Episode 360

The Blueprint of Short-Term Rental Success with Avery Carl

Avery Carl is the author of Short Term Rental, Long Term Wealth: Your Guide To Analyzing, Buying, and Managing Vacation Properties, and the host of "The Short Term Show" podcast. Avery went from a 37k salary to a real estate investment portfolio of 100 doors in 5 years through strategically investing in short term and vacation rentals. This strategy allowed her to grow her portfolio much more quickly than starting off with traditional long term rentals. The Short Term Shop has helped over 4,500 families create generational wealth through real estate investing.

Connect with Avery Carl at https://theshorttermshop.com/

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"You can invest 10,000 hours and become an expert or learn from those who have already made that investment." - Jack

Transcript
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Welcome to the REI Mastermind Network where host Jack Hoss gathers amazing stories from leaders in real estate investing.

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In each episode, our guests will tell you what they're doing that works what they've tried that failed, and best of all, you'll learn actionable steps to take your real estate investing.

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To the next level.

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Now here's Jack with another value packed episode.

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We have Avery Carl joining us here this afternoon. Avery, I really appreciate your time before we kick things off, I want to head everybody over to your website because there's a lot of content there. Want to make sure that if they want to follow along so the short term shop.com

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And I'll make sure to have that link in the show notes, but AV Avery.

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I think your domain name says at all short-term rentals.

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How did you end up here?

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Well, it's a.

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Little bit of a long story, but accidentally as most real estate investors end up in real estate investing, I don't think very many people when they were five said I want to grow up.

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And be a real estate investor.

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So, I guess so.

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I'll start halfway through this story, so.

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My husband and.

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I moved to Nashville from New York City.

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In:

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I was also working in the music industry and our real estate agent at the time was really trying.

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To get us.

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To buy in this really hip, really fast appreciating part of Nashville and we're like, no.

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You know we didn't move from Brooklyn to live in the middle of the city.

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We want to live.

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We're moving into the city we're living out in the country.

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So, we bought.

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A house out in the country, but.

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We thought well.

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You know, maybe there's something to that fast-appreciating thing you know, maybe we.

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Could take this little bit of money that we have left and buy one of those houses and maybe one day our hypothetical future children will need to go to college, and we can just sell this House and appreciation will pay for their college and will be like the smartest people ever.

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Nobody has ever been this smart before and we're going to be so smart and so.

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We bought one we didn't even know.

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Was called real estate investing at the time we just happened to get really lucky that it was a good one.

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We paid 122 for it the mortgage.

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On it was.

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645 bucks and we were able to rent it for 15.

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100 so not bad for a little tiny single family.

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And then when we got that first rent check, we were like oh wait, a minute.

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We want to build a business out of this.

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We want more of these so then we started doing the actual education part of it and realize that appreciation is not a.

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Good reason to.

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Invest in something.

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Luckily, it didn't bite us in the.

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**** on that, but so we had.

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Just a little bit of capital left.

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And we thought, well, well, what can we buy that will make us the most amount of money the fastest, so that we can go buy more properties so we can scale our portfolio faster?

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So, we landed on short term rentals, and we didn't want to do it in Nashville at the time because the regulations are just.

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Changing constantly.

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There we didn't.

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Want to get caught up in that?

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So, we thought.

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Well, where can we buy something that the normal thing for people to do is go?

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Rent house.

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And we landed on the Smoky Mountains in Tennessee.

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People go there to rent cabins.

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They don't go there to stay in hotels and there's lots and lots of tourists.

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Coming through all.

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The time

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So, at the time there's lots of better ways to do research now, but when we started there were not.

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A lot of resources so.

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The time we did the best with.

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The data and information that.

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We could get bought.

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One and that quickly became 5 in that area.

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5 short term rentals over the course of.

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The next 18 months.

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Which over the course of the past five years has become 105 doors with another 48 under con.

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In fact, a mix of eight short term rentals, 4 multis of 12 units and up, and then the rest single and duplexes long term rentals.

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So, a little bit of everything.

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Yeah, so there's a lot to unpack just in that in that little yeah, that little blitz right there, so you obviously you.

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You didn't then start with your short-term rental portfolio in your backyard.

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Or did you?

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Maybe I missed that.

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We did not know so.

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It's possible to start with your short-term rental portfolio in your backyard, but.

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It's you're not always going to live in the best place for short term rentals, and I personally like to stick to those regional drivable vacation markets like the Smokies.

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My other ones are in Destin, FL and Cape Sandblast Florida, so areas where people the majority of the tourism is driving in, not flying and the area is dependent on tourism, so you don't.

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Have to worry about.

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A lot of primary homeowners saying, hey, we don't want this year because these are areas where short term rentals have been forever.

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So, I stick to those.

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Types of markets rather than you know in my.

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Backyard in Nashville type of markets even though.

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Now I live in Destin.

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So, I moved to.

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The vacation markets.

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So, you mentioned that we.

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Used you kind of stick to specific markets then that are kind of destinations.

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If you will, are there criteria?

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That you like.

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Hard set criteria that you use to determine what market would be a good fit.

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Yes, so I the number one thing you want to look for when you are trying to choose a short-term rental market is favorable regulations and established regulations.

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So, regulations where there's a lot of push and pull and change and I hate to keep picking on Nashville.

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I just used to.

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Live there so I know it the best Nashville.

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There's a lot of primary homeowners there that are not dependent their income is not dependent on tourism and vacations, so there's a lot of people who do not want bachelor parties next door to their house.

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I mean, I don't either, so I stick to places where the area is dependent on tourism and the regulations are very, very established.

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So, like Destin FL.

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Where I lived there were vacation rentals on the beach before there was electricity.

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Here in the 20s.

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So, the cities and counties figured out how to monetize and regulate the short-term rentals decades and decades.

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Nashville, for example.

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It all started about 10 years ago and they're still kind of trying to figure out what the equilibrium is and where things are going to land.

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So, you want an area that has established rules and regulations you don't really want an area that has no rules.

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A lot of people are like oh wow, I found this goldmine.

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There are no regulations, but it's not if the regulations are coming.

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It's when they're coming so.

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It's better to have regulations in place than none at all, so regulations are most important.

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The other thing that I look for is I want accessibility and affordability.

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So, there's three types of markets that you can invest in short term rentals.

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One metro market like Nashville, two big fly to vacation destinations like Aspen, Hawaii, places like that.

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ssible and affordable. So, in:

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Extra cash, they weren't necessarily flying to Aspen anymore, but they would, you know, drive to the Smoky Mountains for a weekend 'cause it's a cheaper vacation and they didn't have the money to do.

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Ask them last year people didn't want to get on planes, so they weren't necessarily like.

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Flying to Cancun to go to.

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The beach, but they would you know if they live in the.

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Southeast drive to Panama City and go to.

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The beach there.

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So, in the last two downturns, those types of markets are don't know that, Cove.

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It's necessarily a downturn, but certainly an event.

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Those types of markets have been a little bit insulated, and then they already have the built-in millions of tourists coming in a year, and the infrastructure for being able to find cleaners and handymen.

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Just because it's such a.

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Big industry in those areas.

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So that's what I look.

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For so let's take a minute and talk a little bit now.

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Now you've you, it sounds like you've given us the blueprint on picking the right mark.

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OK, how about?

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Picking the right property, how do you run those numbers compared to since you've had experience with a traditional rental property, do you run those numbers differently?

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So, with the difference between long term and short term is that long term fits really nicely into a spreadsheet.

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The rent is the same every month, and that's what it's going to be unless you go in there and do a major renovation or minor depending.

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On what it?

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Is but with short.

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Terms there's seasonality.

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There's pricing differences, just you know, very.

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That vary by weeks and days, so you're going to.

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Be a lot more expensive on the July 4th weekend than you are like a random Tuesday in October.

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So, there's not an easy spreadsheet to use, but gross annual income is what I look at when it comes to short terms, because that helps you get to your cash on cash, return number and short terms are really more dependent on the way the success of them is more dependent on the way there.

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Managed than only the property itself.

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Long term multi's the success is dependent on the property, but short terms there's lots of different ways to optimize and boost that income so that you're making more than your neighbor that you just kind of can't measure with a spreadsheet.

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So, I look at gross annual income I looked at.

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There's a lot of data sources out there where you can get market wide data for short term rentals.

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Air DNA is 1 rabu is another one.

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Price Labs which is a tool that you use to price your property once you.

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We own it has a function in there called the market dashboards which also shows market wide data.

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So, I use a combination of that and then what we call the enemy method, which is basically where you just look zoom in on the map on Airbnb go into the neighborhood that you plan to buy and look at your enemies or your neighbors.

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But enemy methods more fun to say and you're looking at.

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Why the data says what it says?

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So, things like.

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Is the so if you're looking at a four bedroom and the four-bedroom next.

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Door to you is.

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Falling down and it's in disrepair, and the pictures are terrible, and its really grandma, well, you're going to be able to do better than what they're doing.

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But if the four-bedroom next door to you comes with like a private jet and a private chef, and all this.

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Craziness, well, you're.

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Probably not gonna be able to do as well as they are.

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So, you're kind of looking taking the data using the enemy method to kind of see why the data says what it says, and then you're kind of backing.

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Into your cash on cash.

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Return from there.

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Is there a way to then see what your enemy enemies are doing when it comes to booking too then so you can see like, OK, this is an actual hot area.

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You can kind of.

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Firm that another Airbnb could work well there.

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So, there's no way to truly.

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Confirm without another owner just opening their books to you.

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But there are lots of tools and algorithms that can tell by their number of book days and prices about what they did, which is what you can see.

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On air DNA.

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And rabu, it's really, really close. It's not perfect, but that's why I recommend using 2-3 data sources and not just one.

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And you can kind of get you know zero in average of.

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Those three, so you have a number of short-term rentals.

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Now various parts of the United.

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States and quite a few of them.

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How do you manage all of this and and then on top of it remotely?

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That is a really.

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Good question, so that's kind of what we.

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Do at the short term stop so we.

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Are real estate agents.

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In 10 markets that work only with short term rental investors.

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We closed over:

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It remotely so that they don't have to go that traditional property management route.

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'cause with long terms like all my long terms are with a property manager but short term the gross well the split with the property manager does not.

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It's just not worth the amount of work that it is.

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So, with short terms, a lot of it is automatable with a few apps on your phone.

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So, property management software is really, really, really.

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Mark nowadays really automated automatically books when somebody books on your property.

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It will automatically book on your cleaners calendar so they know when they have to go clean.

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It integrates with iCal, Google Calendar, whatever, they're using.

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A lot of the communication is automated too, so that unless the guests ask something really, really specific, you're not having to respond to them.

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You can set up all these automations to making sure that every question they could possibly have is answered unless they ask like hey, I can't find a spatula.

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Where might.

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I find that so most.

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Of it is automated and the average.

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Traditional property management split in short term is 25%.

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And for me, for eight properties last year to give you some perspective, if I had paid a manager that I would have paid them $200,000 and as a real estate investor have better things to do with that $200,000 like put it into the 48 unit that I'm under contract.

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On right now so.

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It's just so easily done with apps.

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On your phone that it just doesn't make sense to use that traditional type property manager, you really just need a good cleaner and a good handy person.

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You can build out your other boots on the ground.

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From there.

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Everything else can be semi-automated.

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You're still having to manage the systems, but you're not having to like run out and give people keys and.

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Turn lights on and stuff.

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So just a reminder, everybody head over to the short term shop.com to find out some more information.

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I also found your YouTube channel.

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There's a lot of content there as.

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Well, yeah, yeah, we definitely try to put out enough content for people to get comfortable with the idea of self-managing and help them realize that they can do it.

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I mean, when I started, I was.

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Making a $37,000 marketing manager strategy.

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In in the.

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Music strategy marketing manager salary in the music business.

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And you know just five or six years later I've got 105 doors and financially independent by a lot so.

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People anyone can.

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Right?

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So, I would imagine that these processes and procedures and and applications and getting those boots on the ground is.

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Would you say that's a fair concept to throw out regarding how you're scaling then and 'cause it sounds like you're growing rather quickly and and in various vacation spots.

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The process is the same in any vacation spots, so.

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In all the markets that I'm in, they've had vacation rentals since well before the air.

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Being well before the Internet, well before Airbnb, all those things.

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So, there's a big infrastructure of cleaners who know how to turn a vacation.

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Rental, so when you're.

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Buying like in a metro market or like if I'm in Starkville, Ms where I grew up, there's not really an industry for that, so I'm going to have to.

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Find a housekeeper that's used to cleaning just regular houses and teach them the process for cleaning a vacation rental.

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But in these markets, like all the cleaners already know the process to do it.

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There's there are plenty of.

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I mean, it's always.

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Hard to find good work, but there's plenty of workers that focus on these types of things so.

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In any market that you're buying, I would just say join the local real estate investment groups.

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There's also in especially in the vacation markets.

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There are Airbnb and short-term rental owner groups specifically where a lot of that information.

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Is shared, so you.

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Can find those boots on the ground people and then really you just need a good property management software.

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The one.

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That I use.

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Is gesti for hosts.

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That's the easiest.

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To use in.

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My opinion, but there are some other good ones like.

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Igms and some other ones, and then you just need a good pricing manager which a pricing manager is probably the most important in terms of how much money you're going to make because it is constantly analyzing past booking data and current booking data for the market that you're.

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In as well.

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As events happening in the market that you might not realize are going on to make sure that it's.

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Pricing you at the highest possible price per.

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Night, so those two pieces.

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Of technology and those two people, your cleaner and your handy person and you're on your way.

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So, you know you've obviously painted an interesting picture here when it comes to short term rentals, but I think a lot of people are going to.

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Under like, what are what are the actual returns compared?

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Can and can you compare those to a more traditional long-term single-family home rental?

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Yeah, yeah so.

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I mean, my most recent single families and even multis are like between 4 and 8% just because if they need some updates or you know they need some things, whereas my lowest short term I think is in the 30% cash on cash return.

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Range, so you want you're looking really for a minimum of 15%, with the assumption that you are going to be able to bump that up to 20.

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But I mean we see people get up into the 30s and 40s all the time.

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I actually did have.

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There is an agent on my team, Julie, who years ago before prices went completely nuts across the country.

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She bought a.

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Cabin in the Smokies and had a 100% cash on cash return year one. Those deals aren't out there.

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Anymore, but it's pretty.

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Easy to get into the 20s and 30.

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Well, it sounds like they're what're those particular amenities then that seem to biggest be the biggest return on the investment when it's when you're trying to increase that cash on cash return?

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Pools for sure.

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So, in the beach markets a private pool is great, but you also if you don't.

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If you can't get a private pool, then access to a community pool is a big one too.

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And then in the mountain markets, indoor pools are starting to be a thing like basement pools, and those can add I mean 50 to $75,000 worth of income in a year.

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So, it just kind of depends, but as long if you're buying in the right market, as long as the property is in line with what tourists have come to expect.

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So, for example, mountain market cabin or as kabani as possible, not brick ranch home.

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Or if you're buying on the beach, you know beachfront condo or bright colored or white is like the New Beach house color.

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But you know, beach houses and condos and again not.

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know, white vinyl siding mid:

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Know it you could.

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Pick it up and move it.

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Anywhere and it.

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Would fit.

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So, whatever is in line with what the tourists.

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Have come to.

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Expect as long as you are providing.

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That, and it's a.

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Cute, nice clean place to stay then.

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You should be OK.

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So, it seems like that there was a bit of a land rush if you will when it came to Airbnb.

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B and in these short-term rentals everybody was getting into it when they realized that they could make a sizable return on their investment.

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Now you got these websites and frankly, I when you're when you're first starting out in short term rentals, what would a person have?

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To do or what can they do in order to stand out?

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Because it seems like.

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The people that have had some sort of history are the ones that are probably going to.

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Get picked first.

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So again, if you're buying in the right market, then you don't have to worry about getting picked first like the Smokies.

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For example, has 13 million visitors a year into the park.

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The area of Gatlinburg, Pigeon Forge, Sevierville had 20 million visitors last year and it just does not have enough.

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Does not have enough inventory to keep up with the demand and the growth.

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Down here on the Emerald Coast.

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Same thing eight to 10 million visitors every summer and there's just not enough real estate to actually.

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They support all of that, so if you're, but if you're buying like again, I'm going to use where I'm from in Mississippi like my dad thinks that West Point Ms where his fishing camp is like the greatest place on Earth.

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But it's probably not a good place to.

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Have an Airbnb 'cause.

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Nobody wants to go there.

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There's nothing there except his fishing camp that he loves, so that would be a place.

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Where maybe one Airbnb is going to do OK, maybe 2, but that's a place you're going to have to worry about getting picked first or not getting picked at all.

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But in markets where there's just so much tourism that you just have to provide a cute.

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Nice clean experience.

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It's really not that difficult.

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You don't have to worry about that different differentiating factor as much.

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Sure, OK, well you know it.

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It like I said I, I've actually tried the Airbnb thing, but my biggest mistake was trying to do it in my backyard.

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And and frankly every time I tried to turn it over.

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Uh, it would kill any cash flow because of the cleaning crew.

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And everything else where was it?

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Or do you?

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Wanna say well I'm up in near Fargo, ND so it's not a travel destination by any stretch.

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Oh, goodness.

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Gotcha, yeah, that's why I just.

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Stick to those.

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Vacation markets, and that's a place where there's lots and lots of tourists is going to be a place.

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Where they're willing to pay.

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Like my cleaning fee and Destin is $450 and guests don't even bat an eye at that. Actually, charge them more than what the cleaner charges.

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Me and guests don't complain about.

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It at all so.

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It's definitely an area like if the precedents already set it.

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It's definitely something that.

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Is a lot easier to do in an area where there's a lot of them.

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Already than when you're the only one.

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Sure, well it is.

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Would it be fair to say that the short-term rentals and being you know realtor to real estate investors who are buying this type?

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Things that's your primary business, but it.

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Sounds like you're also.

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Buying some long-term rentals.

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Is there a reason you're in both?

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Yeah, just diversity of portfolio, so I was able the goal for us was not necessarily we didn't start with short term.

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We found that on our second investment and our goal was never really to like, oh, we're just going to buy 150 short terms and just that's what we're going to do. Our goal is to build a big portfolio of different types of.

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Real estate and we were able to do that faster because we invested in short terms.

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Towards the beginning of our investment career, so I'm certainly not a proponent of only having short terms like I think you know, if you're going to have a portfolio of 200, maybe you have 10 short terms.

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You don't need more than that.

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Some people would tell me I'm wrong.

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I'm leaving money on the table.

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Why on Earth would you buy this 20?

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4-unit apartment.

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Building when you could get a much better return for your money.

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On a short term, I think Coca is a really good example.

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Of that although.

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The opposite of what we thought was going to happen is what happened.

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So, when the first COVID shutdowns happened, we were like, oh crap, there go the short terms.

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The jig is finally up a good thing.

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We have all these long terms to support us if.

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The short terms go.

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On the tubes, and so you know, sat around.

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For two weeks.

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On the first shutdowns and as soon as those were over, the doors blew off of our short terms and we were making more money.

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Weren't higher prices per night than we'd ever seen, but it was actually our long term we had to worry about in the.

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Eviction moratoriums that just.

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Goes to show that it doesn't matter which way the economy wants to mess you up.

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It's good to have different.

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Different streams of income and but I also don't like, even though I just said it's good to invest in different kinds.

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Do one at a time like I'm not saying run out and call 100 different agents in 100 different asset classes in 100 different markets and try 'cause that you're never going to get started.

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If you do that, but we have our short-term machine kind of rolling and then we got our long-term machine, kind of.

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Rolling and then we started with the Multis last year.

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And we kind of have our three pillars all separate from each other that.

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We just keep.

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Keep cranking so I don't recommend trying to.

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Do that until.

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You've got a few under your belt, but for us sure terms were a means to scaling faster, and we'll probably never sell our short terms, but there definitely we're not necessarily.

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Short term.

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The end goal.

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They're just cash flow turbochargers.

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And any kind of portfolio.

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So how did how did the?

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How did COVID impact your short-term rentals?

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Over the past 15 years.

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It's made them.

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Significantly more profitable, really?

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Yeah, because of.

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The type of market that they're in.

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So, in last year everybody was dying to get out of their houses, but they didn't want to go to metro markets and breathe on, you know, breathe on people.

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People breathing on them and get sick.

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They didn't want to get on planes and go to big.

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Fly two markets for the same reason.

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But they were dying to get out of their houses, so those regional drivable vacations.

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Went through the roof and everybody was standing in line to get out of their houses and get somewhere and so they just they kind of exploded in the past two years.

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So, you've been doing this now for quite a while.

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The short-term rentals.

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What was the one?

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Big thing that.

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One of your biggest a-ha moments that when you a lesson you.

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Learned a lesson I learned so you're it's OK to set business hours and I learned that in my short-term rentals.

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But it's.

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Helped me across my real estate sales, business and and other things because.

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Guests, clients, customers, people.

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Kind of when you're providing a service, they kind of want all of you all.

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The time at which.

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Can cause some, you know, take an emotional toll of like not being able to just take a chill pill so it's OK to say hey you know we're going to respond, and we this is on the front page of.

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All of our Airbnb's like we are going to respond between this hour and this hour, and if something happens after this hour, it'll be addressed the next day, and so that's something that I've been able to kind of implement across the board with all of our different businesses. Is that, you know, after this?

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Some night hanging with the kids.

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If it's not an emergency, you will hear from me in the morning and that you know that is really good for the old mental health so.

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Sure, so here's kind of.

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An oddball question you you've had a.

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YouTube channel for a while.

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What is your number one viewed?

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YouTube video what's the topic?

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Well, that's a really good question and I haven't looked at my metrics.

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In a minute.

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I think it's probably the enemy method that I mentioned earlier.

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Where are you teaching you?

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Basically, how to look at why the data says what it says?

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I think that one is.

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The has the most hits.

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Yeah, that would make sense because I think that's that is a.

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That isn't as well known or how these numbers are run and and understanding how to make sense of those numbers is probably a pretty vital piece of it.

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Right?

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So no, I really appreciate your time.

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This has been really eye opening and one more time head.

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Over to the.

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Short term shop.

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Take a look at what Avery.

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And her team are doing, there is, uh, you got a lot of content on this website.

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With that I kind of warned you it was coming.

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Is there a question you wished I would have asked you here today?

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Well, normally I would say people forget to ask though.

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Well, if short terms are so great, why don't?

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Why do you invest in long terms also people?

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Usually skip that one, no, I think.

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I think you got everything.

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Well, I appreciate you giving us some time here to get today again and you're welcome back anytime Avery.

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I think you and I could probably go down various rabbit holes and and I know that we've just tip of the.

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Iceberg on this.

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Yeah, absolutely.

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I'm I'd be happy to anytime and thanks so.

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Much for having me today.

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