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Finding Your First Vacation Rental With Kirby Atwell

Episode 493: Finding Your First Vacation Rental With Kirby Atwell

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REIS 493 Kirby Atwell | Vacation Rentals

 

Everybody needs to unwind and have a good time every once in a while. With that modern human need comes an opportunity that you can use to your own advantage – vacation rentals. Join Mitch Stephen and the host of the Living Off Rentals podcast, Kirby Atwell as they delve into the ins and outs of investing in vacation rentals. Kirby comes in with a lot of practical tips you can start taking action on, like recognizing need in beautiful areas where there aren’t enough hotels for people. Tune in and stick until the end for a lot more!

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I am here with Kirby Atwell. We’re going to be talking about how you can learn to get your first short-term rental under your belt and get moving on with some cashflow that maybe you desperately need or you just want to retire. I want to pay homage to my sponsor, Livecomm.com. I’m averaging four days on the market with my houses for sale and I don’t use any signs. I don’t put one sign out in my yard anymore. If you want to know how I do that, go over there. It has lots of uses for Livecomm. It’s about smartphone numbers that capture the incoming caller’s cell phone number and put them in a text distribution list. It’s a great way to track ads, signs and see what’s working. There are a lot of uses for it. Believe me, I’m going to give you a whole bunch of them when you go over to Livecomm.com. Kirby, I paid the bills. Now, it’s time to get onto how to make some money. First of all, introduce yourself. Tell us where you’re at and where you’re from.

It’s an honor to be back on your show. I appreciate it. It was years ago at this point. Readers can refer back to that for more details but the short version. I’m in Northwest Indiana. I’m from the Chicago area originally and then served in the Army. I got out in 2011 and I’ve been investing in real estate ever since in different capacities.

How did you start out? You didn’t start out on short-term rentals, did you?

No. In 2011, I left the Army and jumped into real estate investing full-time. I was super excited about it. I read Rich Dad, Poor Dad when I was in the Army. I bought some rental properties and thought success was going to come quicker than it did, and deals were going to be more profitable than they were. I learn the hard way by jumping into it full-time. We did about 70 flips from 2011 to 2016. That’s when I looked up and had the realization that financially speaking, a lot of flippers have this realization at some point that I was not any better off than I was when I first started. We had made millions of dollars and we put that money right back into marketing, staff, an office, and all the things that you pay for to get deals. I had no assets so I’m pretty much in the same spot five years later. I realized at that point, that’s when I needed to get into rentals.

I started with long-term rentals, doing this VASH voucher program that I talked about where you can rent houses to homeless veterans through a voucher that they get with the VA. It’s very similar to a Section 8 voucher. It was a great program. It worked well in the suburbs of Chicago where price points were very affordable, and the rent rates were high. Eventually, my wife and I moved over here to Northwest Indiana. It’s a very management-intensive thing to manage voucher programs, especially with homeless veterans. There are sometimes some issues that come along with that. I decided that I needed a new strategy and that’s where I landed on short-term rentals over here.

Everything gets down to how much drain bramaged it is. Everything is doable. It’s like, can you see yourself doing it for 30 years, 25 years, 20 years or not? Ken D’Angelo, the Founder of the HomeVestors franchise said to me once that entrepreneurs rarely end up with the business they start. They always morph to more money with less resistance. They keep morphing until they find their place or until they find the perfect business for them. You’re morphing yourself. You’re trying all these things. You come up with the idea that short-term rental is the way to go. You must have some rental properties besides the veteran rental properties. Can we all raise our hands? They’re a pain in the ass too if you agree.

Always keep in mind, there’s no free money. You don’t get anything for nothing. There are just some things that are harder than others, and some people are equipped to deal with other things better than others. I was probably the worst landlord in the world because I’ll strangle the living hell out of you for peeing all over my carpet. How do you morph into short-term rentals? You had some rentals and you did some flips. How does that morph into, “I’m going to try short-term rentals?” Did you meet a friend? Did you go to a seminar? You did what?

As you evolve and grow as a real estate investor, it becomes more about lifestyle by design and more about how do I achieve better results with less effort. Flipping wasn’t the way to do that. I got into long-term rentals and I realized at that point that if you go on BiggerPockets, everyone talks about the 1% rule. That’s great for people who have a full-time job that want to just build rentals passively and retire on those at some point, but that wasn’t what my goal was. I realized I needed better cashflow than 1% or turnkey type of properties. That’s what drove me to get into the voucher program initially because the cashflow is good.

Eventually, once we got over here to Northwest Indiana, I said, “That program doesn’t work over here.” The cashflow is nowhere near what it was in Illinois but I saw that there’s potential. I kept hearing about short-term rentals. We bought a house on Lake Michigan that overlooks the water. It had a walkout basement and it was unfinished. As we were gutting this house for us to live in, we said, “Why don’t we pay an extra $30,000 to turn the basement into a one-bedroom apartment and see what it will do on Airbnb?” We were shocked because we didn’t know anything about what we were doing. We left so much money on the table when we did this. Any income from it was income we didn’t have previously. We thought any income was good but we could have charged double what we were charging in the beginning.

Everything's doable but make sure you see yourself doing it in the long term. Click To Tweet

It paid for 3/4 of our mortgage for the 3 or 4 months that we rented it in the summer, and then we didn’t even rent it for the rest of the year. At that point, I realized, “The possibility here is crazy. If we can scale this a little bit, it’s very lucrative.” That’s what we started doing. We started buying other properties all around the area that we could manage very easily. We got into the short-term rentals that way, starting with our own.

It’s the perfect classic example of how usually things happen to me. I accidentally try something. It works and then you start going, “That was pleasant. Let’s explore this idea a little more. I wonder how I 10X this. How do you make this happen more often?” You start looking around and you start exploring. Unfortunately, someone has been trying to tell us all this stuff all this time. They just never found it so we weren’t listening or it just wasn’t our time. We weren’t ready to hear it. We weren’t there yet to even accept the message when it came to us. It’s like the thing that the teacher will appear when the student is ready. It was there. You just weren’t ready. You buy your first one-bedroom apartment. What are you renting? What does that look like? Your house payment is X and you’re bringing in what X with the apartment?

With our total mortgage, because we’re living in Indiana and not Illinois, our taxes are a tiny little fraction of what they were in Illinois. It was $30 to $50 at that time per month. We started renting that property. I’m trying to remember the exact number. I think we started at $150 on the weekends and maybe $120 during the week. There’s a massive shortage in this area of housing because it’s a new national park. A lot of people want to visit. There are nice beaches in the summer. There are no hotels in the area and not nearly enough Airbnb so we got booked up right away. We were booked up solid for about four months or so in the summer.

Did you enjoy people being there or did you not enjoy people being there?

That was the big question that we got from our friends and family like, “Do you really want strangers walking into your house?” We would screen people. We wouldn’t rent to anybody who didn’t have previous five-star reviews on Airbnb. We knew they were vetted a little bit. We didn’t know half the time if they’re even there because we had a separate digital lock on the walkout basement where they could enter and go as they please. We did have a big patio in the front that overlooked the water that they would sit out on at night and stuff. We would get to talk to certain guests if they wanted to. It wasn’t like we were their tour guides while they’re there. It was nice. We met some family from Germany that came and stayed for ten days. We wouldn’t have met them otherwise but they were super nice. It complemented our lifestyle well.

You’re giving away a free guide on how to identify a great short-term rental. I want everyone to go to 1000Houses.com/Atwell. By the way, Kirby, it is evergreen. Anytime you want to add something, delete something or update something, you can call us and we’ll update it, add whatever you have. Let’s talk about that. Why did you move from the rentals to the short-term rentals? You used to have a lot of rentals.

Initially, my goal with rentals was I looked at a spreadsheet and I said, “If I can buy 24 properties that have $500 a month of free and clear cashflow after all my expenses and set aside. In each one, I can build in $40,000 of equity through rehab so I was doing like the BRRRR model. At the end of that, I’m left with $1 million of net worth and $12,000 of income going forward. I put my head down and did that. I accomplished it and got to 26. One of them was an eleven-unit apartment that I bought along the way but it was very inconsistent, especially with the vouchers. There are lots of problems that come up. I’m OCD and like to have my places kept nice after a full rehab of them. As you said, it’s very difficult for me to walk in and see someone pee on the carpet and not flip out. I loved this idea of having my houses clean twice a week, kept in tip-top shape, and being able to vet people before they get there to know that they’ve stayed in other places and have five-star reviews.

They have $1 million of insurance when they tear your house down. I read a case study one time where someone came in, had a big party and tore their house down. They have all got redone. It’s not that you want that to happen but if it happens.

It’s called the host guarantee. The problem that most people have is that they say, “I get long-term rentals. I can see that it’s $1,100 for a rental in this area. It’s a three-bedroom. No matter what I do, I’m going to get it around $1,100. If you go on Airbnb, you see this guy is asking $150 a night and this guy is asking $250. Is he booked up? Will I get bookings? I don’t know how to judge occupancy level in the winter and in the summer.” They’re trying to run numbers and they’re like, “It doesn’t make any sense to me.” In that guide, I talk about how you can run numbers and know your numbers ahead of time. I ran very conservative numbers based on the comps I was seeing on Airbnb. I realized that even at these conservative numbers that if it works out, it’s still way better than a long-term rental. I bought the first one with the backup plan, the insurance policy in my head. If all this doesn’t work out, I’m going to sell the $8,000 worth of furnishings, plates, cups and all the stuff that I bought. I’ll turn it back into a long-term rental and it will still do okay as a long-term rental. After the first separate one beyond my house, it worked out well.

REIS 493 Kirby Atwell | Vacation Rentals

Vacation Rentals: Analyzing the right property within your target market and how to buy and set it up are the starting points in a vacation rentals business.

 

Help me with the math, though. At $100 a day, 30 days is $3,000 a month. You’re looking at a $1,100 rental or $3,000 a month. This is optimum. I’m figuring 100% occupied. I did take the low road between $120. I went to $100 so people can get an idea of the numbers. You’re baking a couple of days so you only make $2,200 or $1,800, but then there are also seasons where you can go up to $250 and you’re going to be booked for the five days in the holidays, which makes up. God only knows what the average is going to be. It’s going to be more because of the high seasons and everything levels up. You probably haven’t had time for this but there are people that are going to repeat. I know me. When I go to Airbnb and it’s all right, I don’t want to take a chance on another one. I want to go back to the one I know that was all right. Even if it wasn’t my favorite, at least I know what it was.

We have a Postable account where people can log in, put in their address and get discounts for future stays. We’re trying to build up that future stay business of repeat customers but you’re right. We make all of our profit for the most part in the summer. We have one property which is our best performer. It was a hoarder house. I bought it for $70,000. It got it rehabbed. It took about twenty dumpster loads to the dump. I put about $110,000 into it. It appraised for $240,000 afterwards and it will make over $10,000 of gross income. We charge about $400 a night in the summer. You don’t need too many of those months to do well. In the winter, it still books. It’s like long weekends but it’s $1,500 or $2,000 a month. It’s nowhere near what it is in the summer but overall, it still does well. You do have increased expenses where I’m paying the utilities, somebody to cut the grass and cleaners, but you charge the guest for a cleaning fee as well. There are increased expenses but it still blows a typical rental out of the water.

Your asset is being taken care of. I had this discussion on my YouTube channel. Do you want to rent your houses, take care of the lawn, probably have a maintenance program, and try to add that on or do you just want them to take care of it, which means it’s not going to get taken care of? Your $3,000 landscape will be dead by the end of the summer. If I wanted to be a landlord, that would be the way I would want to go. If it was me, I’d be trying to concentrate in the smallest area I could like around this lake and have as many hosts so that one team could pretty much handle a lot. I understand you could have one over in Madrid, Spain and in The Bahamas. There’s a certain allure to that too but trying to manage that stuff, I short circuit at that point.

I’ve had some storage in other cities far away from me but I decided to come back and build my storage around the lake where I live. There are more opportunities than I’ll ever get right here. Why was I going to Corpus and go into all these different places? Build a whole new team down there. There’s a whole other culture and the way people think down there than the way you think. You’re in a whole different phase and everything is different. I can’t even price anything because you think, “I’ll hire a cleaning lady as I do here.” They want $10 million down there to clean the house.

You and I think very similarly because all of mine are within walking distance at this point. I’ve got nine listings. I’m about to close on a tenth property here and they’re all right in the same area.

I had this idea. You could build a virtual mobile home park by getting lots, renting the lots, putting a mobile home on it, selling the homeowner finance or renting the house and lot. With the mobile home park, the properties wouldn’t be contiguous but there would also be no limit to the boundaries of how many homes your park could have. If you could find 100 lots, you would have on this spreadsheet a mobile home park that had 100 spaces, but the spreadsheet has no end. If you can find another 100, then your park grew to 200 spaces and then it grew to 300. What you’re doing is like a hotel. It’s just the rooms and the locations aren’t contiguous. You can build this to 1,000 rooms if you want.

The coolest part about it is you can grow it one little tiny piece at a time to buy a big hotel with 1,000 units. Who’s got the money for that? That’s a whole different game. Storage is the same way. It’s the reason why I like self-storages. I could buy a 5acre piece of land that had a little storage building on it. I can add 10×20 units one at a time if that’s all the money I had to keep growing in tiny increments. What was important about all of that was I was growing in the increments that I knew that I needed because I was getting the phone calls and I didn’t have the product. I would go out and look for that product. If people wanted 10×20, I build 10×20. If people wanted 14×40 boat stalls, I’d build that. It’s not that different from the Airbnb model. You have this hotel that you can keep raising the ceiling, go up floors after floors and have one million units if you want.

It’s so funny you say that because Airbnb led us into that thinking. In 2020, my wife and I bought 45 acres with an old farmhouse on it. What we were able to do is buy it with a conventional loan. I did a YouTube video on what we’re doing. This house here, we gutted it. We rehabbed the house. We’re refinancing at a higher dollar amount. On these 45 acres, we’re planning to put either yurts, cabins or tiny houses. I’ve got one mortgage and there’s no limit to the number of rentals that we can put out here. They’re inexpensive but people from Chicago, Detroit, Indianapolis, and all around here want to get out of the city. They want to come out and experience nature without having to rough it. They’ll stay in these for a couple of $100 a night. It’s incredibly lucrative. We’re in the middle of doing that too. We rehabbed a 100-year-old barn on the property that we can hold events or weddings at as well.

It’s fun too if you have that in you. I do. You’re creating some kind of theme. You’re making this place look a certain way. It’s fun to call the architects out or the virtual design people and say, “What if it looked like this?” You find your master plan and you start one little piece at a time growing it as you can. How exciting is that?

As you grow as a real estate investor, it becomes more about lifestyle by design and achieving better results with less effort. Click To Tweet

It’s a lot of fun. The kids can take part in it so they’re learning a lot. It’s great. I have fallen in love with the model. I don’t recommend probably starting with a 45-acre farm but you can start with one.

Start like you did, probably a duplex that you’re going to do one side or something. It takes a little while to acclimate to know if things are right for you. Put your little finger and keep going. You’re going to have a six-week course or a course in six weeks?

It’s a six-week course on this. It’s a blueprint for how to get your first short-term rental. How to analyze the market, how to analyze the right property within that market to buy, and then how to buy and set up your profile listing that does well. All the ins and outs. I’m going to deliver it live over six weeks starting in September 2021. There’ll be a live Q&A to go over deals that you’re looking at and that sort of thing throughout the program. I’m excited. I’ve been wanting to work with other people on this because it’s changed my life so much. This is the first time I’ve had anything paid or premium offering.

If this sounds interesting to you all out there, why would you try to figure this out yourself? Why don’t you go with Kirby or someone else? You’re going to pay the street or you’re going to pay the guy who’s doing it to show you what he’s learned so that you don’t have to learn it the hard way. It’s a good thing. I understand there are different increments in the prices. It depends if you sign up early or if you sign up late, but what it’s going to run about average? What can you expect to come to this six-week seminar for?

It was tough because I don’t want it to exclude anyone. At the same time, if you can get a deal that pays you $1,000 a month forever, what’s that worth? It’s going to be right around what I think a monthly income of a property that you could get is.

“I’ll teach you how to do it. You give me one month rent. 

The cashflow from it and that’s after all your expenses. It’s going to be $1,295 or $1,300 or somewhere in there is the price point that I’ve landed.

He has the right to change his mind and change his price point, but you’re thinking around $1,200, $1,300. What a deal if someone could show you everything they figured out for over six weeks. Even if it’s $1,500, what a deal. To show you how to make money for the rest of your life is stupid but it has to turn you on. It has to be what you think is for you. Are there places where nobody ever wants to go? I imagine there is. You’ve got to find some places somewhere.

Most people wouldn’t say Michigan City is the hotbed of Airbnb activity, which is where I invest but there’s got to be draws. There’s the beach, a casino and an outlet mall. There are things for people to do there. Almost everyone lives within 1 hour or 2 of a place that would be a perfect Airbnb area for them. They’re the biggest factor. That’s the thing. It can work well for one person in this area but not for somebody else because they don’t market it the same way or their goals are different. It’s got to match. We’ll go through all that and make sure that the area and the property you’re buying match with what your financial freedom number is and what your long-term goals are. That’s the most important thing.

REIS 493 Kirby Atwell | Vacation Rentals

Vacation Rentals: There are increased expenses in utilities and assets that need to be taken care of when you enter the vacation rentals business.

 

Within 2 to 3 hours of you might be the perfect place. You don’t need to be right on top of these. You might need to travel to them, especially when you’re buying or looking. The way with technology right now, being a little further away from this might even be an asset to you upfront. You’ll be building a business that you work on instead of in and it would force you to do that.

It’s all about the team. The cleaner and your handyman are essential. In the program, we’re going to talk about how to get a solid cleaner and solid handyman so you cannot have to be there, check guests in yourself and all that stuff.

I think we’ve covered it. Kirby, anything we need to add before we wrap it up?

I love this strategy. I’ve interviewed about 50 people as I’ve been developing this course to find out what’s holding them back from doing short-term rentals. There’s always one aspect that’s like, “I don’t know how to run the numbers. I don’t know how to find the cleaner. I don’t know how to set up my profile.” It’s like, “That’s holding you back from potentially thousands and thousands of dollars a year because of that one thing. Don’t let that one thing hold you back. Find out the answer to that, whether it’s with me or somebody else. Dip your toe in and try to get going.”

You’ve got to know how to drive a car either. You want a driver then. You got in the car with a guy who knew how to drive a car, who sat right next to you with a break in a steering wheel probably on the other side, and he taught you how to drive the car. It’s not any different. You got to hire someone who knows how to do it and do what they say, not to say that you can’t improve it or modify it to fit your own self but you got to start somewhere. I would like to thank you all for stopping by to get you some Kirby Atwell and learn a little bit about how to identify a great short-term rental. Also, if you go to 1000Houses.com/Atwell, you’re going to get that free guide. It’s a three-page little guide on how you might start out looking and finding that great short-term rental. It’s always good to have some help.

I’d like to thank Livecomm.com for sponsoring this episode. If you haven’t had a chance to go by there and see what it can do for you and your marketing, you owe it to yourself. Texting has a 96.7% open rate. If you’re still using email and you’re not using texting to reach your customers and clients, then maybe you’re making a mistake because the open rates are fantastic in text messages. Think about it yourself. When was the last time you got a text message that you didn’t look at? Never. We’re out of here. Thanks very much, Kirby. I appreciate you. Maybe I’ll see you soon on your show.

Thanks, Mitch.

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About Kirby Atwell

REIS 493 Kirby Atwell | Vacation Rentals

Served as an officer in the US Army from 2005 to 2011. The first business focused on flipping properties in Chicago. Then transitioned to long-term and short-term rentals in 2016.

 

 

 

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