Turn Your Vacation Getaway into a Money-Making Haven!

Good day, everyone. Welcome to the Raise Capital Legally podcast and YouTube channel, where we talk about topics of interest to real estate syndicators and fund managers with an opportunity for live questions and answers before we sign off. I'm Krystal Young, the co-host and business development director for the firm, and this is Kim Lisa Taylor, attorney and founder of syndicationattorneys.com. Now, before we get started, please note that audio and video from this event will be posted on our podcast podcast platform, YouTube channel, website, and social media and will be made available to the public. You can go ahead and ask questions at the end of the broadcast by raising your hand or typing it in the Q&A. The information discussed during this event is of a general educational nature and should not be construed as legal advice. And today, please join us as we sit down with real estate expert Michael Parks to explore how you can turn your vacation home into profitable investment. In this episode, they— we will cover the essential steps to start renting out your property, how to maximize rental income, and the key strategies for balancing personal use with generating profit. Whether you're just considering purchasing a vacation home or you're looking to optimize an existing one, this episode will provide valuable insights on how to have your getaway pay for itself.

Hello. Hello.

Hello, Michael.

Hey.

Oh, we're super excited that, uh, we get to talk about this. This is part of our Beyond Multifamily series. Um, so we've been, uh, interviewing our clients and guests that are doing things other than multifamily real estate because, you know, we know that's a super popular asset class, but there's cycles in the markets where it's hard to find deals. And, you know, so what do we do in the meantime? We're still real estate investors. We still want to invest. There's lots of other things that we can look around and see and, and do. So we love it when we've got somebody who's been successful doing something that we think our audience could benefit from. And this one is near and dear to my heart because we have 3 homes, and when we're not in them, we rent them out. So same thing. I will tell you the pros and cons of that at some point along this, because there are benefits, but there's also a little bit of detriment that goes along with that. But for the most part, it's been a really great and positive experience. And other people are paying for our mortgages while we're not there. We love that. And it allows us to live in multiple places. So, Michael, tell us about you. What's your background? How did you get started in this asset class?

Yeah. So, well, thanks for having me on. First of all, glad to be here. So my background, you know, my first foray into real estate investing was through buying a vacation home and renting it. And that's what we'll ultimately talk a lot about. But just to kind of round out my background from there is I did, like a lot of people, I went into rentals in general, right? So I bought apartment buildings, I bought them myself. And, you know, rented them out, eventually got a property manager to run them. That was helpful. And, and then discovered multifamily syndication and started becoming a multifamily syndicator. So I was a multifamily syndicator. I still am. But as you pointed out, the deals are hard to come by. And so we haven't done a deal in multifamily for a few years now. And we said, all right, well, where is there opportunity in the market? And certainly short-term rentals is one of them. But there's also— we really like the lending space. And so ultimately, you know, I can talk a little bit about that when you're ready, but we like to do private money lending, hard money lending.

Okay, that's fantastic. So you kind of saw it as a niche that you could get into, you know, kind of in the between times of finding multifamily. And honestly, that's what we did too. We had a syndicated property and then we started buying properties in different locations just mainly because You know, we had family here and family there and, you know, we wanted to go there and, you know, things like that. My goal in life has always been to live where other people vacation. And so, yeah, you can do that. So we're excited to hear more about it. So what, you know, what kind of steps do you have to do? So you have a house in a location that you think would be suitable. There's— we do midterm rentals. So there's short-term, then there's midterm. Could you maybe define?

Yeah.

For our audience? Yes.

So I think short-term rentals typically are considered 7 days and less, uh, and if you average 7 days or less, uh, from a tax perspective, that it actually— and I'm not a, I'm not a tax attorney or CPA, but I believe it does qualify, uh, differently as a short-term rental from tax purposes. Um, and then I imagine midterm is, is, you know, more than 7 days. You're probably doing more like monthly rentals, um, in the midterm. And then your standard rentals, of course, are, are year leases typically. So, um, yeah, that's, that's probably the way to look at it. And you had mentioned, you know, you have a place. I think sometimes it's like, well, where do I buy a place? And you said, I love to— I want to live where people vacation. I love that. And, uh, I, I totally buy into it. But what's interesting sometimes is, uh, vacation places can be very seasonal. And I'm not sure where you are, but up here in New England there is a ski— you know, for me it was a ski house. There's a ski season, pretty short in New England, and then there's a summer season, also pretty short. And then the shoulder seasons, really there's not a lot of, uh, you know, demand. So I think that's an interesting thing to look at when you're finding a— or looking for a rental property, is to think about seasonality.

And what we found is, you know, it, it really doesn't matter where you are, even if, as long as you're in, you know, an area that's desirable and, you know, it's not a blighted area or something like that, you'll get people that want to come there. Even we used to have people that would come because, you know, somebody was getting married or, you know, because they're looking for a home in that area or they're there to take care of family members and, you know, some event. And, you know, so we would get a lot of people that would come for those reasons. And Even now, you know, for instance, our house in Florida, we have somebody there who's— they were buying a house and the house fell through and they had to have a place, but they sold their house, so they had to have a place to stay in the meantime till they found something else. And, you know, so it worked out great for us, you know, and for them, and they ultimately found something and, you know, and we're getting ready to go there. So that works out. But yeah, so what, what kind of steps do you have to do to turn a vacation home into rental property?

Yeah, so obviously finding the right places is important. And if you're not already in the market and understand it, I think a good property manager can go a long way in helping you to understand, uh, the reality of what you can expect for rents, what you can expect for occupancy, and As I mentioned, the seasonality in my area was significant, and that was something that, that was super helpful to have a property manager trying to talk me through so I could build my numbers the right way. And, and, you know, successful property rental property business always starts with understanding your numbers going in. And so I would say it starts there. And then, as far as optimizing it over time, Airbnb and VRBO generally have now— they've taken over, right? So that is the key to marketing and so getting your property out there. And so you got to be on both of those platforms. And it's a heck of a lot easier now than it used to be. Before they were so popular, it was a lot harder to market and you really had to rely on property management, different websites and all that sort of stuff. So it's gotten a lot easier that way. And, you know, the other thing is that I would say just to optimize it, your reviews really matter. Reviews matter a lot. And in order to get great reviews, there's a couple of strategies there. One is making sure that what you're presenting is what you're delivering, right? So your pictures have to be great, but they also have to be real. And if your pictures aren't showing what your guests are going to see when they show up, you need to improve the property. You know, I think probably many people have had the experience. You go into an Airbnb, yeah, it looks the same, but why is there cobwebs and an inch of dust and dead bugs in the lights? And like, clearly this place hasn't been fully cleaned in a year or years, right? Even if the sheets were changed and the floor was vacuumed. So like maintenance to make the place look the way you would expect after seeing the pictures is really important to get good reviews ultimately, right? You want the good reviews. So I think that's really important. And then another thing would be just how you interact with your guests. So whether it's you personally or through a property manager, being super responsive, being polite, being helpful, providing kind of above and beyond information, local information. A lot of people, they're there because they don't know the area. And when you give them your favorite restaurants and how to go find the free you know, trolley service if that's available or whatever, you know, all those kind of insider local information type things. Very helpful. And then I guess the last thing I'd say on reviews there is ask for them, right? So as somebody's leaving, ask, say, hey, I just left you a great review, you've been a great guest, and I hope you do the same for me. If there's anything that you saw that was not what you expected, or I could have done better, please let me know directly. And that way they can give you that direct feedback that's not public and know that you're open to it. And so asking for great reviews, even going so far as to say, you know, we're looking to maintain our 5-star rating, or, you know, so 5 is what we strive for. That makes some people who are like, yeah, it was okay, I'll give it a 4. No, no, 5 is the accepted standard that we are looking for. And you'll see that your reviews will be improved.

Those are really good tips. Yeah, I do remember we had this poor woman went to rent our house in Florida one time, and of course we hadn't been there for a while. And she said, well, there's like, you know, water gushing out of a pipe and running down the driveway.

Oh, no.

And, you know, the bug guy had been there and she's like, yeah, there's like dead bugs. And it was just a really horrible year everywhere for bugs in Florida. And it's like, yeah. So we had the guy go over and talk to her about what was going on. And, you know, we had Local property manager that went and, you know, got to her, you know, helped her, like, you know, get oriented to the area. She was looking for a house, so she introduced herself. Look, I can help you find a house if you want. And then the neighbor, like, came over that day. And so we took care of everything. She stayed for a month, and then she left, and she came back. So something right, because she did come back. And, you know, but that day it was just like, oh my God, could anything else be wrong? You know, they were just like Oh, and the AC wasn't working.

Oh boy. Yeah. Well, you got it all corrected pretty quickly, it sounds like. So she came back.

Within a day or two. And I mean, we got the AC fixed that night. So it was like, oh my gosh, this is just a poor disaster. I feel so bad for her. But she ended up giving us a great review and she came back and she was a great guest. So, you know, you can redeem yourself, but you really got to kind of— but, you know, sometimes you just don't know, you know, so you've got to make sure that your people that are there are informing you and going over frequently enough so they can look at it and that somebody's walking through before they actually go there, before they— the guests arrive, right?

Yeah, that's helpful.

But I've stayed in Airbnbs and, you know, for the most part they were all really, really awesome. But I do remember one in San Diego a few years ago and they were not responsive. I didn't know how to get in. Like, there was all these, like, things. And then I was coming from East Coast to West Coast. And so I was— I woke up at like 4 in the morning or whatever at the time, and there was no coffee. There was no coffee. So I was like, what am I going to do? And I'm wandering the streets of San Diego at like 4 o'clock in the morning looking for like an open coffee shop. So, oh yeah, really, it's important. You know, that wasn't necessarily safe for me.

A Keurig and a handful of K-Cups go a long way on day one. So yeah.

Think to look when I arrived.

Right? You've got to leave toilet paper, soap. You've got to leave some paper goods, like some paper towels, things like that, because, you know, it's going to be a day or so before people get oriented and can go out and, you know, start supplying themselves. So you really need to leave them some basic supplies so that they don't— and especially if they're only going to stay a few days, you know, they don't need to be buying paper towels and toilet paper for your house. Just provide it, right? I mean, what other things do you think?

Absolutely.

You suggest people should provide? Or what do you—

Yeah, like the whole welcome pack, to your point, the paper goods and the starter coffee set and the soap. Usually, you know, bathroom got the, the tri shampoo, conditioner, body soap, all of— yeah, all of that. And we don't go too extravagant. I can imagine if you were doing monthly rentals, you may want to consider some kind of a welcome basket type of thing, but Yeah, that's not something we do.

So we've left like a bottle of wine. I remember staying in one, one time where they left us like a whole spaghetti meal, right? Awesome. They were pasta. And it was like, well, that was really cool, you know? And I don't remember if we used it or not, but it was just really kind of like, wow, that's a really neat touch. We had never thought of that. So it was really just making people feel welcome and at home and, you know, like they don't have to rush out and, you know, first stop grocery store before they even get there. And you kind of Kind of leave some basic stuff too, like salt and pepper and, you know.

Yes.

Right.

Yeah. And, you know, over time, usually I find that condiments collect because people will want whatever their oregano, whatever they want, and they leave them. And generally that's fine. You know, we have rules around, you know, you can leave dry goods, no open perishable foods, things like that. Nobody wants to walk into a half-opened a pound of bacon or something like that, but certainly things like condiments. And, um, and even, you know, people will leave unopened sodas or beers or wine that, like, they can't travel with the liquids and they don't have room, so they leave them. And, you know, that— and that's fine too.

So actually introduced to, uh, unfortunately, uh, the little, you know, Starbucks cans because somebody left them behind. And then I was like, oh my God, I love these, you know. Yeah, that's, that's kind of It's fun to get introduced to that kind of stuff. But all right, so you mentioned how to make sure the numbers work. What's the best way to do that? Is there some kind of underwriting program? Do you use an app or something to figure it out?

Pretty basic for me. It's Excel, right? And it's, you know, it's for me, it was really just you figure out your rents, you multiply them out, you start laying out your costs. It's very much like multifamily underwriting, which I know many of your listening audience knows about. It's a lot— it's actually simpler usually because it's not a big multifamily property. So I actually use a model that I have available, make it available to anyone who wants it. It's a small multi-underwriting model. So I used it for 1 to 4 units. You could use it for some more, but it's less about cap rates and refis and all of that. It's more, you know, it's what I used when I was just buying my own apartments. And so I use The same thing, the same model. I just adapted it for short-term rentals. And instead of having a unit with a specific rental rate, I said, all right, a unit at high season, a unit at low season, you know, and just put different rental rates in and then adjusted occupancy accordingly. So it's not overly complicated. I think the biggest thing is understanding those rental rates and then your expenses. You probably will understand from, you know, what is your water, what's your electric, all of those sort of things. And your property management fee can be a big variable. So understanding if you're managing it yourself, if you're using a property manager, what are their fees going to look like?

So let's talk about that for a minute. So you said figure out rents. Would you just do that by looking at other properties in your area on VRBO and Airbnb or—

Yeah, I mean, I think VRBO— I know Airbnb has a rental property estimator. So, you know, I usually like to triangulate with a few things. So rental property estimator, Airbnb, look at similar properties. Sometimes when you buy in a community, there's a lot of very similar properties, like they're almost identical, right? So that's a good way to look at it. And then if you are using a property manager, they'll just tell you, like, they'll look around and they'll be like, I can do $1,200 a week for this or whatever it is, right? So a few different inputs to get it right.

Yeah. And then I think there's something else called AirDNA. Have you ever used that?

I haven't. I've heard of it. Yeah.

Yeah.

You want to tell us about it?

Well, yeah, I— so I was looking at a property that I was interested in buying in St. Augustine, and it was really cute property. But when I— so I got this subscription to AirDNA so I could look at it. It turns out that I didn't know that I had signed up for 180 dollar a year recurring subscription, but they were gracious enough that when I noticed it yesterday, they refunded it.

Yeah.

They didn't give me what I needed, but yeah, and I ended up not buying the property. But I think, how do you figure out occupancy rate? Because that's really kind of an unknown factor. Is there a way to guesstimate that?

Yeah, I mean, I worked with my property manager to figure that out and have them look at what their occupancy in general looks like across all of their units. So in general, they would say, you know, we're 100%— where I was, it was, you know, 90% occupied July and August and, you know, holiday weeks in the winter for ski vacations and, you know, every weekend during the winter season, but not during the week, you get 50% of them. So they, they could, they could give me averages in the area. And that was, that was pretty helpful. And maybe, you know, I think, so sometimes a property that might be in a city that you might not think of as a vacation area, but, you know, in Boston, we have a lot of hospitals, we have a lot of people that come in to Boston to stay for a week or 2 weeks or a month because they have a loved one that's sick, and they want to stay. in the city. And you see, you don't think of those as vacation homes, but they're certainly short-term rental opportunities, and they tend to actually be less seasonal and more consistent. And maybe that's true in other areas too, like Florida, that has great weather all the time. Um, but for the real seasonality that we see in New England, it was helpful to have a property manager. Yeah.

Um, well, and so the way we've done it is, uh, we list directly on VRBO or Airbnb, and so my husband kind of screens the tenants, and then we have a local person on the ground. Well, we have a cleaning crew that will come in and clean between, but they're not necessarily looking at things like, you know, cleaning the oven or making sure that the linens are all, you know, in order and all of that. So we have somebody else who is a local realtor that will come in and just, you know, kind of give it a second look and, you know, make sure that everything's done that needs to be done. So that's been really— that's kind of been our model, because I know that the property management rates can get pretty high. I've seen as high as like 20% of the rent. Yeah. And typical what you see.

Yeah. Yeah. And so sometimes it's better to do maybe what you did, which is find the realtor that is in the area that doesn't mind picking it up on the side. Maybe they charge you 20%, I don't know. But some of them will do it for less because they see it as like an add-on thing that's sort of in the realm of the stuff they're doing anyway. And, and they won't charge those particularly high rates. You just got to make sure you don't lose the service. So, you know, who's communicating with the guest, right? And if that's you, that's one thing. But if you're hiring somebody to do that and they're— this is not a focus for them, they may or may not be good at it. So it, you know, you got to vet that out, right?

Yeah, that's our rating, right? And the person that we have is, you know, she's pretty reliable and that's worked out for us so far. But Yeah, you do have to have other people, you know, whether it's neighbors, friends, or, you know, somebody that you pay ideally, because then they, you know, they take it more seriously than just having a friend go over and take a look to help you make sure everything's ready and right before they go in. For me, you know, I think the biggest issue is because we do live in the houses and we're not minimalists. We're kind of maximalists. So we end up moving in and spreading out. And then when you want to go, you have to actually, you know, pack up. You got to get everything out of the drawers and the closets and, you know, clean out the refrigerator and the pantry and, you know, stuff that you wouldn't necessarily do if you weren't living there. You know, so that, that to me is kind of the detriment is that you've got to take that extra time to get it really ready. And get yourself out of it so somebody doesn't feel like they're in your space. They feel like it's theirs.

Yeah. And that's even harder when you're dealing with the short-term rentals, right? Where you say, hey, I want to use it this weekend and 3 weeks from now on the weekend, I'll rent it in between. It's— you're constantly coming in. It doesn't feel like your house because it's like, I don't want to pull everything out because I got to put it all away in 2 days. So, you know, when you— when it's your house, you still have to treat it somewhat like a rental. You end up doing that because otherwise you're just making too much work for yourself, to your point.

Well, and the best thing is, you know, don't show up with a truck, show up with a suitcase.

Yeah. Yeah.

Tenants that we like the best. I mean, we don't— we don't want people that are, you know, displaced from a house where they have— they're going to try to bring in their furniture and crowd it around ours or rearrange ours so they can use theirs. We've had all those things happen.

Did you have— have you had the situation where you showed up and you're like, why is my couch completely broken? Oh, well, why did my— where'd that painting go that was on the wall?

What I've had— why is my bed out in the lanai?

Oh my God.

That's interesting. If I could digress for a minute, I'll tell you a story. We had a paint— it was a photo of Lincoln, New Hampshire from the 1920s, which is where this property was, and loved it, right? It was like old 1920s, big photo. And one year we went, it was gone off the wall. No, I asked the property manager. I don't know. We don't check for that stuff. No idea. Nobody knows where it is. It's just gone in the wind. Oh, well, okay. Chalk it up to— It happens. Like 7 years later, it showed up on our doorstep. I showed up at the house and it was there on the doorstep in front of the door in a, in a plastic bag. Yeah, somebody got guilty, turned it back. I don't know. I have no idea.

Or they didn't realize that, oh, that wasn't ours. And they took it. We had somebody—

hello, you're taking it off the wall. Like, how could you not know that that's not—

They replaced it with their You know, who knows? They were there for long enough, they might have— oh, I don't like this decor, I'm going to put my own pictures up— and then, you know, just pack up everything. I think we had that situation once when somebody had moved in, um, while they were doing some remodeling in a house, and I had replaced a rug in the living room, and, uh, that rug wasn't there by the time I got back. And yeah, so I think they had movers come in and move their stuff out, and they just— oh yeah, all this stuff's ours. You know, they didn't know. And of course, you know, there had been 2 or 3 guests, so I didn't really want to go accusing those people. But I should have. I should have called and said, hey, by chance, did you take that rug? This, this, or that. So, you know, the key there is buy cheap rugs, right? So don't spend hundreds or thousands of dollars on artwork or things like that that you want in, you know, that you want to leave in the house. And if you do have that kind of stuff, then lock it up. Then you're usually going to maintain an owner's area. So it could be a closet. It could be a room. We have a 3-bedroom house that we— so we just end up locking up one of the rooms and we don't give people access to our garage, you know, so they're just renting a 2-bedroom Airbnb. So yeah, you do have to have a way to secure stuff that you want to leave there. And one of the ways of not, you know, bringing too much stuff with you is leave some stuff there, you know. So if you want to fly there with just a suitcase, you've still got some clothes there. And, you know, you don't have to feel like you've got to bring your whole wardrobe with you.

Yep.

So cool stuff. So this was kind of the how do you balance personal use of a vacation home with your rental? We do have one rental property. It's on a golf course. And that particular one, it's really just kind of a break-even scenario for us. So it's not always making money, right? It's sometimes it's just Somebody else paying my bills when I'm not there, so that when I go there, it's basically free, which is what we do in one of our properties. And so that one works out real well because we have it rented. It's very seasonal. It's in Yuma, Arizona. It's, you know, January through April, it's rented to snowbirds. So when we go, we just try to go between October and December, and we'll get out, you know, make sure everything's good for the tenants. They come in, and then we're the next people coming back. So We do have to have somebody go there. Either we have to fly down there, or we have to have a local kind of summarize the house for us, because, you know, it gets really, really hot, and you don't want to leave out your, your outside furniture, things like that. So, you know, there's always some logistical things that have to be figured out if you're, if you're living there part of the time, and then you have guests there the other part of the time. But for us, it works out great because that 4-month rental pays all of our expenses there for the year, and when we go, we don't pay anything. So that's our return on investment is, you know, we would otherwise be paying, you know, $1,500 a month to stay somewhere or, you know, even stay in an RV in the same place. So, so that's our offset.

And it seems like you're, you're using it, call it on the shoulder season, right? So that works out great. I think sometimes people say, well, I just want it for those 4 months. I'll rent it the other 8. And that'll pay for the— and then they don't get the occupancy, those other 8.

So maybe they do, but sometimes, sometimes you get lucky. So in our St. Augustine house in Florida, it's, you know, you have the Florida people that will vacation near to the beach all times of the year. So we got rented out in the summer pretty consistently. But, you know, in the, in the winter, sure, we could rent it out, but that's when we want to be there. So No, no.

Yeah.

So yeah, we're going to try to rent out our Idaho house for the first time this year and we've just decided to rent part of it. So we'll see how this one goes because it's, you know, this one probably is going to get people that want to come over the holidays, but I'll be surprised if we get someone for the full time. But we have had good luck, like you said, with hospitals and also graduate students. So if you have— be careful of like just regular, like college college students because they're party, you know, they're more likely to party and maybe trash the house. But we've had really good luck with the graduate students. Um, and, uh, if you, you know, what about the regulations in the area? Like, have you found them getting more and more onerous, or what are you seeing about that?

Yeah, I mean, there was definitely a trend probably 6 or 7 years ago where there was a lot of pushback against the Airbnbs and the short-term rentals, right? And so you saw a lot of communities, particularly, you know, certain vacation communities that, um, that started restricting it and said you can't do less than 30-day rentals. And if your plan is to do 30-day rentals, then there's really not a problem, right? But if your plan was to do 7-day rentals and get some uber premium for that, uh, yeah. So I guess I haven't been seeing it happen as quickly as it did some years ago, but there was definitely this wave of every community was looking at it and reviewing it, and there was pressure from hotels to restrict it, right? I mean, so the, the hotels were pressuring to do less Airbnbs. Communities that were more maybe family-oriented, more— that might not be the right term. Communities that didn't already have a big influx of vacationers, but it was people who owned houses. They didn't like the house next door turning over every week and party all week, party all week, party all week next door. So there was some pressure in those communities, but then there was others that were already highly vacation-oriented, and they seem to continue to allow those Airbnbs, short-term rentals without much trouble.

So if you want to buy a condominium or if you have a condominium, you need to make—

For sure.

Your covenants, codes, and restrictions, otherwise affectionately known as your CC&Rs or your HOA rules. You need to read those and understand what their restrictions are because they can have restrictions that you agreed to when you bought the house and which could prevent you from renting it in the fashion that you want to. I remember we stayed at a place in New York City and the guy's like, well, you know, if anybody asks you, you have to say you have a 30-day rental. I mean, it's just kind of weird, you know, because they They clearly had that 30-day restriction.

What about— I actually had a neighbor do that. So the neighbor bought a house right across the street from where I am now, and we're a little bit of a vacation community here. And my other neighbor called and said, you can't do that. Had the police shut them down.

So— Wow. Yeah.

They were— yeah.

When you're looking at your numbers, this is one thing I saw when I was looking at this house in St. Augustine. That it said, oh, you can get $250 a night. And so I asked the seller for the rental history and I got, you know, they had like one weekend the previous month. Yeah, it was $250 a night. They had it for 3 days. Not exactly something you want to build a 30-day pro forma about. So you need to look at the rental history, but you also need to look at the property manager because I do think that there's some Kind of nationally recognized property managers that are like, yeah, whatever, if it rents, it rents, we don't care, you know, whatever we rent, we get. And they don't really, you know, they're not like doing dynamic pricing and things like that. And the problem that I noticed with this one we were looking at is it was a 3-bedroom, but you're only going to have a call for 3 bedrooms in the summertime when there's families traveling and vacationing. Other times you've got a zillion 2-bedrooms competing with you for rents and they're cheaper and they're at the beach and you're on the Intracoastal close to waterway, you know, people are going to go, hey, let's go to the beach, uh, you know. So if you're not renting your 3-bedroom for the same price as those 2-bedrooms, it's going to be a tough sell. Um, so you gotta watch out for that.

I was just looking up, um, in, in Vancouver here, um, because I know that there were some changes, um, here too. Like, there was like— they took it away for a little period of time. I think it was like really hard to find, uh, vacation rentals. I was just looking it up, and, um, you have to have a business license, a short-term Um, and you can only rent out your principal residence or an additional unit like a secondary suite or laneway home. Vacant units, including secondary units or laneway homes, cannot be rented out as short-term rental. So it looks like they've got some regulations here. I don't know, do you need a business license down there to get it to rent out?

There are some communities that require it. I've seen some towns require it. I don't know how prevalent it is, but I've certainly seen some.

Right.

So I just saw an ordinance for Spokane, Washington, where they said, you know, nobody knows this, but if you're running a property, you have to have a business license in the city of Spokane. And if you don't, then you can be fined and, you know, shut you down and all kinds of things. So you do need to be aware of those rules. And in St. Augustine, taxes are the issue, right? So if you're in the county, it's one thing. If you're in the city, it's another. You know, you got to pay a city tax. And then, you know, they, they have further restrictions about you have to have a certain number of parking spots. You've got to have, like, you know, some kind of fire suppression, you know, sprinkler system or something. Those things are going to be, like, cost prohibitive in a lot of areas. So, you know, and you've got to know, like, there were rules about, well, you know, if you're in an area where you're claiming this is your homestead and you rent it out for more than, you know, X number of days in a month, you could lose that homestead exemption. Which is going to reduce, you know, your tax increases annually. And then also, if you rent it for less than 6 months, then you're going to pay some additional tax than if you rent it longer than 6 months. Or there's also exceptions if you rent it to students. So, you know, there's— you just gotta get familiar with all that, make sure that you're paying it, make sure you're doing it so you don't get shut down. And, uh, or end up getting a really huge bill at some point for, you know, $6,000 or $7,000 because you haven't been paying it.

Yeah, we also have, uh, Board of Health inspections required, and you pay for them, um, in our community here. So I think, you know, you gotta, you gotta go talk to the town hall, say, hey, I'm looking to do a short-term rental, who are all the people I need to talk to, what are all the rules, you know. Do some research online, but A stop to, to the town hall clerk and walk around there for a while talking to the right people will help a lot.

Well, the other thing is insurance, right? So you need to make sure that your insurance company knows what you're doing.

Yes. Yep.

You have short-term tenants in there, you haven't informed them of what you're doing or have some rider for, you know, that kind of liability and something happens, they can completely deny your claim. So you've got to be aware of that as well.

Yeah, and it does add to the cost, right? So back to when you're doing your pro forma, making sure that you're using the right insurance number helps because it's not the same price.

And what about like policies regarding, you know, broken appliances and stuff like that? What do you do with that?

We don't do it. I mean, at this— I, I look at appliances really as disposable. I mean, the warranties on them now are so short anyway. You know, it's just the cost of repair or replacement. I don't, I don't think the warranties make sense.

Yeah, well, and then the other thing is think about your linens, right? So we rented a place one time and we were doing it. It was something that was rented out in the summer as, you know, monthly rental. And we ended up renting it for 6 months. And you kind of listen to what the landlord tells you when you're moving in because she said things to us like, well, you have to maintain the lawn. It's like, okay, this is a short— you clearly don't understand how short-term rentals work because you can't expect your people to come in and maintain the lawn for you. They're not going to mow. You know, they don't have a mower. You're not providing a mower. You should be providing a mowing service. The other thing she said is, yeah, well, gee, the last people were here, took all my linens and put them in the basement and brought their own. And when I looked at her linens, I'm like, I'm not even sure that Goodwill would take these. You know, so you got to have decent linens. You know, we just go buy Costco white towels and, you know, when they get ratty looking, then we just buy some more, you know, or we take them with us when we go and, you know, leave the good ones for them. I have had somebody who actually swapped out our towels for hers because ours were nicer than hers. She left hers.

Wow.

I've had somebody that, you know, Called us, and we, we had, we had a vacation rental in a 2-story house that we had in California. And the people got there and they said, well, you know, when do we get new linens? And I said, well, you can take them to the laundromat and you can wash them. I said, you know, so they just, you know, showered and threw everything on the floor in a heap, and they were expecting us to come in and, you know, clean like it was a hotel. They didn't understand the, the whole concept. But, you know, we had other people that would just leave, you know, stuff all over by the pool. And, you know, and he's like, we live up there, we live upstairs, they live downstairs. You know, it was, it was just kind of weird things.

Yeah, you're dealing with, you're dealing with the public, you're gonna get everything right. And, and the thing is, when it's your house, and if you use it a lot, you feel like it's yours. If some of that stuff, it's like, oh, what are you doing that for? You know, it hurts you. Whereas if you buy it as a rental property and you're like, okay, well, it's just a cost to do in business. But it's when, you know, when it's your— anything that's special or personal to you, I would go take it and put it away. Because you'll— somebody will do something that will annoy you with it.

Like take your art for 7 years.

There you go.

You got that back. It's just hilarious.

Um, can, can I just interject here super quick and just talk about our, our books, Kim? Is that okay if I, if I pop in here at this moment to do that? Um, so in case, um, those of you listening, watching were not aware, uh, we have 2 best-selling books here on raising, uh, capital legally. Uh, we've got our beginner's book here, which is our quick little guide and our bigger, more reference desktop reference here. Both of these books are fantastic for anybody starting out in syndicating or anybody a little bit further along the line who really wants to do this the right way. And you can get a free copy if you head on over to our website, or you can text the word syndicate, S-Y-N-D-I-C-A-T-E, to our phone number at 844- Again, that's texting the word syndicate, S-Y-N-D-I-C-A-T-E, to 844-796-3428.

Yeah, and, uh, if you do want— so the, the copy that you can get for free is a digital copy. If you do want to have, uh, reference copies for your desk, which a lot of people like to have, uh, then you can get them on Amazon. And the best way to do that is look at my, uh, look, search for my name, Kim Lisa Taylor. Taylor, and you'll find both those books. And, uh, and then the, uh, the bigger book is actually on Audible. So if you like to listen, you'd rather, uh, get it on Audible. This is, uh, really kind of an expansion of the first book. So they're, they're both, you know, covering the same topic, but one is, uh, you know, more just succinct, and the other one is more expansive and talks a little bit more about different topics we weren't able to cover in the first So yeah, it's been helpful for a lot of people. And, you know, if you want to syndicate, you want to really understand this, then you can take advantage of those books. So how do you, you know, do you just rely on the property manager to rent the property or do you also do things to try to generate occupancy?

Generally, mainly the rental property and Airbnb and VRBO, pushing it that way. I have done a few things where, you know, if there's a local venue that holds weddings, for instance, things like that where like groups would come or events, an event space, I've gone to them and said, hey, do you have something you offer people who are coming here like a guide and get listed in the guide? And so that's been helpful at times. Or a school, like you mentioned students, but parents who come visit students will often be— if you're near a school, a lot of times depending on the school, they may have particularly private schools like high school, private high schools, things like that. Sometimes if it's a boarding school, they'll have people from all over. And so they'll have a reference list for parents to say, hey, here's places to stay in the area. There's no reason you shouldn't be on that list with your short-term rental along with the hotels in the area. So those are some of the things that a property manager doesn't necessarily think of to do, particularly if it's a bigger one.

But yeah.

I used to travel a lot for conferences. Sorry, Kim. And like conferences, right? Like to speak or whatever. And I was always staying at Airbnbs for stuff like that. So conference centers or event organizers as well, I think could be a good resource as well.

And make sure you have some clear house rules when people come. Like, we provide a little notebook that has some general information about the house, and several of the other places that I've stayed in have done that as well. And we also have a place for people to write their reviews right there and just leave us a review on the spot in the house. You know, there's— you just got to make yourself accessible. You know, we we have a little tag that we put on the refrigerator. Like here's the Wi-Fi code. Here's the you know whatever you need to to be able to get Wi-Fi. You know, just your common questions. You can get those answered. But you also want to have a policy about people leaving stuff behind because I had somebody who was you know building a house and they brought too much of their own stuff. And you know then they integrated it with our stuff in all of our you know cupboards and closets. closets and drawers in the kitchen. And it took me about a week to weed all that stuff out. And, you know, it's like, okay, that took me several hours to do that. I don't want, you know, and then when we talked to them about, oh, well, we thought you might like that. It's like, you know, I don't want any of your stuff left in here. You take your crap with you. And if you don't take your crap with you, then I'm going to charge you for the time it took me to get rid of your crap. You know, so You just need to make sure you're doing that as well and looking for things that people did leave behind that you don't want. So if they do it, make sure you have a policy that you're going to charge them for it. But if you're not there and somebody else is doing the turn, you really have to have an inventory of what is there and make sure that they look around at all the items that are left in the, you know, you know, the furniture items and linens particularly to make sure that, you know, there is the same number of things that you And that things haven't changed and make sure they have pictures so they can kind of compare the picture to what was left behind. Because you don't know, somebody can take your couch and leave a crappy one.

Yeah. And yeah, having that inventory, I mean, we do it like once a year where we go through and we have the inventory checklist. We say, is the stuff here? And if it is here, I mean, the small stuff like kitchen stuff, if it's here, is it in good condition? So yeah, that slotted spoon may still be there. It just might not be very useful anymore. So, you know, it's, it's when I think sometimes people will, they'll rent, they'll just be in the mode of let it rent, rent, and goes years just turning it over. And if nobody goes in with a critical eye on a regular basis to say, you know, is it still the way I left it and the way I want it from when I started renting? If you don't do that regularly, it just deteriorates. Yeah.

Yeah. Well, and things like the shower curtain isn't moldy and, you know, think about. So, yeah, you do kind of have to look at that with your guest eye. Like, you know, when you're having guests come to your house, all of a sudden you're looking around and, you know, oh my God, that, you know, but you've been living with it for a month.

Yeah.

You know, so we have talked about some of the detriments, but I will say that But for the most part, they're just minor annoyances. You know, we only ever had to evict somebody one time, and it was because we let somebody rent that we shouldn't have. Don't allow corporate guarantees or somebody else to guarantee the rent because it's nearly impossible to exercise those. And so, you know, if the person isn't qualified to rent, don't rent to them. Or if they're coming there to rent for, you know, the wrong reason, you know, Like in the case where we had to evict somebody, it was because they were displaced by a hurricane. They really needed an unfurnished place to live, and they did not, you know, they shouldn't have been living in our place. It was way above their means, and, you know, there was just nothing available. So, you know, don't feel sorry for people. You know, you can't, you can't support everybody's lifestyle. You gotta, you gotta think about your own, and you really, you really gotta be careful. And, you know, I've never had any issues with squatters, but I guess that is a thing now. Have you ever had any issues with that, Michael?

No, no issues, thankfully.

So if there are, I happened to see this guy speak at a conference not too long ago called The Squatter Hunter. So if you do have any issues with that, then look him up. He's all over YouTube. And he has an interesting way to help you get people out that you may not be able To exercise as a landlord, and it's very hard for law enforcement to get involved with the current rules. I think Florida just passed an anti-squatting law, but there's very few states that have gotten on board with that yet. But that's become a thing, so be aware of it. And, you know, check out this guy if you get in trouble with one and you need help. But all right, well, cool. Does anybody have any questions? Do we have any questions in the chat, or If any of you would like to ask a question, you can raise your hand, you can put it in the chat, or you can put it in the Q&A. Yeah. So anything else that we haven't covered, Michael, that you think people should know about? Well, first of all, how can people get a hold of you? You said that you had a little underwriter. How do you finance your rental properties?

So financing for the ones that are vacation rentals, we usually just do them personally. Right. We, we, um, just, you know, buy it like a secondary home, uh, and then rent it from there. Um, so it's not your primary residence and you can't claim it, and— but, uh, you certainly, uh, can, can say it's a secondary home. And you don't have to buy it in an LLC. You don't have to buy it, um, you know, as a business.

Yeah, but be careful about that because you may want to at least hold it in a trust and then have have the trust beneficiary be an LLC to give yourself some liability protection. It's tough to do that if you're trying to get a second home loan, a residential loan on it. If you're getting it as a rental property loan, not a problem. You can buy in an LLC, but you do have to be cautious about things that are in your name when you're allowing other people in your space. That just—

you're certainly the expert in liability protection, so I'd certainly defer to you on that, just not the way, you know, I've just done it in my personal name and probably took on more risk than I needed.

Yeah. So you can, as a strategy, the lender that you have cannot prevent you from putting the home into a family trust. And then you can swap out the beneficiary after you do that. So it's not you personally, it's a trust or an LLC so that you've got some additional liability protection. Some states offer the same liability protection for trusts that they do for LLCs. So you'll want to check with someone who does land trusts, not necessarily family trusts. You want to try to find an attorney in your state that does land trusts or title holding trusts. You may even reach out to the title company about that. They may be able to help you with that. But there is a kind of a federal law that prevents the lender from calling the loan due if you just place it into a trust. So that just can give you a little protection. But if you do that, then you've got to go back and you've got to make sure the title company amends your title insurance policy to the new owner and also make sure your insurance is up to date for the new owner, all of that. So you really just kind of have to create a little checklist of all the things you did when you bought and make sure that everybody knows that the name has changed, but still the same owners. And also the, you know, filing with the county clerk work to make sure that the name changes, but they don't assess, you know, reassessment of property or transfer taxes, things like that. So you've got to do all of that a little bit cautiously. Usually a local real estate attorney can help you do that, or the title company might also be able to help you do that. So, okay.

We have a question here, and Michael will get your contact information. We'll make sure we get that so we can type it in the chat here. How do I guess you, uh, this is from DJ Singh. Um, how do you evaluate rental property location, etc.? What is the criteria for underwriting to pencil the property? Well, you mentioned your, your spreadsheet.

Um, yeah, we covered a little bit about it earlier, but I, I'm glad to give the spreadsheet to anyone who wants it. They just email me, michael@navwf.com. Stands for Navigator Wealth Fund, so navwf.com. Um, glad to email them the template, and thank you for dropping that in the chat. You did, you did. And I'm glad to— I'm glad to talk with, uh, anybody as well. And, and on my website, navwf.com, you can book a call with me. So the— as far as how you underwrite it, I mean, a template's the template, but what you put in it is what matters. And so we talked about various ways to Figure out your rents and your occupancy. And that's probably the toughest part with short-term rentals. And we talked about a lot of ways to verify that from, I think it was AirDNA is what Kim mentioned, and there's Airbnb estimators and there's property managers. And certainly you can go look at what other ones like yours are going for. Occupancy is tougher, a little tougher. And that's where I found a property manager to be very helpful in figuring out occupancy. And then on the expenses side, it's all your normal expenses of any house. But we talked about insurance being a little bit more costly when you're renting. We talked about property management fees being much more than you would see in typical apartments. And so knowing who your property manager is and getting the right fees in there for them is, is another thing that's different than just a normal apartment.

Yeah, and also maybe keeping an eye on your utilities and having in one of your rules that, hey, if the utilities exceed this amount, that we're going to charge you the extra. Because otherwise people will turn on the air conditioning full blast and leave all the windows open.

Yeah.

Stuff like that. It should be, you know, $250, you know, because either they're not from an area where they understand air conditioning or they, you know, just don't get it or they want fresh air, whatever it is, they just need to understand if you do that, that's fine, you're just going to get charged for it. Um, so, um, yeah, so let's see, there was one other point I wanted to make here. Um, Michael, you said you, uh, you financed these personally. We do have a lot of clients that have done funds, uh, so they've created a blind pool fund to go out and buy rental properties. Certainly something you can do, certainly something we can help you do. We have some who are buying in more exclusive areas where they're, you know, the cost of, you know, the house is $500,000 and above. And sometimes they'll create a series LLC where they'll have individual investors on specific properties, you know, all different manner of things. You know, Florida is a tough market right now because every time it gets hit by a hurricane, more insurance companies leave. Give them a few years; they start to come back. But in the meantime, insurance rates are really high and cost prohibitive. So you've either got to be you know keep some liquid cash so you can self-insure, or you have to you know just suffer the cost of that and realize that's part of the cost of doing business in Florida. And Florida also has a rule that separates a dwelling from a residence—a residence being owner occupied, a dwelling be something. that anybody can live in. And if you're in a residence, then you only have to replace your roof, you know, when your roof needs to be replaced. If you're in a dwelling, the insurance companies can force you to replace it every 10 years.

Wow.

How that got passed through Florida legislature, I don't know. But, you know, unfortunately it's there. And that's something that we've had to deal with as well. And a lot of people in our community. Anything else you should know? Oh, you said you have, um, uh, like a lending fund or a mortgage fund. Tell us about that.

Yeah, so it's a hard money lending fund, and, uh, essentially we are lending to, uh, first position loans to people who do fix and flip, 1 to 4 units. We do it here in the Massachusetts, Rhode Island, southern New Hampshire area, which is a very stable area for prices. So we feel like it's a relatively low risk area to, uh, to lend in. We lend 70% loan-to-value, uh, so, you know, investors should have a fairly good, um, you know, lower-risk position in the capital stack. It is all first-position debt, uh, and investors are, uh, 8% to 11% returns depending on the amount they've invested in the fund.

And is that a Reg E offering?

506.

Yep, 506. So that is open and available to verified accredited investors. Michael does have the ability to advertise that offering. So if any of you are interested in talking to Michael about that, then, you know, feel free to reach out to him. Is that the email that you gave us, the NAV? Is that for the fund?

Yes, that's the fund, Navigator Wealth Fund. You can also go to the website. navwf.com. Um, and we have not, uh, fully announced the— this fix and flip debt fund on that, but you can reach out to me directly and, uh, get all the pre-reads that we're putting together right now. It's going to launch in January, uh, and, and so we'll start accepting funds in January with, uh, the first loans in early February.

Okay, well, you know, I know that sometimes people like to invest in their local area. So any of you in the Northeast, that might be something of interest to you. And, you know, certainly anybody can invest in a 506 offering, doesn't matter what state they're in. But Michael, we're so happy that you came today and shared your knowledge. This was fun. I got to lament about all the things that are going on in our houses. But, you know, for the most part, it's not irritating enough that, you know, that we discontinue doing it. The rewards are greater than the, the detriments. I will say that my husband and I, because we so entrench ourselves, at one point we were moving and I said, you know, every time we move in and out of our Florida house, it takes 3 days. And I said, so that by the end of 10 years, we will have had 60 days of doing nothing but moving.

Wow.

You got a lot of stuff.

I started thinking, you know, hey, maybe I shouldn't have so much stuff. Maybe I should come with less.

Yes.

You know, it's better to fly than it is to drive because when you drive, you bring too much stuff, I guess, especially if you bring— anyway, you all can do it better than I do. But that's how I've been able to live and work in all these multiple places. You know, I, you know, my home, I have a home office in each location, so I just work where I am. And you can do that too. That's, that's actually a subject for another podcast is how to live and work from anywhere. And we can cover that at some point in the future. But Michael, any parting words that you'd like to share with the audience?

No, just thank you very much for having me on. It's been fun and it was great to have the conversation. Appreciate it.

Thank you for being here. And I hope you get some context from that. And, you know, thank you so much for offering your spreadsheet. That was very Gracious of you, and hope somebody takes advantage of it. In fact, I should do that too. So thanks, Michael.

All right, thank you.

Bye bye, everyone. Thank you.