134. REAL DEAL: Maximizing Vacation Rental Cash Flow with Eric Gubler - Real Estate Investing School Podcast

Summary5 min read

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.

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Transcript1 lines

[00:00]
A
What's up, everybody? This is Eric Gubler. I'm your host for today on the Real Deal podcast with Real Estate Investing School. Listen, I'm going to bring a cool deal to you today that involves a little bit of strategy with funding both primary and an Airbnb at the same time, which is kind of cool. It was really unique. I'm going to talk to you a little bit about how we forced it to happen. There was some hiccups along the way, but we made it happen and how we found it. So let's just dive right in. This is a really cool deal, super unique, but still possible to do even in the same city. So I'm going to tell you where it was, was in Kanab, Utah. 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, like St. George area and all the cities that surround there. It's a kind of a tourist town, right? It's kind of close to Zion. So that's why you can get away with it a little bit better out there. Okay, so how we found it, honestly, just set up search criteria for anything that was over an acre and anything that was more rural, anything that was just, just more. Just laid back living. I had a client, so I'm a real estate agent in southern Utah, help people buy and sell. So this client was coming out of California, very successful guy, had some decent amount of cash. So he's going to put 20, 25% down on whatever home he bought. I was working with him for over a year, but this property was just a no brainer. And here's why. They had, with this deal, had two properties on it, so. So it was actually two separate tax ID numbers. Again, we found it through this search portal and then as we dove into it more and more, we realized that there were two separate tax ID numbers that we could buy separately. Here's the cool thing about how we funded that. So he was getting a loan, right? He was only putting like, I think 20, 25% down. He was 25, maybe a little bit more. And because he was financing it, if you think about it, a primary resident loan is always going to be cheaper on your interest than an Airbnb or second home interest rate. So the seller didn't care. They just wanted, I want to say it was a million bucks. Okay? It was somewhere around there. They just wanted a million bucks total. They didn't care what property, how it was split up Whatever. So the cool thing in this case is because there was two separate tax ID numbers, but it was like all one property. Like they touched each other. He was buying it together. The cool thing is he was able to buy like the bigger house. Let me back up. There was two houses. So you had a big house with a pool and then you had a smaller house with like two bedroom, a bath and then like a little garage. Right. And he was able to buy the bigger house on the bigger parcels, like 2 acres total with a primary residence loan mortgage, which saved him a ton of money on interest. He's going to be paying the same anyway. But then 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. Right. For a buck so that he didn't have to spend that extra money on interest on the loan. That's more expensive. Super cool. And then, yeah, the primary, the primary interest rate allowed him then to be able to have a loan off payment to where he's actually getting paid to live there. It boggles my mind. The main house is like a four bedroom, two and a half bath again with pool in the back. There's a big three car garage in between the two. Plus that other unit. The other unit he's Airbnb is paying for two acres of land. His payment on two acres, the big house in the pool and itself, it's just mind blowing. Like he's crushing it. And he was okay with a, you know, a mortgage payment of, you know, four grand a month. 3, 500. 4 grand, like more 4, 505 grand. Like he was fine with that. Successful guy, is still active in his practice, but instead we found him a property where it was just like, hey, this is what I want. It's in the middle of nowhere kind of a thing. But that's what he wanted. He wanted to get away from California. But I'm going to get this property for free. Like, are you kidding me? So we pulled the trigger. The issue that we came across along the way is the bank, the loan people came to us and said, hey, that other property like this in general, actually, sorry, the full thing looks like, smells like, walks like a duck, quacks like a duck, just like a. What am I saying? Like it. It looked like a investment property. And the reason why is because his business, even though he travels everywhere for his business, was primarily based out of California. His check came to him in California. And so they didn't believe. And this is in the middle of COVID when things were a little bit tougher, they didn't believe that he was really going to live there as primary residence and that we weren't able to put, provide any proof. So it actually where we had it set up, where he was going to be able to pay for the whole thing and make a little bit and then the margins shrunk a little bit because they came to us and said, hey, we're, we actually have to raise your interest rate. We're going to, we're going to say that this is a second home. And it was tough. I mean, it was, it was tough, it was mentally tough for the lender to be able to tell my client. It was tough for me to be a part of it because it was going to cost him another 5, 600 bucks a month. I think he actually, I think he had to come up with more in fees because a lot of these investment property, they charge points. So he had closing costs that increased. He had a monthly payment that increased all this stuff. And he came to me and he said, eric, what would you do? And I'm like, dude, I totally get it. There's no way that the lender or I or you or anyone could have been able to guess this or catch this from the beginning. But here we are. And you got to remember, like, you're gonna live there even if you pay, even if you have a down month and you're paying 500 bucks, like you're willing to pay so much more. The crazy thing was like he, he was so mad, so angry about it, he almost didn't do the deal. And I was actually kind of nervous that he wouldn't for a minute there. And I was just thinking, why would you give that up, guys? I see this so often. Lesson learned from this. He did go forward with it. He is slaying it. He is crushing it. He does own a 2 acre property in Kadab that is beautiful with beautiful views of the Red Rock Mountains up there. But the lesson learned is, guys, we blow up deals all the time over small amounts of money and we don't see the bigger picture. And a lot of times it's because of the expectation that we set for ourselves in our minds. Again, it happens all the time. I see as a real estate agent all the time with my clients, I'm even guilty of it when I invest in real estate. But I really try and I feel like I've done a good job so far at just saying, you know what in the grand scheme of things does it really matter? Because when you start to add up the principal and the cash flow and the appreciation and the depreciation over time in a 10 year period, if I'm going to keep it that long, that's my plan. It doesn't, it doesn't matter when you start adding all that stuff up. It's like, that's not why I'm getting into it. You know, I, I, I need to make sure that there's cash flow there. I need to make sure that it's actually going to pencil and work out. But once it does, who cares if you're, if your return goes from, let's say 15% down to 12, like it's still a good deal, do the deal. Don't let your pride get in the way of doing the deal. I'm glad that he did it and he's crushing it. So for you, you guys got deals out there, you're working them. I love hearing about these deals. I'm one of the coaches at real estate investing school. I love it when my students have these success stories of buying properties and making it work. But every single one of us goes through that gate of fear. I still feel it. Most real estate investors still get that gut, you know, feeling of like, oh, shoot, I hope I'm okay. I got two deals going on right now, a four plex, and then I'll call it a deal. It's hard money loan that I'm lending to a member of this school to be able to go and do their, that deal. On both of those, there's like a man. I hope this works. Here we go. If you feel the same way, just know you're on the right path. But check with your coach. Check with somebody that knows better. I don't want to say better, but like knows what they're doing. Look, I even run it by people that, just so that I feel like I have a clear headspace. And I know that, hey, I've looked at every angle of this and somebody else isn't seeing something that I don't see because I'm not perfect either. You should do the same thing no matter how advanced or beginner you are. So anyway, that's the message for today. I hope you guys have, have had a great day. I hope you continue to have a great day. Continue to watch this. I, I love this podcast because there's so many snippets and tidbits of like, creative ways to make something work. If you're open to living in a rural area, consider Kanab. You can maybe find a property again? I don't know. I haven't looked at the market today. But if you can find something in a small town like that, okay, where you can allow there's Airbnbs and you can go on air DNA and make it all pencil. It's a great way to go. At least you can house hack and house hack pretty well even if you have a small mortgage. So go get after it. Go find those deals, 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. Guys, great being with you today. Follow us on Instagram if you don't already. Real Estate Investing School if you want to reach out to me specifically, my handle on Instagram is probably the best way to reach me. It's at Egobler. Hope to talk to you guys soon. Have a great night. I'm gonna say night because it's night here. Guys. Have a great night. We'll see you.