Table of Contents - Airbnb that Works in a Pandemic with Avery Carl
Dave Debeau [00:00:09] Hey, everyone, this is Dave Debeau with another episode of the Property Profits Real Estate podcast today. Zooming in. I think you're either in Tennessee or Florida, which we're in today.
Avery Carl [00:00:19] I am in Tennessee today in the Smoky Mountains.
Dave Debeau [00:00:23] All right. In the Smoky Mountains of Tennessee. I'm Canadian, Avery. I've never been to that beautiful part of the country, but I've always heard about it. Sounds fascinating. So Avery is a very, very interesting person with an amazing background. Sports, music, school business, music industry, real estate. So a lot of stuff going on in your life there, lady. You've done a lot of different things. We'll focus today on real estate, but we will I will ask you a little back story in a few minutes here, how you got started with that. But but your main focus, if I'm not mistaken right now, is short term rentals, is that correct? Yes. All right. As we're recording this, we're in the midst of the whole covid coronavirus thing. And I'm not personally involved in short term rentals or Airbnb type properties, but some of the people I know have been very, very drastically affected by the fact that tourism is pretty much ground to a halt almost everywhere. So how is how is that affecting? People that you work with or your own portfolio have short term rentals right now.
Avery Carl [00:01:40] Sure. So this has been kind of a an educated guess of mine for a while, a hypothesis that the drivable vacation, heavy markets like the places that are one hundred percent dependent on tourism. I'm not talking about Nashville's Chicago's no metro areas are going to be the most resistant to recessions of any type of market. So metro market, there's metro markets, there's fly to vacation rental markets like Hawaii or Disney. And then there's the drivable regional vacation rental markets like the Smoky Mountains. So we get 13 million visitors a year, all of which are driving in. Very few fly here. Same thing. The other market that I'm in is Destin, Florida, and Panama City Beach, Florida. Same thing. I think we get more like eight or nine million visitors a year, but pretty much everyone drives. And then also the Gulf Coast in Alabama, which is Gulf Shores and Orange Beach, same thing. So I have done a lot of work in Nashville, have a lot of clients in Nashville, too. And what we found is that well covered. First of all, let me back up that covered spot for the entire short term rental industry in March and April. My personal properties, which are only I've got twenty eight properties total. Six of them are short term rentals. The rest are our traditional long term fiber in the Smoky Mountains. One is in Destin, Florida, and we lost within a week. As soon as they got serious, everybody canceled like they did everywhere. Within another week as people started realizing, OK, I'm going to be working from home for an extended period of time. We got just enough bookings in both places for people who live in drivable big cities, who might live in condos or small apartments. That said, OK, I cannot be in this small space for two weeks. How about I come social distance and work in your short term rental? So we were able to break even for March and April without having to dip into any cash reserves, which is a conversation for another podcast. So we made it through there and then in the southeast, which is where most of our tourists are coming from. Anyway, in these two markets, everything kind of started to open back up beginning in May. And we have seen a boom in the derivable vacation rental markets because people are busting to get out of the house, but they don't want to get on a plane and they don't want to go somewhere like Disney where they're going to be, or even just a big metro area where they're going to be around a lot of people. So they're all driving to the vacation areas so they can get to in their car. So we're actually seeing higher prices per night than we ever have, even on holidays. So these are very, very cool. Yeah, yeah. So the regional drivable markets have bounced back in full force. The metro markets, Nashville is still struggling a little bit down the road of the bigger cities where there's still a lot of lockdown's struggling as well.
Dave Debeau [00:04:28] OK, so that is that is a fantastic distinction because I think most people, uneducated people, might not be involved in short term rentals like myself. Actually, you know, you always assume that it's always like a tourist focused people flying in. But you brought in such an important point there, like regional drivable destinations. So, yeah, that makes perfect sense. Everybody's going what we call chac wacky, staying over the day. You want to get the hell out of the house, go somewhere different, somewhere they can drive to somewhere that's not surrounded by a gazillion other people. So it just makes sense that if you go to a local, relatively local tourist destination, stay in an RV and be a short term rental, that might be a very good option. So very, very cool. OK, well, I'm very glad to hear that it was just a little blip for you guys and things are going along pretty well. So let's let's talk about short term rentals in general. How did this get into a little bit of your backstory? How did you come across short term rentals and why did you decide to focus on that? And what exactly do you guys do around the whole short term rental industry?
Avery Carl [00:05:46] So what I do is I'm an agent. I have a team of agents in those three markets and we just mentioned in Tennessee, Florida and Alabama. And I got into this. I was working in the music business as a marketing manager. Before that, I played guitar in bands and did that whole thing. So we kind of started this just as like a retirement plan. We were only going to buy one or two properties long term and we had no idea what we were doing, didn't listen to a podcast, didn't read a book, just bought one. And luckily, it's still our highest performing long term to today. We still have it. But once we bought that first one and we started getting those rent checks, we said, oh, wow, this is something we really want to scale and build. So then we started educating ourselves after we'd already pulled the trigger on something. But our problem was we only had one down payment. We didn't have a lot of cash to put down on any. Arctic by a bunch of stuff. So we said, how can we best optimize this with one property to where we can scale the fastest? And we were living in Nashville at the time, so we thought about short term rentals. The Nashville market, like a lot of metro areas, has a lot of volatility with the SDR regulations. So not really the safest place to
Dave Debeau [00:06:56] stand for short term rental,
Avery Carl [00:06:57] right? Yes, short term rental regulations. So and you'll find that with a lot of the big metro areas, there's a lot of clashes between the city council and people who live there in the neighborhoods. You don't want the Airbnb there. So where can we go? So where can we go that we can do this and not have to worry about that? And we said, well, we go on vacation to the Smoky Mountains all the time. People have always been staying in short term rentals there since the 70s. So let's try that again. Didn't know anybody who did it. We just went out on a limb, made a bet on ourselves and did it now. And that one was very, very successful. We quickly scale that into five within a year in the Smoky Mountain market. And then we started branching off and getting some duplexes, some long term and some other markets. But the hole that I found in the market was that there were no agents or really anybody who could help us out with cleaners and handyman and learning how to do this. They would just say, oh, here, use this rental company, use this property manager and the property managers in these vacation rental markets that have been around for decades and decades charge between 20 and 40 percent of your gross. So it's a lot. And so what I did is as we started to buy more properties, I got license and I made myself that agent in these three markets. And now I have a team of agents under me who all do the same thing. They all own their own short term rentals. And what we do for our clients is not only do we do the buyer agent thing and help you get the property, once you get it, we teach you how to get your Airbnb and Gharbia listings, put together automation tools, tips and tricks. And then we also get you everybody that you need to be able to manage it remotely from anywhere without having to pay anybody that 20 to 40 percent of your gross.
Dave Debeau [00:08:40] Very, very cool. So maybe if you don't mind me asking a little bit about your personal journey when it comes to short term rentals. So you guys went from you bought your first single family home long term by an old. He decided to get into short term rentals in the Smoky Mountains, you very quickly built up to four or five properties, I believe you said there. So what do those properties look like? Are these houses? Are they cottages? Are they condos? What are the.
Avery Carl [00:09:08] The ones in the Smokies are cabins, and that's going to be dependent upon your market and what is expected by the tourists. So in the Smokies, condos don't really work. The tourists want to stay in cabins. They want the mountain experience. Whereas if you go down to Florida, condos are totally OK. People love condos on the beach. So you kind of have to pay attention and do some research on what's expected. But mine are single family. All of mine are single families in all the markets.
Dave Debeau [00:09:34] OK, very cool. So just to get an idea, what kind of price points are people looking at or what's the range in these three different markets that you have, I understand is going to be all over the place. But give or take, just to get an idea,
Avery Carl [00:09:46] depending on how big of a property they're after, how much money they want to spend, it can be anywhere from two hundred thousand nine hundred dollars and a million. It just depends. The biggest driver of income is going to be number of bedrooms. So like I had a client recently who insisted on a one point three dollars million three bedroom, and it really, really made my head explode because that is not a good return on investment. The more expensive it is, the more bedrooms you want it to have, because the more money people will will pay to sleep that many people. So it really just depends. It's not really a one size fits all, which is a really good thing about this investment strategy, is that nobody is priced out. No, there's not a lot of barrier to entry like, say, with multifamily. So newbie's or really experienced investors can find a price range in ahli range that works for them.
Dave Debeau [00:10:37] Cool. So let's take a look at the properties that you have in the in the Smoky Mountains. So give me an idea of these these five cabins that you have. What are the what size are they? What are they going to look like? Are they all in one fell swoop where they kind of like a little and all in one area or they separate completely separate properties?
Avery Carl [00:10:54] They're all in slightly different areas. As long as the property in that market is within twenty minutes of the attractions, you're in good shape. They're going to rent roughly the same. So mine are all one and two bedrooms. And the reason for that was I was saving up a down payment and buying what I could afford really quickly to just snowball that cash flow. But the most recent one that I bought is a big four bedroom with a pool. There's kind of a little turbocharger in income between three bedrooms and four bedrooms are short term rentals so that four to six bedrooms have the highest ROIC and efficiency and management. I mean, it's it's the exact same amount of effort to manage a six bedroom as it is a one bedroom. So while my one and two bedrooms did exactly what I needed them to do to get me scaled, four bedrooms are not really are the the best way to go.
Dave Debeau [00:11:43] So what do you mean ideas? So let's say that one or two bedroom, the smaller property that you got into, well, I guess that wouldn't ever really rent out as a long term rental. Or maybe they would compare and contrast like a standard rental versus what you're doing with short term rentals as far as cash flow.
Avery Carl [00:12:01] OK, sure. So my two bedroom cabins, they are grossing fifty five thousand a year each year. You're not going to start at that. You'll probably gross about forty five to start out. I've had my in for a couple of years. I have some great reviews so I'm looking at fifty five thousand a year each whereas and you'll have to forgive me, I measure my my short term on an annual basis, on my own terms, on a monthly basis, whereas my long terms are making a standard two bedroom unit, whether it's a single family or half of a duplex, they're making four or five bucks a month.
Dave Debeau [00:12:34] OK, so the first ones are grossing fifty grand, let's say, annually. What would your net be after you've paid everything else out, including mortgage and management fees and all that kind of good stuff.
Avery Carl [00:12:45] So if you're self managing and everyone that's listening, take this with an entire shaker of salt, because two people can gross the same exact thing and have wildly different nets just depending on how they manage. But with a mortgage, you should be able to net roughly 40 percent of your gross in your first year. As you get better reviews, you'll be able to raise your prices and you can do better than that. But to start, you're looking at right around 40 percent.
Dave Debeau [00:13:10] OK, very, very good. Interesting stuff. OK, so what are some of the biggest mistakes you see people making when they first start getting into short term rentals, like if they are working with a team like you? And if they don't, it sounds like you got pretty lucky with your first one. But what are some of the I'm sure you've seen some disaster stories,
Avery Carl [00:13:29] haven't seen too many big disasters. But the main thing that the and it's with any type of investing, and I'm sure you've heard it a million times, is analysis paralysis is the worst thing that any investor of any type can do to themselves.
Dave Debeau [00:13:41] Yeah, just overthinking it and never doing anything right. That's very, very cool. Also, maybe so if people want to find out more about you and your team and what you guys do or be the best thing for them to do.
Avery Carl [00:13:56] My website is the short term shop dot com, you can text me right off the website or you can set up a consultation, send me an email. There's a zillion ways to get a hold of me on there.
Dave Debeau [00:14:07] Just out of curiosity, a lot of our listeners are Canadian. Do you work with any foreign investors? You've got any many folks from outside of the states that bought these kind of properties with you guys?
Avery Carl [00:14:16] Yes, yes. We have a few Canadian clients also. We have quite a few clients from China as well, and then several from India. So, yeah, definitely out of the country. Friendly for sure.
Dave Debeau [00:14:28] Thanks, Larry. I want to thank you very much and thank you for expanding my context and understanding the difference between an Airbnb in Hawaii or Disney and those kind of things, which are kind of what I had or Metro, major metro in short term rentals versus what you call the regional driving distance type properties where the primary customer are people that can drive to your area and how that but the big difference that makes when you come into situations like this, where economic uncertainty, pandemic's things like that, it seems like that doesn't get affected nearly as badly.
Avery Carl [00:15:07] Right, right.
Dave Debeau [00:15:08] Awesome. Thank you very much. It's been a lot of fun.
Avery Carl [00:15:11] Oh, thank you so much for having me.
Dave Debeau [00:15:12] All right. All right. Take care and we'll talk to you on the next episode. Bye bye. Well, thanks very much for checking out the property profits podcast. And you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review it. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.