Hosting short term rentals on Airbnb and VRBO can be lucrative.
Charlie Cameron found success with his short term rentals – even while being an active duty Air Force officer!
Transcript:
Chris Bounds 00:02
What’s going on, Charlie?
Charlie Cameron 00:03
Hey Chris. How are you?
Chris Bounds 00:05
Good. Man, I’ve loved your hustle and your quick evolution in the whole real estate investing game all the way to the point to maybe we’ll get to it later, but we’re actually building new construction for Airbnb. So to start off question of the hour, what should people consider when they’re starting their very first short term rental?
Charlie Cameron 00:31
Yeah. Probably, the first question is do you want to self managed or not. I kind of found my niche self managing a Disney Airbnb about seven hours from a seven hour drive. Well, with kids to seven hour drive. It turns out, it’s not as difficult as you think if you use systems and leverage local service providers. You can actually make a ton more money that way.
But you have to be willing to put up with all the fun things that potentially come with it, all the issues are now your issues instead of your property managers issues. But some people have suffered for that. Some people don’t, but that’s probably the first thing you need to consider because that’s gonna make a huge difference on your ROI when you start analyzing properties.
Chris Bounds 01:17
Then, what are the key distinctions between long term or traditional renter and short term rentals is you’re not providing housing. You’re providing hospitality. You’re providing experience, which that rolls into a completely different type of management system. Right.
Charlie Cameron 01:35
Very different. Absolutely different. It’s all about getting those five star views. You have a totally different mindset. It’s not cut and dry. Here’s a three bed, two bath house in this zip code. It’ll rent for this. The spectrum is wide of what your income can be. And it’s very dependent on how well you perform and how well you serve your guests.
You’re kind of taking serving tenants to a whole another level. You’re now basically, you’re a Hilton. You’re your Marriott. You are a hotel for all intensive purposes but it’s a little bit better than that. It’s a little bit more personal. And because of that, it can be a lot more fun. Everytime, I get a five star review from someone I get so excited. Like, it’s heartwarming when someone’s really excited to stay in your place and they give you that review.
Chris Bounds 02:22
Yeah. I like that when you said personal. This is not a comparing again to the long term lease, I just set it forget it type thing. It’s very ongoing. It is personal because you literally have some individual or some family out there saying, “Hey, we would love to stay at your place.” So that is an honor and privilege for you to provide that. But then you actually have to perform and make sure when they leave where they is excited to the whole thing.
What is your your experience been dealing with some of the challenges that come up during a stay? How are you mitigating that when you’re seven hours away? Maybe even if you were to fly, it’s not like you’re gonna be there in 10 minutes. How are you mitigating some of those challenges?
Charlie Cameron 03:10
Yeah. It’s pretty simple. You gotta have two key service providers. You got to have a killer handyman that is local and can show up with the drop of a hat. You got to have an awesome cleaning crew. Everything else you can kind of figure out like, “Oh, if there’s a problem with the AC.” Okay, let me look up the closest five star AC company. I haven’t done it yet. Right. That’s easy to do. Call them. Have them come out. But you got to have those two local experts that are there all the time are willing and able to show up, even if it’s not their cleaning day or not that you scheduled to do that fix or that upgrade. After that, you can kind of get everything else settled out. But those are the two big hurdles. If you have those two, you’re golden.
Chris Bounds 03:54
It makes life a lot easier and gaming has been that. I would like to use the word critical, but it’s not even. It’s not even that. If it wasn’t for her, we wouldn’t really have an Airbnb business. There’s just no field to manage it. But she’s been able to find those, those two key pieces that have made life so much easier for her and managing them. You’ve bought existing homes or properties to turn into short term rentals which is traditionally what people are doing but you’re actually doing something a little different now or at least you’re in the progress of building new construction for the purpose of short term rentals. What was the thought process there?
Charlie Cameron 04:40
I will say a startup cost is a little higher because you kind of have a little more vacancy than a turnkey initially and you’ve got to furnish the darn thing and instead of buying a furnished rental. Those are two things to keep in mind. But the reason I went with new build is honestly it’s because it was the easiest thing to buy right now with this crazy market. With almost no bidding war on one of them.
No bidding one on the other one and I could get in there and it gives me time to figure it out. Right. Okay. Put a little bit of downpayment in there. And then, “Hey, I’ve got five to six months till it closes and then I can put a down payment on the next one and figure that out later.” Right.
That’s kind of been the the process is, “Hey, at least these are things I can get into right now.” The nice thing is you have fewer callbacks to worry about. You’ve got a builder’s warranty. You’ve got a few things kind of going for you that you don’t have to worry as much about compared to an existing property, especially older ones.
Chris Bounds 05:38
Yeah. I know some folks that are doing this for actual long term rentals. But your yield is typically higher for short term rentals. Your real costs are too because you have management even if you’re self managing. You have time involved there. But you have other costs as well.
Do you have an idea of what type of yield you’d be expecting or folks should target for a new construction? From what I understand, at least a monthly rental. A long term and short term comparison two, three or maybe an upwards of five times what you’d expect from a long term rental. That’s that’s kind of what a lot of folks are targeting for short term rental, but from a yield. What are you expecting for the new contract?
Charlie Cameron 06:27
It depends on the market. If you count all your costs to furnish, permits and all that good stuff upfront. If you put 20% management in place, you’re looking at a 10 to 15% cash on cash, which I know is not excellent. Now, if we look at the loan pay down, it’s of course, five to 7% more than tax benefits and on top of that.
Chris Bounds 06:47
There’s still pretty good. I mean, there’s that risk but it’s still good.
Charlie Cameron 06:52
You can get 25%-30% if you self manage. Right. That’s kind of what I’m what I’m going for because if I systematize everything it takes me one or two hours a week and then that most of that I can give to a virtual assistant per property. Yeah.
Chris Bounds 07:11
You’re building the vertical. You’re building a management system in house and putting systems in place that can take care of that at a cheaper cost than using third party management. One of the things then, now I’ll get your final thought. I thought with short term rentals is essentially allows never.
We’ve never had this opportunity before to have your own McDonald’s. So McDonald’s is they have their way of affording the most expensive real estate in the world by just putting hamburger stand there. But otherwise, they own the most expensive real estate in the world. Now, with platforms like Airbnb and Vrbo. We can do that. There’s still risk involved and COVID things happen. But you can buy new construction actually have that cash flow, you still own the asset. Final thoughts, what folks should consider before jumping into this game?
Charlie Cameron 07:59
I think people need to be aware that they can systematize things like this. I mean, it just takes a few pools, a few smart devices. There’s a setup time involved. But after that, you can do this yourself and manage it from afar. As long as you have a couple good teammates and a system in place. You can knock this out and keep 20%-25% which I think is massive. If you’re looking for financial freedom. To me, this is the way to go about it.
Chris Bounds 08:26
You’re doing this. I mean, it’s not like you have a lackadaisical job. You work for the government, you’re in the Air Force. You’ve got a lot of responsibilities there. You’re able to do this. It provides. Yeah. You’re absolutely right. It does provide a lot of options and potentially even some financial freedom if folks want to build that out. I love it. I love it. Thank you so much, Charlie.
Charlie Cameron 08:54
Chris, I appreciate it. Thanks, man.
Chris Bounds 08:55
Absolutely. Take care.