How to Scale Your Short-Term Rental Business with Clint Harris

There's no sitting still. And so we had to incorporate that into our original properties. And then as we scaled, we hit a whole new set of roadblocks as to how it was really tough to continue doing that as we got bigger and had more listings, but that was the key for us. And the key differentiator was how do we do that on a level with 60 properties or 80 or 100, but keep the same attention to detail that we have with our small single privately owned investments.

That's the difference in what the other companies are doing? And that's really where we found our niche.

How much time it takes and what kind of knowledge it took to get started? Or why passive investing might be right for you.

Join us and let's hit the road to Family Freedom!

We had moved down to Carolina Beach in North Carolina and we bought a upstairs downstairs, duplex, and we lived in one half as a house hack. And then, um, the first summer we did 57 grand in the other unit. And that was kind of a light bulb moment for us. From there we were out of money, but we in a roundabout way, um, we didn't know what the word for it was, but we took on a triplex to do arbitrage. We found an owner with a really dilapidated triplex with bad tenants in place. He was trying to sell it and had no interest from anybody. Everybody thought it was overpriced. Our opinion was that it was underperforming. So he got rid of the tenants, renovated it. I managed the project. Um, we paid him 48.

Let's see, $33,000 a unit. I believe that first year. So $36,000 for the three units. We did 125 K in gross rents after paying cleaning fees and linen costs. Our net was 54. You can imagine the rent went up with him on year two after that. But since then we took that money and we partnered with my parents to buy that quadplex and Kure Beach, which we did a renovation on.

We want to take the slow part of the year, but yeah, that's a hundred percent short term rentals. We don't take any winter rentals or anything like that. And since then we took money from the first few properties we had that quadplex. We went in and bought another ocean access quadplex, it's four 550 square foot, one bedroom, one bath units, right on the best surfing spot on the island.

Yeah. And continue to scale from there.

Arbitrage creates a lot of cashflow, but that's it. When you own the property, you get cashflow, you get equity pay down, you get natural and forced appreciation from being a nice property in a nice area that you fixed up that has a maximized rental history. You also get the tax benefits that come along with that arbitrage is just a vehicle to make more money so that I can turn around and buy more properties.

And it turns out. We did in fact, add on a few more arbitrage units. After that the neighbor next door has a duplex that we took on through arbitrage. We've got two other friends that bought oceanfront condos here that wanted to do arbitrage as well. So we have other arbitrage units that we make cashflow off of.

But one thing we ran into is my wife is a full-time realtor here on the island. And she, and a lot of other realtors were getting frustrated with every time they sell a property, they send somebody a referral to a property manager, and those people came back disenfranchised because that old model of property management here has always been managed 200, 300, 400 properties.

And the companies from the company standpoint, if it rents out it rents out out if it doesn't it doesn't, they can make up for it with volume, the numbers we were getting on our units by using a very data-driven approach were astronomically higher than anybody else around. And so, because of that, we were getting pressure.

And push to do property management. Eventually we did decide to do that. And for me, that's another vehicle where we can just generate tremendous revenue to turn around and reinvest into ownership. Okay.

He's awesome. He and his wife, Christine partnered with my wife, Abby and I, we started a property management company and along with a couple other realtors. We really thought that we were going to have to advertise and bring in realtors as partners to help get us referrals. The reality is that we were pretty wrong about that.

And after we had a handful of properties operating and could also show the numbers from our properties, things kind of took off like wildfire. So we scaled in just a couple months in terms of properties that we managed. We went from zero to 20 in just three or four months at that point in time, Sean, my partner quit his job as a chiropractor and went full-time as the operations manager for the company.

And then we quickly jumped from 20 to 30 and we were playing catch up and hiring cleaning teams and staff and things like that. We got to 40 properties and we capped, it took us about probably six months to get to 40 hard cap at forty. And then just reworking everything, making sure that our systems were automated and streamlined the messaging, the work orders, the owner statements, we hired bookkeepers.

And at that point in time, we had the revenue to do that. We're hitting, uh, you know, our original target goal was to make eight to $12,000 net profit per property that we brought on. Now, in that we have a unit density mix of some small properties and some large properties because we're looking for turnover, that's going to be year round so that we can keep our cleaners booking year round.

Because even though in the off season, the average daily rate comes down, the cleaning fee stays the same. So if I have small properties and specifically all the properties I own are duplexes, triplexes, quadplexes small multi-family I turn those really quickly so I can keep my cleaners working through the year.

And that creates some stability that we were able to springboard off of. Once we got to 40 properties and we hard capped for a while. A lot of our owners were really happy and started buying more investment properties and we weren't going to turn them down. They were great partners and we were very careful about selecting properties and owners that we wanted to work with for the long-term.

So unintentionally, we got to 50 properties. And then at that point in time, we cut loose a few of our properties that were kind of problem properties, people that just, um, you know, some noise, pollution issues, one property, it was continually flooding and the people they could have just gone in and spent $5,000 to $10,000 in taking care of the property.

And instead they were trying to spend a couple hundred dollars every time. It wasn't a great fit. So we found them another manager and made a clean handoff. So we got to 50 kind of, we kind of scaled down a little bit and then we scaled back up. We got to 60 properties. We hard capped again.

We opened an office. We opened a linen facility. We tried to, in terms of the vertical integration of the laundry, we tried to buy laundromat this past year and just couldn't pull it off. And it was not feasible to build a new one because of the tap fees and the cost of propane on an island. It's we don't have natural gas here.

So we opened up office, we opened up a linen facility. We just a couple of weeks ago, um, we're going to continue to scale. We brought on several new managers that had been training for several months. We feel comfortable now bringing on another small portfolio of properties. So at the moment we're at 64.

And then, we're also starting electric vehicle rental service. It's going to be incorporated into that as well over the next year.

We've got properties that are either under contract and the people are going to turn over to us or there's tenants in place and they're getting the tenants out or they're doing a renovation. There's always several in the pipeline and we usually have. Three to six a month that are coming on board, um, somewhere in the pipeline of things.

And then we have people that have properties and they want to come stay in them for a couple months in the off season. Cause that's not really a revenue generating time for them. So we never limit the amount of time that our owners can come stay in the property. So yeah, somewhere in flux right now operating, we've got like 64.

And um, now that we've kind of taken the limits off for right now, we're onboarding some more. I would expect it by springtime. We'll probably be, in the eighties.

that's about right.

Um, and not, I would definitely say not data-driven, especially. I recall, uh, when they, when they were excited to tell me that they thought our property was going to make $35,000 this year. And when I ran the numbers for a property that was almost identical, further away from the beach, but closer to the Tiki bar.

And it did $85,000 last year. And I showed that to them and they ignored me. They didn't say a word about it. Not to say that what you guys aren't doing is amazing. But if that's a level of your competition, then it's in my mind, probably not all that hard to kick their butts.

And if they're equal to them or a little bit better, they feel good about it. AirDNA is the data source that we originally started using. But now that we've got a handful of properties, we kind of become our own data source. The benefit of a data-driven approach is that when you can look at every short-term rental on the island, that's happened over the last 365 days.

You're building. Expectations for yourself. And that's a median projection, and we want to beat that medium projection every time. Yes, we own a property management company. But we are investors first, right? And our job is to look for value Delta in the performance. We can get out of a property, which is significantly greater than the cost of the property when we get into it, that for generating that value.

So essentially I think the traditional property management companies around have always been able to make up for it with volume, where we're in a position where we use a data-driven approach, we can use other people's past performance, their mistakes, and the things that they've done right. And try to formulate.

Okay. Airbnb is a positive, negative feedback loop. People literally tell you what they like. They literally tell you what they don't. And so when we use that with our original properties, Everything from the led daylight bulbs, the LVP flooring, the mattresses, the linens, everything was based upon what people like more than anything else.

And it's a continual game, right? Like you, and I've talked about that. Airbnb changes things within their algorithm constantly. And it's our job to stay on top of that. And because it's a positive, negative feedback loop, like a review based system, your property is either getting better or it's getting worse.

There's no sitting still. And so we had to incorporate that into our original properties. And then as we scaled, we hit a whole new set of roadblocks as to how it was really tough to continue doing that as we got bigger and had more listings, but that was the key for us. And the key differentiator was how do we do that on a level with 60 properties or 80 or 100, but keep the same attention to detail that we have with our small single privately owned investments.

That's the difference in what the other companies are doing? And that's really where we found our niche.

We had 28 grand worth of bookings come in, in a 12 hour period. So the occupancy has shifted dramatically. The average daily rate has shifted dramatically. So the key performance indicators have kind of been really up and down over the last year or two because of what's been happening with the market.

But essentially what I'm looking at is occupancy on the island and making sure that we're beating that with our units. One of the things that I look at is our management software shows us the number of clicks per listing that we have. We started using a pricing software that helps us adjust our pricing based upon what's happening in the market.

So call it a thousand clicks per listing. And of that, we had a pass through rate of around 3-4%. So out of those thousand people, 30 to 40% of people would book. Now, obviously they can't all book in the next month, but sometimes, sometime in the next three to four or six months, 30 to 40 out of those thousand people are booking up once COVID happened and we shut down and then we opened back up and everybody had been cooped up for a long time.

That average amount of traffic jumped from a thousand clicks per month to 4,500. And it was a massive shift and a lot more people using short-term rentals before. And one thing that we looked at when we were getting inquiries from people, the questions used to be, "Hey, is it pet friendly? How close is it to the beach? Do you provide beach chairs?" And all of a sudden the questions are, "Hey, is there a workstation? How good is the internet? Can my kid do school remotely? Can my husband and I work remotely?" Right? So we're sort of listening to the market. All of a sudden, the average length of stay. It went from 2.8 guests for an average day of 3.6 days to an average of 6.6 days.

But all of a sudden we saw the ones that did have that. The average length of stay jumps up. And that means less of your gross is going towards the cleaning fees because the length of stay may have doubled or tripled sometimes. So in situations like that, like we had to listen to the market. We go put in washers and dryers.

We make sure there's a workstation. We pull out our little coffee reading nook and we put in a desk and a lamp and a charger. My cousin came down from Raleigh not long ago was like, you know, one is, I told you, I was like, man, I told you, you say at one of our units, he's like, yeah, he's like, but I really wanted someplace with a Tesla charger.

I looked around like crazy and could not find a place. And I was like, say that again. And I was like, okay, so it's 650 bucks for the equipment. And then another three or 400 bucks to get it installed depending on where the electrical box is. So electric vehicle charging stations is something that we're putting in as well.

So I'm looking at. Key performance indicators in terms of what are the people doing? What are they looking at? What's the occupancy on our properties? Are we beating the average where are we winning? Where are we losing? But I'm also trying to listen to the market and be our own data source. Look back through all of our messages.

What are people asking for? What are people looking for and things like that.

That's not the journey for me. For me, the journey is you need to get a lot farther along than that, and bring on as many properties as you can, as fast as you can, scale as fast as you can, so that you generate tremendous revenue that you can turn around and use towards ownership. Or investing into a different market and do things that have less inherent risk.

Once we start scaling, one of the early mistakes we made is that we were quick to hire and slow to fire in terms of bringing on cleaning teams. So we would have bring on a new cleaner, we have really high standards because we looked at the data and we could see that people really prefer having a bed that's already made, having a really clean unit.

So we had really, really high standards. And because of that, It was hard for our cleaners to meet our standards. And now we pay them really well. But a lot of times, if we had a cleaner working for us and some of the other companies where all they have to do is go drop the linens on the bed in a garbage bag, and people are expected to make their own beds.

Like that's easier for them right. In a property like that. It's not a big deal. If there's dust bunnies under the bed, like it is what it is like, that's kind of what you sign up for when you rent from that company or you rent that property. Well, that's not how we roll. So we hold people to a significantly higher standard.

Sometimes if they came in and they weren't hitting our standard right off the bat, we were like, okay, well we'll train them and we'll get them there. The reality is we had to switch and we had to learn how to be slow to hire. And quick to fire, you can come on board, you can try, you can work with some of our teams.

You can see what we do. And if you can do it, you can do it. If you can't, you can't no hard feelings best of luck. That was something that in maintaining that standard was something that we had to learn that was really important.

For instance, like we had a property that over time, the grout in the shower was getting gray and black and the cleaners were cleaning it as best they could. And it just wasn't coming out because we had different cleaners in there every time they were hitting it, but it wasn't coming out and they couldn't tell that it was progressively getting a little worse over time.

We have hard water here. Right? So that's what it was. But the cleaners were different every time. So they couldn't tell us that's what was happening. Or we may have an AC vent we're ocean front here on a lot of our properties. So it may have a little rust on it. And that might be getting worse over time.

So we found that there were things that were more than a cleaners responsibility. That were being missed. So we had to hire a quality control person. So we hired a realtor and she's in our properties. Five to eight hours a week is what she works for us. She bounced around each property. She's in every property at least once a month, every property before any owner's visit.

And she's looking, she's walking in, she's checking to make sure all the light bulbs work. She's checking to make sure the batteries in the door locks are good. She's looking at, she's changing out all the air filters and writing the date on the new one. She's looking at it for water spots in the ceiling or AC covers or anything we might have.

And if we need to go in there, we need to bring somebody in with a dremel to dremel out all the grout in the shower and redo the whole thing. Fine. We'll do it because that's our standard, right? So that quality control person as we scale and didn't have the ability to be in every property. The way that I used to with my personal properties is something that we really had to work on.

So we've just found that there's more positions in our company that we have to hire. Another thing that she does, thats really been helpful. Airbnb is constantly changing the amenities list and things like that. So when she's walking into a property, she's got a two page checklist and she goes into these properties and she looks around at everything with the property while she's there.

She's also pulling up the listing. She's looking at the whole description, looking to see if anything needs to be changed. She's looking at the amenities list. A few things that have changed recently? There's three different type of coffee machines now, so she can go in and select. Is it a drip machine?

Is it a French press? Is it, this is a whatever. Now you can get into the property. You can pull up and you can say that you have high-speed internet, which is extremely important in this day. But now you can actually get in and through the app, you can run a high speed internet test through the app onsite at that location.

So that's something she's doing as well, which is extremely important. She's also looking through the pictures. If any piece of furniture has been changed or anything like that, we need to get a new picture. So those are things that she's constantly doing. And then on the backend, all of our cleaners are only allowed to clean on our listings, full vertical integration there.

You can't leave and go clean for somebody else. It's like you take all of our properties on. You're awesome. You do great. We'll give you more. If you're struggling, we'll take a couple back. If we don't get it corrected, we'll let you go, but we'll try to help you find something else.

We open an office, we've got our own linen facility, so just complete and total vertical integration there. That's the only way you're going to be able to scale and maintain the same quality. And the quality is your differentiating factor. But you know, when we're talking about getting to 40, 50, 60 properties where you're averaging around $10,000, gross profit per unit, you can put that money back into the property and still do just fine.

And once you get, I think that your first 20 properties is way harder than the next 10, those 30 properties. I think once you get to 40, after that, it's pretty smooth sailing because at 40 you're really forced to take a hard look at yourself and figure out everything that you need to do. And after that you've either done it right.

Or done it wrong. And for me doing it right, and then putting the right people into place that can handle those issues. And then those people make it very easy to go from 40 to 60 and hopefully beyond.

Right. And so you really had to very, very approach it very, in a very focused manner of this is a business correct. That, that I'm going to run. I'm not going to, I'm not going to work in it.

28:06 Clint Harris: So my job was to work on the business and not in the business. I was putting everything in place because my goal is not to do property management.

I've got an operating partner for that. My goal is to have a bunch of real estate that I own. That I know is being managed at a very high level because I own the management company that's owning it. Again, full vertical integration. So for me, there's a transformative moment when we were looking at all this and it was, how am I going to do this?

Or how are we going to do this? Or how is Sean going to do this? Or, and it was all these questions. And it's just one figuring out one thing after the other nonstop, I read the book called "Who, not How" it was a transformative moment for me because I realized. That I don't have to figure out how to do all these things.

If I can figure out who can do these things better than I can, which is not saying much, then I can try to find that person and put that person in play. So Sean was operating when we got to 20 properties, he went full time. And then when we got to like 28 or 30 properties, we brought on a manager named Tori.

She's amazing. And from there we've expanded, hired my brother in the company. He moved here and is working as a manager as well. We hired Lindsey as quality control. We've got at this point, I think the number of teams has changed to see between six or eight teams, but we've got 16 cleaners and a couple cleaning managers, and they just constantly manage those teams.

And, and, um, depending on what the current needs are and things like that, but those people are better operators than I am. For each of our properties, we've got a master file at our office that has multiple sets of, the electronic door code. It's also has the list of when the last time the batteries were changed, it has the backup keys.

We have backup keys, hidden on location. It has the AC unit, you know, the size and the model it's got, where all the air filters in the property are located. It's got the fire, you know, where all the fire alarms are when the batteries were changed, where the water shut off on the street is where the electrical panel is.

I didn't do any of that. Tori did that because she's like, this is a need, this is how we need to do this. So she came up with a master protocol of when we bring on a property and I'm in there talking with the owners and walk them through how we do things or how we get paid out and how they get paid out.

Or I'm looking over the data with them. She's stomping around the property, coming up with pages and pages worth of information so that we know that inside and out and the owners can't answer most of her questions. It's pretty in-depth stuff. A lot of times they just bought the property. And then when we got into quality control, there's a two page checklist that we go through.

I didn't create that Lindsey created that because we described what we were trying to accomplish. Um, and I've known her for several years before, and it was just like, listen, I think you need to come work with us. I think this is something you'd be really good at. Um, she looked it over and like immediately grabbed it and ran with it and created the protocol that has become part of our system.

Now, all that is compiled together, we own the system, right? It's all there. But instead of having a, how am I going to do each of these different little things? It was a, who do we have that could do this better than I can. And the people that we chose were fantastic. And so because of that, that made scalability really quick.

And at this point I don't have anything at all to do with the daily operations. I have oversight just to try to make sure the new people that we bring in, um, they're being trained appropriately customer services, where it needs to be. We already are going to have to expand our linen facility in the next couple of months.

So. I'm talking to the contractors and making sure look, we got to cut through the foundation and add another drain line or run some more to 20 lines and things like that. Like I can do broad stroke, things like that. But at this point, I'm completely hands-off and that's just a Testament to the team that we have the data-driven approach that we had that was extremely profitable so that we can take that profit, put it back into the company and pay the people that are high-level operators.

And like, this is the way that it needs to be done. And this is what our expectations are when we've had people from other companies. There's usually been some growing pains. Cause we expect a lot. We've had people that they're not hitting the mark. And so we have discussions about that.

We try to make corrections and if they're really defensive, and it's not how they've done it before then it's probably not going to work out. A lot of times, if they are willing to look at the money that we're willing to pay them, which is more than anybody else's willing to, and the stability that we can give them by working year round and that we're trying to invest in these people and create a long-term solution.

And we want to hear from them. If they've got pain points, tell us we're working on it. We're all growing together. So if they're collaborative and things like that, then yeah, we can, there's a good chance. We can make it out. As long as they're not shortsighted on how fast they can get there Saturday or Sunday, turnover's done and get out of there.

That's not what we're looking for. The most success that we've had is having our handful. We've got a husband and wife couple, and then two other cleaning managers that kind of operate their own teams. And then there's a couple teams outside of that, but those people are awesome and they're connected really well.

Derek and Miranda are kind of our go-to husband and wife team that just seemed to endlessly, be able to find talent and hold a high standard. And again, and so who not how situation we don't have to go find cleaners. We just had to find people that could go find cleaners for us. And then ultimately.

It's not our standard anymore. It is, but it isn't, it's Derrick and Miranda's standard. They bought into what we're doing. They're the ones that when we built a linen facility, it was look, tell us what we need. What do you need? Show me. I want to give you everything that, that you need to get this done efficiently.

And anytime we're experimenting with quilt covers versus duvets or this and that, the other it's like, Hey Miranda, look, this is what we're thinking. What are you thinking? And she'll be like, all right, give me two weeks. Let me just, I'm going to throw it at the cleaners and see what they think. Let's get some feedback let's go from there.

Right. So I don't have to figure a lot of that stuff out. Or Sean doesn't or whoever's in charge of the project. I'm at this point being introduced to the new cleaners. But when I say new, sometimes they've been with us for six months or more like we've got some continuity, we've got some loyalty, we're trying to invest in the people and give stability.

And it seems to be working out because that's something else that they were, if anybody has worked for any of the other traditional property management companies, it's not something they were getting there. Those people will burn through you quickly. And that's not what we're going for. I really believe that the cream rises to the top.

So we're trying to find the people that are good at their job, and then treat them with respect. Don't overwork them, pay them well. And, uh, we're trying to go take this a long ways. So I think that's the way to do it.

34:59 Neil Henderson: Well, speaking from experience, somebody who has, you know, managed, uh, one or two short term rentals, but at a very much smaller level, you're gonna run across two things.

One is you can't just have one. Even if, uh, you know, even if you are only managing one unit because inevitably, and this is something that Brittany I experienced when we just had our little one unit in Las Vegas is, everything's great until your cleaner's not available. And this turnover or your cleaner, or your cleaner gets sick, or, you know, your cleaner just gets tired and doesn't want to do it anymore.

And just literally one day calls you, the week before you get three turnovers, Hey, I'm done. You know, so you, you, you know, you've done this, you had to build not just, a couple of cleaners, you had to build multiple cleaning teams. Even if, even with probably just 14 units back when you're, before you had, you know, 64 units,

If you have five to 10 short-term rental units, like. When we jumped from one to four and then jumped to 10 pretty quickly, it got really easy because we found a management software that really helped streamline and automate the messages and stuff like that. But you're still dealing with a lot of it's gets hectic dealing with the cleaners and getting them in and out and things like that.

If you're at that level, like five to 10, like it's going to get a little bit more hectic as you grow to like 20, but once you get some redundancy in your cleaning teams, and if you work on the systems on the backend and making sure that anytime anybody books, the amount of people and the number of days that they're staying gets sent out to the cleaners and they know when they're checking out.

And so they know what to expect in terms of how dirty is it going to be. If there were two people versus eight people or whatever, and is it a pet friendly unit, things like that, and you can manage expectations a little bit. It gets easier. The bigger you get honestly. It's smoother. And you have redundancy at this point in terms of redundancy.

We've got a lot of different units, but we got a lot of different cleaning teams. You talk about a tough time to manage short-term rentals, man omicron has been wreaking havoc in our community and we've got people in and out constantly either. They're either they're sick or feeling sick and need to go get tested.

And obviously there's, we don't want those people in any of our units and we're following enhanced COVID protocol, but still like we have to just roll with the punches here is what we're all dealing with. So there's that, but at the same time, as we've opened up a linen facility, now I've got people that even if we don't have enough cleanings for them, which we do pretty well with that, I don't think we're, you know, we have a little bit of a lull in the winter, but because of our smaller units, we can still keep.

But now people need more hours. They can go do linens for us and just work in the facility. So typically what we're doing is, you know, that the hours of doing our short-term rentals is the checkout is at 10 and the next check-in is at four. So we've got that window to kind of rush out and turn all over the properties, especially like on Fridays and Sundays.

Right? Cause people are always checking in on Friday and always checking out on a Sunday. So there's a lot of turnover on some days, but some of the other days there's a lull. Well, right now we have between 12 and 15,000 pounds of linens a month, that previously we were paying a dollar, a pound for it, a laundromat.

So if we can bring that in house, that's 12 to $15,000 in revenue that we can keep in-house. If we're vertically integrated, we can take a chunk of that and pay it out hourly to anybody that wants to work. And if it's odd hours outside of regular cleaning turnover times, that works out great. So it helps us with that.

Keeping people employed and keeping some stability and things like that, but it does get easier as you get.

So that's why you're having to look. Either renting linens, which I think is one thing you've done in the past or having the owner rent the linens, or you've looked at buying or creating your own laundromat.

We realized very quickly, you're not going to be able to do it on site, because you have no idea how much linen has been used, or it just wasn't feasible to do it on site and get it done in a timely manner. You'd have to have people running back and forth between properties and some of the old, the dryers are worse than others and things like that.

There was no continuity. So when we started off, the easiest pivot for us was just partner with a laundromat. And so we shopped around several different laundromats and found anywhere from a dollar 50 to a dollar 25, a pound, you know, for a laundry mat and things like that. And then we did experiment with there's a company where you can rent linens from.

For a dollar 50 a pound, they come drop them off, but they won't make the beds or anything like that. So they're just dropping them off. There was no continuity with when they were going to get there with them. They would tell us a window, but our cleaners are there ready to make the beds, turn the property over there and then dropping them off late.

It just wasn't gonna work out really well that way. So we needed more vertical integration and to be in control of that. And the way that we did that was, we just had to bring it all in house and we're actually in the process of making another shift. So originally we had, three sets of linens for just about everything we got to the point that we got to two sets, we would ask the owners to buy those.

So originally they would have a couple of sets of linens for each bed. We've gotten to the point now where we've experimented with different things. We had all white quilt covers. Then we switched to using gray quilt covers. We've got hard water here.

The gray started to fade over time. Wasn't a great look. So we're going back to white. And we're about to make a shift where originally we would ask the owners to buy those. Sometimes we would pay for them upfront and just take it out of the first one or two owner statements for properties that we manage.

We're about to make another shift and we're going to start providing the linens ourselves and just rent them to the guests for each individual stay. And right now we already do that. So the way that we do it is we have, let's say that you're coming to a property and it's got 40 pounds of linens in that property between bath towels, dish, towels, bathmat, and all the sheets, quilt covers everything like that.

We have it broken out. We weighed each individual piece of linen. So when we put the property together, we know exactly how many pounds of linen are in there and the way that's what you pay for, right. Go to a laundromat or our and facility. You wash it, dry, it, fold it. Then you. And that's where the weight and the price comes from.

So let's say that you've got a guest coming to stay for five days and it's, you know, 40, 50 pounds or 50 pounds of linen. Right? So basically what you're going to do is you're going to take that $50 and you're going to spread it out. So when they go to book those days and they choose a five day, stay behind the scenes, our software adds $10 a day, to the price to factor in the cost of linens.

We don't want to lump it on the cleaning fee because then they're going to see our cleaning fees astronomically higher than the one next door. Right? So we build it into the price. If they're staying for 10 days, it would take that same 50 bucks and it would increase the cost per day by $5. And it just smoothes it across the length of their stay because we just don't want it to show up as another line item.

So what we're going to do is we're probably going to spend 10 to $20,000 to buy all new linens in bulk high quality linens for all of our listings. And then we're just going to start stocking them ourselves. Cause right now there's a hole in a towel. And we don't see it until it's after it's been cleaned or something like that.

We can't go back and charge anybody for that. And I don't want to talk to my owners about that and be like, Hey, you need to buy another quilt cover. We would rather just eat that and make it easy that if we see a problem, we can trash it, pull another one off of our shelf and keep on rolling. And we're going to buy the linens and then basically rent them out for a dollar, a pound to the guests.

Just build that in. And then that's what our linen facility we'll charge. And then we pay a fraction of that because we're paying hourly to our workers who are in there a couple thousand pounds of linens at a time.

Right. Um, and you wanted to put a laundromat in there, but can't get,

So it just wasn't going to work there. So then we looked at building one, and it was that vacant lot over by Food Lion. I don't know if you knew that, but the problem there is that the tap fees on the island are really, really astronomical. We also have really hard water, which is hard on the machinery.

And then we don't have propane and commercial, traditional commercial dryers are all on propane and we don't have natural gas on the island. So there was some barriers to entry there. We were going to have to go over the. Which kind of defeated the purpose of what we were trying to do, especially when we're incorporating the Moke vehicle rentals, they can't go over the bridge.

So we got to stay close for that. So at that point in time, we pivoted and, put the linen facility in that we have, my idea was like, look, if we've got 12, 15,000 pounds of linens every month, that's enough. If you have a wash and fold in the back of a laundromat, that's enough to cover your fixed overhead.

And then anybody that walks in off the street to use the brick and mortar, laundromat is all profitability. I'm not done with that. We might look at, you know, potentially buying or building a laundromat closer to monkey junction in the next year or two. But for now that's not the way that we're diversifying outside of short-term rentals.

Our goal is to buy, some kind of hotel and convert to invisible service, Airbnb style, ala carte, where schedule early check-in or late checkout, you pay for that through your phone schedule, your cleaning basically take the data-driven approach for everything that we've done and streamlined and automated buy a hotel.

You don't have to have anyone on site. So you have reduced fixed overhead from not having an onsite staff person. We've already got the infrastructure to clean it and take care of it. A lot of times you can take the office and convert it into another unit since we don't have to have someone onsite. So that's what we'd like to do.

We'd like to create a brand around. And then, you know, at some point I think that short-term rentals comes with inherent risk between whether it's a pandemic or hurricanes, things like that. So the next step for us after that is expanding, in real estate off of the island.

46:09 Where are the best places to invest in short-term rentals today?

---

So what are the best places to invest in short-term rentals today? Now, I can't provide someone with a list, you know, I'm sure there's probably, articles out there left and right. But I think they change, they would change by the month. So what I'd sort of like to go is if you were forced to start over today, in a new market and you could not invest in the market, you're currently in, how would you go about researching and picking a new potential market to invest in? And what tools would you use?

However, it's the most widely used data that we have available. So anything that's on there is going to be pretty well picked over. What you're looking for is like they might have the top areas as say, Nashville, Tennessee, or Gatlinburg or Pigeon Forge or whatever it may be. You're looking for an area where.

There's sneaky performance there that people may not be aware of that hasn't driven up the price of the listings yet. Cause you got to go in and buy or arbitrage and hopefully turn that into owner financing or whatever you're going to do. That's the value Delta is that you need that cashflow, but you also want the appreciation from getting the property for less than it's worth after it's a maximize and optimize Airbnb.

So one of the sneaky things that I've seen in the last year or two is, um, and I'll use Fort Jackson in Columbia, South Carolina, as an example, but this is happening all over. Looking at military bases that have a high graduating rate from their soldiers, uh, Fort Jackson in Columbia, South Carolina graduates a class of soldiers every Saturday of the.

Well, now you can turn a three bed, two bath ranch style house, close to the base in, in Columbia, South Carolina, and put a grill in the backyard. And all of a sudden these things are renting for, you know, you're going to have, 'em rented out Thursday through Sunday, every weekend of the entire year for, you know, 200 to 300 bucks a night.

So all of a sudden you're getting a thousand dollars per weekend. With the same property used to get a thousand dollars a month. Um, that is not a vacation destination. It's not something people think about. So what you're looking for is a transient population in and out of a market that's being overlooked and it doesn't have to be vacation rentals.

It can be, um, you know, I think a military base is really, really a great place to look and then obviously sports venues and things like that. But, um, that's something that I've seen recently, like you would never expect. In fact, you know, you've got property in Fayetteville, North Carolina. I've got property in Fayetteville, North Carolina, I did a 10 31 exchange into a BRRRR property there to avoid the taxes so I could buy more multifamily down here.

So I own a property up there. A lot of the investors in Fayetteville right now are converting houses that you would never think of as a short-term rental before and turning them into Airbnbs. And the reason that market works is not because it's a super high performing Airbnb market. It's because the properties are really cheap and that, but the money that you can make there as a short-term rental is still significantly higher than what you get for long-term rent.

That creates a value Delta. That value Delta is where you have opportunity. And what's going to happen is over time, the prices are gonna continue to go up until they match, you know, what it should be based upon the amount of income that it comes in. Or potentially the market's going to flood with Airbnbs.

And so many people are going to be doing it that the supply is greater than the demand. And for that, you have to look at, you know, who's in that market, look at the air DNA data and all that. But even if that happens, the early adapters are going to be insulated. But because this is a review based system, the people that got in and did it first, the Superhost that had the most reviews, the properties that had the most reviews and the first people to convert over, they're always going to be on the top of page one, right?

And so the market may flood. Eventually people are going to realize that it's not worth the hassle and they're not making that much money because the supply is so much greater than the demand. And they're going to go back to doing long-term. But those people that were the first ones to do short term are going to continue to thrive and do well.

And so in that situation, that's an example of, you can look at air DNA, you can look at an Airbnb article about the top markets here or top markets there and things like that. And usually what they're looking at is. The revenue produced by the property. If it's showing up on a list somewhere, usually it's reflected in the purchase price.

So you want to look for some kind of transient population and find a place where there's still a Delta between the value that the property brings in and what you have to pay to get into the listing.

You need to think about who you're going to, what kind of customer are you going to serve? There are successful short short-term rentals that are not catering to vacationing families.

There's people who are doing corporate relocations, sports, you know, big sports venues, although that's a harder one to find, where you're going to be. That's going to be hard in my mind to find a hidden market there. But you just need to think beyond the traditional vacation market.

And think, where are the places where people are coming in and out. And especially as families,

And they're in and out. It makes more sense for them to have a house than a hotel. Or maybe there's not a strong hotel lobby around there, something like that. And yeah, things like that. Run the numbers and look at it, look for something weird that other people aren't doing be the first one to do it and do it well.

And nobody else will be able to catch up.

That's basically what the book "Who not, How" is about, it doesn't mean that you're not going to have to do work, but I'll use my good friend, Michael Brunelle, as an example, Michael wrote a book, a fiction book, and he's had that book done for awhile. And one of the things that was holding him back was creating a nice cover for it.

And it's a sort of scifi fantasy, novel superheroes and things like that. And he's not an artist. He's very talented. He's not a visual artist. And I think I was the one that mentioned it to him, the book"Who, Not How" I was like, well, Michael, why are you working so hard trying to figure out how to create a cover for this book? Just hire somebody. There's people who do that. And you'd be surprised how little it costs. I think that's a lesson that Clint learned very early on, which is he recognized what he wasn't good at. And rather than trying to slog through and learn how to do the things that he was already not very good at, and maybe didn't have a passion for either.

He should maybe find somebody who's good at that and who really likes doing it. And in his case that turned out to be their property manager, their sort of operations, director. I'm suddenly blanking on her name. My apologies. The other lesson learned, I would say, has to do with building cleaning teams.

This is a review based business and you are going to be largely, rated based on how clean your properties are, how nice they look. So those cleaning teams are like probably 80% of the business, at least. So if you don't have that dialed in, you're going to get in trouble in a real hurry.

And so Clint talked about where they started off, they were quick to hire and slow to fire, and they had to reverse that thinking and they had to become slow to hire and quick to fire. They had to, build teams of people, not just, a couple of cleaners, once you start to scale, he talks about it does get easier, but in the beginning, you're running up against a problem of, you need a lot of cleaners, but you're going to have a tough time, keeping them busy and they finally kind of hit that sweet spot, where they have enough units and enough, uh, cleaning teams that they're able to keep them. Pay them what they're worth and not overwork them, but also not under work them. And that's been a challenge that we've seen, uh, especially right now in COVID.

People are really having tough times finding good help, and I've reached out to some cleaning companies and several of them have told me, we're not going to be doing any cleanings until the summer because that's when our staff comes on. Well, that doesn't work for me. We're going to be a year round business.

We need somebody who's going to be cleaning, through the low season. There's a lot of, a lot of companies that, that don't have enough business to keep their staff busy through, the lulls. And that was that's basically it, this was a little bit different episode than how we've normally done.

As I said, this is going to be a, this is a two-parter, in the second part of our interview with, Clint, which will come out next week. We're going to talk about how he's pivoted, into self storage, along with me in order to diversify his income and, guard against some of the shocks and downturns of, the short-term rental industry and, specifically investing in, a coastal market with hurricanes and things like that.

So once again, next week, we're going to talk with Clint Harris, again about self storage and all the things that he and I have got going on there. So keep an eye out for that. So until next time we're doing this all again, next week, let's hit the road!

Hey, before you go. If you like the show we would be delighted if you'd head over to pod chaser and leave us an honest review. And do let us know why you like the show, how long you've been listening and in particular, what you find really useful or entertaining. And let us know if there's anything you think we should do differently.

Also, if you have specific questions about real estate investing, especially self storage or short-term rentals. Shoot us an email at info@roadtofamilyfreedom.Com. And we'll be happy to answer your question on the show. We might even turn it into an entire episode.

Thank you for listening. We'll see you again on the next episode of the Road to Family Freedom. Safe travels.