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Episode 063 - STRR - Chris Villela on Intention & Strategies: Long Term VS Short Term Rentals

acquisitions long term vs short term Aug 20, 2021

In this week's episode, Michelle speaks with her friend, Chris Villela, in regards to the differences between Long Term Rentals and Short Term Rentals.  Plus, the importance of having holding strategies and exit strategies, especially in times like these.  Chris and her family own and operate close to 500 units in the Tucson market and she's been buying and managing houses for the family business for decades.  She knows a tremendous amount about Long Term Renters, especially in the university market We are hoping you find her input informative and entertaining.



Transcript of this Episode:

Hi, this is Michelle, the master of money mindset, and you are listening to BNB dash boss podcast, and it's Friday. I get the weekend off and you get to listen to a replay of the short-term rental revenue podcast. And in this week's episode, you are going to listen to a very dear friend of mine. Her name is Chris Veeva, and Chris is literally a walking calculator of property management for long-term rentals.

And her specialize in renting out to students, although they have other long-term renters in there, that's their specialty. And they've done it for many years and I have nothing but respect for this woman because she is absolutely brilliant. And I just love her to death. So I would love you to listen to this episode.

I'm going to be listening in, popping in if I need to or popping in at the end, for sure to put my 2 cents in, but enjoy this episode with crispy ALA. In this episode of the short-term rental revenue podcast, we do have adult language. So if you have any little ears around listening, grab your headphones, Chris and I have been friends for decades now, bris and her father own probably up to 480 close to 500 units in the Tucson area.

And they specialize in long-term rental. So, what I wanted to do was bring her on and kind of talk about the differences, how he handled short-term rentals compared to long-term rentals. Remember when we buy, we always buy looking at the long-term value. So actually Chris and I just partnered on a place, Chris and Moto and Kevin and I partnered on a place down in Tucson that we will be using for a short-term rental.

This will be her first short-term rental, and we're kind of butting heads. Let's just say on how things should be done, how fixed up they should be. And so it's kind of difficult to let her know because she always wants these numbers, right. She wants the exact numbers that you'll get, because she can tell if she fixes up a property that she's going to make X amount of dollars every single day.

More in a rent, fixing it up or putting this much more into it so she can look at the ROI on it and tell right away if she's going to get her money's worth out of it. But it's much more difficult to do that in a short term rental, we don't have those numbers. We're like, it'll be between this and this.

How much occupancy will it bring it up, probably around this, to this. And she said, she's looking for exact numbers. And we're like, yeah, can't give you exact numbers, but I can give you kind of variables. And it's probably making her crazy because her life is about definite numbers she can pull in. But we're going to talk about that.

Today's book I wanted to recommend is a new one that I've been reading. The book is titled buy rehab, rent, refinance, and repeat that's the burn method. And it's by David Green. David had another book that was really good about long distance real estate investing. And that was a really good book. I thought, oh, I'll listen to his new one.

Not exactly sure, but I think it came out last year in the summer and I thought I would take a listen to it. I love listening to his stories and you're going to love this book. You can get it on audible. Just look for buy rehab, rent, refinance by David Green. I'm going to recommend that book inside the burn method.

And that's pretty much the method that kiss Saki has been recommending for a long time. There are different ways to invest. And we talk about this constantly. A lot of people like paying cash for everything. That's pretty much the way Susie Orman and Dave Ramsey, do everything. They want to pay cash for it.

But if you were educated by someone like Robert Kiyosaki, it's all about using and leveraging other people's money. That's the method I would rather use. Now that doesn't mean I take a lot more risk. Right now. And we've been talking about this in several episodes. Guys is when you purchase a rental property, you always purchase it, looking at all your exit strategies and the longterm rental value.

Why? Because we talked about it. We said, shit could hit the fan. Things could happen, right? The market could drop out. People stopped traveling when something big happens and something big has just happened. So every single one of our properties, and if you've been listening and you've been following the advice that we've given you, every single one of our properties was able to rent out at the long-term rental value, which is a lot less.

So even if you were doing rental arbitrage, and let's say you're a renting an apartment for a thousand dollars. That is the going rate. You could sublet that apartment $4,000 a month and you won't be losing anything. Okay. You have to act fast on these things. You have to decide. Am I going to switch over to traveling nurses or am I going to just freak the F out and go right into long-term rentals, whatever you do decide to do it and do it quickly because the market is going to change.

When people continue to lose money in their markets and not everybody is, we're not at a hundred percent capacity or anything, but we're definitely making our money. And if you aren't, you're doing something wrong, you can fix it and you can switch over. Make sure you start looking at marketing to traveling nurses, pick a group, and then go there, right?

Or long-term rentals. If you do long-term rentals. That means for the next six months or a year, depending on how long you allow somebody to sign a lease, you're not going to have the monthly income from a short-term rental. I wouldn't do that in my market because I know my market is going to recover.

People love Arizona plus Arizona right now is still a wonderful spot. Here. We are close to the end of April, and we've only had less than what is it? 160 deaths. It's not a lot. The reason why is this virus does not do well in the heat. And so we've had a couple thousand cases, but the majority of people recover, recover fully.

And we've only had less than 200 deaths. So this is going to be a place where people are going to want to go. And we are a hotspot for what we call snowbirds. Arizona gets snowbirds, Florida gets snowbirds. That means people come from the north and come down, not usually in the summertime, but I have a feeling that this summer is going to be a wonderful, wonderful place to be in the desert because people are noticing.

We're not crazy out here. Not yet. Anyway. Not, not so much for the most part. I mean, this virus is going to be around a long time. We're going to have to learn to live with it. So are we going to change everything about our life? I doubt it. I really doubt it. I mean, we're going to change a few things. We'll be a lot more careful.

We'll be much better about social distancing, but I believe we'll still shake hands and still meet people for lunch and still gather in restaurants and parks and stuff. So I don't think that things will change that drastically here in Arizona. I'm looking forward to recovering. So the burn method, rental property, investment strategies, oh, such a great way to invest.

And we used to do this a lot too. Before we get started with the interview with Chris, I just wanted to go over. One of my favorite ways to buy rehab and then turn a property into a long-term rental or a short-term rental. This worked fantastic in Florida. So let's say you buy a property, you have to have some cash or some investors, right.

But let's say you do, let's say you have some pocket investors and they're there for you. Anytime you need them, you can purchase a house and fix it up, always buying under market, fix it up, make it nice. And then you're going to put long-term renters in there, or maybe even a short term rental business.

Now, if you've got other short-term rental businesses in the area, you can use it. The seasoning from those other properties. So let's say for instance, you're looking for a bank loan. They want something called seasoning on a property. They want to see how much income that property has generated in the last year or two.

Right. And that's called seasoning. They don't want to give you any kind of loan unless they can see that that property is going to be making money. So if you have a property in the area with a longterm renter in it, or if you have a property in the area with short-term rentals, They will allow you as long as it's in the very same area, it has to be very close and very similar properties.

They will allow you to use those numbers when you're getting a bank loan. If you want a traditional bank loan, or you can use it when you're looking for private money lenders. So private money lenders are really great too, because there's a lot of people right now. They're not getting enough money from the banks and enough interest on CDs or just having their money in a money market account anymore.

They're older people and they like to invest a little, a little more careful. So these are the private money lenders you're going to look for and you can pay them a low mortgage rate and take that and pay off your mortgage. So let's do a for instance, let's say for instance, you buy property and I'm going to use some numbers of a property that we fixed up in Florida.

About five years back, we picked up this property on auction for less than $50,000. And we put about 25 to $30,000 in it. Okay. We have $75,000 into that property and now it's all fixed up. Right? We got it. We rehabbed it. Now we have $75,000 all cash in the 50. We bought it for this, the 25. We fixed it up.

And then we go and we look for private money lenders, or maybe even a traditional bank to give us a loan on that property. Right? So if we have seasoning, we can do it with a regular bank, or maybe we've got a bridge loan and we can do a refinance. I can explain that later in a different episode, but whatever it is, let's say it's a private money lender, and they're going to give us the word most of the time, they're going to want a 75% LTV, which is a loan to value.

Meaning the property will have to appraise for a hundred thousand dollars and they'll give us 75% of that. That means they want 25% equity in that property. Well, it's so turns out that that property actually appraised for like a hundred and twenty-five thousand dollars. So what we did was pull out even more.

Okay. So if you look at that, then 75% of the LTV on that property would be $93,750. So if we took out 75% of the value of that house as a loan, and we were paying the mortgage on $93,750, right. We were able to do that with our rental property. And absolutely we could that property. I think the rentals in the area were about 1200 bucks so easily.

We could make that mortgage and then some with a long-term renter. But if we took that money out and we paid ourselves back, the 50,000 that we put into it and back the 25,000 that we rehabbed it with. So if we took that 75,000 back out, we would have $18,750 in our pocket. And what is that money? That money is completely tax free.

Why the money is tax-free because it's a loan it's alone. It's a mortgage on that property. So not only would you get the whole complete 75,000 that you put into that property back to put into your pocket, right? So you made that money back, but you would have an extra, almost $20,000 tax-free to invest in other properties.

So we've done that over and over and over again, with a lot of properties, he will talk about that later on in the book, but it's one of the best ways to invest. And what it does is it makes your ROI infinite. Why is your ROI infinite because you don't have a penny in these properties at the end. Now that 18,000 for us is really great because each one of those properties, we could take that 18,000 and it's tax-free money, right?

Because it's mortgage and we can buy the furniture for that property and decorate it and get it all up and running. Basically for free, but you have to buy smart. You have to buy at the right numbers. You have to fix it up and make it look great. Now it will work with a short-term rental. It will work with a long-term rental.

The reason why that's such a great way to do it is because it gives you a way of holding the property and allowing the renters, whether they're short-term renters or long-term renters to pay that property down, you will have no money out of your pocket. Okay. But you have to have the money up front first.

So that's one of the ways. But remember there was a time we knew that the market would be shifting and changing. So we sold a lot of our holds Chris and her dad right now are selling a lot of their holding properties. They actually just did a big package. I believe they had over 40 properties in that package and sold that for an nice little 18 million.

I think it was down in Tucson. You're seeing a lot of long time investors selling properties, but they're picking up other types of properties. Why? Because as we get older, we want to do different things with our life, right? Nobody wants to be fixing flipping properties when you're in your fifties, sixties and seventies.

And it's not just because of physically, but because of time-wise too. So as you get older, you're going to want properties that are bringing you more of an income in. Now, when you do this, you're not going to have the same amount of income. Because these properties are paying for themselves. So you're going to have a mortgage.

So you could just easily take that 75,000 and leave it in there. And then whatever you make on that property goes right into your pocket every single month as income. And then you're taking all your deductions throughout the year, the rest of the year. So there's a different way to do everything and a different reason, just depending on your age and the purpose of doing real estate.

Why are you doing it? Are you doing it for cashflow? Are you doing it for long-term investments? Are you doing it to create wealth later on and maybe a legacy for your family? Why are you doing it? You have to know every time you go into a property, when you pick out a property, every property is different.

Every single one, every price is going to be different. Every negotiation is going to be different. It's going to be handled different. So when you go into a property and you take a look at it, you're going to do exactly what Chris does. You kind of, I look at it and go, what am I going to do with this? Am I going to fix it and flip it?

Am I going to wholesale it? I mean, what am I going to do with it? You're going to start to know after you've done a few, but the thing is you got to do a few today. We're going to be talking about the differences between long-term short-term. We're going to let Chris just tell us more about what she does.

And you guys probably know what I do. I might chime in once or twice, but this is going to air on four 20 Monday is four 20. So happy four 20 to all of you guys who are for 20 years, I am way too old to four 20. And also in the state of Arizona, if you four 20, you don't get to keep your guns. So I would much rather have my guns than a little herb.

I can always drink a glass of wine. If I feel like it take a listen to crispy ALA. And I speaking about the differences between long-term rentals and short-term rentals enjoy. So you're going to terrorize me. No, what I wanted to do, most people have like an idea when they go and they see all those HGTV shows and they're like, I'm going to pick up this property.

I'm going to get it for like a most excellent price. I'm going to choose what colored tile goes in it. And I'm going to like every different one is going to look different. They just, they have no clue what the reality is. So I was like, okay, well, let's talk about the realities of when you buy a house, do with it.

And what, why your intentions of what you're going to do with it makes such a difference in what you do, right? Because I have done zero mental prep for this, but I've done it for 20 something years. So that's all I've got. There you go. Well, here's the deal I figure with, you know, the few hundred units you have under your belt.

All right. So Chris, we are super lucky and blessed to, because we just bought a property together and I'm driving you crazy because I'm going, I'm going against your grain because you have bought and purchased with your, your family and your business, tons of units of property and the majority of your properties.

You, you hold correct. Correct. And then you put long-term rentals in there, you know? Well, most of your, most of your guys are students, right? No. I mean, we have a good volume of students and then we also have, um, some multifamily and a little bit of commercial, but I've got a good mix of month to month and year leases.

Well, that's good because it's different than what we do now. So when we got into real estate investing way back in the day before the crash, the majority of ours were long-term the majority of the ones that we held were in Mesa, Tempe. They were students, doctors, nurses, because we were always by the universities and the hospitals, because that's what Robert had taught us.

Right. And so he kept those. And when I got back into real estate, after the crash, then I started with long-term renters again. But because I knew that another thing was coming in, I started selling those properties. And when I did. I missed the cashflow because what do you miss when you sell your property?

It's like, if you took properties, you're like, okay, now the cashflow is disappearing. And that was the really nice part. So what I figured do was rent. So I started renting and turning those into short-term renters. We had the properties that I got from my mom and dad in Florida. And so we were like, oh, short-term rentals.

I mean, they make a lot more money, especially in Florida, they did, but there's differences. There's a difference when you buy a property and you're going to turn it into a long-term rather than short-term. So I wanted to talk about those differences because it is different. I mean, it's just, most people don't realize what the, you know, like I said, they just don't realize what they're going to do with it.

So when you buy properties, do you buy properties that are already fixed up? What condition are those properties? Usually in when you first pick. There's multiple different ways. I could talk about it because over 25 years of doing this, there's, you know, multiple different avenues, but I can talk about what we're doing right now, but you're always, you're always looking at, you hear lots of people say, what's your exit strategy?

What, what are you, when are you going to be exiting out of this party? And if that exit strategy is when I die, you know, that you plan on buying it and holding it, and it's going to go to your kids. That's an exit strategy. So, you know, right now, We just sold a couple of properties. And so we're out taking that money for the properties that we sold and we're out there changing those multifamily ones into SFR.

So how so those and, you know, 50% because we need something and 50%, because we like it, you know, it's fun for us, you know, you gotta want to wake up every morning and, and do something fun. So generally, if we're looking for something we're buying, you know, a mid-century older house, you know, 40, 50, 60 years old, and it needs some work.

We liked doing the work. We like whatever we need to do it, whatever bones it's at and fix it up and then make it a rental. When you pick up a property, do you believe just like Kiyosaki said, do you believe that you make your money on the books? Oh, absolutely. Yeah. I mean, so you know, the properties that I own, we own as a family.

So it's my dad, my brother, and me, and we have lots of discussion about, you know, when you buy it, what's the purchase, you know, what's the value of that property. Yeah. Your dad will just pick it up. He's like, oh, I like it. Let's get it. So you have that discussion and you have to, and it's okay to be real about that discussion to say, you know, everything that I've done, we can talk about how you come up with that price and comparables and condition and costs that you have to go into it.

But if you say that property is worth picking a number one 50, but you're like, but I'm willing to go to 1 65. That's okay. You just have to know that that 15,000 more is the emotional amount that you have for wanting something. Paying that extra could be for a lot of different reasons. You just have to identify that you are paying more for it.

You can't sugarcoat it with lots of fancy things like, well, when we fix it up, we're going to build so much equity into it or, well, we'll make it back in the year or I'm saving so much money or this is a really hot market or, or your 10 31 ING because you just sold all those properties. And you're like, well, I can afford to pay a little bit more because a little bit different situation.

We can come back to it. We can talk about 10 31 exchanges. Cause, um, but, or, you know, I in my world, you know, because we have so many properties, we have maintenance guys. And so you can sort of lie to yourself and say, well, my maintenance guys, aren't busy, so I need to buy a house now to keep them busy. And then paying too much for it.

That doesn't make sense. Um, but it's okay if you make that decision and you consciously know it, when you go into it mean you you're like, you're like one of those savant when it comes to running and crushing numbers. Yeah. You know, your market, you know what things are worth, you can walk in. And you're really good at saying, this is what this property is going to need, and this is what it's worth to me.

Right. Because I know what, what I can get for it. I know what the rents are and I know what I can get for it. And I know what has to be put in there and what needs to be fixed. So there are things when you're, when you are doing a property that, you know, the basicness, let's talk about the, when you're renting it, long-term you pretty much just do the basics and you want it nice and livable, but it doesn't have to be.

Upgraded in any way, shape or form, correct? No, not really, but here's kind of the difference is, I mean, you can do upgrades, um, you know, everything doesn't have to be vanilla per se, but you're not looking at it's best to explain and comparisons in my, in my mind is when you're doing a fix and flip, you're really trying to put flashy things.

That'll really identify with somebody or you're really designing it and putting in the materials at that moment that will really speak to a buyer at that moment that are almost, you could say trends. Right. You know, you're gonna find what's really, you know, fireable for buyers because you want to sell your house.

Rentals are different. You don't want them to feel out of date, but for that same reason, you don't want them to feel out of date. So you're not going to remodel the house heavy on a trend because in three years, people are gonna sit feel like your house is out of date. You want whatever work you put in it to it to feel nice and current, but maintainable, you know, you know, if you put in white shaker cabinets, because you'd like white shaker cap cabinets, then, you know, put in a little more of a basic counter top, and maybe you go for granted, or maybe you decide on your market that it's, it's gonna still be for Mica because of the type of tenant that you're going to have.

And that's going to be how you can maintain it though. Exactly when you're, when you're flipping a house, when we were buying and flipping down in Florida, we would look at all the sales in that neighborhood before we fixed it and see what they were selling. So, absolutely. Yeah. So if everything was in everybody else's house that was selling was granted.

Then we went with granted, but if it wasn't then why would you go with Brannan? Everything that, you know, when you're looking and you're, you're putting stuff into, um, a unit you kind of want to go with, whatever's kind of the 80% around you. You don't want to be that unique house by any means. Um, and that goes for the materials on the house.

When you pick your cabinets, you want them to be something that you can get parts for 2, 3, 4, 8, 10, 15 years down the road. You want, you know, your tile to be kind of generic. You know, don't pick a weird size that, that when, um, a tenant breaks some tiles or the fish tank explodes in the living room or whatever happens, and you gotta replace some tiles that you can't do a good job of that.

Cause the last thing you want to do on every house you own is save two boxes of tile for every house. And then we were Clippy that was the same or paint the same tile, the same cabinets. I mean, it was pretty much the same, basically for all the houses. It did go from Beijing to graze, you know, with the, as it trended out.

But we never went with barn doors yet. We never, yeah. So like there's a doing barn doors. We were like, okay, there's a good example. I mean, a barn door, um, you know, is okay, but it really is a very trendy kind of item. And I would never put that into a rental. It just, um, it's easy to get broke. How are you going to replace it?

If you have to replace it, it's just an expensive cost to now put in a door and now, you know, it's just a lot of work and you want to just make things easy for you as a landlord to maintain and the tendance to maintain. Right. Right. Because tenants are harsh. It's like, especially if you have college kids, they're pretty like, holy cow.

I mean, you don't know what I mean. Yes, yes. And no. It depends on the kind of kids and how well you, you monitor them and such, but. It doesn't matter really where it's at 20, 30, 40% of your tenants are just going to be hard on it and the others aren't. Um, and it's really hard if you only have one, because your first two tenants could be the ones that are really hard on it.

Trying to average it out over 10 tenants, not over 10 houses or a hundred houses. I think the first houses that I had in queen Creek were like that, that I, I bought three houses in a row and every time someone moved out, whether it was a year or two or three down the line, it seemed that I had to put another five grand into the place to, you know, get everything back into shape, to rent it out, to make, you know, a few hundred dollars a month.

And it was like, this game is like two steps forward, three steps back day. Yeah, it is. It's hard. Um, I mean we, when we, we just bought a house and we're almost done with it. But, you know, we have our own way of doing inspections, which doesn't yeah. Work for everybody, but we walked through the whole house.

Um, and we pretty much do our inspection on a house within like 15 minutes, just four of us walk around. We kind of take notes, we just look at the basics. Right. And then we're done. We kind of know a rough estimate of what we're going to be in at price wise. So on this house, we found that there was a crack in the bathtub and we're like, oh great.

The bathtub is going to have to be redone. It was a jacuzzi tub. They did funky tile to put in this fancy jacuzzi tub, uh, because it was really important to the homeowner at that time. Right. So we knew we had to take it out, but we also knew we were going to have to redo the tile in the bathroom because of taking it.

But then you get into it and then you figure out what's the tenants move out because you buy it with tenants. And we bought it with tenants in it. Well, tell him how to crack in it. So they ran the tub, of course, which leads them to meet the flab, which damage the wood flooring, which they had a rug on top of, you know, so now you're at, okay, now we've got to rip up the floor, all this wood flooring and a bedroom and redo that.

And then you rip out the tub and you figure out they did a bad job of it. So now you're spending even more money to refurbish something and it looks great at the end, but it's just a point of it always costs more than you think it will. Yeah, absolutely. I like that. Is that the one with the pool where the kids are going to jump off the roof?

Uh, huh? That's my choice. Not, not my, yeah, no, not what I would've done kids. I remember, uh, 1 7 1 where you had, uh, the kids took the trampoline and dragged it over to the pool so that they could drunk triple roll. And you're like, oh my God, you know, this is not a dive. Somebody is going to die. Yeah. Well, that's one thing.

Just remember if you're a landlord and there's a pool in it. 100% of the time, not 90%, not 95%, 100% of the time. If there's a diving board, take it out. Oh yeah. Yeah. Okay. So when you go in there, you know what you have to do, you, like you said, you guys walk in, you see what needs to be fixed, what needs to be done, but you don't go overboard.

Um, now when now the difference is. In different neighborhoods. I think you would do different things too, when you, like, if you were up in, uh, okay, let's go up. Cause we just drove through there yesterday that oral valley you were renting there, you would have higher end rental. And if you have a higher end rental, you're probably going to do, you're going to make sure that it's the same as the neighborhood, right?

Yeah. I mean, similar in sometimes that doesn't really change what kind of cabinets it may be. Like, let's say you really find a cabinet that you like, and it's a good value. Um, sometimes it's not really the quality of the materials you put in. It just kind of ends up in that. There's just more so as you go into a little bit more affluent area, um, you know, a little bit higher price point houses, they're also bigger.

And so, you know, right now we're, I'm putting in a, a kitchen and the cabinets are $1,500 just for the cabinets. I mean, that might double, so, you know, you want to be careful that you don't say, well, I'm going into a nicer neighborhood. I have to buy a nicer cabinet. Well, you're going to buy twice as many cabinets.

So your bill is going to double and then upgrade the cabinets. And now the bill doubles again, and you're just blowing money. And especially for rental properties, you, you don't have to always spend a whole lot to make something look good either. No. And, and so I think as you start to get into more of an affluent neighborhood in general, you're going to get a little bit more established families.

They tend to care a little bit more. And so maybe you start to do a little bit more in terms of amenities that you wouldn't necessarily do in a rental that might turn over more often. So maybe you do accent wall painting. Maybe you do a higher quality carpet or, um, You do a little bit more with the landscaping because you know, that they'll take care of it.

Um, you might provide something that might be amenities, so you might provide outdoor seating or something, you know, it's he had a rental when we sold the house, we were in a rental and they did the pool service for us and the landscaping. Right. And it was, it was a lot more, you know, obviously than a regular rental.

I mean, we were up there in our price range, but the thing was, it was in an affluent neighborhood looks great. And you obviously wanted it done that way. You know what I mean? So, yeah. So you can include that in the price of the rent. So it's like, okay. Yeah. So like even when it comes with, you know, you have to look at specifically what your market is then too.

So like, I do have a lot of student rental properties and in my world, they, they rent the whole house. But I provide other services that are valuable to them. So I allow them to pay individually. I allow them to see their accounting individually. You know, I have amenities in the house that are important to them as students and it's designed in a way that's, that's more comfortable for them, you know, it just works for their lifestyle.

So that's kind of what, you know, every market has things you want to kind of, that you can do that aren't necessarily cost more, but then target more to your audience. Great. That's honestly a great thing because I remember when we were college students, we had to get everybody and then one person had to be the one who is in charge on the lead.

We paid that person. And then if that person wasn't trustworthy, then sometimes you would pay them and they wouldn't pay the rent. And you're like, well, we gave them our money. Yeah. That's pretty cool. So I'm just sitting here thinking. So like one thing that seems sort of small, but let's say you're completely regretting, you're getting a house and redoing it for a rental is closets.

And I'm just thinking like, my daughter just bought a house. It's just got this huge master closet. Right. And it literally has one rod all the way around the closet on two walls. That's it? I'm like it is the most worthless closet ever, but it's, so it doesn't really cost that much money to really make a closet.

Cool. And so if you spend just a little bit money, let's say in the closet, adding extra rods, maybe in the kid's room, which would be, you know, like the kids' rooms, adding some more shelf space in there versus just all rods doing, spending the extra hundred bucks or hiring 50 bucks to do wood shelving.

Versus I hate the wire shelving personally. I just take it. You can't, nobody can put their shoes on it, you know, and, um, So doing that, then when you go to rent the property point that out, you know, so what, you don't have anything, your kitchen cabinets look just like someone else's and you've got a brand new refrigerator and that's great, but show the mom, look, I've really nice closets for you, you know, maybe that's where you spend a little extra money.

Yeah. So, and we do that on our college kids. So they always have extra rods, more shelves, lots of storage space everywhere I could, when I designed the houses, lots of storage room, um, because you got five individual. I, you know, my house is already worked from two bedrooms to 11 bedrooms. And so you had just have a lot of individuals that have things.

And so we try to give them lots of stories. That's awesome. That's perfect. So when you now you're, you're moving in with, have you done any short-term because I forgot to ask a motto. Is this going to be your first short term? It's our first. Oh, wow. Okay. So what's the scariest thing for you when you're going into this?

Because we, we were talking about when we went to close, it was kind of fun because a model called me, I forget if it was the week before. And he started to panic because suddenly the pandemic came up and we were like,

we're about to close on a house. And we're like, well, the travel industry just went into shitter.

I was like, okay, Michelle, what travel industry? Exactly. Non-existent right now. But we kind of looked at each other and we said, okay, but what, what was our exit strategies? We had a bunch of them. Right. So we knew. If, if something were to happen, we could go to long-term and we're like, what's, what's the long-term rent.

It's going to be this much. And then it's like, what's the mortgage while we paid cash for the house. So we had no mortgage. So we were like, oh, okay. So we're going to be okay. Like we're going to be okay. But then we, you know, so it was kind of funny because we, you know, you always get scared before you do something, but, um, right before you do something and there's a lot of times you, you get that scared that, that, you know, that fear comes up.

Like even before you get married, you know, like the night before somebody gets married, they go, holy cow, I'm going to be with this person forever. And they get that, that anxiety for you. Was there any Ixinity before you did the short-term rental? Like what, what things are you coming? What things are coming up for you that, that don't usually come up for you?

Because you've been doing, you've been doing what you've been doing for more than two decades. And I know you're only like, you're probably only like 30 right now. You know, th the whole thing is you've been doing it pretty much your whole life. I started in the womb. So, yeah, I mean, I can tell you most of what I've done has been with my family.

So it's always, it always feels more comfortable to do it when you have a group of you to support, which has been nice to do it with you, because we can all sorta support through our fears and, and, uh, you know, and, and cheer each other on to push forward, you know? Um, so, you know, this is one that we've done with you, so it's my own money versus, you know, this family money.

So like you said, when you're getting going again, it's, it's like, ah, what's and that's why for me, I'm, I'm glad you talked about that. I do best with like, what's the worst that could happen. Right. You know, and, and I mean, you could say, well, it could burn down. Okay. I have insurance, but that hasn't happened in the last 60 years at this building.

So that probably won't, um, I could have to sell it again. Well, it's pretty much worth mostly what I bought it for. So I might lose a little, little, little bit of money, but yeah. We're actually improving it already. Yeah, exactly. So you know that it could be a positive and negative in general. Let's just say it's an even so I was okay.

That part. For me, the thing is just I've, I've never done a short-term rental, so it's, that's hard. What are the logistics of all of it? I kind of just sort of let them out of it. Cause I deal with this all day. It's sort of like, you know, you, you work in a restaurant all day, long lasting you want to do is come home and cook.

You know, I do real estate stuff all day long. The last thing I want to do is do it again and hope you are always, um, that, that was a thing Kevin and I were talking about today. Cause we, I said, you know, I've got Chris and I are going to come on and talk about stuff. And he said, you know, um, someone like Chris, he said, she knows her numbers.

So well she can look at a property and say, each of these units is going to bring me in $700, a unit or seven 50 or whatever it is per month. And I go, she looks at a model and I. If we do this, how much more can we get? And we're like, anywhere between this and this, how much more occupancy will we bring in?

And it's like,


single improvement, every dime that you put in, what is your rate of return at that time? What was your rate of return? And I said, she she's, we're making her crazy because everything we do in a short term rental is stipulation. I mean, everything depends on, you know, the market and the weather and, you know, the virus or not the virus, or, you know, if you're up in Tempe, it's like the cubbies coming in for spring break at the time of the year, like how many more rentals are out there?

How many new ones are coming in, what their rates are. There's so many variables and right. And so you have it for me. The thing that makes me the most nervous is I, um, I don't want to have the Sunday, the person's moving out of the unit and I don't have anybody to clean it. And it, 11 I've got to be over there to clean it.

The unit

that is the toughest that is, or fix a bed or change a battery in a smoke detector. Exactly. That's the hardest part you've got to. Well, you said you've. With your guys. You've got your maintenance guys. Yeah. So, I mean, that's where planning comes in because most of the properties that we have in Florida, as a matter of fact, all the properties, now we have them run by, by companies, property management companies, or they're run by, you know, like Wyndham or whoever is running that entire unit.

They're basically turnkey where we don't have to do anything. We just get a check and the check isn't obviously when you have something like that, your check isn't nearly as big as our check is when you're running it yourself, but there's a lot less work to do. Yeah. So that's probably, would you rather have it that way or would you rather have a motto?

And I played with it, like I'm okay with the playing part. So it's just more about, you know, like the logistics, you know, just all of that. I don't know how it works and it's not that our arrangement is. I need to know how it works. But I'm definitely more of a control freak. And so I either have to be in control or completely disassociate.

She was like, I don't mind

and just have trust that it will happen. And if you need me, let me know. But otherwise I'm just trusting it all happen. I'm trusting the process. Cool. You're doing that though. Cause I told them, I go, that's gotta be so freaky for her because everything for her. I mean, when you sign a 12 month lease, you know, specifically that you're getting so much per month.

I mean, there's no question about it. You might not know exactly if they're going to pay or when, but you know that if they don't. That, you know, here's the process for that, or here's what we're going to charge for a late fee per day, or, I mean, you know what this is going to be. It's not, there's not a lot of variables.

There's so many variables in what we do, you know, it's like, so you also know that, you know, when they've rented it, that's what they're going to get. And things, things don't change in the middle. Um, and so, you know, someone, you might need to make a repair, but that's going to happen anyways. Right. But they don't get into the middle of the house, you know, the rental for four months and go, you know, I mean, we just can't seem to lease it well enough with this stove.

We need to buy a new stove, you know? No, you've got the stove in there. You're done.

So have you done like that? So that's kind of where we're at with this unit. You're like, okay, I have appliances. Are those appliances going to work? Sorry. Or do, do we need new ones or can we find a used one? And so, you know, when you're up and running, but that's the other part on this is we've talked about why does going to make this short-term rental get us the most money and what's, what's got the most bang for the buck.

We've talked about artwork, we've talked about furniture. We've talked about just the location alone to location. I mean, we've already picked the location. So, you know, what's, what's the little amenities that you, you do for people when they're there and how do each of those fell into five-star ratings, you know, and people recommending it.

Exactly. Exactly. The service is the main thing. Yeah. It's it's such a different thing. I mean, when kids and families, even when I know when we sold our place and we had to find a rental property, we were looking at so many places. Like I went through so many places and you have an agenda, you know, if you are a lifetime renter, if it's something you do, you're looking for one thing.

If you're ready to buy another house, you're looking for another thing you might be looking for location. You might be looking for a lot of storage. There's reasons people renting and what they're looking for, but when they go on vacation, I mean, well, it might differ a little bit between somebody who's a nurse, a traveling nurse, and they're looking for a place to be comfortable for a month or two.

But if somebody's going for vacation, they're basically looking like, is this close to these places that I'm going to be visiting? Or, you know, is it close to the hiking? Is it close? Is there something that I can do while I'm there? So we're just trying to make it, you know, the best thing that they can when they open it up.

And they look at the property that they go, holy cow, I could feel at home here for this many days and Arizona. I mean, this makes me feel like I'm visiting Arizona. This pool makes me, I know it's, even if it's 115 outside, that I'm going to be able to slip into my little bikini and go sit by the pool and I'm going to feel great, you know?

And, um, that's the way from it. So, I mean, those are the things we're looking for, but we, we have to transfer that feeling to them. It's more when people are traveling, it's more of a feeling, you know, right. Yeah. Well, they're, they're going on vacation and they want to be entertained and transported to someplace other than where they live.

But when you're renting monthly, They want to feel like that's where they live. I live in my stuff is here and there's my kids, my dog. Exactly. My Cheerios. Yeah. Yeah. So we're, this place is so adorable that we're doing together. I'm so excited about it. Yeah. It feels kind of like 1950s, Palm Springs. Should I keep telling Kevin, I go, I love the era that it's just, it's got this feel to it.

And he said, so, um, you know, as we're doing all the painting and everything going into it, I just look at it and I go, this place feels good. It has a really good vibe to it. You know, the area has a great vibe to it. That whole area. I love that area. The mountains are spectacular. You can see the, the Catalinas and everything.

Oh, what a great area. Yep. And your house is right over by there too. So that's nice. Yeah, that parts that's another thing is, I mean, and that's more about how I've been brought up with my business. I definitely have a comfort level of owning in Tucson, or at least knowing that things are close to where you can take care of things.

Could I buy a house somewhere else and have it long-term rental. Sure. But why I'm wanting to like start buying real estate in another city so I could go vacation there something and write it off per se, I guess so, but that's just not how I live my life. You know, I don't want to just go from here to.

Branson Missouri, or from here, that's kind of funny because that's one of the other places that my parents timeshare, they had a timeshare in Branson. They had timeshare here kind of how our parents generation travel. You just like you did Tucson and you did summers in San Diego or you, wherever you live, you went to the lake for the summer.

You know, you went to the same place year after year after year. You know, that's, that's not how I live my life. So for me, it just works to have everything very centralized in Tucson and I can manage, you know, maintenance and management, all of that, um, with one team. And that's just much more cost effective than trying to spread it out over multiple places.

Well, you'll be excited to know that there are a bunch of exchange places that you. You can put your unit out there and then rent somebody else and you give them a week at yours and then you take a week at theirs. So if you ever want, oh, I'm just saying, in terms of my kind of rentals, now this'll be interesting to get into short-term rentals and because so much of the management is done by somebody else.

So it's very, very different and it's so much of it is automated and automateable so even the messaging, like 90%, I would say more than 90, I'd say 95% of our messaging is just a bot. I mean, it's literally a robot. Everything is, we just have these pre written grips and messages that we have in there. And when somebody, you know, investigates, it, it, it goes to this.

And I mean, it's, it's just so automated that we rarely get any messaging unless it's out of the ordinary. And the booking same thing. And then the cleanings week, we set that up the same way. Like everything is just, it's just click, click, click, you, set it up. And then once you set it up, it just automates itself.

There's very little to do with it. It's kind of fun. But at the same time, like you said, it is scary because if any system fails, you've got your plan B, but then sometimes plan B will fail and then plan C and you're like, you better be on it. You better. I mean, I definitely, for me doing this, I mean, I feel comfortable because I know you've done a lot of them and I feel comfortable because I can just blame you.

That's awesome. No, but I'm, I'm super excited about this property and I'm really glad that you're letting us, you know, just fix it up a little bit nicer than you would normally would let us. I love that. So we're going to fix this up. We're going to make her a little uncomfortable, but then eventually she'll, she'll come and she'll go.

So how do you guys do that? And then we'll show her. I can't wait to do more of these because I have a feeling once we get these going, then we, especially, once you get the short-term rentals running, you've got that history. So we call that seasoning. You call it seasoning in your business too. So once you get a history of income, then you can refinance this and we can pull a lot of this money back out.

And then re-invest it again and do it again and do it again and do it again. That's literally what you want to do. I mean, eventually you want these to pay themselves off. You don't keep borrowing against the equity if you want it paid off. So I figured I don't want to do this the rest of my life, you know, but definitely I like having the income so much younger than you.

I know that's because you've been doing all that since you were in the womb, I didn't start until much later, so much younger than you. I'm 53.

Well, you know what? That makes a difference. These wrinkles right here in the last two years, don't get me started. We won't talk about wrinkles, but when we're, when we're doing this, where we're just making it look nice or painting. All the way. I mean, sometimes when you have a rental property, you don't have to do all the painting, just, you know, some of it, here's my thought, unless you happen to buy a house where someone went through and fixed everything, the paint always looks better when you're walking through it and buying it, especially if they have all of their own stuff in it.

I mean, our house was empty, so we knew the paint look bad, but it always looks better than you think until you get in there and you start fixing other things. Oh, and then you notice how much of the paint needs to be touched up or dealt with. And it looks anybody plan on painting the whole house fix. It makes it look.

I mean, no, no said, cause we put flat on the ceilings so that somebody had put semi-gloss up there and we were like, you know, if you put a flat on there, you're not going to see all those imperfections. And then a model put a picture I saw on his Facebook page of the flat and there it's huge difference.

It's a huge difference. And it makes it look so much nicer and it, and it brings down the brightness of it, making it feel much more cozy. Yeah. So it's such an awesome feeling when you're in there. So I love the tall ceilings too, those tall ceilings spectacular. So I would say if someone's buying a place just in your mind, always plan on painting.

Um, even if it is the same color, unless you absolutely know there's a fresh coat of paint everywhere. It's just going to look dirty and gross compared to all the new stuff you're going to be putting in. Yeah, absolutely. But that's cool. All right. Well cool. I just thought we would get in here and kind of just tell them there's a difference.

You can still work with all those differences. So worst case scenario, we said, if, you know, if everything hit the fan, we still have a property that's worth a lot. So if we, we had to put a long-term renter in there, we would all be okay. Yeah, absolutely. Yeah. And it wouldn't be too bad and we could actually get, because we upgrade the flooring and painting that, painted it and stuff.

Um, we could get a little bit higher rent than we did when we walked in. Oh, absolutely. So, so it wouldn't be so bad. So always have those different exit strategies, whether you're going to hold it, how long you're going to hold it. Not that you can't change your mind, you can totally change your mind later on the that's.

What life is, you have to make a decision like this is how I'm going to go forward. You can get sick and have to decide you have to sell your properties. You could win the lottery and decide you're going to buy more. So a different town, you know, there's positives and negatives in life that can change your trajectory.

But if you don't at least make a decision at the beginning, then you consciously decided to make none. Exactly. I mean, we've had plenty of times where we bought a unit as a rental and it was a great rental. We moved people in and then, um, you know, we had long-term tenants in there and it was a good rental, but we just looked at the portfolio and, and where we were at that time, how we felt the market was going to be.

And, and, you know, you're always reevaluating it and we're like, you know, this was a purchase. It's a buy and hold, but right now, I can sell it for so much more. I would never buy it for this price. If I, if I knew today that I could buy that, the price I bought it for and fix and flip it, I would do that.

And so, you know, you reevaluate and you change. And that's great. If our condo suddenly decided to double in price, we would sell it

because we would have to rent it for twice as much to be able to make this. So our exit strategy can change, but we decided this moment, what we're going to do. And then you, you don't just put your head in the sand and say, well, that's what I always decided. I'm stuck with it. Changes. Look at it in two years, look at it every five years.

Yeah, look at the money. You're making stuff. Look at it every two weeks. That's like when you buy gold or silver and you're like, the price is up, the price is down on the prices up. It's like, no, that's a buy and hold and you just leave it there. And then don't look forward to that. Board is down. The beaches are open.

The beaches are closed.

I'm watching that. I'm like, I'm not even looking at this anymore. Like I can't, I can't. I'm like I can't have any more weekends off that I can't go to California. I know with the gas prices, like the lowest thing, you're like, I don't want to take your road trips so bad. We're down to like a buck 50, like six and Tucson.

It's so low though. What a wonderful, honestly, this has been for us and we were talking about it, you know, talking with the kids on the phone and everybody's home and everybody's talking to each other and I'm like, this, this is a great thing. That's happened for families. I think a lot of families are closer than they have.

They had more time to communicate with each other. And then before in a long time. So I think like you said, coincidentally, which is nice, a good time of year for it to happen. Spring is nice. I mean, forget the stuff about school or whatever, but at least it's generally most places. It's nice weather where you can be out in the yard with your family and start doing planting and, you know, spring cleaning.

And there's just projects you can do versus like if it was January. Yeah, exactly. You're like great. Clean up our Christmas, take down the light, you know, whatever, any muds, pretty much knowing again, Um, it's been gorgeous here and everybody's out on their bikes and out on the trails and stuff. And I love it.

You just see more and more families out now, altogether, which is really rare to see, like you see the mom and the dad and the kids on the bikes. And you're just like, look the whole family. I mean, this is so cool. I still get, I go, honestly, it's the coolest spring. I can remember seeing all these families out there together.

Yeah. It's been, it's been really great for us here in Arizona. So we are totally blessed. I really believe that we are blessed. We got a great deal on that place. And those were your numbers. We used Chris's numbers to do them because Chris, like I said, she is amazing. She knew, she knows her long-term rent.

Michelle be honest. I kept telling you go lower and you're like, no, no, no, we can't. We'll lose it. to make yourself feel better. I made the first offer pretty low. I did. You did like I low balled the heck out of that one, but then you're wanting to go. That was the number we decided. I was like, oh, let's not lose it.

Let's just fake it because this is the number that we said, this is as far as we'll go. And this is what they came back with. And I was like, take it, take it. Let's not lose it. Let's not lose it, but it was not worth what they had it listed for. And they knew that too. They came down. Oh yeah, they did. They absolutely did, but it's definitely worth it now.

Cause I mean, it's, it's looking great. I can't wait to see with all the stuff and all the little cactus and all the little decorations, we'll have to post pictures of it. All right. Well, thank you so much for coming on and helping people understand. I mean, there's, there's a budget that, you know, when you walk in, it's definitely not like the shows on HGTV.

You know, it's not like we're going to buy and replace every, every inch of it. No life is, life is not buying a $300,000 house in California and putting a hundred grand into it to sell it for 500. Those notes numbers only exist in California. We love you too. Alright. Talk to you. More questions you call me.

Absolutely. All right. Take care, Chris. Bye bye. Joyed. That that was crispy ALA. And I speaking about the differences between short-term and long-term rentals. We just picked up our new property down in Tucson, and we're super excited about fixing it up. I'm going to make Chris crazy because I'm keep fixing things that she wants to stay and things that she likes.

She really likes white appliances. And I don't know why, because I really don't like white appliances. I would rather have black over white and stainless steel still over black. Um, black just leaves fingerprints. And I don't like anything black as my husband. I don't like any black sinks or black countertops black, just in a house.

It just makes me cringe. Although I love black furniture. I don't mind black furniture. It's kind of weird. I just don't like black countertop stuff just seemed dirty to me. Don't like anything that makes it look dirty, but Chris, it's going to be a lot of fun and we're going to do a few more down there with her and her husband and Moto and Kevin and I are very, I'm very excited.

I'm very, very blessed that we have friends in our life like Christina motto. Yes. Lots to learn about there. And I wanted to add in here that right now, Nike just did an episode of help us. So I'm sure you heard me, but long-term versus short-term when it comes to your BNB property is extremely important to know your legal differences, the differences in your state or your county or whatever ordinances you have.

So you want to stay within the parameters of a short-term rental guys. You are taxed differently on a short-term rental business than you are on a real estate business. I mean, it just makes the world of difference. And then again, if you listen to that episode that I just did, you will know that long-term renters, you have to evict and anytime one of your guests stays more than 30 days, you have moved them from the short-term rental into a long-term rental.

And now you have to go through an entire eviction process. So they can literally squat in your property, meaning they can sit there and not pay you and not have to leave. And depending on the state that you are in, depending on your laws, you might not be able to get rid of them. And sometimes in some areas for years and they won't have to pay you.

So it's very, very important that we stay under 30 days, that we say 30 days or under, in most, most instances, Some states have 29 days. Some states have 30 days and some have 31, the majority have 30 days. Our state has 30 days check your local state. Okay. Go to the national short-term rental association has links to all the states and you can check there, but when you are looking for things like that, make sure you know, your local laws.

It's really, really important that we act as a hotelier more than a real estate business, because when somebody doesn't pay in the hotel, they have broken the contract as a hotelier. Right. And now you can say, look, you didn't pay. It's not an eviction process because they don't have a long-term lease.

They don't have anything like that. So it's just a matter of saying you didn't pay me. You didn't follow through on your part of the bargain, which was paying me. And I would give you a room for the night or two nights or three nights up to 30 nights, up to the short-term rental state, anything above and beyond that is considered long-term and Airbnb.

And these companies are really pushing these long-term stays and they're extremely dangerous for us. And I want you guys to know that it's not the same. It is not the same legally at all. So I'm always like, look, do 30 days, stints. Like you can have nurses in there for three months at a time. That's no problem.

But 30 days at a time, 30 days at a time, and I would go between one person and another person. So if there's a couple do a 30 days with a wife, do a 30 days with a husband, 30 days with a wife. You want to say legal within the short-term rental range so that if they do not pay you, then they are breaking their contract with you.

You can cancel the reservation and they are now trespassing and you can get them out immediately. You don't have to wait 30 days. You only have to wait two days. You don't have to wait two hours. You can get the law out there. And these people are trespassing and you can kick them out of your property.

Otherwise you will be screwed. You'll be shooting yourself in the foot. If you don't have a short-term rental contract, keep it under 30 days. So that's the only thing I'm adding to. This is because right now we are in an attack of our rights as property owners. They are going after the small guys. And that is you and me is pretty much anybody.

Who's not Blackstone. Right? So if you're not Blackstone and you don't own a shitload of properties, it's the big guys against the small guys and they want us out. And how the air going to start with that is they're going to. Attempt to make a lot of laws that make it extremely difficult for us to run our businesses.

So we have to run our businesses very, very strategically. And within the parameters of the law, let's be smart about this. Like I said, take this business seriously. It is a business. Your business is a business, treat it as a business. And also don't compete for last place because if you're only making a minimal amount of money, that means if somebody screws you, you're more likely to lose everything faster.

So you want to be making a profit here. It's just it's business. I mean, every business is in business to make a profit. That's not capitalism. That's just reality, right? It doesn't matter if it's the government or anybody. They want to make money. And somebody is making money somewhere. Even if it's not a company, somebody is making money somewhere.

Believe me. We ask God to bless our business. So we're doing a fair business. Right. But we make a profit and part of that product. For timing. And part of that profit goes to our family to feed our families. And a lot of that profit goes to our business partners so that we're paying people a fair living wage so that they can make a living of decent, you know, good living like we make on their businesses.

So we pay our cleaners a great wage. We don't just give them minimum wage, especially in Florida. I am not paying somebody seven or $8 an hour. That's ridiculous. Especially if they are, you know, women and men who are supporting families on that, maybe a kid working for the summer. I don't mind that, but I'm talking about people who are trying to support families.

I'm not going to pay people who are trying to support their families, a wage that I would pay somebody if I owned a fast food joint. Right. It's not right. So I want you guys to think about that and I hope you enjoyed that episode. Have a great day, have a wonderful weekend. God, bless you. Go and grow.

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If you want to become financially free, you need the right education. That’s why we created our Mini-Courses on investing in Short-Term Rentals.  If you are serious about investing your time and money into an Airbnb (aka Short Term Rental), you need a system.  Our courses are jammed packed with everything you need to know to create massive, passive income.  Plus, they're affordable.

and take a look at July's BNB Budget Makeover Series inside our blogs...

This month, we give you loads of great ideas on using your orphan days to make inexpensive changes to your properties.  Begin here, with Budget Room Makeovers: Weekend Projects for Under $1000.  


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