How Much Can You Make With a Tiny Home Airbnb?

Imagine buying a piece of land for 140k and then cash flowing $550,000 off of it in your very first year. Does that sound like, I don't know, a superpower? Or perhaps it sounds like a little bit of fiction. I thought the same thing, except I happen to know a guy out in Waco, Texas, who did exactly that. So I figured, let's go out here and ask him ourselves, huh? I own a bunch of Airbnbs and we make a couple six figures off of them, but they don't look anything like place. I gotta be totally honest. And so I want to figure out all the tips and tricks that actually lead to this being a million dollar a year property. There's details all around, from the toothpick set up like this, to the coffee mugs, to the little chocolate chip cookie that I already ate. So I can't show you, but I want you to take it away too. Because what if we all give everybody better experiences, but we also make more money doing it? He turned a literal plot of dirt into an Airbnb hotel that's now booked out 95% of the time. No big deal. And so I figured, isaac, why don't you tell me all of your secrets so I can share them with my closest friends on YouTube? So you were 25 years old, you decided to buy a property for 140k. This here property, then you turn it into short term rental, made about a million bucks a year, all within the first year. Does that sound about right?

Yep.

And then you did this extra thing that also sounds ridiculous, which is that you automated the whole property. And so essentially you don't have to be here all day slaving away. You kind of look at your phone and a couple different things and bada bing, bada boom, people come in and check in.

Yep.

And before this, you had never run an Airbnb, right? You didn't go to college.

Nope.

And you were an accountant.

That's right.

So naturally, he went and built a multi million dollar Airbnb. Kind of astounding. Tell me why this?

I was collecting ideas for the modern Scandinavian vibe. I used to live in the Pacific Northwest, and there's a lot more of this kind of architecture there. And when I moved back, I really saw an opportunity here to bring that same vibe to Central Texas.

Isaac, how long did this take you to do?

9 and a half months. From closing the purchase docs to. To opening the doors.

When you first had this place, it was basically like an overrun jungle that looked something like this. You picked this place out of all of them on Zillow and saw this. Talk to me about like that first day you showed up. You got your 140k down that you got your dad and some brothers to invest in with you. Right?

I think I've always had some ability to be able to see potential. The amount of trees that we had, these gorgeous live oak trees. These are just the flagship tree of Texas. I just had that feeling when I saw this place.

Must have had like 72 dump trucks here.

200 dump trucks.

200. He does my kind of math. This is contrarian math.

I was the superintendent and did some of the stuff myself. I was designing, I was coordinating with subcontractors, ordering materials. Thinking ahead, I hired friends with excavators, skid steers. We brought like, yeah, 200 loads of dirt in for the roadways. We had to cut all the utilities in because it was just raw land. Put a septic system in. There was a lot of groundwork.

So let's talk cash, because this probably cost something.

When we closed on it, I was like, we're not waiting around for financing. We'll get that part figured out. We're on a timeline here. We were able to immediately start work and some cash I had saved up. Four months later, I actually got a construction loan approved. So total construction loan was like 1.4 million.

Nailed it. So you basically are only in for a couple hundred K between you and your family and then whatever your line of credit is. So it's not a multi, multimillion dollar endeavor.

Yeah, 150k of cash and another 700ish in the line of credit. And the rest was a just short term construction.

I love it. This is one of those really important things to understand that it doesn't have to be millions from you, doesn't even have to be hundreds of thousands of dollars from you. The key to actually running some of these businesses is understanding how to get OPM, other people's money and leverage, which is debt in an intelligent way. This guy knows a thing or seven about that. Do you want to know the one key to business that's just really one thing? Whether you're an Airbnb, whether you're in finance or anything else that you do. And that's making your customer have magical moments, those little milliseconds where they feel surprised, delighted, confused, overwhelmed by your product set in a good way. That's really important with Airbnb because what does that mean? It means they tell other people about it. That means you get free referrals, which means you don't have to do paid ads, which is a whole different game. So Isaac has a really cool idea for this that he's turning into a magical moment in his Airbnb.

So we created this commons area that has pergola and a fire pit and a dock and kayaking and swings. After we opened, the idea kind of just flashed off like a light bulb in my mind. We should do a pool. There are these container pools that take shipping containers. And this is going to be a 20 foot by 8 foot black. So it matches the aesthetic of the cabins. And so we poured this concrete right here. And on Tuesday, we're gonna drop a container pool in right here. It's got a big 10 foot glass window that overlooks the lake here. Then we'll have another thing we can add to the experience for people to come enjoy.

First of all, who isn't into like those zero edge plunge pools? And then you get to have it in a shipping container, which probably doesn't cost you hundreds of thousands of dollars. How much does this thing cost, by the way?

It's about $50,000.

Okay, so we got 50k in cost. We're gonna sink into this. What do you think your ROI is? How do you decide whether to spend Spend on something like that?

Another part we just added, I didn't mention is hot tubs. So we just added a hot tub to each cabin. Those were about 10 grand each tubs about 50,000 each. So that's a total add of about 120,000. And I upped the nightly rates to buy like a hundred dollars a night. Zero impact so far in our pace of booking right now. That means we're going to pay off in about eight months.

Oh my gosh. So cash on cash return. How fast are you going to get your money back for putting your cash down on something? Typically when I look for an investment, it's got to be three to five years now. Interesting in Airbnb land that you could have something returned that quickly. Do you typically look for a specific cash on cash return when you're doing big ads like that? Do you need it back in a year or.

I don't actually drill down too hard. I've been playing around with like pay per click with social media. Organic is my big push because I actually want an organic following collecting emails. I'm developing a really robust automation with tons of emails to leverage what we have there. The other way I look at it is we're building a moat as Warren Buffett would say so even in recession, if we do have to lower our rates, we've got amenities that nobody else has. And some of these things like the pool, it's an economy of scale. Every one of the guests at the seven cabins can use it. We're not having to multiply that times seven different units.

Well, I get concerned. I own a bunch of these bad boys. If a recession happens, they're going to get hammered. But you have some takes on which ones are not going to get hammered. Which ones are those?

Yeah, anything that's actually designed cohesively and uniquely in the market that you're in. In the Pacific Northwest. This is going to be a lot more common in Waco or Central Texas. That's a lot more charming and unique. I think experiences actually providing activities, amenities, a dock, there's kayaking, there's paddleboarding. Actually, I think a recession, who knows time's going to tell, but is potentially going to benefit us because within two hours of like 15 million people and in a recession, a lot of those people that would be going overseas for their trip are going to be taking a shorter staycation. So we just have to educate them on who we are and what we are and how unique it is. And they're going to come. They already are. But I think we're going to see more and more of that.

Yeah, I think you're right. You know, I was looking up the numbers. There was anywhere from 3 to 7 acts more local travel during recessions. And so if we take that idea of you have something here that is three things. It's accessible from a price point perspective. It's not crazy, but it's experiential in that there's this cohesive element you talked about. You feel like this is a live oak property when you come here. Third is it's. It's local enough to a big metropolitan area because I mean, Waco does not seem like a massive tourist destination. But like, I like the idea of hanging out here with my fam and like beating Isaac at fucking. Did you see that? Can we all just let out a giant sigh at the fact that the tax season is over with for businesses, there's like this secret that maybe you don't know about running a business, which is if you buy a business, most of those businesses have no books. They don't actually have P. Ls, they don't actually file taxes correctly. Half the time it is a mess. But there's a solution to that that I found and now I try to make all of our portfolio companies use it and their name is Bench. So anyway, the coffee talk is that these guys automate the bookkeeping P and L tax filing process and they do it all online and they make it super easy and they give you this nice clean P and L and you don't have to pay a bajillion dollars. So. Thanks, Benj. Let's talk about shared spaces and communal spaces. I feel like in a world in which we're increasingly on these things nonstop and not engaging like this with other humans, creating moments for people to connect sort of asynchronously and without you having some like, you know, glorified happy hour or something is really unique. So what did this cost for you to put it together and how did you about creating this space? What are some tricks and tips you have there?

Yeah, so we were originally actually going to put a cabin right here in the commons area, but we sort of sacrificed that idea with the. When we thought about the amenities that could be a communal space for everyone, it cost us about 50 to 55,000 for the landscaping, the pergola, et cetera, the dock. We wanted to incorporate as much as possible. Families, I would say, are our target audience, though we can host a huge spectrum. I just thought of like, okay, what are things we can incorporate? Swings. We could have a hammock for dad to sit and read in. We could have kayaks for the teenagers to paddle around in. We could have cornhole. We'd have a picnic table. We'd have the campfire to move towards at twilight and whatnot. So we really packed a lot into this space on a pretty low budget. And I've been shocked at how many people utilize it and other families and individuals overlapping and coming together, random strangers becoming really great friends here.

Group events. So you do group events here, but you do them in a way that's kind of low maintenance for you. So talk us through how you do that, why you do that. You could probably charge 10x the premium, but you've decided to do a certain way. What's the deal?

I'm keeping the whole operations and management overhead as low as possible to make this as automated as possible. And so we essentially have no overhead except a random maintenance check and landscaping. We allow group events. We have a listing on our website where you can essentially buy out the whole property. So all seven cabins. And then this just sort of comes as a bonus. And so we've had weddings here, corporate off sites, several family reunions. And I've. I've really been shocked at how, how much interest there is for the whole place.

You try to keep this reasonably priced. That's not something a lot of business owners say, right? They're like, I'd like to increase prices continuously. What's your thought process behind that?

I think it's relative because I've definitely heard complaints, oh, you're so overpriced. So you have to find the happy medium of who you're trying to please. You can't please everyone. That's the first thing I wanted to be affordable for middle class families to come out and at a really elevated experience that frankly, some of these people have never even had. And therefore build a super loyal, organic ecosystem of guests that just comes back and back and back. And like you said earlier, they become your greatest marketing mouthpieces. So we've had people since opening seven or eight months ago that have come back three, if not four times already. Shows a sense of the loyalty that we're building.

Ah, I love that. So you get pretty chummy with influencers and partner with them for this property. Said influencer. That's basically grown your social media in a big way and led to a ton of bookings. Most people are not thinking about that for their Airbnb's. They don't even have their own Instagram. What's the thought? And break me through that crazy story about the first one you partnered with and how much you got from it.

So it all started because we got suspended on Airbnb like a couple weeks after we opened, which I thought was the worst thing that ever happened. Ended up being one of the best things that ever happened because it really was a reality check of where the direction of our marketing was going and not being reliant, overly reliant on one platform. So I just started calling all my friends, didn't know anything about social media at all. He started posting high quality content. Somebody said, hey, you should talk to these travel bloggers in Dallas. So I gave him a call and they said, yeah, we'll post it tonight for 950 bucks. We'll post a giveaway. Essentially, the rules are, you follow my account and you follow his account and you'll be entered in for a. I think it was a two night stay. So I paid him 950 bucks, gave a two night stay away. And from the first giveaway, I got about $40,000 of direct bookings and like 5,000 Instagram followers from zero. And when that happened, that was like a eureka moment for me. I was like, we have struck gold on where we're headed. So then it was actually pretty easy from there. I just, like started following the crumb trail of all the influencers I could work with. There were some hits and misses, but for the most part, I started figuring out who it was that I was I was going after. And yeah, we grew from zero to 50,000 in seven months. And no big deal. We've gotten like 400,000 of direct bookings just from social media, Instagram as the funnel.

What? Isaac. Okay, I need to talk to these influencers because what a killer strategy. He gave them 950 bucks. They basically 10xed their return and more in 24 hours. Not to mention the fact that they probably grew their followers in tandem with his. It's a brilliant strategy. Nobody's using it except this guy. And don't let the smile and the blonde hair and the very, you know, American lookingness for you. This guy's smart.

I didn't tell Cody about the real duds that I had. I had like, probably 10 or maybe 15% of the influencers I reached out to fooled me, and their following was actually fake. And I didn't do enough due diligence. Basically just checking their posts and seeing how much engagement there was. So most of them I didn't actually have to pay, but I wasted a few free night stays on them.

The other part that's really cool is you don't have a property manager. I pay my property manager 25% of everything that I earn in my Airbnbs. But you do it all in house in a super automated way. Walk me through what that looks like.

Yeah, it's pretty cool. So there's about six or seven softwares that we've stacked together from the property management software like the Hub, and that coordinates calendars between platforms. So Airbnb, your direct booking engine, VRBO, all the different OTAs, and then it also automates messaging. So you can come up with pretty sophisticated sequences for everything from the reservation creation, to check in instructions to check out, ask for a review. So I've really fine tuned those over the months since we've been open and eliminated a ton of unnecessary human input there. And then we have a pricing software, so it uses AI and some parameters that you set to maximize occupancy and revenue together. That's done really well for us. We're like 95% occupancy.

That's huge, by the way. Just so you guys know. That's a lot. You're one of, like, my favorite type of entrepreneurs. The very driven but Lazily efficient type of entrepreneurs. He's got some big money energy in this thermostat. Basically this is automated so he never has to worry about should the temperature be up, should it be down, am I wasting electricity? He has everything on a system that holds saves energy, also makes the experience really, really cool. And it's not just thermostats, it's also lights like these bad boys which are all on a time control system that he has perfectly completed. Basically because he slept here and would feel what would it feel like to be a guest? And wouldn't it be lovely if they just dimmed in the evening? So he dimmed them. Smart.

Everything inside that you're interacting with that talks to the property management software so it knows when reservations are. It plugs unique codes into the messages to get in the doors that only work for the reservation. It adjusts the temperature to my pre selected range, saves energy in the ops time. The lighting only comes on from the certain hours which is programmed around sunset, to such and such. So it's really, really efficient. What you have to be aware of though is that it's illusion to say you can fully automate your property. But it's about finding the balance between personnel and software. And I would say our ratio is like 80% software, 20% personnel. So we've split that between two key people. We've got a guest communications manager and I pay her 200 bucks a week and all she does is just monitor incoming and outgoing messages and sometimes she has to get invol. If there's a unique question that we don't have addressed in our automations. And then the maintenance manager, so he's just here every day, eyes on the property, boots on the ground. If I'm in Europe, he's here to see whatever's going on and coordinates, landscaping, contractors, etc. So it's totally hands off for me.

Sometimes it's the little things. When you see a sign like this, oddly, humans have this thing in our minds where we associate with first impressions. A feeling of luxury, a feeling of cheapness, a feeling of validity. And I never thought that signs would be that important for something like an Airbnb. But you did. And so what's the story behind even the details you do in the signs?

These small details, like you said that a lot of people would brush past and sort of raise their eyebrows and say why are you spending so much on signs? But sure enough, I've received hundreds of comments. Design is just beautiful and it's so cohesive and minimalist. I think there's a quote from Steve Jobs when he was designing the iPhone about the packaging being as important as the product and this beautiful tactile experience. You could apply the same thing to the sides for your cabin.

Dirty. What happens on the Internet, Isaac, and I'm sure you've already seen this because you had this viral tweet happen, is that you tell people that you automate a property, that you make hundreds of thousands of dollars, and then first they go, liar, no, you did it. And then second they go, you're taking advantage of people. And you're like, no, I'm not. I'm providing incredible service that people are really happy about. And one thing that I think really humanizes your story is you had a pretty nasty fall that led to you having to not be involved in every aspect of that and prying your little control freak hands off of it. What happened?

About three quarters of the way through the project, I was. I popped into one of the cabins one day to help somebody install a spiral stair, and my ladder fell out from underneath me. I fell like 8ft on the concrete and broke my pelvis. But I found myself laying on a hospital bed for a week. Multiple surgeries, and it really shook up my perspectives. This actually helped me, I think, like you said, make the business more efficient and really focus on the family, the time away from work.

I think there's one thing that's really important for us to talk about anytime we talk about building businesses is building businesses is really about serving humans, right? And the Airbnb has gotten a bad rap lately. Airbnb has gotten a rap of taking away people's houses, but what about giving people an escape? You were in your house during Corona. Were there moments where you wish that a stranger might open up their house for you might create a special magical moment for you and your family? And I think it's those moments we as humans, as Americans have to remember, number together that people like this guy decide to do for all you. Let's play a game of where should we put AirBnBs in the world? Why'd you choose Waco? Besides, you're from here. Tiny little bias. But also you had a bunch of other drivers that I think are super smart. So give me your framework.

So Waco is, first and foremost, very centrally located in Texas. Texas is a really big state, both geographically and as far as population. And it's just constantly growing. More and more people moving here from California, New York, etc. It's not naturally the most beautiful state that's I think, actually coming from a hardcore Texan. So it's okay for me to say that, but my idea was, let's find an area that's not so pretty. The land is cheaper, but we're in proximity to a lot of people who want to take a staycation or vacation and then create something that feels like its own little world. We chose Waco. We're two hours from about 15 million people coming here to get away from Dallas, Austin, San Antonio, really the whole state at this point.

Well, also, I think there's a couple secrets here, which is you got a university that's a huge draw. Right. Then you've got that proximity, the big cities. And so you have sort of these, like, attractions that come to it as well. Let's think about where else in the world we would we or would we not put an Airbnb? I'm gonna throw out some names and you tell me yes or no. Okay?

Okay, fair.

Let's start with a few. I think I know what he's gonna say with this one. Rob Bilt might be mad. Joshua Tree?

No, for me. Why? Overcrowded. Everybody's doing that. It's a cool thing to do.

How about Smoky Mountains?

Nope. It's like the highest concentration of Airbnbs. And so the pro is you always have the insurance policy of the park, but the con is standing out is really hard to do because there's like 15 million others.

Yeah. Plus Disney itself. Kind of hard to stand up to.

Fredericksburg Furniture. Yes. Love it. Yeah. Honestly, Texas, I'm just going to give you a hint. Is very warm. So most places in Texas I'm going to like.

Yeah. What about San Diego?

Yeah, I think San Diego is prime for it. Really nasty hotels and kind of off the beaten path a little bit, but still within proximity to a bunch of people. Absolutely.

Yeah. If you got one in San Diego, tell me. I'll come. I want to come check it out. I love San Diego, but Airbnb is not the greatest. How can you tell if somebody's a perfectionist? Voila. No OCD in this establishment. A couple things I thought were cool when you were talking to me about this place is you were like, we bought everything online, basically. At first you were like, all the furnishings, we, like, basically bought them online. But I remember there was one thing that you were like, we bought so many of them, and they were never good. Do you remember what that was?

Pillows and rugs.

Yeah, exactly. So why is that? Because that's actually really important. Shipping back rugs. Huge pain. Often can't do it. And even pillows are sometimes non returnable. So what was the deal and like what do you do instead? Where do you recommend getting those? Because those really tie a room together.

Absolutely. They're super important as just those finish. It's like the last 5% does 80% of the work. But yeah, like the pictures were super deceiving. So there'd be these prints and textures. And I was like this is exactly what we want. We get it. And it was print like screen printed on to shiny. It was just awful. So it was so bad that like I would return some of these pillows and they wouldn't even take them back. They would just like say just keep them, we'll give you the refund. So it was obviously junk, but World Market was really great. And then I actually kind of. I went with CB2 West Elm.

Isaac, should we tell about the giveaway?

Yeah, let's do it.

Okay. We are going to fly one of you lucky people out here to stay in this place for two nights for free. Don't sleep on this or you're not going to be sleeping here. You should be on our next video. Make sure to subscribe. It's gonna be insane. I don't think you're ready for it. You know how insane it's gonna be? This high kick stain. I don't know if that was intimidating or not because my videographer is now laughing hysterically at me. Which is fine. It's not like I have PhDs or MBAs or you know, I'm super serious. But you should be on the.