Short Term Rentals: Corporate Housing vs. Vacation Rentals feat. Dr. Chau Ong

Hello, future billionaires. Welcome back to another episode of the podcast. Today we have a guest, Dr. Chao Ong, and he's going to be talking about corporate housing and leveraging real estate without having to buy the real estate through some master lease agreements, which we'll talk about, and generating additional income through corporate housing. So it's a really cool strategy. You can do this, he purports, with very little money down and with pretty minimal risk because you're not buying the properties. So definitely a cool strategy. And just, I always want to give the disclaimer for anyone that's selling anything, any product or investment or whatever, obviously do your own due diligence. We've not vetted the system, but he has had great success and the strategy is pretty cool. And so we obviously want to always bring interesting ideas to our listeners. So appreciate you guys listening. I think you're going to enjoy this episode. With Dr. Chow Wong. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Looking for passive investments done for you? With Aspen Funds, we help accredited investors that are looking for higher yields and diversification from the stock market. As a passive investor, we do all the work for you, making sure your money is working hard for you in alternative investments. In fact, our team invests alongside you in every deal, so our interests are aligned. We focus on macro-driven alternative investments, so your portfolio is best positioned for this economic environment. Get started and download your free economic report today. Welcome back to the Invest Like a Billionaire podcast. I am your co-host Ben Frazier, joined by fellow co-host Jim Maffuccio, and today we've got a really fun guest, Chow Wong. If you are not watching this on YouTube, you got to go at least peek over because he's got a pretty, pretty cool background and pretty cool, pretty cool outfit. So he came ready to go today on this podcast and we're excited. If you don't know any of his story, he's actually an immigrant who came to America with the American dream, pursuing it, became a pharmacist, MBA, but quickly found out it was not what it— what he signed up for and started looking at other ways of entrepreneurship, got into Airbnbs, corporate housing, and has really created a pretty cool lifestyle. And now he runs a coaching program and something called Beyond B&B Secrets. And so you can kind of learn his whole approach, but want to bring him on because Airbnb's hospitality, this is an industry that a lot of folks have been aware of for a while and it's obviously performed very well even through COVID. And so I want to bring him on to kind of share his expertise on, you know, what he's seen in the space and the kind of corporate housing, Airbnb. And so, Chow, welcome. Thanks for coming on the show.

Thank you so much for having me. How's everybody doing?

Doing good, doing good. So tell us a little bit of your story. So I think it's such a unique story, kind of being an immigrant and kind of coming here, and just share a little bit about how you got into doing what you're doing.

Yeah, absolutely. So I'm just going to share my screen about some pictures, uh, of my youth and just some of my story. Is that cool?

Yeah, yeah. And just throw heads up for those that will kind of just do a few quick slides here, but if you want to take a look, you can definitely watch this on YouTube. We'll post the full video here.

Yeah, absolutely. So I was an immigrant from a third world country. When we came to America, all four of us had to sleep on one tiny bedroom in like the worst neighborhood possible. I would hear like gunshots as I go to school and my mom would just pray every day for us to come home because they don't even speak any English. They had to start over during middle age without any English. Can you imagine that? Going through a whole new world without knowing anybody except my uncle. But we determined to achieve the American dream. So since I was 11 years old, I was saw my mom and dad crying to bed every night. And I promised myself that one day when I become a man, I would do whatever it takes to take care of her, take care of my dad as well, retire them. So we thought the way to get the American dream is through traditional education, right? We've been sold that so many ways. So then we sacrificed everything for me to go and earn my doctorate in pharmacy and also MBA. And this time it took me 8 years to accomplish all of that through a lot of sleepless nights. Studying 60, 80 hours a week, sleep on the basement in Utah where it's freezing cold at this time. And finally, you know, surviving off of ramen noodles, McDonald's dollar menu, and Little Caesar's pizza. Finally graduated. Yes. So you can see my pictures here. This is our friends, our backyard when we first came to America. Pretty much. Well, actually this is an upgrade. This is our like third upgrade, but, uh, we walk out and then we hit the backyard. That's how big our backyard is. I took a picture of the backyard, right? But it's still better than our old country in Vietnam where we had like this many people fit in one shack. Pretty much, you know, there's like 15 of us. So anyway, very grateful to be, to be here. Um, so basically I became a pharmacist. I thought I made it. I was like, mom, you don't have to worry about a thing. Dad, no worries. The day I graduated is the day you get your freedom. So far as I know, I worked that entire first year like nobody's business. So I was determined to achieve that American dream. By the end of that year, I won the Pharmacist of the Year award in my district.

Okay.

And I thought I made it. I was like, yes, but now they're going to give me so much more bonus. They're going to give me so much more help, blah, blah, blah. But the opposite is true. They gave me less help because they know that I can handle it. They give me stricter KPIs, you know, so that way they can basically trap me and suck more out of me. And they give me the same standard raise, like 2-3%. It doesn't do anything. It doesn't even keep up with inflation. So I was like, I climbed the ladder of success all the way up to the top to know that it's lean against the wrong wall. So I determined something got to change, right? And I determined to, no matter what it takes, to find that business, that one idea that will free me forever. And on top of everything, my mom was diagnosed with cancer at the time too. After all of this, I thought we'd finally get her that freedom, but now she's diagnosed with cancer. So I had to figure out fast. So I tried all kinds of businesses you can imagine. From MOMs to day trading to crypto to forex, you name it, I probably tried it, right? Opening a restaurant, opening businesses left and right. Amazon, eBay, all of those businesses. What I found is all businesses required two things, either a lot of money or a lot of time, which I did not have. I was working 40, 50, 60 hours a week and not, doesn't have a lot of money at the end of the day to show it. For it either. So I was frustrated, I was burned out, and I was trapped. I was miserable and I was rock bottom. That's when I met somebody, gave me the epiphany. The epiphany is, what if I could just rent vacant homes and sublet them on Airbnbs and scale to freedom? Does Airbnb own any homes, guys? No. And does Uber own any cars?

No way.

And they are the biggest companies out there. So why do we need to own anything? We want to just control everything. We don't have to own them. So that's exactly what I did. Then I scaled to 23 Airbnbs very quickly and got my, my 6 figures, got my financial freedom, right? Because the old model is pretty broken. It's trading 1 hour of our life for a dollar, right? So what's the worst trade in life? Any ideas?

Trading your time for your money.

Yeah, exactly. Because we never going to know how much time we have, how long we have. And how much time our loved one have either. So basically the new model is leverage. Leverage is the number one key to success. In our model, we leverage other people's properties to make money, and then we leverage other people's expertise, like all the handyman, electrician, maid, they can do all that work. We don't have to do it. And then we know how to leverage other people's companies to rent from us. So that way it's not just vacation rental. I don't do any vacation rental anymore. I do corporate housing, which means I rent out directly to companies or I rent out directly to insurance companies that will pay, they will stay for months instead of days. And that will give you, really give me true financial freedom. I have helped hundreds of people from any background to achieve that 6-figure income working just a few hours a week. Yeah.

So let's pause here real quick because I think this is a unique model that people assume if you want to get into vacation rentals or Airbnb short-term rentals, you got to go buy a property, maybe fix it up. You put, you know, some new furniture and some new drywall and, you know, make it look nice. And then you got to go buy the property, right? You got to go put money into it and you got to go buy all the furniture and get the financing. And then you go and list it on Airbnb or whatever platform and try to get listings. But what you're saying is, is you're actually not owning any of the properties, right? So there's different names for this, but, you know, master lease agreement or similar names where you basically go and you negotiate with the owner of a property, whether it's a single-family property or multifamily property or whatever, and you're negotiating kind of a, you know, here's what the monthly fee is going to be. I'm going to pay you and then you go and drive additional revenue above that through the short-term housing rates because they're generally more than long-term housing. And you get to keep that delta. Am I thinking about that right?

Yes, yes, you're absolutely right. Very smart. Yeah. So it's master lease, or somebody can call it arbitrage. It's basically the difference between what we rent it for and what we sublet it out for.

You think about it, almost every retail business, a restaurant down the street is leasing a restaurant space and then they're turning around and re-leasing in a sense, or they're generating revenue from the people that come in the door and hopefully they're They're making enough to make a difference. So I think a lot of our audience are real estate investors and own real estate or maybe thinking about owning more. So I have a question for you as a real estate investor myself. If I'm the owner of that vacant home, or maybe it's, maybe it just went vacant and I'm really tired of being a landlord. And I would imagine that's probably your perfect avatar is someone that's tired of managing the thing myself. And you're going to make my life easier because you're a professional, you're a company. And you're gonna, and plus if you're in corporate housing, I'm not gonna have the partiers coming and going, right? So is the lease agreement I have with you, is it gonna in general be more than what I would get if I went out and went to a local property manager and just took in whoever they put in my place?

As far as the, the landlord, we're gonna be the best tenant. So one, we're gonna clean it every few months and we're gonna pay for it. Secondly, any maintenance under $200 a month, we're going to cover it. We're not ever going to bother the landlord unless something major. So we basically manage it for them without asking for anything except paying them more. And then the third thing is if we like the property, we even pay above market price, like $100, $200, something about $300. And then the other thing is we can even sign a 3-year lease instead of just a 1-year. I challenge any landlord, has anybody actually offer you all these things? If they are, they're probably my students, but.

So are you generally doing this on like single-family residences or is it a multifamily or kind of combination of all the above?

Yeah, so it's combination depending on the market. Of course, single-family will be the best. And then some markets are so tight and, you know, we couldn't get single family, we can do townhouses. And then some markets are really tight, we can do condos.

How do you manage properties that are not local to you? I think I know the answer, but I'm kind of teeing it up for you, for our audience that might not be that involved in the short-term rental space. But how do you manage that process? And when you say you pick the markets, I imagine you select the markets that are most conducive to your business model. But once you've done that, how do you manage the process?

Yeah, you'd be surprised how much like low maintenance this takes because the average stay, 3 to 4 or 5 months, right? And then the main person you need, just a maid and a handyman. That's it. They can do almost everything for you. And as long as you take care of them, which one of the secrets I always pay is overpay your people, take care of them, and they bend over backward for you. They do everything for you. So you can just treat people with very kind, with respect, pay them more. They will take care of the property for you. And I even have students who live in Canada and have 5 corporate housing in Florida is making like $15K a month for 5, 6 months that I've been in. And they've only been doing this for like a few months.

It's appealing to a landlord who maybe is positioned as a long-term rental. Right, that, you know, they just expect to get X amount per month from someone who's going to be there for a year and have some turnover expenses and they're covering their mortgage. But what you're coming in and saying, hey, I'm actually going to sign a 3-year lease. So, you know, 3 times longer than the average lease you're getting. And I'm going to cover some of the maintenance costs so you don't have to worry about that. So it's kind of a win-win for the landlord. You provide a lot of the furniture, because obviously the difference between a long-term rental and short-term is you're generally providing some of the furniture and, you know, the amenities and other things. So obviously there is some cost involved in this, even though you're not buying the property. But what does that generally look like? How much you put into a property and, you know, how much delta are you generally able to, to generate above what you're paying the landlord on average, would you say?

Yeah, sure. So it's first month's rent, First month deposit and then the furniture. So first month rent could be like $2,500. First month deposit is $2,500. It's about $5,000. And then furniture about $7,000 on average. We have the whole list of everything you need to buy come out to be around there. So the total cost going in is only $12K, but on average you make like $2K a month, you know, almost like right away.

You're going to the landlord, the owner of the property, and asking them to put that furniture in or that spend to make that spend up front?

No, we, we are gonna make that spend for the owner. Okay. Why did you? Yeah. Okay.

So you're, you were, you were talking to us as though we were people that were gonna do, do your program, like be students of yours. But I'm up, I was kind of asking from the, from the direct, from the perspective of being that homeowner that you or your students are going to approach and say, hey, we want to, we want to use your, your place for this. We want to master lease your place. You're going to come in with your furniture, your, you know, the furnishings and that.

Yeah. Whoever rented it is their business. So yes, they put in the furniture.

It makes sense.

Even rent the furniture too. So if they don't have a lot of money, they can rent the furniture for like $500 to $1,000 a month. And pass that cost on to the corporate housing. So basically here's the return. This is why this model is so attractive because for one home that you flip or rehab, you can do about 10 arbitrage and make about $20K a month. So about $240K a year.

If you're doing 10 properties, you're saying? 10 properties. Yes.

Yeah. So 10 probably cost you about $120K. Instead of like do like a rehab, whatever, it will probably cost you around $120K, right? A flip, right? Maybe even more, right? So instead of doing that, you do 10 arbitrage making $20K a month right away, and then you make $240K on year 1. Boom, boom, boom, right? And plus the second thing is you spread the risk out to 10 different deals instead of just put all your eggs in one deal, right? Right? And then it flopped. You put in 10 deals, even if 2 or 3 of them flop, you're still making good money. So, so that's, that's the attractive part. So that's why the return on investment is so huge on this. Because if you, if you think about it, if you put in $12K in and then you make $2K a month, within year 1, you make $24K. So that's like 200% return in year 1.

Break that down a little bit. So what you're saying is on a single property, you could generate $2,000 per month of net profit above what you're, what you're paying the landlord. Yes.

Wow. That's not including paying the, the cleaning or the handyman. Do you already pass that?

Yeah, that's everything.

It's just simple numbers. So if you're paying, say, your landlord $1,000 a month on a single-family property, you could potentially generate net $3,000 running it as a corporate housing or short-term rental versus what they're getting in a long-term rental. Is that just the simple math there?

Yeah, the simple math is rent is about, let's say, $2,500, and then you up that to company for about $5,000. Then you minus utilities, all that, the cleaning, you pass that on to the clients. All the other fees you pass on to clients. And then you make about $2,000 a month. Yeah.

So are your, are your clients or your tenants are typically companies, so they're not going to— they might have somebody coming and going, they might have 2 people in there at once, but they're actually your tenant as opposed to— well, I should, I should say this. What percentage of your business is the— where an actual corporate entity is your tenant? Versus a professional, like, say, a traveling nurse or something like that?

I'd say about 70, 80%. Oh, that's great.

That's— that's a great tenant, right?

To have a—

oh, yeah.

As your tenant.

Oh, yeah. They are the best tenants. I never guess how many evictions I had doing this.

Probably zero.

Yeah, exactly. And how— and we all know we've been— we've been doing real estate for a long time, right? How, how often does that happen? Happen with any regular tenants, right? If you do this anything more than 10 years that we have, right?

Yeah. So what's the appeal of corporate housing over, you know, vacation rentals? Because you said you started doing it in vacation rentals, but you've shifted, it sounds like, 100% to more of a corporate housing model, which is unique because most people get in the space and they kind of go after the, you know, vacation rental for the family and, you know, a hot area that people are visiting for tourism. So this is a little bit different because you might pick a different market that may not be a hot tourist market, but maybe there's a lot of traveling corporate travelers here. So, so talk a little bit about, about that, the differences there.

Yeah, absolutely. So a simple question: would you rather host 15 families and stay for 15 different weekends, or would you rather host one company who take over it for 3, 4 months? And the net profit is about the same, right?

Let me get back to you on that. I got to think about it.

Yeah. Run some numbers here. Yeah.

Yeah. And then, and then do you want to host them with, you know, vacation day parties? They throw events, they smoke, they drink, whatever.

No, I want the 12. I want the, I want the nurse or traveling executive that's working 10 hours at the office. Exactly. They come home and they're so tired they don't even want to turn the TV on. Right. They're not going to use the kitchen either because they're stopping to pick up something to eat on the way home.

So that is very true, man. You got it. You got a model. Yeah. Yeah.

And generally, like, there's kind of an arbitrage on length of time of a stay, right? So— or like the time of a contract. So if you have a 12-month contract with the tenant, you're obviously going to have the lowest, you know, per day cost or to the actual end user. And on Airbnb, you know, where you stay for 2 or 3 days for a vacation, you may have the highest cost per night.

Yeah.

And so corporate housing is kind of somewhere in the middle, my guess is, with, you know, 2 to 3 month contracts. But what you're saying is because of all your turnover costs, potentially with the cleaning, with the maintenance, with a little bit more maybe damage that you're dealing with on the vacation side, you may be generating more revenue on those properties doing vacations, but you actually come out about the the same.

Yeah.

With the corporate, because your, your cost to do that are less. Am I thinking about that right?

Yeah, that's, that's one, that's one part. The other part is vacation rental occupancy rate is usually about 40, 50%, maybe 60%. Right. Whereas, uh, corporate housing occupancy rate is like 70 to 90% because there's no gap in between, you know. Like, let's say they stay for 4 or 5 months, there's no, literally no gap in those 4 or 5 months. Vacation rental, go for the weekend.

What do you find to be the typical length of lease to these companies that you're leasing to?

3, 4, 5 months.

Yeah.

Okay.

But a lot of time they extend. That's what I love about this business. About 70% of the time they extend because constructions always take longer, assignment take longer, people delay, people get lazy, the weather, whatever. So, and every time I hear that, guess what I hear?

Cha-ching!

And without any extra work. You have any sense? I'm so sorry your project took longer, but yeah, I'd love to welcome to host you. So yeah, why don't you stay for another few months?

So how do you choose markets maybe differently than you would for a vacation rental, or is there any difference?

Vacation rental? Yeah, yeah, no, definitely different. So vacation rental, you just got to be destination cities, touristy cities, right? This you can do any, any major city. And we have our formula too on how you can drill in and look into it every little city. Right. But, uh, but vacation rental, you just got to be at the destination city and vacation rental, very risky. If you ask me, like with COVID most of the vacation rental company dies, right? Even the biggest companies. And I don't know about you, but if not COVID happened, I don't want to build my business on sand, you know? So good thing I was in corporate housing already. So we survived that. We only had like a 15, 20% dip because most of our tenants are long-term.

Are you looking for things like where there's a lot of business growth and that would be a good market? I mean, if you can, you share some of the, you know, just high level, like here's the kind of markets that are best, you know? Job growth, maybe.

Absolutely. So, okay, I'll share with you. Um, I like you guys. So the, the 3 H's rule, okay? Highways, hospitals, and hotels to start a general overview. So when, when two highways meet, right? Cross, across each other. That's where the most traffic, the most attention flow. Well, when two highways cross, there's a four section, right? Well, all the, some of the hospitals or hotels usually congregate into one of the four sections or two of the four sections. Why? Who cares? Okay. All I know is that I want to be where they are because they drop $100 million into a project. They done their research. Follow the whales and you get fed, basically. So you got hospitals, you got hotels, and it's the two major highways. I'm talking about major highway. In the big cities, you're pretty good. And then we can drill in and look at deal-by-deal basis, which our team will vet every single deal for you because, you know, our reputation on the line. We even guarantee that after 30 days, if you don't get booking and you follow all our stuff, I actually pay you first month rent. So that way you can just get out of that lease and find a new one. That's the only thing about this, it's very low risk. In any business you want to look what's the downside for us, right? In any business, what's the downside? You lose the first month deposit and one month rent. That's it.

So, so there's not a— there's not like a— I imagine you're the ones presenting the lease agreement to the, to the landlord. So there's not any other poison pills in that. You can break the lease, which is they get to keep your deposit in your last month.

Yeah. Yeah. But it's the concept very important because what I learned from Tony Robbins, you I spent hundreds of thousands of dollars with Tony, by the way, and actually millions of dollars into myself. But what I learned is asymmetrical risk to reward ratio. So anytime we risk 1, you want to win 5 to 10 in anything, right? So in here, we're risking a few thousand bucks to make what, $25,000, $30,000 a year for the next, let's say, 5 years. That's like $100,000. So it's actually a 1 to 20. Ratio. So you only need to be right 1 time out of 20 times to make money in this. And with, without education, without sources, we are right about 80, 90% of the time.

So you do have those cases where you rent a place, you move the furniture in and oops, nobody shows up or you can't find that worker. And then you just like pack it in and take your licks and move on. But you can afford that. That's kind of like when you run a convenience store, you have to account for employee theft has to be one of the line items. Everybody would like to think it never happens, but it's part of your business model.

Yep. Yep. Nothing is perfect, but this one is so low risk, guys. It is super low risk. That's why I'm so passionate about it, because I look at all the other models. I look at the BRRRR method, right? I look at the flip method. I look at the multifamily. Well, any of those methods require you hundreds of thousands of dollars or a full-time job, or even just wholesaling, go out there and find a full-time job. You know, this one only requires a few hours a week, making a six-figure income, and you're only risking a few thousand bucks.

Talk about that little piece of it, because I think for our listeners, you know, that, that's an important thing to understand. What's the time commitment here, right? Is this something I need to be doing full time? Is this something I can do on the side? How much of this am I outsourcing to, you know, another company that's managing the rental for me? Are they managing the rentals generally? Just talk about that because A lot of our listeners, you know, they're working full-time jobs. They don't have a desire to go full-time entrepreneurship, but they want to kind of build passive income.

Yeah, absolutely. So I have helped hundreds of people with full-time job making six-figure income working just a few hours a week, literally. And now they are free and do whatever they want to do. Travel one, you know, a few of them travel around the world for a few months, just take their whole family. So you can manage this anywhere around the world. Once you figure it out and build just a few team members to take care of everything for you. So literally just a few hours a week, uh, realistically in the beginning. Well, if they do this, if they try to do this by themselves without our help, I would say it's like a full-time job, right? But if, if they have my sources and they have my help with all the script and everything laid out, about 5 hours a week, you know, maybe 10 hours in the beginning if they want to learn. Right. And then after a month, they should know like most of it. And then it'll reduce that down to like 5 hours a week.

Interesting. Yeah. I would imagine too, it's, it's less ongoing management because on Airbnb, if you got a booking every new week, you know, you've gotta get the cleaner in there. You gotta update the listing. You've gotta do all the things to make it, make it ready for the next person. And this, if you got 3 to 4, 5-month stints at a time, there's not a whole lot of turnover and churn of the property. So there's, it definitely makes sense on a lower amount of time. So how do you find a corporate user, right? A corporate tenant that, to me, that seemed like the big challenge here. How do you, do you have networks of, Are there agencies that help place corporate people in these housing? Is it you go direct to the companies to, you know, help them, or is there platforms? Talk about that a little bit.

Yeah, sure. So I've been doing this for 8 years, so I have a lot of relationships. There are platforms, there's agencies, all that. We went through so many of them and we have weeded out all the, you know, scammers, all the tire kickers, and really got the best of the best that actually pay, legit companies. That actually, you know, have clients for us on a regular basis. So that's why I built this whole system and plug and play all my students into this ecosystem, all the sources that I have, so that way they can just get booking right away. Now, some of these companies are like IT companies, right? Construction companies. There's also one huge, one of my favorite is insurance companies. Insurance housing. So families need a place to stay when their home get damaged, right? Uh, hurricane, flood, tornado, whatever. Where are they going to stay? You know, they don't want to stay at hotels, so they stay at our properties. So that is a huge thing as well, because insurance will pay for that. And most people don't know that, right? And then there's relocation company for executives who relocate into the area, and the company will pay for that as well. If people want to find on their own, they can contact usually the human resource department. Each of these companies or hospitals and just introduce themselves and tell them this is what I do and start building that relationship that way and trying to find clients that way. Yeah.

Got it.

Very cool.

This is a cool model. Definitely has some very compelling aspects to it. So what's the best way for folks to learn more if they want to kind of check out what you're doing?

Yeah, so you can go to beyondbnbsecrets.com. Once you opt in there, we will give you a 1-hour consultation from my top advisor to see if it's a good fit for us to work together. If not, no worries, right? If it is, at least they give you a game plan of what to do next, how to approach it, and answer any questions that you have. The other thing you can follow me on social media is @drchauBnB. D-R-C-H-A-U-B-N-B. B&B, uh, you know, Instagram, Facebook, all of that. So yeah, just follow me and then we can go from there. We actually have a live class every Thursday night, beyondbnbsecrets.com/live. You can go on there and I'll be there live. So, and answer the questions and go over more details.

Awesome. Well, thank you so much for sharing this. And, uh, hopefully our listeners enjoyed hearing about this cool strategy and leveraging these housing units for corporate users. And thanks so much, Dr. Chow. Thanks for coming on.