How to Stand Out in the STR Market with Mark Lumpkin of STR Cribs - Episode - 532

This person only likes to communicate via email. This person's only available on Sundays. This person is looking for this and this and this. You start to build a relationship. And as you do that over time, the, the client relationship just becomes easier. And so we really have kind of drilled down on that.

Hello, enlightened investors. How to turn business partnerships into profit engines without sacrificing sanity. So today we're going to explore a proven method for growing fast, staying aligned, and avoiding partner burnout. Have you ever wondered why some investors thrive in short-term rentals while others barely break even? In The Friendship Formula, you'll hear why choosing the right partner is more important than property itself, and how one strategic approach to building trust is quietly transforming the short-term rental game. So stick around, and welcome to Streams to Impact. I'm your host, Dr. Allen, psychology professor turned passive investor. And here we're on— we're not chasing shiny objects, we're creating quiet wealth and lasting impact on your time and on your terms. If you're really ready to stop trading hours for income and start leveraging real assets to build true financial freedom, you're in the right place. So today we have with us Mark Lumpkin, and he is a powerhouse in the short-term rental world. As the sales director at STR Cribs, they've helped investors nationwide turn properties into profit without the drama. With over a decade of startup success and a passion for real estate and travel, Mark knows what it takes to grow fast and grow wisely. So Mark, you've led startups and now you're at the heart of the short-term rentals. What drew you to this particular niche of real estate and what keeps you passionate about it?

It's a great question. Yeah. Thanks for having me on. Um, I think like anything, most of us kind of fall into circumstances. We don't necessarily seek something out. It kind of falls into our lap and we end up there. Uh, my story is no different. Um, I had been through a series of startups. I'd done some cannabis startups. Um, I had a little bit of a background when I was younger in construction. And then I really had this kind of knack for traveling. Me and my wife had done a lot of traveling. It was right when we got together in our earlier years, and we fell in love with the Airbnb model, traveling by renting your own place, having your own apartment or condo, and not having to share a space or be in a hotel. That was really attractive to us. And so when a friend of mine— we were in a real estate mastermind, we were in a real estate mastermind together. And when he approached me and said, hey, I'm starting this Short-term rental business. I was very interested in it, and it just kind of fell in my lap. So that's how I ended up here. What I think is so unique about it and what I enjoy is that it's very different, right? There's not necessarily a cookie-cutter model. We're not buying the same house over and over again and putting the same long-term rental in and locking in an interest rate and making a few hundred dollars. It's every property is so unique and is so different. And so it keeps you on your toes, I guess, for the lack of a better term. And that's what I enjoy about it.

Lots of stimulation there, I would think, as well. So you've emphasized building friendships over simply closing deals. So can you walk us through how this relationship-first approach actually impacts investor outcomes and really long-term profits and portfolio growth.

Yeah, I think what's so unique about the short-term rental industry and why those partnerships are really crucial is because every project is a little bit different and a little bit unique. And so oftentimes, the value of the vendors, the partners, the people you know, impact the quality of the property that you get and the quality of the investment that you make. And so if I'm thinking of buying a property in Gatlinburg, Tennessee, and then I want to buy another one in Clearwater, Florida, well, I've got to be able to know that I've got partners that can help me facilitate the purchase of those, close the transactions, set the property up, and then also manage it long term. Because short-term rentals have such a short-term stay, you've got a lot of turns. The average short-term rental turns about 65 to 80 times a year. And so you've got guests coming and going, could be as much as 100 times a year. You better have your infrastructure in place to handle cleaning the property, maintaining it, making sure that your guests are satisfied. So it's really at the top of your list, in my opinion, in this industry.

Yeah, I could see why that those partnerships are absolutely critical. And you're going to have multiple partnerships with properties scattered throughout the country. From your perspective, what sets short-term rentals apart from other real estate investment strategies, and what kind of investors are really attracted to short-term rentals?

Yeah, I think the number one thing that's the most attractive, and I actually don't think that this is the biggest benefit, but it's kind of the draw that brings a lot of folks in, is the opportunity for additional cash flow. And so in a world where interest rates and property values are as high as they've ever been, that long-term model seems to be condensed, and it seems to be harder to earn any free cash flow. Monthly if you're buying the traditional real estate. And so we do get a lot of people that come in here for the opportunity to earn more. And there really is— I mean, a property that, you know, it's very market-specific, property-specific, but there are properties that can make 3, 4, 5 times as much in income as a short-term rental as it could as a long-term rental. Obviously, there's a lot of costs associated with that. You got to do more, but there's the opportunity to earn more. So that's one. Number 2, that's a little bit less talked about is the tax advantages. And I'm not a tax expert, I'm not giving you tax advice. This is just why people like to get into it. There's some unique bonus depreciation, cost segregation, active material participation that you can achieve by investing in short-term rentals that you maybe couldn't achieve through other avenues. And so we do see a lot of high-earning W-2 employees looking at short-term rentals as an option to offset some of their, their earned income taxes. And then my personal favorite is, it's just kind of exciting. And who wouldn't want to own a property in their favorite vacation destination, have it be a good investment, cash flow, give them tax benefits, but then have a place to go visit with their family on the weekends. And so To me, those are really the 3 big ones.

Well, I can see how you would certainly have the immediacy of being able to increase prices as interest rates go up. And of course, that's dictated by demand. But as inflation increases, people just expect higher prices. So it all would seem to me to kind of all go together to there. And, and make short-term rentals a little bit more attractive because of that flexibility in pricing. Can you share some stories with us about some strong client relationships that directly influence the success of investments or projects that you've had? And what have you learned from these relationships and experiences?

Yeah, so great question. I could probably talk about this for hours, but I'll try to keep this sweet and to the point. I think the biggest thing that we've learned is that we're now looking at quality over quantity. And we would much rather have a smaller number of clients that we're working with that are of higher quality in both aspects of the relationship. We can provide more value to them because we know what they need. We've been through the fire with them before. We're essentially kind of rinsing and repeating, and we're able to help them build out their portfolio. And then they can be of more value to us because we know that this person only likes to communicate via email. This person's only available on Sundays. This person is looking for this and this and this. You start to build a relationship. And as you do that over time, the client relationship just becomes easier. And so we really have kind of drilled down on that. I would rather know that next month we're going to do 15 new projects and 12 of them are coming from existing repeat clients and just a couple are coming from new clients than say we're doing 30 next month and all of them are coming from brand new clients. It becomes a headache for the business, and it also becomes you know not the greatest experience for the clients as well. It's new to them, and so really just I guess what I'm getting at is taking really good care of the clients that you do have and making sure that their visions and your visions are aligned. You're on the same path, and then trying to just keep that client over and over again. And maybe that means you make less profit on an individual client, right? You could, you could milk a cow over and over and over again, or you could shoot it in the head and butcher it once. And so I like to use that analogy with our team, which is that, guys, this is a long-term relationship and we don't need to kill this client on their first project because then we'll never get them back. And so we need to take good care of them on this one so that we can get their next 5 projects.

Well, it sounds like a wise investment and business strategy there. Well, Mark, as you look ahead, what are the trends or the shifts that you're seeing that are affecting short-term rental markets? And this is, you know, going to be a particularly meaningful question to investors who are looking at investment options. So what— I mean, In every aspect of investing in real estate, all I hear these days is there's just so much uncertainty. And most people I talk to really don't have any definitive concept of where things are really going to end up and play out here. But in terms of short-term rentals, what are you seeing?

Yeah, you know, I'm, I'm seeing strong demand. And it's continually gone up year over year over year. And so there was a bit of a dip at the beginning of COVID but then it came roaring back. And it started to stabilize a little bit. It's not as crazy as it was in 2021, 2022. However, it's in the, in the last 10 years, in the last 20 years, when you look at it, it's just constant growth in travel, in luxury travel, in multigenerational family travel. So you're getting families that are traveling together. That tends to be the best demographic for a short-term rental stay. Obviously, if you are traveling by yourself, a hotel is oftentimes much easier. It's less expensive. You don't have to worry about check-in, check-out. You can come in at any time you please. So that tends to attract and be a better option for single travelers. However, as family travel increases, that benefits the short-term rental industry. And so as a whole, I would say I'm very optimistic about the industry and the numbers seem to support that. However, the one thing that I am cautious about and that I would caution anybody that's looking to invest into this space is really around regulations. And so that seems to be kind of the, the uncertainty and the X factor when it comes to investing in short-term rentals. Even cities like Barcelona or New York City have recently put some very tough restrictions on operating short-term rentals in the city, and that's the unknown. So if you invest into a property, there is potential that in the future your city, your HOA, your county will implement regulations that you didn't have to compete with before or abide by, and that's the unknown that could really affect your business. And so what I would suggest to people is don't purchase and operate short-term rentals in areas with no regulations. If it's the wild, wild west and there's no rules, you can guarantee that sometime in the near future there are going to be rules and you might not be able to operate within the bounds of that because you don't get to dictate what those rules are going to become. I also don't recommend people invest in places that have a lot of regulations and make it very, very difficult to operate. You want to kind of find the sweet spot where an area already has some regulations in place, and they're reasonable, and they seem to be working, and that you can work within the bounds of those. You don't want something with no regulations. You don't want something with a lot of regulations. You want to try to find the sweet spot. And there's some great resources out there to help people do that. But to me, that's the kind of the unknown is the regulations.

Yeah, that is, from what I understand, a A huge concern for short-term rentals. And I know here in the Smoky Mountains, which is one of the driving forces of our economy, probably the major driving force is tourism and hospitality. And yet in, in Asheville, they have recently been facing growing restrictions on short-term rentals. And I'm wondering what is driving this. I mean, I think probably part of it is a lot of individuals who don't have short-term rentals do not want short-term rentals in their neighborhoods. And I'm not sure why that would be a huge concern to so many people, but what is it you're finding that is really the driving force? behind the growing regulatory situation?

I would definitely agree that the number one driving force is probably neighborhood complaints, and that comes back to investors and hosts not doing a good job of setting up their property and not setting strict enough rules. You call it the party houses, right? The party houses become a problem for neighborhoods. And I understand that. I live in a residential neighborhood with a couple of short-term rentals, and I own a property not far away in a residential neighborhood with homeowners surrounding it and no other short-term rentals. We have the only one. And so I can see both sides of the coin where if you're living next to a problem house, it's not enjoyable. However, there's some real benefits to these neighborhoods to having it. Like you said, you live in an area that tourism and hospitality is one of the leading drivers of the economy. And so we don't want to put that aside. I would also say that there are cities or counties or HOAs that are looking to earn a profit off of, off of rules and regulations. And so if they add a bed tax or a flat nightly rate tax or whatever it is, they're able to use that as a revenue driver for their organization. And so to me, those are the 2 biggest things, right? You've got neighbors complaining, And then you've got city commissioners going, oh well, we're getting complaints and I could earn a buck on— we could earn a buck on this if we implement some regulations. So the combination of those two things are what's driving the regulations. And, you know, we always kind of talk about it as the automotive industry, right? When cars first came out, there was no speed limits, there was no seatbelt laws, there was no stop signs. And That was a new industry. It took a long time to build those rules and regulations and registration and requirements. The short-term rental industry is very similar in that we're only 20 years— we're not even 20 years in since Airbnb launched. They launched 18, 17 years ago with renting out your couch. And so it's a relatively young industry that is going to go through what all industries go through, which is It's new, we've got to regulate it, we've got to make sure that this works for everyone. And so that's just what we're going through right now.

Well, in terms of it being a growing industry, not only are regulations changing and uncertain in a lot of respects, as more and more people really become aware of amenities that can be offered in short-term rentals, what do you see the guest profile shifting to over the next 5 years? What are they going to be expecting as guests?

Yeah, I think they'll be expecting a heightened experience for their travel. And so what we've started to see is that people aren't necessarily— they're leaning more towards booking the house as part of the vacation versus just an afterthought. And so instead of saying, ah, I'm going to Scottsdale, Arizona to go golfing with my friends. And we got to find a place to stay. They say, hey, we're going to Scottsdale, Arizona to stay in this house that has a golf simulator, a mini putt, a game room, enough beds for our whole group, and a barbecue to hang out in the backyard by the pool at. And so they're thinking of the property as part of the vacation. Or me and my wife driving up to Blue Ridge, Georgia, We're thinking of that cabin in the woods with a hot tub and that great view of the Smoky Mountains— of the Blue Ridge Mountains, excuse me— as the reason that we're taking this vacation. It is part of the vacation. And so I see that becoming more and more apparent in travelers' experiences where the destination, the home that they're staying in, is part of the vacation, if not the main reason for going to it. On that vacation. And so that's how I see things change. And then how investors can take advantage of that is by hyper-focusing on the guest experience. Hey, I've got this cabin out in the woods, it's only got one bedroom. I know this is a great destination for couple retreats. And so I'm going to make sure that I've got wine glasses and coffee cups and a 2-person sauna and great high-end linens, things that a couple could appreciate on their couple's weekend. They're really hyper-focused on that setup. And so that's what I see the industry going towards, and it's already trended that way.

Well, that brings up an interesting question. I— the amenities, I would think, would have to vary depending upon the location and really what kind of destination the location is to start with. And then from there, it seems like you would build out whatever amenities are appropriate for that location. So how, how is an investor going to determine that? How are they going to do the research to determine what kind of property they need, what kind of amenities they're going to need in that property?

That is a great question. That is, in my opinion, really step one is, is, is identifying who the guest avatar is that's coming to your property. And then deciding what to do with the home. There's a there's several ways to do this. You can lean on some local information, whether you're talking to property managers in that market that know, you know, hey, how many guests did you have last year? How many people came? What was the age demographic? Why were they traveling to this area? What were they looking for? Really, the boots on the ground in terms of property managers or realtors can be a great way to get some local firsthand knowledge. That's the thing about this industry is it's, it's so localized what you're doing with your property. Every market, even a town or two over, sometimes just a couple of blocks away, can drastically change what you need to do with your property and who you need to be attracting. And so starting with that foundation, getting that local information, a Google search, AI like ChatGPT, just start diving in. Hey, what's going on in Panama City all year round? How many events are coming? Oh, there's 3 biker rallies that come every year, and they bring in 400,000 people per event. Hey, maybe having a garage where bikers can park their bikes during their stay might not be a bad idea. So really just trying to figure out why folks are traveling to your market and who's coming, how long they're staying, and what they're looking for is going to be the first step. And then you start to build out your blueprint. You know, if you have a market that people don't travel to with their children, and you're in Las Vegas, Nevada, it might be silly to put together a family house, you might be better off putting together a bachelorette-themed home or a bachelor party house, things like that will help you dictate what to do with the home.

Well, on, on top of that, I think one of the things about short-term rentals is that it's, it's kind of easy to get into them if you have a spare space, a garage where you could convert to a, a mother-in-law suite or something like that. It's easy to get into it. And so that's, I think, one concern that a lot of people have in going into this is What is the competition going to do and is the competition going to drive down what we can get for, for our short-term rental?

Yeah, it's a— I don't think there's a black and white answer to this. I see that the industry is a little bit segmented where you are correct, the barrier to entry is relatively low for those shared spaces. Spare bedrooms. You know, we see a lot of folks, they bought their first home, they've got a pretty low interest rate, and it's a starter home, and they're moving on. And so they keep it furnished and just throw it up on, you know, Airbnb or VRBO to rent it out. However, I do believe that they are— if you are in that category, it's very difficult to compete because you have a lot of competition. You have to compete with hotels, you have to compete with other hospitality options for the guests. However, those people that are creating unique experiences, they have little to no competition. If I've got a treehouse in the mountains, well, I might have the only treehouse. If I've got a beachfront property at the beach that has a pickleball court, I did have to invest more in that property. But I have the only one. And so I can set the market rents, and I can decide what the property is worth because there's scarcity. However, if I'm in a, in a 3-bedroom, 2-bath home in a neighborhood that has 30 other short-term rentals and they're all about the same, well, the industry is going to tell me what I can get and I'm always going to be competing with my competition. And so our, our partners and investors we work with tend to lean towards the side of the scarcity and creating unique stays so they don't have to compete with a lot of other Well, sounds like an interesting space that I'm sure a lot of people are interested in exploring.

So Mark, tell us a little bit about STR Cribs and the services you offer, and how can we get in touch with you there?

Yeah, I'm always available. I'm very active on LinkedIn, and so you're more than welcome to connect with me there and DM me. I'll provide my email, Alan, or you've got it, you're more than— please throw it in the show notes. We'll respond to any email you send our way directly. Our story is relatively simple. We're individually owned and operated by a guy named Josh. He has got 30 years of experience in the construction industry. And he worked for some of the major homebuilders like D.R. Horton and Hayden Homes and then built custom homes. And we just kind of fell into this niche of folks have reached out to us and said, hey, we need help setting up a short-term rental. Because we're a licensed general contractor, it allowed us to do a lot of things that other people in this space couldn't, like renovations or like pouring concrete or like doing home additions or like doing major remodels. And so it allowed us to do things that others couldn't. And we've just kind of continued to play into that where We've prioritized short-term rentals and have found a niche, and it's been awful fun.

And you can also find Mark at their website, which is strcribs.com. So Mark, thank you for being with us today and enlightening us on the short-term rental industry. And investors, Thank you so much for being with us today, and I hope you've gotten a lot out of today's show. And please take a moment to like, share, and subscribe, and we will see you in the next episode.

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