Transcription
You want to know with absolute certainty when your slow seasons are because if you don't plan for those slow seasons, you're going to lose money.
I'm not one who likes to sit by and just like, oh, let's just see what happens in the market. Whatever we got to do, like I I want to solve that problem pretty fast.
But a lot of people are just too dang proud to admit that they aren't making the money that they think they deserve. So, one of my Airbnbs just recently took a massive nose dive last month, and I'm talking like it went from printing money to just bleeding. Everyone talks about financial freedom like it's a straight line, but sometimes your properties just stall out.
Yeah. I mean, if you have Airbnbs and they slow down for a season or long-term rentals where everybody moves out at once, it just happens even to the best of investors.
So, this is exactly what we're breaking down today. What to do when your properties start bleeding.
Yeah. We're going to talk about how to survive the slow months, what not to do when things go quiet, and how to build a portfolio that actually balances itself out. So, when you have one property with a slow month, the other property's having a payday.
Yeah. Because sometimes your properties might bleed or lose money, but if you build the right foundation, they don't have to bleed you dry. And by the way, for those of you that don't know me, I'm Rob Abbisolo. I am primarily a short-term rental investor with over 40 units in my portfolio.
If we haven't met yet, I'm Chad Carson. A lot of people call me Coach Carson online, and I'm a long-term rental investor. My business partner and I have over 100 units in Clemson, South Carolina.
Okay, so just a few more than 40. No big deal. Um, all right, man. Well, let's hop into it. So, let me ask you this. When the cash stops coming in, because obviously it's kind of a scary time in one's portfolio, what's the first thing that you look at to figure out why? Is it the property, the market, or is it something that you are doing?
Yeah, I look at each property and like what I actually made a call to my property manager. So, we have a dialogue every Friday like if the property is not leasing, I'm like, "Hey, Friday, I want to get a check-in, see what's going on." And I just look at it like a lot like a sales funnel. People have been like looked at other businesses. With every rental property, you have a few numbers that are kind of key indicators that tell you like the health of the the the funnel to getting a tenant in the property. And so I ask my property manager, how many listing kind of clicks have we got? You know, if it's on Zillow, if it's on all these other places, like how many impressions are we getting looking at this page of our website? And then from there, how many people are requesting to see the property? Like getting a showing for the property. And then from there, how many people are applying for the property? And then the final stage of that is how many people are actually leasing the property. And so obviously we haven't got any leases. So I would go back through that and say how many applications did we get? How many showings did we get? And sometimes you can diagnose a problem. Like for example, it might be that you had 15 showings and nobody applied for the property. Like some something's up there, right? If you get it's not a marketing problem. It's probably something at the house. There's you know there's something that stinks. There's a you know bunch of bugs on the floor. The house just doesn't show very well. So like I I first go through that like diagnosis problem of just saying is the thing is is there anything wrong with the property itself but in my case on all four of the properties that I had vacant we just weren't getting enough showings. It just wasn't that people weren't looking at it and we went and looked at the property made sure everything was clean looked okay and so it came down when we diagnosed the problem there that there's just a problem of other there's a lot of other properties on the market and we're not competing well at the where we are right now. We're going to need to change something about the price more than likely to to get it better.
Yeah. So, let's take a step back because I I want to talk about this both from the short-term rental perspective and the long-term rental perspective because I think it'll be valuable for really both sets of investors. So, vacancy is something that uh affects both Airbnb, the Airbnb model and the long-term rental model. Generally speaking, aren't you kind of planning for vacancy uh to begin with before you ever buy the property? I mean, most long-term rental investors I know are not thinking they're they're going to be 100% uh, you know, occupied.
Yeah. 100%. Yeah. And I'd be curious what your some of your numbers are for short-term rentals, but for long-term rentals for me, I usually underwrite maybe 5% for a healthy market for me. And if you do the math on that, that's one month about every two years, plus or minus, you know. So, if you have somebody stay for 10 years, it's going to be a lot less than that. But if you have somebody turn over one month every two years, but what does that one month mean? That means if somebody's moving out, you've got to get at least interned in 30 days in order to have a 5% vacancy rate. And that doesn't always happen. You like some people, you know, they they they get it empty and then they get it cleaned up in a week or two, they get it on the market and then maybe somebody leases it within two or three weeks, but they're not moving in for another two weeks. So like that that number can vary a little bit, but um you you have to my point is you have to be really on top of it to keep a 5% vacancy rate. That's a pretty tight ship to be.
You don't have a lot of time.
Yeah. You got you got to get it turned pretty quickly or or have people stay longer. But but but with the vacancies we have, we've been much longer than 30 days. Like we is 30 days would have been a good good turn. In this case, we had multiple months instead.
Wow. Okay. So 5% is once every two years. So how does it break down? Like at what point does it actually become sort of a critical situation? Is it 2 months, 3 months? Is there a moment in which it actually flips the profitability of your property from, hey, I was making money or I was actually doing decently on cash flow to, yeah, this is actually kind of a bad investment this specific year.
Yeah, I personally hate vacancies. So, like one or two weeks, I'm already getting a little antie about it. I'm like, all right, what's up with this? And especially in a college student rental market where I was mentioned earlier, we pre-lease everything. Like there's no reason typically that we don't have somebody ready to go lease the property. So in this case, it was it was already pretty urgent ahead of time where you even when we got to August when the tenant moved out July 31st, we're like, "All right, we got to start doing something here." And so yeah, it it is urgent, but I would say like this is kind of interesting because where I am in my business 22 years and as an investor, it's a lot less urgent and like worrisome for me now than it would have been 15 years ago, 16 years ago when I like cash was a lot tighter. Like at that point, I would have been like I I used to have a joke with my business partner. I would have been jumping around like those people on the corners like trying to sell jewelry or sell whatever. Like I would have been like I would have been like spinning the sign, you know, like on the corners saying like for rent for rent. Like that was a joke we always said if we have a vacancy like we're getting in the monkey suit or something or whatever we got to do to like rent this property. Whereas now like we have better we have more cash reserves. We have more rental properties that have other income coming in. This isn't our only rentals. So, it's from a personal stress level, it's not that it's not as bad financially, but it's still like as an operator of a rental business, it bothers me and I want to start being aggressive with it. I I'm I'm not one who likes to sit by and just like, oh, let's just see what happens in the market. I'm like, no, let's aggressively spend some money on marketing. Let's change the price. Let's change something about the house. Like, what whatever we got to do. Like, I I want to solve that problem pretty fast.
I'm the same way. I I I'm competitive and so if I look at other people in my market on the Airbnb side that are booked or making money, I'm like, why are they beating me? I'm I'm a better property than them. I know I'm a better host. There's something wrong here. We're going to figure it out. And so, we'll talk about portfolio architecture here at the end. And that's that basically is the concept of building your portfolio so that no matter what the season is, you're always cash flowing. Before we do, I wanted to maybe hop into like my side of things on the short-term rental side and talk about vacancy or occupancy because there's this idea where, you know, occupancy rate is a really big deal, right? How often are you occu are you occupied? But the thing with short-term rentals is that there's this idea that you have to be booked 80 90 100% of the time to be, you know, to be a a proper Airbnb or a good Airbnb. I find that for some of my properties which are more premium or lux um I think that occupancy rate is a is a bit of a vanity metric. And what I mean by that is like I don't really want to be 100% occupied. And I actually think that that might be one of the reasons why I'm not doing as well right now in the property that I was talking about. But I would rather have the best price point for the best avatar like the demographic that I'm marketing towards. Um, and I want that to be the best price possible. And so that actually might mean that my occupancy might be 30 or 40% versus 80 to 100%. So, for example, I've got the Pink Pickle, which is my property in Austin, Texas. It's a bachelorette party home. So, it's for for ladies that are coming to celebrate their their brides. And they spend a lot of money. Uh, I I am between $12.99 to 14.99, so 1,500 bucks a day on a 3-day minimum. uh basically Thursday, Friday, Saturday. So on those weekends, I am making anywhere from $3500 to $5,000 uh consistently. So if you were to look at my calendar, it looks like it's a ghost town. I'm only actually booked 30% of the year, but that property is going to do $120,000. So for me, occupancy is not the leading driver of success for that property. Revenue is.
That makes a ton of sense. Yeah. Yeah. Now, the property that that I'm talking about went from making $7 to $8,000 a month to basically being at like 2 to 3,000, which is, you know, losing a little bit or breaking even for the month of September. October, it's turning around. Um, one of the things that I and and I went from being like 100% occupied to like, you know, 20 or 30 in that particular context, being 20 to 30% occupied, no bueno. That's that's not good, right? So, um, there was a really big shift with that. And so, you're looking at yours as like a 5% vacancy, which I think is a more like clear number for long-term rentals. I think for short-term rentals, it's really all about revenue. And I will drop my prices or optimize my prices or set my prices in a way every single day so that I am just getting the most money that I can for any given day. That's kind of that's what it shakes out to. So, sometimes it might be 85, sometimes it might be 90, sometimes it might be 100. One of the things that I was surprised though was that I had such a drastic drop in occupancy and as a result a drastic drop in in my revenue. And I think it is more common for people uh like I like you said if this happened to me six years ago I'd be like I would be thinking of crazy marketing like Nathan for you style ideas to just get people to book because I'd be like oh my gosh I can't afford to like you know lose 500 bucks. Now I've got a whole portfolio that sustains me. So, on a bad month there, everything else is still doing really quite well. Uh, interestingly though, for that property, most people would probably be flailing right now and really freaking out. Um, you really want to stay calm in these scenarios because there might be things at play that are out of your control. And so, ultimately, like I was able to take a step back. I was able to jump into AirDNA, which is like a really big analytics platform for like, you know, looking at occupancy and average daily rate and your competitors. And I was able to assess that my market is dead in September. Like it's just dead. Um there is some money to be made, but there's not a lot. And then I corroborated that by asking all my friends in the city and in Texas like, "Hey, how is your September looking?" And it was slim pickings for everybody. And so I think the important lesson to learn is that you want to know with absolute certainty when your slow seasons are in the Airbnb space because if you don't plan for those slow seasons, you're going to lose money. And so, um, we'll talk about next like, you know, how to prepare for these slow seasons. But ultimately for me, I was able to kind of calm myself and be like, "All right, I'm not a failure. I'm not bad at Airbnb. It's just nobody is traveling to Texas in September." And I think a big reason is like back to school. That's like a huge season. No one's really traveling right now. Um, not to say that it's zero, but it it's far less. And then things picked up in October for like all my Texas properties. One of the things I took away from what you're saying, Rob, that I think short-term rental people get this a little bit better is that pricing has to be dynamic based on the supply demand dynamic of the the year. So, like short-term rentals, it sounds like, and I I have a short-term rental, too. So, I I can it is very seasonal, whereas long-term rental people kind of get fixed on a price to the point, and I think this is a a handicap. This is something we have to get over as long-term rental people. we get stuck on. For example, I'll give you my prices on my long-term rental at a single family house that we were consistently for the last five, six years raising the rent from like 1,600 bucks to 1,700 to 1,800. Then this we were trying to get 1,900 this year on this single family rental. And so you kind of get in your head like that's the rental. Like there's no way you'd go down from that. And I I've seen other people in my town whose properties are still vacant who were not willing to meet the reality of the market. And so we we did we dropped it like we we were like if we this week if we're not getting enough leads and everything else is we've checked everything else out. It looks good. We're dropping it from 1900 to 18850. Next week if it does the same thing 1,800. I I found consistently over like last 22 years. There is some price where it's almost like you turn on a faucet and the leads just like flow in. And short-term rental folks know this because they have to like dynamically price it all the time. Long-term rental folks I don't think get that. And I was very I just learned over the years from scars from my other bad situations that if you if you're not aggressive quickly I look at it as like if this thing's vacant for the next two or three months you know I would rather drop from 1,900 bucks to 1,600 bucks which is what I had to do and miss on 300 bucks but actually get 1,600 bucks for two months that I would have been vacant trying to get 1,900 bucks. like I would have lost 1,600 bucks to 3,200 bucks trying to like have my ego tell me that I'm a $1,900 rental. And so that's I think that's a problem for a lot a lot of folks. So we just have to get over that in the short run and say long run I think we're going to be okay or maybe not. Maybe I need to sell the property. Maybe it's okay. But in the short run, you just got to get that property filled up.
Yeah. You want to divide your loss a little bit too. So, I mean, for you, you're like every month that you don't uh basically rent out, $1,900 divided by 12 is basically like you're you're negative $120,
right,
a month for the like you've lost that much off of your potential every month for the next year. That's how I always see it. With short-term rentals, it's I I'm pretty sure that math is is correct. It's somewhere in there. But something like that,
for sure on the side of short-term rentals, there's a lot of ego busting that's needed because it's like, "No, I want to make 500. I need to make 500. I need to make 4.99." And there are some people that are like, "I would never rent it for less than 3.49." And it's like, okay, that's fine, but would you rather make 3.48 or zero? Uh, and then would you rather make 3.48 four days in a row or zero, you know, two weeks in a row because you were too stubborn to drop your prices? Um, now there is like a a balance and I do think this is where revenue management comes in, but you definitely want to make sure that there is like a minimum price that you have. Like I'm not going to book my place for $50 a night. Um, generally speaking, I'm not going to book my place for less than what my cleaning fee is, but that's very um anecdotal just because it's it's you you don't want cheaper cheapos coming in. Those are usually the hardest guests. Although I think that that's largely a myth in general as well. But yeah, there's kind of like a sweet spot and you have to like know what your minimum is. Like what's your drop deadad minimum and I don't care if it's like the hottest weekend Formula 1 in Austin, Texas. Like busy busy busy. If you are not booked, then you need to drop those prices. And that's basically what I did at Ping Pickle. Like you know I said I booked for $12.99 to $14.99. Well, I wasn't booking. And you know, for me, I have to ask myself, well, I can either make $0 this weekend or I can make $2,000 this weekend. What do I prefer? Yeah, I'll take the 2,000. So, we drop prices. Yeah. You know, so there is a But a lot of people are just too dang proud to admit that they aren't making the money that they think they deserve.
Yeah. There's also in the in in the world of commercial real estate, you often have to if you want to sell your property, you got to show people on paper that this property rents for 1,900 bucks. And you know, if you have it for 1,600 bucks, maybe that's going to mean it's not worth as much. like the commercial and I get that like so some people might want to play games like all right instead of discounting my rent I'm going to give them you know half a month's rent on the back end or I'm going to give them a free TV or I mean that that's why you see all those like giveaways and things with apartment complexes but for most of like people in my audience who are small and mighty investors who are managing five properties 10 properties self-managing it long-term rentals like it it makes more sense just uh just to to drop it and get the thing full.
Yeah, for sure. So, let's talk about how to prepare for it kind of philos philosophically like what did you do um to like I I know that you've prepared for this whether you knew it or not like I'm sure you have some kind of financial system in play that's like I've got this bank account for rainy days. So, can you talk about from your from your standpoint what is your like philosophy for actually weathering these storms? Because I think again most people freak out, but if you have this foundation, it's fine because you you've you've saved for it or you've planned for it.
It's pretty simple. It's just having having a bunch of cash and a savings account that you can access is the is my security blanket. And a real quick story. I I basically survived the 2007 89 economic collapse, you know, within the United States and real estate was a was a big issue. We had a lot of vacancies. We had a lot of people losing their jobs and we had really good years before that. flipping houses, rentals, all that stuff. And we saved a bunch of money. We lived like college students and we just saved all our money. But then we needed it in 2007, 8, and nine because we had to draw on those reserves whenever we had a bunch of vacancies and unexpected things happening. So long long story short is, you know, real estate is so it's a great long-term investment and it's going to produce income and it's going to tend to go up in value, but you hit these big choppy periods of time and if you you got to be able to have the staying power to get through the chops and the cash flow. It's almost like a big bucket of, you know, water to like quench your thirst and that when you're really thirsty, that's what cash reserves are. Like if you don't have them, you're going to have a hard time get getting through these these rough patches. And I'm thinking short-term rentals would be pretty similar, Rob, I would guess, but even more so in some ways because you have these huge ups and downs. Like, do you do anything yourself personally with with financially to try to prepare for those big swings that you have?
Yeah, everything it's always a slow season in short-term rentals. And here's why. I don't spend my money. I really don't. Um, I do not subscribe to this like, hey, I make $10,000 in cash flow. Woohoo. I get to do whatever I want. Um, I am a big believer that when you launch a short-term rental, you do not get to spend that money for one year. Like, I need you to understand the seasonality arc of your pres of of your property. So, what that means is like, how much money are you going to make and when? Like, when are you going to have high months, when are you going to have low months? doesn't really matter because you're going to stow it all in a bank account at the end of the year or kind of like year-to- date, whatever. I want you to then look at that money and say, "Okay, great. March was slow. Uh, February was a ghost town. I lost money in December, but I made a bunch of money these other six months or so." Okay, once you know that, permission granted to then give yourself an allowance. Pay yourself a little bit of money if you so choose. But for me, everything always is a slow season no matter what because my bank accounts just stay full. And then when I need to reinvest, I'll go and spend more money to improve the property or I'll take all the money from my built-up bank accounts and I'll use it to to buy more real estate usually or invest in a different property. It's I don't really use my cash flow recreationally. Um but if I did, uh I wouldn't really be able to use it recreationally for at least one year. That that's always my philosophy. So, the way I prepare is very similar. Um, I pretty much exactly the same. I have a lot of cash on hand because I don't consider that money mine. I kind of consider it um I don't want to say house money. I think that's like a silly way to put it, but it's like.
that money's in there. I earned it and then I get to choose how to continue making more of it with that money. But it's rarely I I the the only time I pay myself is from my active businesses, which I have a few companies outside of real estate. That's what that's what I live off of. So, the equivalent would be somebody's doing this part-time, short-term rental, part-time, and they have a full-time job. It's like live off the full-time job. Your your short-term rental is your investment money. It stays in that account. And then down the road, like if you have two or three years later, you can see the performance of your rental and you have a really good record of what that thing performs. Then, if you choose to start like quit your job or you go part-time, it makes more sense at that point because you have three years of P&L and you can look exactly how much it's made as opposed first year is pretty in any business, first year is pretty tough, right?
Yeah, I think that makes a ton of sense.
Yeah. If you make $50,000 at your job and you launch a short-term rental that makes $12,000 profit that first year, in my mind, you still make 50,000. That other 12,000, it's not yours. It's future. It's future use, right? Like, you get to use it one day. But like, if you're trying to replace your $50,000 income in my mind, you have basically got to figure out how to do this $12,000 a year thing five times. And so if you are taking money out of it, it is going to dramatically slow down how many more times you can multiply your portfolio and you'll never be able to replace your job. So if you tr in my mind, if you truly want to replace your 9 to 5 income, then you cannot touch your money until you are pretty far past your income on the real estate side or you know side hustle or whatever it is that you do.
That's smart because it also helps you in those downturns. So, if you do hit, you know, the calamity where all of the sudden everything changes and you're having to drop your rents, like you're you're not living on the edge, which so a lot of entrepreneurs do. They they they spend all their money and then all they can do is borrow money or panic whenever things go badly. So, I think that like it works both ways. It's good for replacing your income, but it's also good for protecting you like as a defensive strategy.
Yeah. I would say like the golden years were definitely during the pandemic we made the most and then there was like a drop and it was kind of during that like Airbnb is dead, it's over era and really what happened was that travel normalized. So like people were not traveling the way they were and so it it felt like Airbnb was dead or dying or whatever. That wasn't really the case. It's just people were returning to past trends. And so had you spent your money on the premise of what you were making in 2020, 2021, you'd be in a really really tough spot in 2022, 2023, whenever all of that readjusted. For me, it was no big deal because my bank accounts were still full and like I I I was pretty disciplined. Um, but now I'll say I have a very good idea of what my properties make and I'm making I'm proud to say it, but I am making the most money I've ever made on Airbnb in 2025. And that same was true with 2024, but 2025 is like new levels and it's like, you know, I I truly feel like I've dialed all the dials have been dialed, you know, dialed in. I'm I'm there. I've done it.
Congrats. Anyway, like I just as a friend to friend, I'm going to pat you on the back because that's that's pretty cool to see, you know, because there's a lot of ups and downs behind the scenes that to get to that point to where it kind of crescendos and just keeps reinvesting and doing even better. So, I think that's really cool.
For sure, man. Thank you. Well, let's talk about portfolio architecture a bit. Um, because I think this is kind of where it's going to play into like your side of things. You had these three vacancies. Obviously, you dropped price and that that's gonna for the most part be the biggest lever you can pull on a long-term rental is my guess. Definitely the you know the biggest one you can pull on short-term rentals too, but short-term rentals you can take new photos, you can add amenities. Like there's a lot of little things you can do to affect kind of like.
you have such a large pool of people that are looking. There's a lot of things you can do. I think long-term rentals, it feels like obviously marketing and creating funnels and and like more lead sources, but dropping your rent is probably going to be the big one. Outside of that though, um can you talk about like you mentioned five, six, seven years ago, whatever, you would be putting on the monkey suit, doing back flips, you know, spinning the sign, and now you're you're cool, like you lost money. Obviously, no one likes to lose money, but you could weather that storm. So, how have you been able to actually build a portfolio that has that would allow you to take losses on three properties like that?
Yeah, I did a couple things. One was I've had this long-term strategy called pruning your portfolio.
And pruning like a backyard gardener who has an apple, you know, I always think like an orchard of apple trees or orchard of orange trees. To have a healthy fruit tree, you can't let just any branch grow up. You have to like prune off some of the branches so that the ones that are remaining get more of the energy and the sun and the water and the nutrients. And I think a real estate investing portfolio I found is very similar to that. Is that over time if you you look at your books, you do what you're talking about where you measure, you know, your success over the last two or three years, you start to see trends where some properties aren't performing as well. Maybe this if you track your occupancy and vacancy, which I recommend everybody do, like be really you this property might be vacant a lot longer than the other properties and or this one we have to market a lot harder than the other ones. Like why is that? and you start asking yourself that question and maybe is the house needs remodel. Like I've had some where like the kitchen was really bad. It was just out of it was out of date. It looked like the 1950s and we kind of got away with it in a hot market because it was in a good location. But we actually needed to invest 10 or 20 grand in this property to like make it come up to standards that our tenants were not wanting to live there because it was just kind of sucked. That's one idea. It's like you need to think about what's how does this competitive? But then sometimes it's just that property might be on a too busy of a road. It's just not in a good location. the next door neighbor might be a problem. And so pruning off a property would be selling every once in a while selling off the the losers, the ones that are not your best properties in order so that your whole portfolio is more competitive.
That's that's been like an ongoing process of just callull it, cull it, prune it, prune it. Um, and then combined with that, I I think you smallbody investors, I do like keeping it small, but I think there's a scale that you can get to where you have a little bit of diversification of income. So for me, I don't want to have all of my properties in one neighborhood. Like even within a small town like I am in Clemson, I like to have some in this neighborhood, some in another neighborhood, I like to have some single family houses, a few duplexes, like having a little bit of a variety. Like this year, some of my one-bedroom and studio apartments, 100% have been full. Like no problem renting those. The single family house that's almost always rented right next to the elementary school, that's been the one that's hard. Like who who would have thought? Like why why is that? It's just so you never know. But if you have a diversity of types of properties around town, that's why I like having small and mighty like single family, small multif family, because if you had them all in one big apartment building, like it's either you're all in or all out, you know, that's that's a problem. Whereas if you have a diversity of like 10, 20 properties spread around town or maybe spread around different markets, that kind of portfolio architecture where you diversify your income sources a little bit, I think helps you not to be able to withstand these kind of little isolated issues that you have here and there.
PS, I I have pruned the hell out of my portfolio.
You've been doing a lot of pruning. You've been like shearing off the whole whole, you know, whole bushes back in the backyard, right?
Yeah. I'm like the the fruit is not that they're like little tiny oranges that like have no juice in them, you know? So, it's like that's how I see and I know what I'm about to say is entirely unrelatable to the long-term rental crowd, but for me, it's like if a property makes$1 to $2,000 a month, it's not worth it is not that is to me a a dry It's like um Popare. It's dried out. It's dried out. uh oranges, you know, if I ate it, I could probably get some nutrition, but it tastes bad and it I don't know why I did it. You know, uh there's a lot of there's a lot that it will affect me in many ways. That's honestly a great way to to to describe Airbnbs because you just go through so much.
Yeah.
So, if you make a thousand bucks on one property on Airbnb, like you've gone through you've gone to war and back kind of thing. Long-term rental, I know it's more passive, so it's like I would kill to make $1,000 on a long-term rental. I would rather make $1,000 on a long-term rental than $2,000 on a short-term rental.
Me, too.
Because that extra $1,000 of work is is not worth it. So, I've been going and yeah, like I've got, we'll call it four fruit bushes. Call back to one of our last podcasts. And um, I've I've cut two of them, you know, and I, as of yesterday, I I just cut the biggest one uh which is my property in Scottsdale. It's under contract right now. feels too good to be true. Like it that one actually that's an unfair one. That one is like that would be like cutting the fruit bush full of actual good like good fruit because the equity that we're going to get on it. It's like a seven figure payout at the like in a few years because it's a creative deal.
continue that metaphor. You've got even bigger fruit trees like to in the in another pasture.
Yes. And that is kind of I I've pruned so much for exactly what you're saying, which is like yeah, the equal amount of time and energy spent on all of these uh cut cut. And I've bought this 13 unit portfolio in uh in Fredericksburg, Texas. 13 tiny homes that make three to that are 300 to 400 square feet and they all make 8 to 10 grand a month on Airbnb and direct bookings. Um, so with that, like I'm like, "Oh yeah, why don't I just do that?" Like get rid of everything else. I don't like all that helped me get to here. Like I sold all that, took that equity, put it in here. So it's like you're kind of pruning, but you're still like, you know, you're still using the the life of what you built and everything to to feed to feed into this new property. And yeah, in some ways I feel like I'm selling off pieces of myself, but now I know that the properties that I've kept are all my Funkit properties. interior design company. It's all those and they're all high hitters that make, you know, basically 3 to 15,000 a piece in cash flow every single month. So now I know if I ever have a slow season like the one that I was just telling you about where I'm losing 500 bucks or I'm breaking even, no big deal because I made 20 grand over here and, you know, obviously a lot more on the on the Fricksburg property. But for me, that's I've built my my portfolio now in a way where everything is a heavy hitter. So if I ever lose money, everything is basically got the back of like the the weakling, which is kind of like the property that I'm telling you about. It's a 1921 house. Like it it really shouldn't be an Airbnb to be honest. It's old. It is it's landlord special. Like.
yeah,
the guy that that I bought it from was did did things to that house and I'm like, why would you have chosen that? But I had to it was an experiment to see if Funkit my interior design company could like take an ugly house and make it incredibly successful. The experiment worked. It's great, but it's an old house. And so I probably wouldn't do that again with an old house that that I I think I actually might convert that to a long-term rental. And uh for no other reason that you know it'll average 2 to 3,000. And now I'm moving in the in the direction where if my properties aren't making 2 to 3,000, then I just prune them and put it into something else that's a little bit more impactful.
What I think is cool about where you are though, Rob, is I feel like I'm in that place too. You get to that kind of harvester phase, that final phase, you can redeploy assets, you can harvest things, you can, you know, you can prune your portfolio, and you can also take experiments. Like, so I have a couple properties that I'm just sentimental about. And I know you're not supposed to be like, you know, emotionally attached to properties, but it's like you when you have a diversity there and you're making core income for most of your properties, you can try some things that are experiments. And I don't know about you, when I first experimented as a brand new investor, it was like, I got to make this thing work. And I was, you know, you really have a lot more stress about it. Whereas a more mature business, you can redeploy some cash flow and it's it makes it a lot more fun without the stress. So, I think it's a cool place to be. Yeah, it's been nice, man, because like that property, the comp said that it was going to make like 35 grand to 48, but I was like 48 would be kind of tough, but like we'll say like 35 to 45 high-end, high high-end. I have an interior design company that I say is the best, and I'm like, we make a lot more than everyone else, no matter what. And so I kind of felt like if I'm going to continue to say that message, I need to I need to basically like walk the walk. And so I was like, "All right, guys. I got this ugly house. Do your thing. I hope it works." You know, uh the data is not on my side. And that property is going to do 70 to 80 grand this year. So I've 2xed every other three-bedroom property like in in basically not the entire city, but pretty close. Um, and so that's an experiment, but again, it's old. It's creaky and I'm like it is it is definitely the problem child. So even though it makes decent money now I'm to the point where I'm like I'm I live 2 three minutes away from it. I'm walking to that house every day now. Uh, you know cuz I I try to get steps in and everything but I'm checking in on stuff and I'm like there's there's a lot there's a lot broken with it. I'm like is this what it's like to be a landlord? Because man I I don't want this one anymore.
It's taking up too too much mental space. Too much mental band width. Um, okay. So, last thing I want to talk about is you said pruning. Um, from a short-term rental perspective. I think it's not just pruning. Uh, I do believe in that. Obviously, I just told you I'm doing that now. All my properties are big hitters. The other thing that I want to say for anybody is like I think it's like portfolio architecture on the short-term rental side is all about spreading your your uh seasonality like trying to distribute it equally across your your portfolio. one really good example about basically you want to counteract slow seasons with high seasons. So I'll give you an example. If you have a beach property uh which I did, you are going to kill it from mid-March to mid August. Kill it. You're going to feel like you're a genius. From mid August to the beginning of March, you are going to be ghost town crickets bleeding money. And so the best way to counteract that is if you know like the mortgage on that property was 5,700 bucks. I it was supposed to break even for me. It's like a personal beach house. Um I have since sold it, but I I kind of calculated it where I'm like I get some personal use and I'm going to break even. But in the slow months, it's a $5,700 mortgage, right? So, I have to know that if I'm going to buy this property and lose $5,700 a month in the worst worst case scenario, which I never did, but like to, you know, to get get my point across, I have to have other properties that from basically mid August to mid-Marchch are making me more than $5,700. Otherwise, I'm coming out of pocket to pay the mortgage and expenses. And so I think portfolio architecture whether I'm sure it's there similar concepts in the long-term space but on the short-term space you just want to make sure that you buy properties that have opposing high seasons and low seasons so that you're never bleeding at the same time if you have two properties that are like going into slow season and nothing else.
Yeah, I'm in the college student rental market which is kind of one step away from a midterm or short-term rental because people stay a year or two. And so for me I kind of use that same concept of everything turns over in August. Like we have one week in August where our property managers are just turning everything over. And so that's like the most costly month in terms of expenses and everything else. So I like to have part of my portfolio be not college student rentals and be long-term rentals that are just families staying in another part of another part of the area or also do a lot of owner financing. So we'll have like a owner financing note that maybe doesn't make as much upside as I could, you know, if I had a rental. But like having that diversity of types of properties, you know, then it kind of they kind of even each other out. It's like college student rental iss pretty seasonal up and down. Um, but then you know a note owner financing pretty steady long-term rental to a family. I have like a couple trailers and a you know just a single family house that somebody's been in for eight years. Like those are like the steady Eddie kind of just consistent. Then that those do what you're talking about. They balance that out. So when August is really rough for them, I've got those other ones that are still producing income and and it cow management's been huge. like if if I hadn't done that and thought about that long run, I don't think I would have survived a lot of those ups and downs.
Yeah, for sure. So, to kind of recap everything that we said today, like one, build up your bank account, have your cash reserves, two, prune your portfolio, um, and make sure that you have heavy hitters that can sustain you, you know, uh, when other ones are not kind of working as hard in the slow seasons. And then three, having a portfolio, you know, aka portfolio architecture that is working for you and counteracting the the low and high seasons of your entire portfolio. Did I miss anything there?
No, I would just say underlying all that, I think you have to have good metrics. I know you run really good metrics with all your businesses. I do the same thing. I call like bookkeeping is like it's like uh Neo in the matrix, the superpower. You can see zeros and ones and the world slows down. You couldn't do any of that stuff if you didn't have good numbers. And so I think that's like underpins everything. You have to really be detailed about your book, your your bookkeeping, your finances, and all of that.
For sure. Which is why I love Baseline. So, thank you, Baseline. I appreciate I appreciate everything you guys do for the channel. Um, recently you you also mentioned that you you've been doing a lot of build to rent lately and new construction stuff.
Yeah, that's been how we've added new new properties to our portfolio. We prune off an old property and build some new ones. So, yeah, that's that's been another, you know, portfolio architecture, you know, strategy for us is getting more, you know, lower maintenance, easier to rent type properties.
For sure. Well, uh, Chad and I actually completely broke down the build to rent strategy. We have a whole podcast where we dive into how it works, the money's behind it, the specifics, all the good stuff. If you want to watch it, you can catch it right here. I promise it's worth your time. You'll learn something. See you on the next episode of Chad Build.