Podcast Summary: Real Estate Investing School Podcast

Episode 134: REAL DEAL: Maximizing Vacation Rental Cash Flow with Eric Gubler
Date: February 22, 2024
Host: Eric Gubler

Episode Overview

This episode features Eric Gubler breaking down a unique real estate deal in Kanab, Utah. The episode’s main theme revolves around maximizing cash flow from vacation rentals, creative financing strategies, and overcoming hurdles during the process of buying and running an Airbnb property alongside a primary residence. Eric shares a real-world example from his experience as a real estate agent, including practical lessons and key takeaways for investors.

Key Discussion Points & Insights

1. Finding the Ideal Property in Kanab, Utah

• Criteria and Location:
  Eric discusses how the deal came to be, targeting rural properties over an acre in tourist-friendly Kanab—a location with fewer Airbnb restrictions than nearby cities ([00:40]).

  “The cool thing about Kanab is that you can Airbnb pretty much anywhere... It’s kind of a tourist town, right? It’s kind of close to Zion.” — Eric Gubler [00:33]

• Client Background:
  The client was a successful professional from California, looking to relocate and benefit from better Airbnb regulations ([01:44]).

2. Structure of the Deal and Creative Financing

• Property Details:
  The property included two separate homes on two parcels (with distinct tax ID numbers) that were adjacent ([02:10]).

• Creative Funding Approach:
  Leveraged the dual parcels for financing advantages:

  • Main house purchased with a primary residence loan for a lower interest rate.
  • Second, smaller house (the Airbnb) acquired for “a buck”, using cash, sidestepping higher investment property loan costs ([03:03]).

  “The seller allowed us to just mark the other property for a buck, like a dollar. So he paid cash for the other tax ID essentially... Super cool.” — Eric Gubler [04:10]

• Cash Flow Optimization:
  Airbnb income from the smaller house covers the mortgage for the entire two-acre property with the main house and pool ([05:10]).

  “The primary interest rate allowed him to have a loan off payment to where he’s actually getting paid to live there. It boggles my mind.” — Eric Gubler [05:20]

• Mortgage and Cash Flow Realities:
  Original expected mortgage: $3,500–$5,000 monthly. Airbnb income allowed for significant offset ([06:10]).

3. Roadblocks: Lender Scrutiny and Changing Terms

• Financing Hiccups:
  The lender, suspicious due to the client’s California-based business and pandemic-era uncertainty, reclassified the loan as a second home instead of a primary residence, raising the interest rate and monthly payment by $500–$600 ([07:23]).

  “It looked like an investment property... They didn’t believe that he was really going to live there as primary residence.” — Eric Gubler [07:44]

• Impact:
  The client faced higher fees and nearly abandoned the deal due to frustration, illustrating how expectations and lender decisions can dramatically shift deal economics ([09:10]).

  “He was so mad, so angry about it, he almost didn’t do the deal.” — Eric Gubler [09:55]

4. Lessons Learned on Perspective and Decision-Making

• Big Picture Focus:
  Eric encourages investors not to let minor setbacks or higher costs derail good deals, emphasizing the compounding benefits of real estate (cash flow, appreciation, tax advantages) over time ([11:20]).

  “Lesson learned is, guys, we blow up deals all the time over small amounts of money and we don’t see the bigger picture.” — Eric Gubler [10:40]

  “Who cares if your return goes from 15% down to 12%, it’s still a good deal, do the deal. Don’t let your pride get in the way of doing the deal.” — Eric Gubler [12:27]

• Common Investor Experiences:
  Even seasoned pros face hesitation and fear with big deals. Consult mentors or colleagues for reassurance and a second pair of eyes ([14:06]).

  “Every single one of us goes through that gate of fear. I still feel it… If you feel the same way, just know you’re on the right path.” — Eric Gubler [13:54]

5. Practical Advice & Encouragement for Listeners

• Market Suggestions:
  Consider rural areas with lax short-term rental rules, use data platforms (like AirDNA) for due diligence, and seize house hacking opportunities ([16:00]).

  “If you’re open to living in a rural area, consider Kanab. You can maybe find a property again… if you can find something in a small town like that, okay, where you can allow Airbnbs and you can go on AirDNA and make it all pencil. It's a great way to go.” — Eric Gubler [15:35]

• Motivational Close:
  Eric urges listeners to be intentional, go after deals, and transform their lives ([17:30]).

  “Go change your life, your family's life, and be able to live the life that you want to live and be intentional about it.” — Eric Gubler [17:10]

Notable Quotes & Memorable Moments

• “The cool thing about Kanab is that you can Airbnb pretty much anywhere... There’s not a lot of restrictions with Airbnb like there are in Southern Utah.” [00:33]
• “The seller allowed us to just mark the other property for a buck, like a dollar... Super cool.” [04:10]
• “It looked like an investment property... They didn’t believe that he was really going to live there as primary residence.” [07:44]
• “We blow up deals all the time over small amounts of money and we don't see the bigger picture.” [10:40]
• “Who cares if your return goes from 15% down to 12%, it’s still a good deal, do the deal. Don’t let your pride get in the way of doing the deal.” [12:27]
• “Every single one of us goes through that gate of fear. I still feel it… If you feel the same way, just know you’re on the right path.” [13:54]
• “Go change your life... be intentional about it.” [17:10]

Timestamps for Important Segments

• 00:33: Kanab, Utah’s uniqueness and short-term rental advantage
• 03:03: Creative acquisition and use of dual tax ID numbers
• 04:10: Structuring the deal for optimal financing
• 07:44: Financing complications and lender scrutiny
• 10:40: Lessons on mindset and not letting small setbacks derail big opportunities
• 13:54: The universal investor experience of fear and second-guessing
• 15:35: Advice on finding similar deals and why rural markets make sense

Final Takeaway

Eric’s story is a compelling case study in creative deal structuring, adaptability in the face of setbacks, and the importance of maintaining a long-term perspective in real estate investing. He underscores the emotional rollercoaster even professionals face, and delivers actionable advice for anyone looking to thrive in vacation rental markets.

For more tips or to reach out directly, Eric suggests Instagram: @Egobler.