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- [00:00]
A
Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no BS and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you too. So if you want to build wealth through real estate or you just love learning about it, you found your home. What's going on, everyone? Welcome to Real Talk Real Estate. This is the David Green show and we've got another fantastic episode for you in our series on Airbnb Nightmares. The short term rental market is ablaze. And just because the thumbnail for this episode didn't have a bunch of fire doesn't mean that people aren't struggling. And I'm joined today by all around real estate enthusiast, Sean McDowell, who's got a story that he's going to share with us as well as some practical advice that we can use to apply to our business, whether we're selling houses, owning houses, or just interested in how the whole thing works. So, Sean, thank you for joining me today.
- [00:55]
B
Thanks so much for having me, David. It is a honor to be here.
- [00:59]
A
Yeah, it's pretty cool. Sean runs a real estate team and they're reading the books that I have for real estate agents. So if you're a real estate agent and you're listening to this, we do put out a show every week called Real Talk Realtor, where we interview real estate agents and talk about the business. And I've written some books and made some resources for agents as well. I'm going to put you on the spot here, Sean. What have you liked about the books? And hopefully it's not too hard to think of like one thing that was good about him.
- [01:23]
B
Yeah, no, I, I love the initial, your initial book sold. We actually give that book to every new agent that joins our team. And I love like the practical mentality that you use towards building your real estate sales business. And the, the tips you have for like building a solid foundation, specifically like a couple nuggets that we've taken out of it is like how you initially built your business mostly on referrals and just diving into these relationships with people that you already knew and providing like a great experience in buying a house down to like helping them move or buying them pizza on the night that they're moving in and delivering it and meeting, you know, their friends and their parents and their families. Some practical tips like that. But Also just, you know, I just respect how you think. And yeah, so we've, we've had a lot of fun reading and working through your books together.
- [02:29]
A
Well, thanks, man. That's true. I heard about that same strategy on the Real Estate Rock Stars podcast when it was hosted by Pat Hyben. So I got my license and I started listening to Real estate podcast for agents, the same as I had been listening to Bigger Pockets, which was for investors. It was, oh, that's how I learned, or didn't learn, but that's what helped me with investing. So now that I had a license, I'm like, all right, I'll do the same thing. And there was not that much good info out there. It was really hard to find anything geared for real estate agents. And I heard a couple that said that they did the same thing. They hired a moving truck, they showed up on moving day, they were loading the couches and the TVs and carrying stuff in there. And it was like, they get, they made such a good impression on that couple that they gave him referrals. And I was like, yeah, that makes sense. Everybody hates real estate agents because they think we don't do anything. But on the other side, everybody, nobody shows up when it's time to move. So how could you hate me if I'm the only person that shows up when it's time to move? And that was how I counterbalanced the hatred of agents for making this big commission and then not helping with anything. And it led to tons of referrals coming in. And you do you meet all their neighbors, you meet all their family members, you meet all their friends, you have a chance to make a good impression there. And then that hopefully leads to phone calls in the future. And it would be so nice if we could just get a little bit of that back into America where restaurant owners and business owners look at things that way. And we get rid of this obsession with how do I automate it and how do I get AI doing that so I don't have to and I can be doing something completely different than my chosen vocation while everybody else does all the work. And I think we just have a better world. And we're going to talk today about how some of that automation has made its way into the short term rental experience. And it's destroying so many people's portfolios. It's, it's kind of a big deal. Now, if you're not a short term rental investor, I understand that you might be sitting there rolling your eyes again. Another short term rental thing. I promise you there will be information for you if you're a traditional buy and hold person. And at minimum, you should understand what's happening as big corporations enter into real estate investing, what happens? They always come bearing gifts. Hey, we're here to make this easier. And then once they've gained control from the mom and pops, they make it work for you. And we're seeing something very similar right now going on with Airbnb specifically. So let's start, Sean, with just your story. Can you tell us where you live, what your portfolio looks like, and what you do for a living?
- [04:51]
B
Sure, yeah. So I live in southeastern North Carolina between basically Wilmington, North Carolina and Jacksonville, North Carolina. Prior to getting into real estate, my wife and I were both in the Marine Corps. Had no intentions of, you know, getting into real estate investing or becoming an agent, you know, 10 years ago, but here we are. And yeah, so I was a Marine for eight years. I started listening to the BiggerPockets podcast back in like 2016 and 2017, around the same time that my wife and I got married. I realized I had no idea what I was doing with money and finances and needed to get a little more responsible in that area of life. So I started kind of learning about investing and just stumbled across bigger pockets and it just like a lot of people, I think, like, it clicked for me. I loved it. I listened to almost every episode, if not every episode, and started trying to, you know, just learn more and do some investment deals in real estate. While my wife and I were both active duty, we slowly have built our portfolio over the years. We're both out of the Marine Corps now. We have two short term rentals currently and a couple of long term rentals here in our market. And yeah, so now I'm a full time real estate agent. I have a small team here in Surf City, North Carolina. And yeah, I'm all in on real estate, but, yeah, definitely hasn't been the easiest path the past couple years.
- [06:30]
A
I don't know what is, though. It's not just that real estate's hard. I don't know that there's a. In our economy right now. There's not a whole lot of options that are crushing it and that are easy. And my personal take is we got used to things being easier than they should be during 10, 12 years of quantitative easing where money was just pumping throughout the government and everybody was making money and we kind of got soft. We just expected that it would be easy. And I remember talking about this when it was happening. Just trying to warn people, this is not normal. It's not normal to make $50,000 of equity in one year when you used a VA loan to get a house and put zero down. It's great. Do it. Let's get everybody jumping in. Don't think it will always be this way. It's almost why I had that sense of urgency to tell everyone you need to be investing in real estate. Because I knew we were sort of destroying our currency and you needed to own assets that would hold their value. And now we've kind of get spit off that ride. Like Jonah coming out of the whale. He's been barfed up on, on the shore and like, what was that? Right? And we're all kind of walking around covered in whale bile. Just came back to life from being dead. Like, what? Where are we? What is this? What am I supposed to do? And it's very difficult. My guess would be guys like you that had a difficult experience in the Marines are having an easier job staying on their feet than people that sort of didn't have a foundation of something. That was hard before this because my heart goes out to a lot of people. It is a shell shocked economy. People aren't buying, people aren't selling. Companies are laying off. I get, I would say I get five to seven messages a week via LinkedIn, Instagram and Facebook saying, are you hiring? I just found out I'm getting laid off. My boss is laying me off. In fact, my property manager that works for me had two jobs. She had her W2 job and then she also worked with me. She got laid off from her W2 job after they forced everybody in the company to use AI. It was terrible. It was like, okay, you have to implement AI. If you're not using it, you'll be laid off. Once everyone started using it, leadership learned how they were using it and then they got rid of all the people. It's like, like a German making you dig your own grave while they waited there to shoot you in the head when it was done right. And I think it's the nor. I just think this is what's going to happen. That if your mindset is I want to go find an employer and work for them and complain to get what I want and expect them to pay my health care, pay my benefits, pay for my retirement and give me a paycheck and have cost of living increases and let me work from home and all these things that became normal, you're just going to be disappointed. And I don't Want to see people not enjoying their lives because their expectations were out of line with reality. So it's pretty cool that you were a Marine. Before we get into your story, can you just tell me, like, was there a moment in the Marine Corps, maybe during boot camp or something, where you just had that shell shocked moment of, oh, this is way harder than what I thought I was signing up for?
- [09:27]
B
Yeah, I think. Let me think about it. During one of the schools I went to, it was infantry officers course in Quantico, Virginia, 2013. And that course, more than any other, you know, in dock experience, really broke us down physically, but also mentally. There were experiences where we had to carry a significant amount of weight and weapon systems and show up to a place in the middle of the night and have to effectively and clearly communicate a plan for the situation. And I just remember that that school was only three months long, but it had such a huge impact on me because they did such a phenomenal job of like, breaking us down and building us up, not just physically, but especially mentally.
- [10:35]
A
Yeah. And do you remember having a moment in the middle of that where you just thought, I want to quit or I have to adapt, but being whoever I was is not going to get me through this?
- [10:45]
B
Yeah. And it actually came when, like, I wasn't in the leadership position at the time, but another guy was, and I was standing right next to him and he got put on the spot. And it was clear that this was like his test in a sense. The instructors were, you know, really evaluating this one person at this point. And I remember feeling like, because he did not pass, and I remember feeling he just froze up. He couldn't think, he couldn't talk. Right. And I remember thinking, like, man, if I was in that same situation, you know, I don't know if I would have done any better. And it was convicting made me want to, you know, work harder and. And, you know, prepare better. But it was. I do remember that feeling. I mean, with some of those situations where you can. You can remember how you were feeling, you can remember, you know, your surroundings that night, and definitely will. Will stick with me for a while.
- [11:43]
A
Yeah, that's it. I know in the police academy there was moments like that, too. There are moments like that during basketball practices. I had a Division 1 coach that became my high school coach. And it was brutal. He ran our high school program like a college program. And I just remember thinking, like, dude, this is like, almost too much to handle. Just the level of intensity and responsibility. But what I found was you as A human are capable of more than what you think. We typically look at what we're used to and we, we try to understand what we're doing now within a framework of what's already happened to us. But if we looked at it from a framework of what we are capable of, a lot of what we're doing isn't really that hard. And this is a frequent thing I see with employees. People come work for me and they think, oh my God, this is impossible because they never did a hard thing. Other people come work for me and they're like, well, when is it going to get hard? When are you going to give me more? This is too easy. I didn't come here to do nothing. And it's the same stuff. It's just the context of that human and what they've been through in the past that dictated what they thought was hard today. And I think this is very applicable to real estate because as you see, it's harder selling houses right now. It's harder making short term rentals work. It's harder to find cash flowing deals. Deals that were cash flowing stop cash flowing. Expenses went up, rents are not going up. Tenants are getting a little more savvy with what the laws are and how they can use it against you. And most areas politically are going against landlords right now. They're not putting laws in place to protect entrepreneurs, they're protecting the voter base who are not business owners. So I think everybody who's in this space could benefit from, I don't know if toughening up is the right word, but just sort of increasing the standard on themselves of what they expect. So let's tie this thing back into your, your business right now. When did you start selling houses and when did you decide you wanted to build a team?
- [13:27]
B
Yeah. And just to, just to give you a quick shout out, I, I really respect you, David, and how you've, I mean, your show, Real Talk, Real Estate, I mean, there's nothing that I found like this where you're digging deep into like the truth of what's actually happening. And it's been so encouraging for me to listen to because going through the kind of short term rental cycle in the past, you know, two years, you know, part of me felt like I was like, what am I doing wrong? Like I'm failing. All these other shows are like, you know, or books or whatever. It's all, you know, the glamour and the cash flow and everything. But I just, you know, I just want to give you a shout out for what you've done over the past couple of years since starting, you know, this show. And yeah, to answer your question, the. I got out of the Marine Corps. My wife still had another, like, two years left active duty. And, you know, we always knew we wanted to try something for ourselves at this point. We had two or three properties. You know, they were by no means killing it, but it was enough of a proof of concept that I was like, I'm going to try going all in on this real estate thing. We have some stability with my wife's, you know, active duty income. We really had fallen in love with this area. We live in southeast North Carolina and wanted to, you know, see if we could stay here after she got out of the Marines. And, yeah, so I got my real estate license. I remember I was on terminal leave in the military, which means it's like your last, like, two months of leave, you have saved up or you're still getting paid, but you don't have to go anywhere, and you can let your hair grow out a little bit. And we had just had our oldest son, and I was, like, at home, and I was, like, driving my wife kind of crazy, to be honest, because she was on maternity leave, and she's like, you need to, like, figure something out. And so I signed up to take the real estate class, and I really, you know, was excited to get into real estate full time. I wasn't sure exactly what capacity that would be, but I got my license and just started helping a few friends, you know, buy houses, mostly military guys who are moving here and, you know, realize I really found a lot of fulfillment in that. And it's also an opportunity where there's, like, there's no ceiling. So the harder you work, you know, the more you're gonna make. And I liked that aspect of it in the military, like a lot of big, you know, organizations, you know, you can. You can work harder than other people or other people can work harder than you, and, you know, you're all gonna get paid kind of the same.
- [16:20]
A
Oh, yeah.
- [16:21]
B
So I. I really loved that kind of entrepreneurial aspect of the real estate agent business. And so I started selling houses full time and about two years later decided to, you know, form a team with the help of one of my, you know, best friends. He was actually my company commander when I was in the Marine Corps. I was his xo and we just worked great together. He's a phenomenal man, a phenomenal leader. And so, yeah, we really started our. Our team back in, like, 2022, and, you know, I've been doing it since then.
- [16:57]
A
That's not a lot of people make that jump. I mean, it's hard enough to get people to be good at their actual job, selling houses, being a real estate agent. But now you have a whole new set of responsibilities that you have to develop people, create systems, make structure, make sure all these people are being useful, train them. Was this your experience in the military that kind of gave you a proclivity towards training and developing people? Or was it purely just, hey, I'm too busy, I can't keep up with this. This is something I have to do.
- [17:29]
B
When I got out of the Marine Corps, you know, I didn't miss the kind of BS that you deal with. I'm sure you dealt with a lot of that as a cop, but I miss the people so much. Like, I, I didn't really realize how much I would, you know, miss the feeling of, like, being a part of a team and even just some of the, like, shared suffering that you go through and in the military and in the Marines. But, yeah, so I, it wasn't long after getting out that I, you know, desired some sort of team environment again. I just think this is kind of a corny phrase, but I'm going to butcher it. But it's like you can go further together, then you can go alone or something. And, and so it, it wasn't too long after, you know, getting into real estate where I just, you know, desired a team and I, I've always loved, like, pouring into people and, you know, by no means am I like God's gift to, you know, the leadership world, but I, I do enjoy, you know, that side of things and that challenge of trying to, to help others, you know, accomplish their goals, especially when they're aligned with, with mine.
- [18:45]
A
That's awesome. I, I know exactly what you're talking about. The red tape, very frustrating. The relationships you build. This is something I think a lot of people don't understand that didn't do something hard. Military, even sports can do this. There's a form of bond that comes when you suffer with somebody else. I think relationships in an odd way can, can work in the similar thing when, like, you see a young married couple struggling through not having enough money, having to live with maybe their parents and then getting their first house and having to fix it up themselves and fighting over who spent money on what, who didn't pay a bill. Our current culture sort of poo poos that you, it's toxic if you ever raise your voice or if you get Frustrated with someone, you should never get angry. I don't know that I agree with that. Some of my best friends I've been in the biggest fights with that were just so frustrated and I was mad at them and we had to hash it out. And in the end I'm like, okay, you're right. I screwed up here and you screwed up there. And actually I screwed up because you screwed up. And now that we have this ironed out, we work better together. And then that frustration is replaced by joy. You're like, I love this freaking guy. He's great at this thing, right? He always crushes it here. And that helps me do my thing. And that can apply in a sports background, it can apply in a business background, in a mission background. Any time that you have a goal and obstacles, you will grow closer to the people that are doing it with you. And I feel bad for the humans that bounce from job to job looking for the easiest thing they can find because they never find what we're talking about right now. That joy that comes from trying and failing and trying and failing and fighting and struggling and realizing it's your fault and then getting that like that the joy of friendship that bubbles up in you, that you're like, I want to have that person's back, I want to come through for them. And then them seeing that and knowing that they are valued by you, it's like, I don't know, it just peels off layers of a lot of the things that cause humans to be depressed and have low self esteem when they go through this. So I love that you're building a team and even when it doesn't work out, I think that there's a lot of benefit in the fact that you tried and you learn things in trying that just make you a better overall human. You have any advice on that front?
- [20:52]
B
Yeah, I mean, I feel like everyone to your point, like, I feel like all humans naturally desire to be a part of some sort of community. And it's so fun for me to be able to have a part in like helping build, build a, a community of, you know, like minded and motivated people. So even if, you know, we never get to the point where like the team is like super, super profitable or something, like, it's still going to be such an enjoyable experience for me because I love these people and I love being able to like, be a big part of each other's lives. And I forget your question a little bit. Oh, but you were asking kind of like some of the struggles that go along with it. And I think on our, from our past, like I'm, I'm a kind of a people pleaser and it's hard for me to say no to opportunities and to people. So about two years ago we were, you know, our team was growing a lot. We had a lot of people who wanted to come and join our team. And so we basically just opened the doors to like anyone with a pulse who was willing to get their real estate license was like, we're like, hey, you're in. So we grew to a size of about 15, 16 agents. And it felt terrible though. Like we had a bunch of issues with the culture. It wasn't like we weren't selling houses and it wasn't like we weren't, you know, people were, you know, for the most part doing okay. But there were these rifts where this little drama started popping up here and there. We had part time agents on the team who when it come to training and events because they had other jobs and that's like, that was known beforehand. Um, but still it was frustrating for me and my business partner Andrew, because, you know, we cover changes or we cover training and then, you know, they would miss it and then not be trained and have issues typically on like nights and weekends. And it was just kind of a drainage. And we realized like, hey, we need to dial down and double down on our culture and get everyone on the same page who wants to be here for real. And so we made some changes, ended up, you know, cutting down the size of our team almost in half, but with the people who, you know, really wanted to be there full time and, and really commit to like each other. Um, so that was definitely a big challenge to work through. Um, and we weren't sure if it was gonna work out. Um, but you know, thankfully it, it has up to this point. It has been a great thing for, you know, our team, but it was, it was classic example of like scaling maybe for the wrong reasons without the proper guardrails in place.
- [24:02]
A
I think so many people hear these stories and they're like, oh man, like, you can't make that mistake. I just assume you're all gonna make that mistake. We're not talking about this to prevent people from hiring the wrong ones or managing them wrong. There is, that is inevitable. I wanted this out there so that when someone has it happen and it goes bad, they don't think that, oh, I'm not cut out for this. Like, I. There isn't a person ever that built a team and crush it on their first Go round. It's more like 10 to 15 iterations before you even get halfway good at it. It is so hard and complicated. And investors have to go through this too. You get a loan officer and then he stops replying to your. You get a real estate agent and then they get busy and they stop talking to you. You get a contractor, then their prices get too high. You get a property manager and they're great at first and then their business grows and then they start stealing from you or they stop replying to you. It never ends. You will always have to be building new relationships in our business at all. And let's say you're great at this. Well, then you got to hire people. And then those people come in and they tell you what you want to hear in the beginning. And then a month, two months later, their performance lacks, or their commitment slacks or they stop doing well and they lose motivation. Or sometimes they start doing well and then they ask for a bigger split. Or sometimes they do really well and then they take off people from your team and go try to form their own branch and there's like a mutiny. Like it never ends. The challenges that we're going to face, it's better to just accept this is part of what I'm doing. I'm always going to be building, I'm always going to be renewing, I'm always going to be trying to improve my character, improve my knowledge. And that's part of what it is to be good at this. Now at a certain point, you started buying real estate too. Can you walk us through your first couple of deals and kind of how you got into owning real estate?
- [25:41]
B
Yeah, so we started out pretty slow, but steady. We just tried to buy, you know, one house a year. So first house purchased with VA loan. Didn't know anything about real estate at the time. My dad, when I was moving to North Carolina, he was just like, my dad was in the Navy, so he was like, hey, you got a VA loan, you know, you could probably buy something and your mortgage will be about what you would pay rent for anyways. And, um, yeah, great advice. And so we bought a house and lived in it for a year or so and then turned that into a long term rental. Bought a second house that was kind of like a unique setup. It had a guest suite that had a separate entrance, separate bathroom, and we lived in the main house. We used my wife's VA loan this time, lived in the main house, rented out the guest suite on Airbnb. And that was really when, like the Power of real estate was like my eyes were open to it because people were. We were only charging like 60, 75 bucks a night for this little guest suite. But there were months when we would, the mortgage was like 1250amonth and there were months when the income from the guest suite would, you know, cover the mortgage and the utilities. And we live in like a beach market so the summers, you know, is booked almost every night. And so house hacking really changed our lives. And then you know, slowly just tried to continue buying a property a year. We, we did another house hack after that with a similar setup. We bought one just straight up long term rental. Did a burr property. After reading your book, thank you for that and yeah, so from there we've just kind of scaled slowly and have continued to drive. Try and buy one property a year.
- [27:43]
A
I love that. I love the one property a year. It is so much better to commit to buying a property a year. And learning as you go where your mistakes are small would be the best way to put it. Like you make a mistake, you adapt, you don't make it on the next one versus I listened to this inspirational story of a person that bought 27 houses in two years and I want to do that and they go raise a bunch of money from other people and they go hire a bunch of people with money that they raise to play these roles and they don't have experience building a team or knowing who to who to hire and how to manage them and they go buy a ton of properties and then screw it all up and they learn a ton in the process. They would be good at that point but now it's too late because they've lost all their money. It's so much better to do what you're doing is like, yeah, just get one next year, get another one next year, get another one. Keep saving money while you're doing this. Keep putting money aside in reserves. At a certain point you hit this, this phenomena where you're like, I know it's going to go wrong. I can predict it. This is going to happen. I've seen it a million times. Let's just do this because we know it's going to happen. And when you're not being surprised by things going wrong when like 80% of it is something that you knew was going to happen, that's when you're ready to buy two at a time or three at a time, that's when you're ready to scale. Once you've done it the slow way, it's just so hard to get anyone interested in what we're talking about if they think I have to do this 10 years to get 10 homes. It's so much more appealing. When you heard the story of the person that raised a bunch of money and they went out to rural Mississippi and they bought a bunch of $30,000 houses and somebody goes, wow, I could be at a meetup and I could be talking about my 27 doors. That sounds really good. And then they screw it all up and then they disappear. You don't ever hear from them again. So I love this. Were you buying them all in the North Carolina market?
- [29:33]
B
Yeah, all in our local market. So yeah, really this, there's this kind of sweet spot between Camp Lejeune, which is the largest Marine Corps base on the east coast, and Wilmington, North Carolina, which is a pretty quickly growing city. So in between there's about a 45 minute stretch of, you know, a few small towns, but really some beautiful spots and it's a great place to live. So yeah, we've, we've, we only bought here until we took this leap into a, the kind of short term rental that's gone.
- [30:12]
A
Arai okay, so how many houses did you end up getting over the years? What was your portfolio at?
- [30:20]
B
So we were at four short term rentals and three long term rentals. And we also, with, you know, the team growing and our sales growing, I'd hired a property manager to manage three of the four short term rentals. And we were, my wife was pregnant with our third child and we were basically this property manager decided, hey, this is not for me. I'm basically closing up shop. This sucks, which I totally get. But it left us kind of holding the bag going into the winter time, which is a, you know, just a slower season around here. I mean you can still, you can still rent some, but definitely, you know, your not covering your mortgage in the winter time unless, you know, your mortgage is super low. But so we were in this position and you know, we had always kind of dreamed of owning a lake house. My wife's family has vacationed at Lake Gaston, which is a pretty small short term rental market or vacation market. It's right on the border of North Carolina in Virginia. I mean, it's a beautiful lake, but it's kind of out there. And we, but we vacationed there for the past like five years or so and we had just gone there and we had stayed in this house that, you know, was an awesome short term rental. Lake Esten is also like two and a half hours away from Us, So that's a key factor in how things have been a little difficult there. But, you know, we talked about it, and three of the four short term rentals that we had here in our local market on Topsail island, you know, we, we've owned them for a few years. We benefited from a lot of appreciation. They were all fairly, like, recently remodeled and pretty nice. And. And we had zero rentals on the books because our property manager, you know, threw in the towel.
- [32:34]
A
Yeah.
- [32:35]
B
And so I was like, what if, what if, what if we sold these three and, you know, just did a 1031 exchange and rolled all the equity into one property? I'm a huge nerd with the short term rentals, so. And I see in a lot of markets there's, there's a few, like, luxury properties that are just in a league of their own. The, like at the beach, it's like the eight, ten bedroom oceanfront houses with pool, hot tub, like, you know, just a beautiful entertainment.
- [33:11]
A
Oh, I see where you're going here. You're like, man, if I had just one of those, I wouldn't need to deal with the three, four, five of them that I have. All this work with no property manager to help me.
- [33:19]
B
Right, exactly. And there's almost like a sense of where you just can justify things to yourself because there's an emotional aspect of the decision where, you know, we've always talked about owning a lake house. We've been vacationing here. We've, you know, our kids come here.
- [33:39]
A
Divinely inspired that this would happen. This is our dream and it's wrapped up in our business. I totally understand that.
- [33:45]
B
Yeah. And so we, I knew the guy whose house we'd stayed at. He's, he's the short term rental guy at Lake Gaston, and he's a good guy. And so I, I had built a relationship with him over the years because I told, I just reached out to him. Like, we have the same cpa. So I was like networking with him a little bit and just told him like, you know, like, if you ever wanted to sell something, like, let me know. And just because I know he runs a super tight ship. And I've, I had stayed in two of his houses just as a renter. So he, you know, we're talking one day and he was like, hey, I'll sell you this one if you want it. And it was the one we had just stayed at. We had a great experience there. And so I was like, it was not on the market at the time. And I was like, hey, if you give me, like four months, you know, I. I need to sell three properties to get this one. But if you give me some time, like, I think we can put something together. And it was pretty cool how it all worked out. And I'm not saying, like, this property is like, just totally, you know, in the dumps. Like, it's. We'll get to it, but, you know, it's. It's not the worst investment ever or something, but it's just gotten very difficult over the past year or so. And I did not expect it at all because I thought I knew, like, what I was getting into, and I thought I, you know, knew, you know, the numbers and the systems and everything. But it ended up, like, being pretty cool how it worked out. Like, we got all three of the houses under contract fairly quickly. This is at the end of 2023, so, you know, the rates had gone up and everything, and. But it was, you know, we got all three of those under contract, and I call them back up and I'm like, hey, you know, we're ready. And I don't know if you want to get into the numbers or anything, but ended up locking down this lake house at Lake Gaston.
- [35:58]
A
Yeah. So you sell the three, it seems like it's in the cards for you. They go under contract. You executed 1031 into this other one, so you avoid having all of your gains taxed. How much was the lake house that you purchased?
- [36:15]
B
It was 2.1 million.
- [36:17]
A
Okay. And it's. How. How big is it?
- [36:20]
B
Eight bedrooms, eight bathrooms, a huge, you know, four stall garage. That's just like an entertainment area. It has, you know, a dock with. It came with a boat, which was kind of cool, but now it's a huge pain.
- [36:38]
A
Like every boat story that you end up hearing. I know. Okay, so this is like every str owner's dream that all they're like, plugging along with something in, like, you know, Midtown Cincinnati or something, and they're profitable. But it's just exhausting having to go out there because batteries need to be replaced and the cleaner didn't do something and something broke. And it's like, man, you're making it work, but you're not happy because you just feel like the effort you're putting in is not worth what you're getting out of it. I'm speculating all of this, by the way. I just think everybody listening can relate. And the first year or two, it's fun, and then it starts to become kind of taxing. And by year three or Four, you're like, I want out, but I don't. I have all the skill that I've developed and this knowledge that I put together and expertise I've built. And so they either become a short term manager for other people's stuff or they 1031 in something bigger. I've seen this story over and over, like, all right, we're going for a big swing. Because if I'm going to do this, it's not worth my time to do a bunch of these little ones. I want one big one. And of course, when you see a big beautiful property with an ocean view or lakefront or an amazing view of the mountains or whatever it is, you get excited and you start thinking of the potential. And there's always comps to support it. There's always something in that market that's crushing it. And you're like, well, if I could get to there, this would work. And I think I could. Why wouldn't we think we could? Because everything we've done before this, we made that work. So there's probably also an element of the economy shifting during this period of time. I don't know that I'm speculating in your story, but I just have seen this happen enough times that these pieces start to make sense for me. So you go all in and you move a ton of equity into a 2.1 million dollar lakefront property that's big and gorgeous and beautiful with eight bedrooms and eight bathrooms and it seems like your family's dream. Did you guys take some pictures in front of the house when you came closed?
- [38:30]
B
We did not take pictures in front of the house. We went straight to work. But the. No, we should have. No, it's a. It's such a interesting story about like, how. And this sounds maybe pretentious of me to say, but there's, you know, the verse in the Bible of like, don't set your heart on things of the world where moth and rust destroy. But. Yeah, and thieves steal, but set your eyes on things of heaven and it's like there's always something bigger and better and more desirable on this earth. And like this lake house was like super cool for like a week and then it was just like a job and, you know, we went and enjoyed it and the kids love it. I mean, yeah, you know, had our whole family come and then. And then I just start seeing things. Every time I go there, I'm like, oh, you know, that piece of furniture needs to get replaced. I mean, there's just hundreds of like, little tasks that are required with maintaining.
- [39:32]
A
And if you don't mind me cutting in, there's this element where you did a great job with an element of the house. You bought new furniture, you got new rugs, you put up new artwork. And then you realized, man, this does not match this part. And then you got to start over. You got to do that part right. Was there, was there a component of you just keep getting sucked into it deeper than what you thought you were going to. Because every adjustment you make leads to another one that needs to be made.
- [39:57]
B
Oh, for sure. And we part of the process for the purchase for us. So we, the seller had a contract to put a pool in at the property. And you know, I still think it was the right thing to do to put this pool in because there's really not a ton of properties that in this market that have like a pool on site. But there was just so many. We inherited this contract and the, the pool company. They were good. But like anything, like there's going to be things that come up. So it went over budget a little bit. Like there's. From the start, it was pretty much like, wow, I feel like we're just dumping a lot of money into this place. And it almost took like a year or two to even buff out to be able to get a good sight picture of like how it's actually performing. But you're spot on. I mean, every, every time you go. I mean, I don't have a design eye. My wife's great with that stuff. I mean, she's so talented, but she's also not able to go as much as I do. You know, we have three kids and you know, we're busy with just normal life. And so I took up the burden of like managing this property on. And so yeah, there's. It takes a super unique person to be able to like effectively manage a short term rental like this.
- [41:27]
A
Yeah. I'm trying to give some examples for people that don't have one, or maybe they have one, but they don't have like a really expensive one that they would hear what we're saying, but it would help them relate. Like, I think the furniture is a big one. You get like a couple new couches and you're like, well now that chair looks terrible. And so then you get a new chair and you're like, that rug is standing out, it's terrible. And then you get pictures taken and you're like, oh, we really need like a big clock on the wall right there. And then you get the clock and Then you're like, I don't think those cabinets look good brown. And so you get someone to paint them. And then you're like, I thought about the fact that I needed to put new handles on the cabinets, but now I'm kind of noticing it doesn't really match those drapes. And so now you get new drapes and then you got to get new pictures again, of course. Right. And then you get the new pictures. You're like, man, this is killer. If we could just get that same thing to happen in the game room. And it always just keeps pulling you in and pulling you in. And the other component that I think short term rental operators, or, sorry, if you're not a short term rental operator, that you don't understand is that your competition's doing this too. Right. Like we typically like, okay, an eight bed, eight bath view should comp out at this. That's how it looks on a spreadsheet. But that isn't how people make their decision of what they're going to book. It's just when they're looking through the pictures, what gives them the tingles? When do they go, oh, that one's incredible. And so then they do this and your bookings start going down and you don't know why, but then you realize, oh, these other four ones added a sauna and they added a cowboy pool and they built a deck and they have a bigger boat than we have. And you're like, well, I have to invest. And it sort of becomes a money pit that I don't even think of the right way to say this. It's not that you always lose money on it. It's more that the money that you intended to make gets sucked back into improving the property. And you edit Net zero. Everybody's at net zero because they all keep dumping money into these properties. And the property itself is getting fixed up, but the owner is not making any of the cash they expected when they bought the thing. But they're still putting their time in. And I know I'm kind of taking over the show right now. I'm sorry, I'm just venting because I. I could just feel your story at a certain point. You're like, I want to hire a property manager to do this, but I got to get it to make this much money to be able to justify it. And you never get there because you're always dumping the money in. So do you have any stories like that that would just help everyone understand what it's like to be Sean with this thing?
- [43:50]
B
I mean, you nailed it, David. Seriously, like, we are at the point where we're basically accepting that we're gonna break even, if not lose a little money, but that we're hiring a property manager to manage it for us because exactly what you're saying where the. So just to give you some of the numbers. So in 2024, which is the first year we owned it, we inherited solid bookings from the seller because he already had the whole summer booked out in total with the house and the boat. People rent out the boat sometimes. Our total income was around 266,000. Our expenses were right around 200,000. And so our net income was like $60,000, which I was like, all right. Like this is, you know, it's, it's not easy, but it's working. 2025 comes around. But we did have some big. Sorry, we did have some big expenses too that year that were not planned. We had to put in, you know, the pool went over budget. There was just a lot of work needed, new furniture, so stuff added up. But then 2025 came around and, you know, we're not quite at the end of the year yet, but I mean, December's pretty quiet at the lake, so I'm confident like these numbers will be very close to what we end the year with. But our total income dropped from 266 to 236. So 30,000 drop. Our expenses went up from like right around 200 to like 210 or so. So insurance went up, repairs and maintenance went up considerably. We had to put a ten thousand dollar water softener in. And so our net income basically got cut in half. And now, and I'm staring down the barrel of, you know, our, the boat there is like, I feel bad renting it out almost because it's dinged up the upholstery, the cushions need to be reupholstered like it's a pontoon boat. So it's kind of a tank, but like, it needs a lot of work. I know we have like some septic work we need to do before next summer. So I'm staring down the barrel of like probably 20 to $30,000 of work just to get it back, like up to par before next summer. And that's. That $30,000 is like our projected net income this year. And it's also been a significant stressor. I feel like I'm just complaining right now.
- [46:39]
A
This is what we want on the show. No, I'm trying to get people that don't own them to understand it. And I promise you, Sean, the people that own them, they're. Oh, my God. It's not just me. Everyone's thinking that because they all bought them, the seller exaggerated the numbers. It's just like commercial real estate. They're like, you know, we rented it this much, which is a complete lie. But the brokers always make it look like expenses are lower than they are. And they don't tell you about all the deferred maintenance. And then you take it over and you've got this like, hey, my standard is here and the guests deserve that. So I'm going to take responsibility as a good human being for bringing it up to this standard. And that just brings these complications that we're talking about. Because upholstering a boat used to be a reasonable expense. Now I'm about to rant myself. Why? Because we had humans in America that enjoyed working with their hands and pulling their own weight. Now it is insane to get anyone to do work. You can literally order it cheaper from China and have it sent from halfway across the world than to pay a person to do it. We, we found this with upholstery. I don't think I've said this on the show before. I asked for a quote to wallpaper. Okay, Two laundry rooms, two small bathrooms, and one accent wall of a bedroom. My guess is if you're slow, it would take you two days to do this. What would you guess? Labor only quotes would be to put up wallpaper, which is not a highly skilled thing. Like, it's not framing a house. That the labor quotes would be to do this two days of work.
- [48:13]
B
I mean, $2,000.
- [48:17]
A
So those $2,000, that's an incredible wage. A thousand dollars a day, an eight hour day. You're. That's like well over a hundred dollars an hour. It's like $130 an hour or so to do wallpaper. There was a time you'd pay someone $15 an hour and they'd be happy for work. Right. Our two quotes were $7,000 and $9,000 to put up wallpaper. This is like when we say expenses are going up. This is a big reason why there is not a labor base in America. In most markets that want work, they're kind of like, man, I got SNAP benefits for food and I have Section 8 paying for my housing. And I've got my health care taken care of. And if I don't have health care, I could just show up at ER and get it if I need it. And there's all these different ways I can get clothing through resources like Goodwill or the Salvation Army. I don't want to work. And it has made everything expensive. So I'm not surprised to hear this at all. And I don't think you're complaining. I think you're kind of sharing this is the reality now, trying to be an entrepreneur in the country. And if you can't do all the work yourself, and so my guess is you've been sucked into doing all this work, which has affected your real estate team, which has affected your family life, which has affected your relationship, because all this energy that Sean has is kind of being redirected towards the property. Am I right?
- [49:35]
B
Absolutely. And, I mean, there were nights when, you know, someone checks in on a Saturday and, you know, there's a couple things, like, out of. The best case scenario is, like, there's a couple little things wrong. They'll send me some pictures and be like, hey, just to let you know, like, this chair is worn out or like this leg's broken on a stool, stuff like that. But over time, you know, as I'm trying to, you know, prioritize being a husband and a father and dedicated to my team here and my clients, like, there was just this aversion I got to the management side of this property to where I just got super bitter about it. And. But at the same time, I'm still. I mean, I'm a people pleaser. I. I don't like when people are not, like, happy with me. So there was a few situations of the. Where the guests are just, you know, you get the unreasonable people. And I have one lady who stayed there, and I think she started. She would start, like, drinking, I think, around like 1 or 2pm and then I would just start getting videos of the property. And I mean, she was like, just, you know, a professional tenant or she had read the, you know, read the blogs about how to get refunds, and she would. As soon as she checked in, you know, Keurig has, you know, you put the pot in the Keurig, and maybe there's a couple little coffee grounds, like down inside, like the pod holder. I mean, she was like reaching a paper towel back in there, saying it was dirty. And. And to her point, like, there were some things that, you know, the property needed a little bit of love. You know, just I hadn't been able to, you know, keep it up to standards. But at the same time, like, it's not like it was filthy. I mean, the cleaners, like, they were. They're phenomenal. And they're, they do a great job. It takes them six hours to clean this place and, and they do a great job. But still, it was like a couple of those tenants too. David, it just wears on you to the point of like, hey, I don't know anymore. Like, I, we, you know, considered trying to sell it, but at the same time, I'm like, I don't really think it's the best time to try and sell this house right now. And so we ended up, like, I talked to the guy who's, you know, the short term rental guy there, and I was like, look, like, what would it look like for, you know, you to take over management of this property? And basically, you know, we're just accepting kind of the L in financially, but.
- [52:28]
A
To get our sanity back. Right?
- [52:30]
B
To get. Exactly. And to be able to like, double down on what's really working, which is, you know, the team, and also not sacrifice so much of like, the time or energy that I could put into, you know, my family and the, frankly.
- [52:50]
A
The things that are more important. I mean, you're making such a good point here, Sean. And I just. There needs to be like group therapy or therapy sessions for short term rental operators because I promise you, it's not you. When I took over management of my own because I had people in Hawaii managing those ones. I had a property manager in the Smokies managing those ones. The staff from the property manager in the Smokey started to message me and say, hey, you need to know my boss is stealing from you. This is what is going on. He's. We're all afraid of him. He's made threats to us. But they're stealing your money and they're staying in your properties without paying you. And sometimes they'll put people there and not tell you about it and they'll pay the cleaning fee, but they'll keep the money. And stuff like that goes on. And I had to take them over. Well, I am now experiencing what you're talking about. It is brutal. There are literally YouTube videos and TikTok reels and blogs teaching people how to get discounted stays on short term rentals. And it's all that what you're saying. Show up, find something wrong. Here's examples of things to look for. Send the the pictures to the host in the chat of Airbnb. Say, this is unacceptable, I'm going to need a refund. And imply, but don't state, I will leave you a bad review. If you don't, then the, the host is terrified of getting a Four star review or a three star review because it's going to tank them in the algorithm because we're all competing with each other to have five stars and they're going to throw money at you. And if you do this right, you can stay for free or you can get half off. Right. And if you bring a big enough group and everybody pays and then you get refunded on your account, you can make money staying at an Airbnb. And people are proud of this. This is going around as something that they're like bragging about. And Airbnb, to their shame, is making it easy for this to happen. They pick the host side every single time. They've got staff in third world countries that are handling their service department that just immediately side every time with the guest and the owner has no choice. And, and we're talking about folks, things like they'll pick up a huge rug in the middle of a room and they'll pull it all the way in the middle and be like, look, there's some cracker crumbs right here. I found a dead bug on a window sill. There were spider webs outside on the deck. Like, we saw that there was a little bit of dry rot in this area of a window frame. We looked at the air handler in the closet and there was quite a bit of dust. And we're afraid our children are going to breathe in this dust and they're going to get sick. It's, like, ridiculous. And I don't know, Sean, if you've noticed it, but I noticed it's like they check in and within an hour and a half to two hours, I'm getting picture, picture, picture, picture, picture, picture showing up in the stuff. And it's never like there was a rusty nail sticking out that somebody could hit their head on. It's just BS stuff. Is that a similar experience to you?
- [55:36]
B
Yeah, absolutely. And it was almost like. And what we did was like, we tried to restrict, I mean, you have to be on Airbnb, but we would try and restrict people from booking through Airbnb. And through the property management software, we were able to add like a 20% increase in the rates if people book through Airbnb. So they would be pushed to book through Turbo or book Direct. And with those, you can get, you know, a deposit up front. And it's. We had much better.
- [56:14]
A
Well, there's, there's. It's harder for them to leave you a bad review in those platforms because those platforms don't put up with letting the guest hold you hostage. Yeah.
- [56:25]
B
Now you're, you're spot on. And I know you talked about like, you know, creating a short term rental tech company that is like more friendly to the, to the hosts.
- [56:36]
A
And Airbn Green, that's what we need. Airbnb Green. If we could get an app developer out there, reach out, we need to make a competitor.
- [56:43]
B
I'll be the first one to sign up.
- [56:45]
A
Yeah. And I. Here's my fear, Sean. I think a lot of people are getting sneaky with this where they'll say, oh, thank you so much for booking. What's your phone number? Let's tell you about our property. And then they try to push them direct or there's little sneaky things people could do that I'm not going to say on the show because I don't want to promote it, that they try to push people to find them on Airbnb and then go book somewhere else. My fear is Airbnb is not dumb. They have a lot of money to hire a lot of smart people. They have technology that can find out the people that are doing this, it's not hard for them to track how many inquiries you get versus how many bookings you get. And if your percentage is lower than everyone else's in your area, they can figure out you're pushing them and then they just drop you in the algorithm or they kick you off the platform. And it's no loss to them. They're. They don't need more hosts, they need more guests. That's why they side with the guest every single time. And what will happen is you now have a short term rental in a vacation market, a lake house home that is mainly gets its value from its income potential that people can make on it. That won't be able to be posted on an Airbnb and you're forced to use only VRBO or direct. And now you're screwed because you can't sell it for what you paid for it and you can't manage it because no one's finding it. And like, the answer is not always going to be just how do you screw over Airbnb? There needs to be a truce. We need to come to like Airbnb. You need to be reasonable and think about if you owned a property, would you like this? I mean, I had one the other day. I almost lost my mind. My assistant Angela had to call me off the ledge because the guy shows up and he's using like a translator Airbnb feature. So he's not an English speaker. And I get like, 17 pictures of stuff. And I'm like, I don't even know what this picture is supposed to be showing me. He took a picture of our kitchen to show me that I didn't have, like, a keurig or something. But it doesn't say that it has a keurig. He just felt like it should. And that became part of his excuse for why he complained, right? So he said, the house is dirty. It wasn't dirty, but we just. Luckily the cleaner was close by. They stopped by within 30 minutes, and they cleaned the entire thing. And he's walking around like, no, no, you didn't do a good enough job. You need to do that too. And so they call us and they're like, this guy's insane. Like, he's asking me to do things that nobody would normally do, like take the picture off the wall and scrub the wall behind it. And I realized, oh, he can't be happy. If he's happy with the cleaning, then he can't complain. He's trying to send the impression that the house isn't clean, and I need the cleaner to run around doing crazy stuff in order to justify that it wasn't clean. If I'm making sense of this. And so the cleaner leaves, and he sends me this long message that's translated that is like, hey, thank you so much for doing that. We really appreciate your response here. Unfortunately, it wasn't quite enough to justify the pain and fatigue and turmoil that it put my family through after a long day of traveling to arrive. One of the problems was there were leaves on the deck. He's going in fall to a cabin in the mountains, and there were leaves on the deck, right? So the cleaner sweeps all the leaves off the deck. He's like, I doesn't make up for the fact that when I arrived, I still had to experience seeing leaves on the deck. And that really should have been taken care of before. You should have had this person waiting for me when I got here. And so I get this, like, long message, and I tell the guy, hey, thank you for that. You don't need to ask for part of your money back. We're giving it all to you. You need to leave right now. And he's like, what do you mean? I was like, get out of the house. Don't take anything with you other than your stuff. You are not welcome here. Leave the property. He's like, I don't know why you're saying that. We just wanted a reasonable refund. You booked last minute. We gave you A discount you got here. We already sent a cleaner back. You don't want it fixed, I'm giving you all your money. You don't need to ask for part of it. Get out. And he's like, never mind, it's fine. We'll just stay. I was like, no, I don't feel comfortable with you in my house anymore. And what's funny is he looked up the other cabins that he could stay in, and he messaged us back and said, everything else is more expensive than this one. I don't want to leave. I was like, I didn't say this, but I thought, good, I'm glad you thought you were going to get money from me. In a weird way, it's worth it to me that you're going to have to pay more money to stay at a worse cabin. Nothing's going to have the views that this one has. This was a last minute booking that we took because we didn't have anything for the weekend. And I just, like, hope that guy has a miserable time because there's so many of them that have gotten away with this for so long. And I had a guest on Sean that told me that they believed that Airbnb thought that they left a negative guest review. And based on the speculation that they left a negative review for one of their guests, their property was taken off platform and they weren't told why.
- [61:10]
B
Insane. It's like, it makes me think of, like, how in our culture now, it's almost like no one ever expects to hear, like, the word no. It's like they're like, no was a very big part of growing up for me. And I think it's a very big part of just being a human being. It's like, there's boundaries, but it's almost like today, like, saying no or like trying to enforce boundaries look like some, like, hostile act instead of like something that is, in the end, you know, healthy for someone that's.
- [61:54]
A
It's treated that way like you're a bad person if you tell somebody no. And it's unfortunate because I think it comes down to greed. I think Airbnb has shipped their customer service from America to a third world country because they contracted with some virtual assistant company, saved a whole bunch of money, increased their price to earnings ratio, increase their stock price. They're beholden to their shareholders. The experience for all of us is horrifying. I mean, I don't know if you've had to talk to them, but they bounce you around from person to person that are super Polite and completely incompetent. They don't tell you anything. It's maddening trying to talk to these people. I think that they are competing with vrbo and booking.com and agoda and whatever other app companies like we joked about. We need to start one that are trying to take market share from Airbnb. And so their concern is the guest ultimately is where the money comes from. So we need to make the guest happy. And the guests have figured this out. And because they don't like the word no and because we have a higher degree of unscrupulous people running around in our country, it is easier to do this. And that's not that I don't mean that in. Because I mentioned the person didn't speak English earlier. It's people that speak perfectly fluent English to do this crap too. It's just the greed overall of everybody that wants something for free. And people don't like working. It's why I got a $9,000 wallpaper bid and why you're getting these crazy bids to do the work in your property has ultimately led to this experience. Being miserable. And someone like you that did a very good job, working very hard, going through the grind of selling homes, putting your profits into these short term rentals, managing three short term rentals, had your property manager quit on you and you're like, well, I got to do something here. I don't want to have to go through the whole rigmarole of finding 1031 into what should have been like an amazing success story that we should be here talking about how you work super hard and after 10 years, this is the pinnacle of your achievement. And this is inspiring to all the other investors that if you make a bunch of good small decisions in a row, you will end up with this 2.1 million dollar lake house that you can take your family to and you could take your kids friends to and your kids baseball teams can all go vacation there. And you can be kind of like a pinnacle in the community of a place where they get to go enjoy the house and you have meetings there or you send your clients there when as a closing gift, when they close on. There's so many cool things that could have come from this story and instead you're just like playing whack a mole with all of these a holes that are complaining about stuff as soon as they get to your property. And Airbnb is empowering them and it's not fair that this can happen. It's not like you bought a house where the Numbers were way wrong, or you got way out in front of your skis, or you let you over leverage to do this thing. You didn't really objectively do anything crazy wrong. It doesn't sound like you just ran your numbers incorrectly or you got greedy and bought this thing. It's more so I think the economy shifting probably had something to do with it, but you're mostly having frustrations with your experience of what it's like emotionally trying to manage a short term rental. And you so badly want your guests to be like, it was incredible. It was amazing. We made memories on your boat and they kids loved making s' mores and we told ghost stories and like all this fun stuff and. No, it's not that. It's. They have to find something to be unhappy about or they don't get rewarded. I know I've just been talking for a long time and I projected a lot of what I'm seeing. But it's not just you, Sean. I am. Everyone that messages me is like, david, thank you for saying this. I thought it was just me. This has been horrible.
- [65:27]
B
Yeah, no, you're exactly right. And I think you're right that, I mean, it is a different economy now than when we bought it. There's just not as many people have as much disposable income to spend at nice vacations. So, I mean, our income's down this year. Our expenses are up. So on top of like the headaches and the emotional energy I'm pouring into it, it's like, well, it's just not super profitable right now. And. And it's almost like my wife and I were laughing because you're like, well, you can. We can try and sell it, but we like depreciated it. If we just sold it straight up, I mean, we would pay hundreds of thousands of dollars in taxes to the government. And that's not something we want to do. But then it's like, all right, well, what do you do? You know, like, I guess we'd look into another, you know, real estate asset class, like a commercial property or maybe, you know, an apartment or something. But then it's like, all right, well. And I haven't dove deep into any of those. I've always done like residential stuff or short term rentals. But it is kind of this interesting predicament of like, I would love to just like harvest that equity and just like put it somewhere, like put it in a savings account or something. But it's. It's complicated to do that. So it's Like I don't think a lot of people talk about how.
- [66:55]
A
It'S.
- [66:55]
B
Almost like the off boarding of like or to off board. You know real estate portfolio is, yeah. Is not easy and it's, you know you're just going to be paying a ton in taxes so.
- [67:10]
A
Well, see here's the problem. I, I think with capital gains personally if I buy some stocks And I wait 10 years and those stocks go up a lot and then I sell them and I make money, I can understand why the government wants to collect some money at from that gain because I didn't do anything when I owned those stocks. That company did a bunch of stuff. But when I own real estate I'm putting my blood, sweat and tears into it. It's not like equity just happened. I had to create it, I had to service it. I had to like take time away from other things that could have made money and put it into the real estate. So to tax it with the same capital gains rate that we tax other forms of gain is just not fair from my subjective opinion. So if you do sell this thing and you have some gains you have to pay to get out of it, it's like man, that's like several years of income that they just took away right off the bat that you had to work very hard to achieve. So it stops being worth it to do that. And so then you keep it and then you, you just have the slow water torture of keeping it. And I know it's like there isn't an easy answer here other than the economy getting really good and there's now interest to buy real estate and at that point some investors could exit and pay the taxes. But doesn't look like we have anything coming down the pipe right now that would indicate that the economy is going to turn around and get really good again. So what advice do you have for just people that are thinking about getting into short term rentals that are like I hate my job, I don't like my W2, I just want to manage couple short term rentals and live off the income from that.
- [68:48]
B
I guess what advice? So I guess like the, the management side needs to be viewed as a full time job. So even being in real estate I work with a lot of investors. We do have another short term rental here in our market that it's a similar story but not quite as, as you know, roller coastery as that lake house. But I mean it's, it's doable and you can make money but it needs to be viewed as a full time Job. You or someone very detail oriented needs to be there every week. I would say I'm gonna get on a.
- [69:34]
A
No, get on it, man.
- [69:34]
B
So just cut me off.
- [69:35]
A
Get. No, no, no. I want to hear it.
- [69:37]
B
Okay. I would say don't make investment decisions based on, like, emotions and family desires. It's stressful for me to go to that house now, and I think my wife a little bit less so. And she's. She's amazing, but still, she sees, like, the toll it takes on me. I would say just be careful with what market you invest in. So where we live here in Surf City, Topsail island, it has a deep bench of vendors. Like, you know, everyone wants, like, their go to. But even if, like, there's a H Vac issue or something here, like, I can call six ten H Vac companies and get someone out there. Lake Gaston is kind of this remote market where It's. It's like 20 minutes off of 95. Like, Roanoke Rapids is kind of nearby, but that's not really a booming city. And so our electrician lives an hour away, and he's. He's the guy. The pool company that services it is less than reliable and charges us a decent amount to the point where we're like, trying to find another pool company and we can't do it. So we're trying.
- [71:05]
A
I mean, is it the point where you're. That's what I was about to say. Have you literally decided it's cheaper to try to train someone to maintain a pool than to hire a company that you would think wants your money?
- [71:14]
B
Absolutely. And so I think just talk to a people who invest in that market more and. And, you know, make sure that there's a bench of vendors who can respond, especially vacation markets.
- [71:31]
A
I find this is a big problem in Hawaii, in the Smoky Mountains, in beach towns. It's a problem. I see it's a problem in, like, the. What's another market in the country that just is like. Like a Branson, Missouri, anywhere that people. Basically the only reason there's an economy there is someone vacations. The local populace is not as excited about working. It's very hard to find people to do the work. And those that will do it are being pulled in a million directions because of all the other properties. So that's a very solid point. If you're gonna buy in one of these vacation markets, like, everybody is advertising, you've got to realize you almost have to be handy and live there yourself if you want to make this thing work.
- [72:13]
B
Yeah. And. Yeah, that's so true. And the last point is I would say look into the occupancy taxes. This is a number that I feel like when people analyze short term rentals, like they don't account for it or it gets missed or some people include it and some people don't. But here in North Carolina at least, like the county will have 3% occupancy tax. The city will have like a vacation rental tax of 3%. You just get nickel and dimed by, you know, the local municipalities. And I don't feel like a lot of people understand that, you know, getting into it, that this number that you might see on air DNA or that a property manager sends you, this might be before that, you know, 12 to 13% tax gets taken out. And yeah, I, I would just recommend that everyone, you know, looks into that in depth. But even with all that, like, I know we're kind of like been talking doom and gloom on, you know, short term rental stuff, but I do think it could be and is sometimes like a pretty powerful wealth builder, just if it's done properly. We have another property here in Surf City that we bought for, you know, 6:30 in 2023. And it's not crushing it from a cash flow perspective, but this year, you know, we'll, we'll net around, you know, $15,000 after all expenses and everything. And it's gone up almost, you know, $250,000 from when we bought it. And so there's still some. Yeah, I don't know, there's, there's some, some light, I would say, but it's just, yeah, it's just, it's, it's kind of brutal and it's, it's definitely not easy.
- [74:24]
A
Well, there's probably some truth to when you bought it. If the economy is doing really good, luxury real estate will do better when everyone has money because when everyone's rich, they're like, dude, let's get this baller place. It's huge. It's on the lake, it comes with a boat. Like they're willing to spend a bunch of money when they have a lot of money. When you don't have a lot of money, you are thinking, hey, let's go to something that's a little more practical. And that would be the second place that you mentioned. So in today's market, it's. If you have the reserves, getting a really big place is probably easier to do and will pay off in the long run because there's less competition to buy them and you get really good tax benefits. When you do it. But if you don't have a lot of money in reserves, you gotta buy the cheaper stuff, which unfortunately is where all the competition is. But that's how real estate works. Like, whatever you're trying to do, everybody else is probably trying to do too. And you ideally want to be the contrarian. So when the market's doing great, you're buying the cheaper stuff. When the market's not doing as good, you're buying the nicer stuff and you're moving opposite of everyone else. The only way you can play that game is to have so much money in reserves that you can weather these long periods of time that you don't know how long it's going to be for a market shift. And most people don't. Most people are using real estate to try to build those reserves. They're not starting with it and then getting into real estate. So it's just going to be hard. Which is why we started off the episode talking about, get okay with things being hard. Fall in love with things being hard. Focus on what it's doing in you. The work that this challenge is creating in your own character and in your own heart, as opposed to the ease and comfort that you were hoping that would come to you from these investments. And I could tell from stuff you said earlier, you're a man of faith. And I think that's one of the things that gets us through these very difficult times is when you have a goal or a purpose bigger than just, I want a bunch of money so everyone can see I have a bunch of money. You can make it. When your goal was, I want to be rich and I want everyone to know it, you're going to quit because this isn't what you started out wanting in the first place. So I'm glad to hear that. Also. You're invited, Sean and anybody else who's listening. I do run a faith based mastermind. It's called Spartan League. We're having the Spartan League.com website remade right now and it's free. So if anybody here would like to deepen their relationship with God, be around other believers and really have their faith tested, things that you may have thought your entire life were the case that caused you to maybe stumble. We tackle those very difficult issues in that group. So all you guys got to do is DM me the word faith on Instagram and I will see it and I'll send you the info for the group. And Sean, remind me to get you that if you'd like to join. We meet On a Wednesday night. So tonight will actually be meeting any, any last words of advice for people that are maybe in the game. You've been in real estate for a while, you'd like to leave them with.
- [77:05]
B
I would just say, and you've said this before, I mean, it's. It's not a get rich quick thing, but it is a build wealth, slow and steady. And yeah, I have a buddy. Thanks for the invite. I'll definitely come to your. Your mastermind. I have a. A good friend here, Joe Pearlman, who's a member of the Spartan League, and we were just talking the other day of like, hey, there's tough times in, in every market. And like, we're not the type of people who quit, though. And like, while we won't be afraid to, like, admit, you know, a loss, like, figure it out, pivot a little bit and, you know, push through. Because I do think and. Or maybe I'm just hoping, but I do think that in a couple years, like, those who can survive these, this, you know, market are gonna, you know, come out stronger and wiser and in a better spot in the future.
- [78:03]
A
All right. And if people want to contact you about buying a house, selling a house, joining your team, whatever it may be, what's the best way for them to find you?
- [78:11]
B
You can reach out on Instagram. It's Sean S E A N dot Quiet Waters. Our team's name is Quiet Waters Realty Group, so that's the best spot to find me. And yeah, thank you so much, David. It's a great conversation and I love listening to your stuff. And, yeah, it's truly a dream come true for me to be here.
- [78:33]
A
Yeah, man, it was great getting to know you and thanks for having the guts to come on and tell people it's not all sunshine and rainbows. I know not everybody wants to hear the truth. They prefer to go to the YouTubers that have the inspirational stories that everybody likes to hear. And I think those channels blow up. But those that have been in real estate for a while, they're not listening to that for a reason they've seen. It's a kick in the gut for a lot of time to make this thing work. So I'm happy to keep having the real talk and hopefully people share this episode with other investors that maybe need to hear it. So if that's you, please consider sharing the show. Make sure you're subscribed. If you're not already on Apple and Spotify in addition to YouTube, it helps us with the algorithm and leave us a comment and let us know what you thought, as well as reaching out to Sean at Sean Quiet Waters on Instagram. And then make sure you guys send me the word Faith on my instagram @david green24. Sean, thanks for having you on. We'll have to do this again. I appreciate it. It was great getting to know you.
- [79:29]
B
Likewise, David. Thanks. Take care.
- [79:31]
A
Bye.