The Secret to High-Yield Vacation Rentals? Think Small, Earn Big!

A lot's happened in the short term rental industry over the last decade and one of the things that we've discovered is that you don't need a normal house to make a lot of money as a short term rental. In fact, a lot of the more unique properties a lot of times make much more than a traditional homes. I'm really excited for our guest today. This isn't the first time on the show. He was with us over a year ago, Dave Zuck. He's one of the founders of Zuk Cabins. They've been building some really amazing properties, different variations, unique styles that can be used as short term rentals. But there's a ton of flexibility with them. They've sold millions and millions of dollars of them. They can send them around the US Excited to dive into the details again with Dave Z. Welcome back to the show.

Hey Tim, thanks for having me back on your show. It's good to see you.

It's good to see you as well. And for those of you that did not catch the first episode, Dave has a truly admirable background. I mean, this isn't his first business. He's done lots and lots of things, lots of things in the real estate world, from multifam to commercial assets. Just. Dave, you want to give just another quick recap?

Yeah. So I grew up in modular manufacturing. So my dad had a storage shed business. And you know, we built storage sheds that morphed into, you know, bigger garages, modular garages and then later into modular cabins. I think it was 2006, I believe, when we founded Zip Cabins. We started building modular cabins. Today we ship modular cabins and park models and ADU units all over the country. I think just about every state. We shipped hundreds of units across the country just last year alone. And you know, as we got into this space, we realized there was a, there was a niche. Yeah, we service RV parks and campgrounds and individual owners, second, third home owners, home buyers. But we also get into the short term rental space a lot and we have a lot of short term rental owners, people that come back to us again and again. And of course we eat our own cook and we, we do a lot of the short term rental space. I have short term rentals and I, I don't know, seven or eight different states now. But you know, I, I grew up in the space. I ventured into, you know, several different asset classes. Multi, family, self storage, more recently, most recently, car washes, building Tommy's Express car washes. But never strayed too far away from the family Business. And, you know, this business, the short term rentals business, kind of fits right in with what we're doing. And I love the space. I mean, we, you know, we've got many short term rental homes ourselves. My son is involved, my daughter's involved, you know, our family's involved. It's a fun business to be involved in it. And you know what, you know what I find interesting, Tim, is not too long ago, you know, we just talked about this recently. Like I bet 10 years ago, the thought that you could own a highly desirable piece of property on the water, you know, on the river, the bay, the ocean, whatever, and have that thing not just be a giant hole in your pocket, you know, have that thing actually play cash flow. That was sort of a foreign concept back there. Normally if you owned a property like that, you know, it was a, it was a liability. It was, you know, it was something that you used. And you know, of course you could supplement a little bit with some rental income from family and friends and maybe an agency or something like that. But today with short term rentals, with the platforms and the technology out there, it's a different story. And I love it.

It is, it is a, it's a reality. I sort of joked before we jump on the podcast that if you could have dipped them all the way down into Columbia, we would have loved to put them on our lot down there where we're developing. Because what you guys are building, Dave, are really, really cool. I mean, just since last year when we had you on seeing all the models and I was out there in person, you know, over a year ago there in Pennsylvania where have your factory and it was awesome. You know, you guys have a machine there knocking out some really, really good quality stuff. And just since then, I mean, jumping on your website and seeing all the new models, it's. It's exciting. It is a fun space. It's a reality that people can, can have properties on the water, like you said, and also have a really good roi. I think that's what, you know, most of us as investors are looking for at the end of the day and now, not to say people couldn't have really good use for your properties for personal use, but we find a lot of times, you know, in the short term rental space, people have vacation ren that they use a little bit on their own. And then sometimes it starts doing so well that they just turn it into 100% investment. Can you talk a little bit just about the ROI numbers? Because I know you have a lot of short Term rentals yourself. And obviously you practice what you preach. You build these, and so you've installed a lot of these on some of your own properties. Can you talk just a little bit about the ROIs?

Yeah. So I kind of fell into this space. I don't know, I mean, I was aware of the space, but I, you know, one of our friends came to us and said, hey, I'm getting into this short term rental management space. Let me, you know, give me something to. And you know, young kid, and I'm like, I don't really have anything. You know, I got multifamily apartment buildings, you know, whatever. I don't, I don't have anything for you right now. But he, he kept coming back to me. I know you got real estate, you got stuff, you know, got stuff going on. Just give me something, anything. So I got with my brother and at the time we had a cabin in south central Pennsylvania up in the mountains. And, you know, there was nothing around. Like, there's no river, there's no lake, there's no tourist attraction. It's just a cabin out, you know, on 300 acres out in the middle of nowhere. And so we, we sort of laughed about it. We were like, yeah, let's give him that thing. And you know, it was just a, it was just a family compound that we would go to and 4th of July and you know, we would hunt out of it. And you know, we've used it number of times a year, but most of the time it's not there empty. And so we sort of jokingly, we were like, oh yeah, let's give him that thing. That'll get him off our backs for a little while. And so we gave him the cabin. We, you know, we did a little, we didn't know it was brand new. We, but we made it, you know, what we felt like was short term rental friendly. We added a few features to it and gave it to him. And, and all of a sudden it was like a month in and we were like, whoa, wait a minute. We gotta, we gotta block out hunting season. I mean, this guy just took off. I mean, this thing was renting for, you know, 800 to a thousand bucks a night. And he was booking out the calendar. And I was like, okay, well wait a minute. We want to, you know, we want to use this segment in hunting season. We had to scramble around, scramble around and kind of block some time that we wanted to use it. So it was an eye opener for us. And that's what got us into the space we're like, hey, this, if this works up there, I guarantee you it's going to work even better. You know, maybe some other places. So we, you know, we bought a place on the river and, and you know, kind of just went down that path and watched the concept kind of play out and, and we really like what we were seeing and so we just, we just kept right on doing it. But in terms of roi, you know, I mean, we, we. I think the biggest home we have, I think sleeps like 25. And you know, those, those numbers can, can really work. And, and it also, you know, whatever we say. I'm sure you would agree with us, Tim. Different areas, different places demand different stuff. Different homes, different square footages, four bedrooms, less bedroom, whatever. So you just got to play, play around with, you know, geographically what's needed in that area. But me, you know, generally what we found is smaller square footage gets us more roi. So we, we started like compacting. Like how small can we go here? And you know, where people still will come and pay a premium. If you look on our website, so cabins.com and you go into the park model section, those are 400 square feet. And there's people, you know, clients of ours, some of our own, you know, we're getting, we're getting 3, 4, 5, $550 per night and to stay in a couple hundred square feet. Little, little cabin. Now it's, it's nice. These people aren't roughing it, but it's, you know, it's a small square footage unit with a price tag of, you know, you know, just over $100,000 and you can command that sort of premium on that small square footage. Pretty amazing.

Yeah. Yeah, that is amazing. I mean, people are there, they love experiences, right? That, that's especially some of the younger generations. And one of the awesome things about having an investment that you know is maybe somewhere over a little over a hundred thousand. I know you guys have a big range of prices with all your different products, but, you know, if the entry level price is lower and you can put this property out next to the river somewhere where there is an infrastructure, because it's already pre built. I'll let you get into this a little bit more, Dave, but just to hit on the fact that the ROI can be so much higher, you don't have to build the thing. And to try to build a property out in some area that's completely remote without infrastructure, that's not only expensive, but it's really difficult. And so you guys have managed to just Remove that challenge for someone that has a good place to put one of these things. Can you talk a little bit? Just, I know, you know, you're, you're kind of at the top and you guys have a big team handling all the details and all that, but maybe just sort of a high level view of the types of models and you know, how they come, they come furnished and, and how you can deliver them. Can you talk a little bit about what's available?

Yeah. So, you know, one of the things that we figured out is it's much more efficient to take the work to the workforce. Like you find, you find a community where the workforce is really strong and then you bring the work to that workforce and you've been here to Lancaster County. Lancaster county is full of entrepreneurs and builders and people that work with their hands in the Amish community and they build really good quality stuff. There's communities like that scattered throughout the United States and we have several, several of them set up with shops, manufacturing facilities that manufacture, you know, where we manufacture our products. But you know, when you are out in the middle of nowhere or even, let's say you're in, you know, New York or Colorado, you know, the northeast or, you know, heavy, heavy populated areas, one of the biggest challenges in the construction industry is the workforce. You know, so it's, it's very inefficient. I think the last I looked, the average contractor was, you know, in his, you know, late 50s, early 60s. That's sort of a problem. And so, so, you know, being able to take the inefficiency out and add a layer of efficiency in there by bringing the work to the workforce and then shipping that product out as a finished unit or almost finished units. Some of our modular products, we got to send a crew out to button everything up after we get it on property. But really the more work you can do on site at the factory, in the middle of the workforce, if you went to whatever the outskirts of New York City and you, you tried to put a team of, you know, modular workers together in a shop that would be challeng challenging enough on it. Right, you know, right in the heart of the manufacturing. But it's, we figured out a way how to take the inefficiencies out of it and really build a really good product and be able to ship it over the country. And it makes sense for a lot of investors.

Yeah, it makes, it makes total sense. And, and so it makes it much easier for the investors, you know, for all the things you just said. But Correct me if I'm wrong, but you guys also ship some of these furnished?

Oh yeah, yeah, they are furnished. And you know, so we'll, we'll ship them across the country. We'll often, you know, we, we have a, of people who furnish them for us. They'll put all the furniture together and ship everything with the unit. So yeah, it's, it's designed to where let's say you're a short term rental owner or a small boutique resort owner or something like that. We'll come out there, we'll, we'll, we'll bring the units to you. We'll build the decks and the porches and you know, furnish the, the units inside and out. And it can be, you know, of course there's some few infrastructure things need to be done on site, but other than that, we'll build you a unit that's pretty much move in. Ready?

Yeah. That's awesome. I know. Last time you were on, we talked a lot more in detail about some of the financial benefits of purchasing a property or investment like this. And depending on the model, you guys have really branched out and you're, you're just, you've got a whole bunch of different models these days. But we talked more specifically last time about the park model homes and some of the unique benefits of being a park model home. You know, some being no property tax, potentially, you know, bonus depreciation, potentially the ability to possibly, you know, get financing. Can you talk a little bit about those pieces?

Yeah. So there's lots to like about it from just kind of a lot of different avenues. They, you know, you hit on a couple of them. This is a 400 square foot. If you're a licensed park model, if that's your building, that thing is licensed. Just like a sort of like a travel trailer that you pull behind your pickup truck. It's, it's licensed, it's movable, it's portable. So there's no real estate taxes that come along with it. You know, there, there's, you can put this places where it may not be legal to. Let's go put a modular building in. So there's different units that we build work for different places or different uses or you know, for different people. But there's, there's a lot of advantages to these park models and taxes. Ease, ability of putting them on the property. You can, you know, if you need to, you can put them on there for seasonal use and pull them off the property when you're not using them. So ease of use. You know, getting them in there on wheels, setting them up, getting them ready for the, for the, for your short term rental guests. Low cost licenses generally pretty easy. There's, you know, the financing is different than say, if you were to go with one of our ADU units or HUD units. But it's, you know, each one of them has its own benefits and features. But we've sold a lot of park models to a lot of our customers over the country and, you know, they, they work very well from a short term rental perspective.

Yeah, there's a, there's a lot of things I'm thinking about here, ways to take this conversation, but let's just, let's stick on the investment side of things. You know, one of the things that I think that's really cool about what you guys have created and made to everyone out there is that, you know, if someone has a nice chunk of land and they have this idea, they're like, you know, I've seen people do this. They've put glampings out there and they put these, you know, modular homes or ADUs or whatever it happens to be, and they do really well rents for $500 a night like some of, some of yours do. They don't have to buy 10 of them at the same time. You know, they can test it out, they can get one out there and put it up and see how it does. And if it works well, they can get more. That's, you know, we're, we're building this project down in Medellin where it's not that way because we have this big construction cre where we want to build them all at the same time because the crew's already there. And for us to build them one by one, it just, it doesn't make sense. It would also take much longer. So I think that's one of the really cool pieces of this sort of investment. Well, why don't you talk a little about, about yours, Dave? You're, you're mentioning you've added quite a few to the same area because they're doing really well.

Well, that's a good point. I'm glad you brought that up because we get quite a few investors that come to us with their big, big grand plan. Oh, yeah, we're gonna do, you know, we got a place. We're gonna do like 20 of them. You're gonna do like 30 of them over the next two years, whatever. Oftentimes our response that is just, just do one. You know, I mean, just do one or three or five or whatever, just get started. Because we know that once they start seeing the numbers, there's no question they're gonna come back and do the, the 20 or 30 that they were planning to do on the front end. It's just when, you know, oftentimes those plans sort of get stalled because, because it's big, you know, it's a big project, a heavy lift, a big push, you know, but we're just like stew one and, and you mentioned depreciation bonus. Depreciation works very different than on a modular cabinet built on a footer. This is, you can take depreciation just like it was equipment, you could appreciate it and you can depreciate it over five years. You know, who knows? I mean we're expecting some favorable tax rulings coming out here in the next, hopefully this year, but we'll see. But you know, even if we don't get that, you can still, you can depreciate it over, over five years.

And that's because it's considered, depending on the model that, because it's considered basically a vehicle over that gross weight that. Did I get that right?

It's taxed the same as a piece of equipment. Just like you were buy a tractor or a brake press or something in your factory. It's taxed like that. So you know, it's five year lifespan, same, same as if you were to buy a travel trailer, you know, five year depreciation schedule. You mentioned a project of ours we bought. One of the things we do is we'll, is we buy large pieces of property and oftentimes we'll buy that large piece of property from a single focused seller. We bought a couple thousand acres in northwestern Pennsylvania where I belong to a timber company, an institutional timber company. So what's on their mind? Only one thing. And a timber. And so we, we bought it and you know, of course we, we took a lot of timber off of the last couple years, but we also taken that several thousand acres and we're chopping it up into small 100 acre, 100, 200 acre, 50 acre depending on where it is. And we're chopping it up and, and selling on that real estate. There was several areas that were just, they were just prime. They' you get to that area, you just gotta stop and just gaze because it's just like amazing. You know, you got like a 30 mile view. So we had several of those spots available on, on select pieces of the property. And so we were like, well, let's put two park models up on the hill and let's see what they do. And my, my initial reaction was, oh my goodness again, I mean, sad. Middle of nowhere. You gotta drive, you know, it's like an hour north of Pittsburgh and that's, you know, you gotta drive, drive, you know, back roads, gravel roads, just, you know, to get to the last couple miles to get to the, to the park models. I'm like, well, you never know until you try. When we get these two up there and they just ran out like crazy and, and you know, our, our max, our, our highest nightly rental. You want to take a guess at what our highest nightly rental was? This happened a couple weeks ago in a 400 square foot unit up there. Take a, take a, take a guess.

Gosh, 750.

You're really close. It was like 700. Just over 700 bucks. I mean, it was okay. So these things are renting like crazy and, and so we just keep adding to them. Just like I was telling you with, you know, we, we tell the people, hey, let's buy one. Just get started. Because we know they're gonna, we know they were gonna be back. What happened to us? And you know, we put two of them up on the hill and people love them and, and they, you know, rented out like in a 90, 90 plus percent occupancy rate and you know, really nice, healthy adrs. And so we just kept adding, I think we're up to like, I don't know, forget 11 or 13 of them now. And we just, we just keep adding them because they just keep doing so well. So, yeah, it works really well. As an investor, I, you know, like I said, we eat our own cooking around here. We love the space and work. Models work really well.

Yeah, it's awesome. Yeah. Well, you know, things have progressed a lot in the last decade. You know, not just in the construction and you know, what you guys are doing and options, but, but also with management. We talk a lot on this channel about virtual management. You can have a property in the middle of nowhere and you can do a really good job manag with all the tools and the processes today. And so, yeah, really exciting and gosh, to think what you can do to the value of a piece of property that was just for a timber use, you know, and you slap 10 of these things on there and they're renting for $500 a night. I mean that in the commercial world that has a, you know, values are based on income, right? And so if you're jacking the income way up, then the property's worth a lot more exciting stuff. Dave, maybe let's, let's just talk a little bit. You know, one of the things about being in a remote area, we've got the construction out of the way, right, because you guys handle that whole piece comes furnished so they don't have to worry about that. Management can be done virtually. But what about like some of that basic infrastructure, you know, does. Are people using solar with these or their water tanks or what? How do those sort of main infrastructure pieces go in?

Yeah, I'm glad you asked. There's a number of different ways you can do this. Obviously many of these places, you know, where you, where you would sit, these park models are not in places where there's public water, public sewer. Obviously if they're, if you got public water, public sewer, great, use that. If you don't, then you can go to, well, and you can go to, you know, a more conventional sewer program. But you know, a lot of times you're using a tank, using a sewer tank, getting it pumped out every, you know, month or two, whatever, depending on your occupancy, you can put a tank in the ground. We do have some off grid options. We just kind of, kind of done some research and development. So we just did two of our own that are off grid. They are, they run on purpose pane for the, the heat, the fridge, the stove, the, you know, kind of the, you know, your heating and all that. And they got a, they got a water tank underneath. So, you know, one of the challenges that we found is, is some of those places that I described, you know, you got, you're sitting up in the middle, up on top of the hill with a, you know, with a 50 mile view or 20 mile view. Those are usually kind of the most challenging or the most expensive places to get your facilities to. And so, you know, that may be a place where you would say, you know what, I'll go solar, I'll go generator backup with a propane tank and I'll go off grid. So now you don't have to run your electric in from, you know, two miles off or a mile off. So there's ways you can do it. And people love that unique experience. You mentioned that earlier. People, people today are not like our parents and grandparents where they collected stuff. You know, our parents collected stuff like antiques and collectibles, you know, stuff, stuff you put on a shelf. Our generation and younger, they collect experiences. And so if you can get them an experience and go really unique and put them in a place that's Just, that's just amazing. They'll give up the electric. I mean, not saying they won't get electric, but they'll give up the power lines and maybe a few of those conveniences. Even if you got to go with a, with a portable toilet or something like that. Just something different. They want that experience. So there's ways you can go off grid with these things. That's still pretty special.

Yeah, Way, way more options than we had, you know, although we left out one, one important piece. This isn't for everyone, but, you know, if someone's out there and they love the silence and they love the tranquility, but they still want to watch Netflix, you know, they still want to watch Netflix at the end of the night. I would venture to say that Starlink is probably available in most places these days. But is that, Is that accurate?

100%. Yeah. I mean, there you're talking about, you know, again, just a game changer. You know, you don't have to run the high speed line from, you know, two miles off or, you know, a mile off. You can now tap right into StarLink for whatever 120 bucks a month. And you know, you're right. People, people like that experience, but they also like to have, you know, access to high speed Internet. So today you've got many more options than you did, you know, 10 years ago.

That's right. All the pieces are in place. Well, exciting stuff, Dave, great having you back on the show again today. You know, for people that want to check out all of your products, they can go to zook cabins.com, the cabins.com.

You'Ll see we have park models, we got modular cabins, we got ADU units. If you don't know what that is, do a little research on it. Adu. A lot of townships and cities are now, you know, allowing a licensed ADU unit in their townships. We've got HUD product, which is totally different from a financing and a permitting standpoint. So we got a fairly broad range of modular buildings and we're shipping them over the the country. So check us out.

Yeah, that's awesome. That's awesome.

Yeah.

And we also have a page set up on our website. Strict forward slash cabin. We have some more information about Dave and everything they've done there. And also way to, to get in touch with them. Really cool products. I've seen them with my own eyes. Dave, it's been a pleasure getting to know you better over the last, I don't know how many years now, but really cool what you guys are doing. And thanks again for coming back on the show.

Thanks for having me back, Tim. A pleasure.