.”

Additionally, she highlights the value of soft skills acquired from her bartending experience, such as managing diverse personalities and handling high-pressure situations, which are crucial in the hospitality-driven vacation rental business.

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Avery’s Achievements and Offerings

Avery is not only a top-producing agent at EXP but also an accomplished author. Her first book, "Short Term Rental Long Term Wealth", serves as a primer for aspiring investors, while her upcoming book, "Smarter Short Term Rentals", delves deeper into systems and processes for outhosting the competition.

[25:08] Avery: “It's called STS Plus, like short term shop plus. And you find it stsplus.com.”

She offers mentorship programs through STS Plus, providing extensive guidance and support for those looking to enter the vacation rental market.

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Conclusion

Avery Carl’s journey underscores the advantages of vacation rentals over traditional real estate investments, particularly in mature vacation markets. Her strategic approach, leveraging unique financing and tax strategies, coupled with disciplined management, has enabled her to build a thriving, scalable business. For listeners interested in real estate investment, Avery's insights offer a roadmap to achieving long-term wealth through vacation rentals.

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Notable Quotes

• [05:13] Avery: “Running the hospitality business of having short term rentals and we've got a lot of long term rentals too. We've got 250 doors across the country.”
• [01:02] Avery: “Vacation rentals in true mature vacation markets... Not turning everything into party houses.”
• [02:14] Avery: “I like to call vacation rentals kind of a gateway drug to both owning a business... and investing in real estate.”
• [16:38] Avery: “All self funded. So back to active income.”
• [25:29] Avery: “There's something called a vacation home loan or a second home loan where you only have to put down 10%.”
• [28:03] Avery: “The cool thing about a cost segregation analysis is it allows you to take accelerated depreciation...”
• [29:38] Avery: “But the difference is everybody expected a price crash, but that just didn't happen.”
• [10:21] Avery: “You got to be careful trying to go too fast.”

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Resources Mentioned

• Books by Avery Carl:

  • Short Term Rental Long Term Wealth (2021)
  • Smarter Short Term Rentals (Upcoming)

• Mentorship Program:

  • STS Plus: stsplus.com

• Real Estate Team:

  • The Short Term Shop: Operating in 20 mature vacation markets nationwide.

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Final Thoughts

Avery Carl's expertise and success in the vacation rental market present a compelling case for investors seeking consistent income and scalable growth. Her pragmatic approach, grounded in self-funding and strategic market selection, offers valuable lessons for both novice and experienced real estate investors.

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Tune in to Digital Social Hour for more unfiltered conversations with industry leaders and trailblazers.

Transcript

[A]

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[B]

Everything. On my corporate dream job, I was making about $1,000 a month, and then this house was making the same amount of money as me while I slept. So my husband and I looked at each other and we were like, we. We need more of these. How do we do that? And so only then did we start researching and listening to podcasts, which back then there was only bigger pockets, really, and learning about real estate investing.

[C]

All right, guys, we got Avery here in Las Vegas. We're going to talk Airbnbs today, right?

[B]

Yeah, yeah. Vacation rentals. I like to differentiate a little bit.

[C]

Okay, yeah. There's a difference, right?

[B]

I think so, yeah.

[C]

Because a lot of people list their stuff on Airbnb, but you specifically target vacation rentals.

[B]

Yes, yes. So what we do is vacation rentals in true mature vacation markets. So beach markets, mountain markets, lake markets, things like that. Not going into, you know, your grandmother's residential neighborhood and turning everything into party houses.

[C]

Yeah. More competitive there, too, right?

[B]

Yeah, yeah, yeah, yeah.

[C]

Airbnb, I heard. Well, there's that whole bus thing, right?

[B]

Yeah, yeah, there was the whole bus thing. Happy to jump in straight in on that if you want.

[C]

Yeah, yeah. For people that don't know what that is. Could you explain that?

[B]

Yeah, yeah. So in 20, between 2020 and 2022, with interest rates going down to 2%, a lot of people bought real estate of all kinds. Primary homes, second homes, investment properties, and short term rentals were one of them because people heard, oh, 2%, I want a beach house. I've always wanted a beach house. I can make that mortgage payment. Let me just slap it on Airbnb when I'm not using it and make money. Well, turns out it is actually part hospitality business. So I kind of. I. I like to call vacation rentals kind of a gateway drug to both owning a business like being an entrepreneur, and also, you know, getting into investing in real estate.

[C]

Yeah.

[B]

And so a lot of people did not treat it like the business that it was. And then there was, I call them FOMO buyers. A lot of FOMO buyers who really wanted to get in. But in every asset class there were thousands of offers on every single property. So a lot of people bought kind of weird stuff, like maybe they bought a little too far away from the attraction. So that when the COVID travel boom, kind of the tide went out on that they kind of got caught with their pants down because they're a little too far away from things and didn't really work. So a lot of people jumped in it that didn't necessarily need to be there. Realized, oh, hey, this actually is a little bit of work, or hey, I hate dealing with people because you do have to deal with people. And then saying, okay, I think I'm going to sell this. This isn't really what I want to do. But I actually read an article from Air DNA last week that a lot of the markets that they were talking about that did see saturation. So that saw a huge supply come on in 2021-22 have kind of the tide's gone out on that too, on that big supply. So like something like 20% came on in a market like Joshua Tree, California in 2022. So a ton of supply.

[C]

Yeah.

[B]

Now that's down to like 6% this past year. So you're losing a lot of that supply. But there's still that steady tourism. So we focus on markets that have decades worth of tourism. So Smoky Mountains in Tennessee. I live in Destin, Florida. We've only got 10,000 people that live there, but 10 million people come visit a year. We very little hotel presence. They all stay in short term rentals, vacation rentals they used to be called. So I kind of like to stick to that. And the local economy is very dependent on that. So you don't really have to worry about being regulated out.

[C]

That's smart. Choosing the cities really wisely. Yeah. We just booked our Sedona trip and we did an Airbnb. Yeah, I feel like that's another good city. Right. Have you looked into Sedona?

[B]

Yeah, we have an agent in Northern Arizona who covers Scottsdale. Sedona and Flagstaff is getting pretty popular too.

[C]

Oh yeah, yeah, yeah. Certain cities. It just is. It's almost better to be in a Airbnb than a hotel, honestly.

[B]

Yeah. And I think that that's something that a lot of people don't realize that there's a time and place for both things. They try to make it a big like we're going to. It's. You're a hotel person or your Airbnb person in their adversarial but they're really not. So for me, if I'm coming like here to Vegas for a conference or a podcast, I'm staying in a hotel. I'm staying in a nice hotel on the Strip. It's got, you know, room service and all the amenities. I don't have my kids with me. I'm going to relax. But, you know, if we're going to go on a ski trip or a beach trip, we're booking a vacation rental. So different time and place.

[C]

Yeah. So before Airbnb, you were in bartending, right?

[B]

Yeah. So I graduated undergrad in 2009, so no jobs for a soft communication major. So I was playing in bands, bartending to make ends meet. During that, once the job market swung back around, I went back, got my master's and got what I thought was my dream job doing marketing on the business side of music in Nashville and quickly learned that it wasn't and kind of ended up in real estate investing. Kind of looking for a way to have a little bit more flexibility.

[C]

Right. And I know you've said on other shows that bartending did more for you than a college degree.

[B]

Yeah, it especially being in the types of businesses that I'm in. So running the hospitality business of having short term rentals and we've got a lot of long term rentals too. We've got 250 doors across the country.

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[B]

But it's still all coming from a place of service and then we've got the real estate brokerage which obviously is a service business as well. So I did, I, I'm one. I'm definitely a person that thinks college is worth it. But a lot of the soft skills I learned bartending, dealing with different types of personalities, different moods at different times where people might be yelling at you but they're not doing it personally. They're having a bad day and just you know, learning to kind of disassociate from that and just getting the job done.

[C]

Yeah, I think the right college is worth it. I got friends that went to super nice colleges like Ivy Leagues and stuff and their network is insane. So like just from that aspect and the connections I think it's worth it. But there's a lot that aren't.

[B]

Yeah. Yeah. And it's. I think it just depends on what you want to do. I think there's definitely something to be said for finishing a four year degree because you, you've done a hard thing, you were consistent for four years and it shows that you're able to do hard things, you're able to be consistent but it doesn't always translate over to skills that you're going to use in whatever career you end up in.

[C]

100% most of the time they major in something, they're not even doing that. You know, I wonder what percent that is. It's got to be high.

[B]

Yeah. I've got agents who work for me who are engineers.

[C]

Yeah, you see that all the time though.

[B]

Yeah.

[C]

I was going for marketing which I felt like they were teaching outdated methods.

[B]

They were, you know, in marketing and they were.

[C]

Yeah. Because marketing so ever changing like that's not going to be in a textbook what we're doing now like with social media marketing, you know.

[B]

Yeah. It's not.

[C]

What were they teaching in your marketing class?

[B]

So I got my MBA in 2014 through 2016 so not terribly well I guess it was like 10 years ago so not terribly long ago in terms of there was social media and social media marketing was a thing but they didn't, we didn't even touch that. It was, you know, how to position and it was more about advertising but nothing about Social media or building a personal brand or the value of that. It was all just very textbook old school marketing.

[C]

Right. But at least you got a marketing job after.

[B]

Yeah. For $37,000 a year.

[C]

Damn. That's not much.

[B]

No.

[C]

That doesn't even cover rent.

[B]

No, no. Yeah. And I mean, we can get into that a little bit. I kind of started looking for. I thought that was my dream job, you know, like, I've been a musician in the past, working on the business side. This is going to be great. But it turns out there's so many people in Nashville and LA and New York, wherever the music business is, that will do the job for nothing because it's sexy. I personally don't love new country. I love old country. I'm more of a rock and roller myself. But it just wasn't worth it to me to. And you. It's not just a nine to five, by the way. They expect you to be at the bars and the shows and everything until midnight. And for me, for 37,000 a year, just to say I was in a room with some country artists who I can't stand anyway, it just didn't feel good. And so I kind of started looking around for a way that I could have some more flexibility for and actually a place where the amount of work, the reward was commensurate with the amount of work I did because I am a hard worker. So I'd get in there, finish all my work by like 11am and then I'm just sitting there like, what. What can I do?

[C]

I feel that I like your business model because you, you put the work in up front and maybe some on the back end, but not as much. It's. It's a little passive. I know that word gets thrown around a lot, but once you get the property and you got a team in place, it's kind of.

[B]

Yeah, it's like an hour a week for one property. It's.

[C]

Oh, that's nothing.

[B]

Yeah.

[C]

Yeah, that's not bad at all.

[B]

Yeah. I don't want to, obviously don't want to say it's passive because, you know, you are dealing with people. You're gonna have to answer questions here and there's. But it's, you know, it beats sitting at a desk all day.

[C]

Yeah. I don't think anything's ever 100% passive.

[B]

I agree with that. And I think there's a lot of people who've listened to a lot of real estate podcasts over the years who want that they.

[C]

Passive.

[B]

Passive income. Yeah. And it's almost to the point where active income has kind of become a dirty word. But I love my active income.

[C]

I like feeling like I earned it, you know? Yeah. So I always want some active income. But as these days, as we get older, I feel like as passive as it can get is good too.

[B]

Yeah. Yeah, a little bit. Everything.

[C]

Yeah. So are you still stocking up on places? Are you kind of just managing your current portfolio?

[B]

So we are always buying something. The market has changed. The real estate sales market has changed a lot in the past two years. There's not as much inventory coming on to. To buy because people don't want to take a hit. Everybody's been in this like big waiting for rates to come down still. Yeah. So nobody is really selling and then people aren't really buying because of the rates. So we've slowed down some, but we've always got. We're always buying multifamily in the Midwest, we're always buying single family long terms in the Southeast and we're always buying vacation rentals as they pop up. Typically we'll be in the Smoky Mountains or somewhere in the panhandle of Florida. But it's just easier now to not branch out into new markets because we've already got our systems built. It's easier to just plug a property in there. So always looking, that's kind of our main investment, like family business and then running the short term shop.

[C]

Yeah, Just looking for the right deals. You're patient, which is a good skill. A lot of people get into real estate, they want to just scale quick into multiple cities and then collapses once the interest rates go up.

[B]

Yeah, yeah. And we saw some of that even with. With our clients in 2022. People who again bought the. I got to build this huge portfolio really quickly and you could then, I mean, I did it. I'm one of those people. But people were taking like $500,000 HELOCs and not factoring that into the property they were buying. So they would take a $500,000 HELOC on their primary home, go buy a property, and then they'd come to us later and say, hey, I'm not making money. Can you look at my stuff? And it's like, well, you have an entire other mortgage. $500,000 is no joke of a payment. And you didn't factor that into what the expenses are going to be on the property. So of course you're not making money. You got this huge heloc. So we did see people over leverage in that way. The majority of people didn't. But I think that, you know, you got to be. Got to be careful trying to go too fast.

[C]

Know your numbers. Right, right. Super important no matter what level of business you're at.

[B]

Yeah.

[C]

Did you have a real estate mentor when you were starting out?

[B]

No. So we started buying vacation rentals in 2015. So back then there weren't a thousand people on Instagram doing it. There weren't courses. There wasn't even air DNA, like the main data source of what the income will be on Airbnb properties started like the year after or the same year that we started. So we kind of came to it from a place of necessity. So we, we kind of got started investing in real estate because we just got married. We'd saved up like $10,000. And having just gotten married and planning to have kids in the near future, I was super into personal finance. I was reading all the Dave Ramsey books because we don't know anything. You think, oh, yeah, that's, you know, the Barnes and Noble guy. We'll read that. And we'd saved up like $10,000 and we didn't know what to do with it. We wanted to be smart with it. So we went to a financial planner that was in the same building as my corporate job, and she told us very politely that we did not have enough money for her to deal with. Damn. Yeah. So. And thank God she did, or else all of our money would be sitting in an account and we wouldn't have been able to do what we'd done. But so she told us no. And we were like, well, there's gotta be something we can do with this. This can't be totally worthless. And when we moved a few years prior from New York City to Nashville, our real estate agent had been telling us about East Nashville, which was really, really fast appreciating. And we were like, I don't really care about that. We're moving from Brooklyn to Tennessee. We want to be out in the country. We are done with neighbors. And so we bought out in the country. But we thought back and said, well, what if we bought one of those houses and we put a tenant in it and they pay the mortgage and the utilities are in their own name and in the future if it's appreciates really well, then we can just sell that house and pay for our kids college. Very stupid reason to invest. We did no research, but we went and bought a house. Luckily it was a really good deal and the mortgage on it was $647 a month. And we were able to rent it for 1550amonth. So really great for a long term rental to make $900. Well, coincidentally, after all the deductions and everything, on my corporate dream job, I was making about $1,000 a month. And then this house was making the same amount of money as me while I slept. So my husband and I looked at each other and we were like, we need more of these. How do we do that? And so only then did we start researching and listening to podcasts, which back then there was only bigger pockets really, and learning about real estate investing. So we saved up a little bit of money again and we said, well, what can we buy that's going to make us the most amount of money the fastest so we can buy more? And we landed on short term rentals. We knew we didn't want to do it in Nashville because Nashville is very anti short term rental, even back then.

[C]

Oh, really?

[B]

Yeah, they're. The mayor of Nashville is very. He was just a city council member back then, but he's. He's not down.

[C]

Yeah, Vegas is strict too, I heard.

[B]

Yeah, yeah, it is. So, but we just been on vacation in the Smoky Mountains, which is about four hours east of Nashville. We stayed in a cabin, all of our friends stayed in cabins. And we're like, oh, well, this is just what people do. Yeah, we can own one of these. And so we looked into it, just bought one, and we thought we'd have to put it with a property manager. Airbnb was just kind of becoming mainstream and the property managers wanted 40% of your gross. Yes. They had a complete monopoly on. And you know, vacation rentals have been around for decades and decades and there was no Airbnb. So they had a total monopoly on being able to make money on those types of properties. So we said, well, we can't do that. We need that money to go buy more properties. So we just figured out how to manage it remotely with just a cleaner and a handyman from Nashville and scaled 1 to 5 over the course of about 18 months. And over the past 10 years, up to 250 doors, different asset classes, but just kept rolling every single dollar we made into the next property.

[C]

That's incredible. So did you raise outside capital or all self funded?

[B]

All self funded. So back to active income.

[C]

Yeah.

[B]

So started the short term shop, which is my real estate team underneath exp for People don't know what a team is. It's kind of like a brokerage, but under another brokerage I started having. I got my real estate License because my husband was embarrassing me in deals. And I like, kept apologizing to agents like, oh, I'm sorry, he's being rude. He's. He's not mean. He's just a New Yorker. And so anyway, I was like, well, I can make a little money doing our deals. I can do it with a little more speed, not having to drag somebody around asking to show properties. So I got my license after our second or third, and over the next six months, friends started saying, oh, you're making how much on that cabin in the Smokies? Teach me how to do that. Help me buy one. So it just. This business model just started of helping people find one and teaching them how to run it. And then it became friends of friends. And then all of a sudden I was the top producing agent in the Smokies. And then we had people coming to us saying, hey, we bought with you in the Smokies, but now I want to buy one down in Destin, Florida or Panama City Beach. Is there a you down there that you could send me to? And I was like, let me put one down there. So we grew the brokerage to 20 markets. So 20 mature vacation markets. Like we're never going to open up in like a Nashville or an Austin. It's all vacation areas. And we've been the top producing sales team at EXP in the world for the past three years. And vacation. Yeah.

[C]

Damn. Well done.

[B]

Thank you. Thank you.

[C]

Because isn't EXP like the biggest?

[B]

I think it is. The biggest. Does have the most agents now.

[C]

Wow. And you're the top producing.

[B]

I was three of the last four years.

[C]

That's insane.

[B]

Was passed this year by a guy who bought somebody else's teams.

[C]

Well, I don't know if I count that because he bought it, but well done, you know.

[B]

Thank you.

[C]

And it's a male dominated space, I'd assume too. Right.

[B]

Real estate agents in general are kind of female dominated, but once you get to the top, it is. It's the top 10 at exp are all men.

[C]

Oh, wow. Well done. That's incredible. So do you see this still scaling to other markets, like the possibility of vacation rentals, or do you think it's kind of saturated?

[B]

It's a really good question. So I think that as metro markets, which a lot of short term rental investors invest in metro type markets, that's not my business model. That makes me uncomfortable. But I think as places like Nashville and Austin and I mean Houston and Dallas banned short term rentals altogether, I think as big Metro and suburban markets like that start to ban things and just tighten up regulations. I think it's just going to further commodify true vacation rental properties. And vacation markets as one of it will never be an across the board. You can only short term rent in vacation markets. But I think they become more valuable as other types of cities don't really want it there.

[C]

Right. Why are so many cities banning short term rentals? You think?

[B]

Oh, I totally get it. So combination of things, hotel presence and primary homeowners. So we'll take the place that I live, for example. So Destin, again, 10,000 people live there. 10 million people come there. It's completely dependent on tourism. That is the only industry in Destin. So even if you don't own a short term rental, you don't mind the tourists staying in the short term rental across the street from you, because we don't exist without them. But if you get like a Nashville where there's tons of industry outside of that and people are coming in, buying that, buying properties in what used to be like a quiet street where you're trying to raise your kids, I get that. Like I choose to live in a vacation market, but I still don't really want, you know, I'm raising small kids. I don't really want people in and out next door that I don't know.

[C]

Right.

[B]

So I get it. And I live in the short term rental market you can live in. So in bigger cities like that, where it's not dependent on tourism, why would, why would any person just trying to raise their kids when their economy doesn't depend on it, their lifeblood doesn't depend on it. Why would they want that there? I get that. So that's why.

[C]

Got it. So the residents are complaining to the.

[B]

City'S residents and then also hotels lobbying against it.

[C]

Yeah.

[B]

They lose a little business to it.

[C]

Yeah, it's like the taxi lobbying gets Uber when it first came out.

[B]

Exactly.

[C]

Yeah, that makes sense. Yeah, it makes sense though. Like if I had a family, I wouldn't want some guy throwing a party next door.

[B]

Yeah.

[C]

That doesn't live there.

[B]

Yeah, yeah, exactly. I mean, it happened. Nashville is the, the bachelorette party capital of the world and you're trying to raise your kids and there's like penis balloons next door. You got to have conversations that you don't aren't ready to have yet.

[C]

So how are you screening tenants? Because you, you probably got a process at this point, right?

[B]

Yeah, yeah. So it just depends. So we have everything from studio properties all the way to big five bedroom properties. Typically the, the smaller ones you don't really worry about too much. The ones that are bigger, we have very strict limits on how many people it can sleep. So we've got a 4,000 square foot four bedroom. We could slam 20 people in there if we want to, but we don't. You're allowed to sleep 12. And we make it very clear, hey, if you're caught sneaking extra people in, it's going to be X amount. We do have a ring doorbell camera or floodlight camera on the front. Nothing creepy, just, you know, right out front so you can see how many people are coming in. And we just make it very clear in our house rules. And then our. We have a rental agreement separate from Airbnb and vrbo that we have guests sign that say, okay, I'm signing this, that says, these are the rules and if I break them, you know, here's what I'm liable for. And really, if you just ask them questions, if they're coming to do something that you don't want them to do, they'll tell on themselves. Like, we had a guy in the Smokies who was like, hey, can. It's a one bedroom cabin. He's like, we've got four dually trucks. We're coming for the truck show and we can't fit them in the can. We fit them in the driveway. And we're like, why do you need. It's a one bedroom. How many people? And you know, then they tell themselves. And you don't say, oh, I'm not going to rent my place to you. You say, oh, I think you'll be more comfortable somewhere else. Your trucks probably aren't going to fit. And you make it sound like they'll be more comfortable elsewhere and not, we don't want to rent to you.

[C]

Makes sense.

[B]

Yeah. So you just ask a few questions. Typically, if people realize you're the type to ask questions, they're not going to book your place.

[C]

Yeah, yeah. They don't want someone watching them.

[B]

Right, right. Or they don't want to, you know, get in trouble if they break stuff. If they're planning on throwing a party and you're like, hey, just so you know, here's the thing that you have to sign that says you're not throwing a party.

[C]

Right. Are they pretty good with like refunding you if something breaks?

[B]

Airbnb and vrbo, I have never filed anything with them. I've never had anybody tear my properties up.

[C]

Wow.

[B]

The one thing that's Happened and it was an accident. Like it's something I would have done because I don't know. I don't know how to do a charcoal grill either. They put a charcoal grill over some pine straw and some of the charcoal fell out. Caught the pine straw on fire. Caught my fence on fire. But it really wasn't a big deal. The guests didn't even know they did it. They checked out and we got a call from the fire department and they said, hey, we're at your house. But, you know, just do the fence, no big deal. So I haven't had enough significant damage ever to have to go through that.

[C]

Well done. I think that's a testament to your management abilities, honestly, because a lot of owners report some incident.

[B]

Yeah.

[C]

Especially at your level.

[B]

Yeah. I don't want to say that it's typically the owner's fault if you book something like that, but it's never. There's ways to kind of screen it, and it's just by asking questions. It doesn't really matter how they answer the questions, but if you ask, then they're going to be like, oh, you know what? We're trying to throw a party. Let's go find somebody who's not asking questions.

[C]

Yeah. Do you have pets allowed at your properties?

[B]

I don't. And, you know, I really wanted to be at first because I'm a big rescue dog head. I would come home every day with a new rescue dog if my husband would not save me for sure. And so we, we started with that first, but then what I realized is not everybody, it takes as good a care of their animals as we do.

[C]

Right.

[B]

And also all it takes is one big white German shepherd for your cleaner to hate because they have to, like, unweave the hair out of every single thing. And what I have noticed, because I do travel with our Chihuahua, is that sometimes when I book pet friendly properties, for us, when you go in, it smells like somebody else's dogs. So for us, it just wasn't worth jeopardizing the other bookings for that. I'm totally pro doing that. If you can make it work for us. We kind of just got upstream of the problem by just not allowing them.

[C]

It makes sense, though, because you got to pay more for cleaning too, probably.

[B]

Yeah, yeah. And like I said, you don't want your cleaners, the last person in the world you want mad at you.

[C]

Right. Because they got to clean all your properties.

[B]

Yes. You want your cleaner happy.

[C]

Yeah, that makes sense. I know you already have a book and you're dropping a new one. One soon, right?

[B]

Yes, yes. So first one called Short term Rental Long Term wealth came out on bigger pockets in 2021. I believe that one's more of a primer on how to choose a market, how to choose a property and some like light managing. This one is called Smarter Short Term Rentals and it's more about the systems and processes to put in place to out host your competition.

[C]

Yeah. Is this capital intensive for people?

[B]

Not as much as you would think. So there's a few things about short term rentals that are cool that you can't do with other asset classes. So one of them's tax related, one of them is down payment related and I'm telling you that. So you remind me to talk about the tax one. Okay. Down payment. There's something called a vacation home loan or a second home loan where you know, most properties you have to put 20% down. This type of loan you only have to put down 10%.

[C]

Okay.

[B]

So there's some stipulations to that. So definitely ask your loan officer, but you have to stay there for 14 days out of the year yourself because it's your vacation home. You're getting a vacation home loan, but when you're not using it, you're 100% allowed to rent it out on Airbnb and VRBO. You're not allowed to put it with a professional property manager because then it wouldn't be your vacation home. You wouldn't have control of it. But pretty, I would say a lot of people use that type. If you are somebody who maybe has a good size down payment but you don't show a lot of income, maybe you don't have a W2, maybe you're 1099, maybe you're a professional real estate investor and you don't show income because that's why we invest in real estate. There's something called a DSCR loan. Works very similar to a commercial loan, but it's a portfolio product and they approve you for the loan based on what the property should be able to make rather than what you make and what you show on paper. The vacation home loan is conventional, so you are limited by what your debt to income ratio is. And then the last cool thing about short term rentals that you can't do with anything else is you can offset if you're a high W2 earner. So like Q3 and Q4, every year we get a ton of high income clients who want to employ this strategy. It's called a short term rental Loophole. And typically you can only do what's called a cost segregation analysis. Which guys, by the way, I'm not a cpa, obviously, so talk to your CPA about this is not tax advice. But what a cost segregation analysis does is it allows you to take accelerated depreciation on the property, which basically means that instead of extending that out to taking it annually for I think it's 39 and a half years or something, you can scoot all that depreciation to the front. So what that means basically is a 20ish percent tax deduction. So if you bought a $1 million property, you can, if you meet a few requirements, deduct like 200,000. When that was when we were at 100% bonus depreciation, the Biden administration was kind of sunsetting that. So we're at 60% this year. But it did go back through the House and the Senate last year and I would expect it to go back to 100% this year.

[C]

Nice.

[B]

So we'll see. I'm.

[C]

I hope so. Yeah, because that applied to cars too, right?

[B]

That I don't know because I know.

[C]

I bought my G wagon last year or two years ago and it was 80%.

[B]

Oh yeah, it might.

[C]

And then I think it dropped to 60 like you're saying.

[B]

Yeah, last year. Yeah. So hopefully the, it will go back through the House and the Senate again this year and we'll get it back. But the cool thing about it is to be able to get that usually outside of short term rentals, you have to have what's called real estate professional status, which means you have to be able to prove to the IRS that you spend more hours working in your real estate business than anything else.

[C]

Wow.

[B]

Well, if you're a doctor, you can't get that. So what the short term rental loophole does is, is you don't have to have real estate professional status to do this strategy. You just have to meet a few requirements, which there's three of them. I'm not going to go into detail on each of them, ask your cpa. But the basic premise of it is you have to spend more hours working on it just than anyone else who's involved with it. So more than your cleaner, more than your handyman, and you have to self manage it. So typically what a lot of high income earners will do, they'll wait till the end of the year because setup is the most intensive part of a short term rental. So they'll very easily have more hours than anybody else and they'll Self manage it for a year or so and if they don't like it, they'll put it with a property manager. But it works just like a regular cost seg on an apartment building or whatever. But you're able to do it without getting that real estate professional status.

[C]

Yeah. This seems like a good way to, for high net worth people to kind of park some money, get some tax benefits and some, some income.

[B]

Yes, absolutely. And we get a wave of them the end of the year every year doing just that.

[C]

Yeah. Do you, do you worry about something like.08 happening again ever to real estate?

[B]

Oh, it's a great question. So we actually are in a very 08 like situation in the real estate sales market. But the difference is the prices didn't go down. So fewer homes were sold in both 2023 and 2024 than the last 65 years.

[C]

Wow.

[B]

So worse. The real estate market was worse last year than in 2008. But the difference is everybody expected a price crash, but that just didn't happen.

[C]

I kept hearing that every single day on YouTube or Twitter like, yeah, prices are going to tank. And it never happened.

[B]

No, no.

[C]

I personally, because I was buying a house, I waited two years because I thought it would crash a little bit and it never crashed. So I just bought anyways. And it still hasn't crashed.

[B]

Yeah, I don't, I'm not an economist, but I don't see it crashing. Especially as rates tick down, there's only going to be more buyers jumping in. So if you want to buy something, whether it's a short term rental, primary home, whatever, now's a really great time to buy because nobody's buying. You'll be able to get a better deal because you don't have any competition. I just got bought a place in New Orleans. I got almost a 20% discount. It had been on the market for a long time. There's nothing wrong with it. The pictures weren't great, which by the way, that's one of my favorite ways to get deals is bad pictures. Because a lot of times if you go look at something, it looks so much better now sometimes it doesn't. But a lot of agents are lazy. They're outdated photos or they just do it with their phone and it doesn't look good.

[C]

Yeah.

[B]

And so by there not being a lot of competition, things sitting on the market for longer sellers can get. Not always. Some of them don't come down here to reality with the rest of us, but they can get fatigued and they're like, fine. Just take it. I'll just take the lower price. Yeah, it's a great time to get a deal.

[C]

And I also feel like a lot of people are going to leave Cali and move to other states, especially after the fires. So the market might pick up from that too, right?

[B]

Yeah, yeah, I think so. And especially in. A lot of our markets are in no income tax states, so Tennessee, Florida, Texas, which California obviously has a lot of.

[C]

Yeah, they love those. They love Vegas too. Yeah, you know, man, I don't know if you know the neighborhoods here, but like Summerlin has like no inventory right now. I believe that like literally none. Like it's super hard to find anything. I don't know what it's like by you, but that's what I'm saying.

[B]

Yeah. So ours, our market is, is different because it is a lot of second homes. So things sit on the market a little bit longer because you don't have a lot of need to buyers. So people aren't really buying a lot of houses to live in. So ours is a little weird. We have stuff sitting on the market for a long time.

[C]

Okay, that makes sense. You also got a top 200 podcast, right?

[B]

Yes. It's called a short term show and it's on as you would expect. Short term rental.

[C]

Do you have guests on or just you?

[B]

Yeah, I have guests most of the time. I have guests every now and then. If there's like a big piece of news to report, then I'll do it without a guest. But we have guests, so that's cool.

[C]

Yeah, there's some good real estate shows. I used to watch Ramsey a lot, but now I. I don't know the debt free stuff. I want to get your opinion on that.

[B]

I think that I was a big Dave Ramsey fan when I first started paying attention to finances. And I think that his advice is good for people who are never gonna move beyond. I just don't wanna have debt. I just wanna live my life and work my job and that's it. But I think for people who wanna be entrepreneurs that it's not good advice. People who really want growth. I think that all debt is bad, debt is bad advice.

[C]

I feel that, yeah, I think to a certain level it's like kind of detrimental advice. Like if you want to make tens of millions, that's going to be hard to do it without debt.

[B]

Yeah, 100%.

[C]

I haven't seen that in anyone.

[B]

No, me either. And you would grow so slow. Like if I'd had to pay cash for every single house or Apartment building that I own.

[C]

It would take you 20 years to make your money back. You got to put down 100% on everything.

[B]

Yeah. It just wouldn't make sense in any capacity.

[C]

Absolutely.

[B]

And it's not you, it's not you that's paying the debt down, it's your tenants or your guests.

[C]

Absolutely. Anything else you want to close off with here? Do you have a course or anything?

[B]

Oh, yeah. Good call. Yeah. So the way the short term shop works is we have offices in 20 markets. If you want to spend 250,000, go, you know, affordable, we've got markets for that. If you want to spend 25 million right out of the gate, we've never had anybody do that, nor do I recommend it, but we got a market for that too. So we try to be have a diverse range of markets for our clients. We've got beach markets, mountain markets, and if you buy with a short term shop agent, we will teach you how to manage it for free. But in the past year or two we've ran into a lot of people who are buying one want us to help them, but they're buying properties in markets we don't service like California. So we did recently start a course called STS Plus. That's a mentorship. So it's a little more extensive than what we, what we do in our management Monday for our real estate clients. So it's. We try to keep it super affordable. So if you want to do ours and somebody else's, you don't have to choose. You do everybody. So it's called STS plus, like short term shot plus. And you find it sts plus dot com. Cool.

[C]

Link below we'll link your podcast, your books and everything else. Thanks for coming on.

[B]

Yeah, thanks so much for having me.

[C]

Absolutely. Guys, check out our links. See you next time.

[A]

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