4 Rentals in 7 Years with LOW Money Down (5%

Ashley:
Can you turn a risky real estate investment into a success even during the Airbnb bust and the 8% interest rate? We’re going to find out today in 2022, there were historic storms and high interest rates, but we’re going to talk about navigating many of those things with Chris today, our guest who has turned his real estate portfolio into successful short-term rentals. This is the Real Estate Rookie podcast. I’m Ashley Kehr, and I’m here with Tony J Robinson,

Tony:
And welcome to the podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And I’m super excited today to have Chris Young on the Real Estate Rookie podcast with us. Chris, welcome in brother.

Chris:
Thanks so much for having me, guys. Really appreciate it.

Ashley:
Chris, let’s start off with why you chose real estate. How did it come into your life?

Chris:
Oh man, that’s a tough question. So growing up, I mean I think I was always interested in real estate. My grandmother actually immigrated to the country and owned a couple rental properties as I was growing up long-term rentals. But I was that kid who was in college and I should have been studying for exams, but I was on Zillow looking at properties and saying like, oh, can I find a good deal? Had no money, no experience, but always knew I kind of wanted to end up in that space somehow. And so fast forward a few years, graduated college, got an engineering degree, got into engineering, and my first job I wasn’t super happy with. I think I ended up realizing it was the company, not necessarily the job, but as a backup. What I ended up doing was I ended up getting my real estate license.

Chris:
So I wanted to make sure that, hey, if I’m going to stay in this job, I don’t want to feel stuck. So I wanted to give myself an out a second option. So hey, if I give myself some time in this career and it doesn’t work out, I know I could go into this real estate thing and do well. I still have my license, don’t really use it. But what it gave me was the knowledge to understand the process of buying a property. So I bought my first property, which was a primary residence in 2017, in December of 2017. And fast forward now, we’ve got going on four properties now, and I really found congratulations. Thanks so much. Really found kind of our niche with short-term rentals that I just absolutely love.

Ashley:
And how did you start to develop that niche of short-term rentals? What made you pick that strategy specifically?

Chris:
So our first property, like I mentioned, was our primary residence. It was the typical worst house on the best block that you could afford. I mean, we were 25 years old and bought a house that was half a million dollars in la, which LA is one of the most expensive real estate markets in the country. A lot of people thought maybe it wasn’t a great idea. Our mortgage was going to end up being almost twice what our rent was. So it was a big major expense. So there wasn’t as much going out and planning fun vacations, but instead it was how do I get the carpet out of the bathroom in this place? So we did a lot of sweat equity and turned that property into a long-term rental after having that property for about a year as a long-term rental, it did okay and I just didn’t feel like it was satisfying some of the creative side that I had. Also the business side, I think long-term rentals are great passive income, but I got my real estate license. I wanted to be active in the space again. I soon realized that I didn’t want to be an agent necessarily. I think I’m a little bit too analytical to deal with handholding for first time home buyers and things like that. That just wasn’t my jam. But hearing about folks getting into this short-term rental space, and this is around covid, so 20 20, 20 21.

Ashley:
Before you go on, I just want to make clear that your long-term rental was too easy that you go else because I am thinking of myself included, all the people who invest in long-term singing. You probably had the most perfect tenant. You didn’t have to do any maintenance requests, they paid on rent. It was too easy for you and that’s how you needed something

Chris:
Else. No, I definitely wouldn’t go that far. I mean, we are lucky we still have the same tenant and they’ve been pretty good, but I think I wanted to feel more control and kind of that entrepreneurship aspect. I think there’s something to short-term rentals where it really is a business that you’re building, you’re building an experience. And growing up, I worked in restaurants and kind of the guest experience and hospitality type of space. Even in my job now, I still deal with clients and with people, and that’s one of my favorite parts of my job is the people I deal with. So with short-term rentals, I wanted to be able to get into a real estate space where I’m dealing more with people.

Tony:
Spoke kind of more to what your interests were, and I want to talk about that transition to short-term. But before we do, I just want to make sure I’m tracking. So you guys bought a property in Southern California. Did you initially live in it or was the goal initially from the beginning to run it as a long-term rental?

Chris:
Yeah, we initially lived in it and so I guess it was, we didn’t know it at the time, but it was kind of like a live-in bur, right? So yeah, we bought it 5% down conventional financing. We fixed it up over a couple of years. We refied and pulled all of our equity out essentially to move into a new primary, but we also had funds left over as a potential way to go into another investment.

Tony:
So you said you bought it for about half a million in 2017. When did you move out and do the refi?

Chris:
Yeah, so we moved out in December of 2021, so it was a couple years ago. So we lived there for about four years.

Tony:
Okay. And then what did that property appraise for in 2021, and how much capital were you able to access during the refinance?

Chris:
Yeah, no, great question. So again, our down payment was probably 25,000 I think with the rehab. We ended up probably putting in about 35,000 over a couple of years. I mean, we moved in and didn’t touch the kitchen. It wasn’t a get rich quick scheme or like, oh, we’re going to flip the whole property, then we move it. No, it was months and years of hard work and just really a lot of DIY, a lot of lessons learned. And so in December, 2021, that’s when we refied the property appraised for 735,000. We had 200,000 of equity appreciation. I actually wasn’t super happy with that appraisal. I thought that was undervalued and that property is probably sitting at around 800, 8 10 in terms of value right now,

Tony:
And I appreciate you sharing those numbers. The reason why I ask is because I think that is one of the best ways for a rookie to get started is to get into a property 5% down, put a little bit of sweat equity into it over the course of a year or two years, and then either convert that into a rental or sell it tax-free to help you move into your next one. And I feel like we’ve interviewed a lot of people who’ve leveraged a similar strategy and it’s a great low cost way for rookies to get started today, especially as interest rates kind of fluctuate.

Chris:
Yeah, a thousand percent.

Ashley:
So let’s move on to you’ve done this live and burn, now you’ve got your renters and moving on to the next property.

Chris:
So that’s our primary residence right now that we’re going to be turning into a rental, most likely we’re considering selling it and just it being a flip,

Ashley:
Did you kind of go about the same process looking for something that needed value add?

Chris:
Oh, a hundred percent. Yeah. Yeah, so our first initial property, even though we have renters in it right now, before we actually moved out and got renters in, I was actually in the process of adding an A DU on that property. So we had plans drawn up for

Ashley:
It. Explain real quick, with an A DU?

Chris:
Yeah, so an A DU is an additional dwelling unit, and so that would create an additional income stream on the property so that we could rent out the main house, but as well create an additional dwelling at the back of the property and rent that out to another renter for additional income.

Tony:
You said you started that process, so you guys halted that process or

Chris:
We did. We did, yeah.

Tony:
What was the thought process behind that?

Chris:
The cost, I think for construction, I mean this was 2021, there was a lot of demand on contractors.

Tony:
Lumber was marked up 400%.

Chris:
So there were a lot of things like that where we, and the laws are changing in California quite a bit as well now, where it’s becoming a lot easier and a lot more affordable as well. And we were in a market where the laws were changing, so we thought, okay, let’s hold onto the property. We’ll give it some time and maybe we’ll come back to the A DU idea, but why not take that same chunk of money that we would use for the A DU and acquire another property? Because in California it’s a state that continues to appreciate most states in the us, but if I have two properties that appreciate at 5% rather than just one at 5%, I’m going to have more wealth in the longterm if I increase the number of properties I have at this phase of my career.

Ashley:
So that was your thinking going forward to buying your next primary,

Chris:
Correct. Correct. So that property had a few more bedrooms, also had a garage of the property that was already halfway converted to an additional dwelling unit. So that property was great because at the time I had some family who, my two sisters who were looking for places LA is very expensive to live in. So figured, hey, why don’t you save some money, come live with me. So that place had four bedrooms and then the additional dwelling at the back. So right now we’re considering potentially doing co-living on that property sometime next year.

Tony:
Can you define co-living for folks who maybe haven’t heard that phrase yet?

Chris:
Yeah, yeah. Lots of strategies here that I’m implementing, but yeah, so the co-living would be renting out a property room by room so you’re not just renting out the entire property, running the comps on that deal. It wouldn’t cashflow very well compared to with what our mortgage is now, but if we were to rent out each room and then also finalize the conversion of the garage at the back of the property as an A DU, it would cashflow pretty well.

Ashley:
Ricky, we are so close to hitting 100,000 subscribers on YouTube. If you haven’t already, please head over to the real estate rookie YouTube channel and hit that subscribe button. We want to hit 100,000 subscribers by the end of the year and we need your help. We’re going to take a short break, but we’ll be right back with Chris after this. Okay, let’s get back into it with Chris. Give us an example real quick. What would you rent out one of those rooms for compared to if somebody was renting a studio apartment in the same area?

Chris:
Yeah, the studios in Southern California probably range from 1200 to 1500 in at least some of the suburban markets. We’d probably rent it for somewhere between 900 and a thousand dollars, so there’d be some savings for the potential tenants that would move into a property like that. Plus, I think the other thing is there’s just so much more education on co-living within the last couple of years of people who are doing it at a really high level and providing just an experience for guests not too dissimilar from short-term rentals. So there’s a lot of crossover there that I think could really work for us.

Tony:
I love that you’re taking the short-term rental elements and putting them into the more traditional long-term rental route. So you get the first primary, you set it up, move out, you’re in the second primary. Is that where you’re currently at still right now? That’s where we’re currently at. You’re still currently at that primary, but you’ve also purchased some additional properties outside of that. So what were those other purchases aside from the primary residences?

Chris:
Yeah, so after we bought the second primary, we made a decision we wanted the next property to be a true investment property, and I think that was my way of getting over the hump that we are investors. I think we had that mindset that we fell into investing because so far two of those properties were primaries, even though we had the mindset and the idea that they would be investments. And so that’s when we were looking for different options. We attended BP Con in 2022, which is great. I mean, we were just starting in our investment career and I think going to that event was so great. We so many people who were doing it at such a high level in terms of real estate investing. The challenge was though there were so many different things to pick from. I mean, there’s so

Ashley:
Many, so overwhelming

Chris:
Different things you can do with real estate investing. And I had a little bit of shiny object syndrome. You can ask my wife,

Ashley:
We’ve all done this.

Chris:
So I was like, oh, I still have my license active, so maybe I’ll actually get more into that. We had gone to a few meetups where people were flipping and wholesaling. I was like, maybe we could do that for some side income. Then finally, I think we just had to decide what we were going to focus on and it ended up being short-term rentals for a couple of reasons. One is my wife and I are both high income earners as far as W twos, and so the tax benefits of short-term rentals are incredible in terms of different real estate investing options you have. So that was one. I think the second one was for personal use and not a lot of people care about that I think in the short-term space, but we were definitely of the mindset of how cool would it be to have a property that we can use, that we can make memories in, but yet it’d be an investment where it actually makes us money and creates wealth in the long run.

Ashley:
That’s funny because the first nice short-term rental I did because I did my Airbnb arbitrage where it’s like, go to my mom’s friend’s basements, pull out the furniture, and it’s not a destination to go to. It’s people who are coming to visit their grandma in the nursing home, stay here, but when we first did our first A-Frame property in this cabin, it’s so cool. We would go there sometimes before it was even finished, before we had furniture, we put air mattresses and we’re like, oh my God, this is going to be so fun to build memories with the kids here, whatever. We literally have not gone there once because it was like, well, if we block it off to go, we’re going to lose this money. Let’s not go or whatever. So

Tony:
It’s a catch 22 that is kind of the road, right? It’s like you build a property that’s so good that everyone wants it, which it’s a good problem to have. So you land on short-term rentals as your strategy, and you said this is a 2022 BP cons of fall time. So what steps did you take coming out of that conference to actually go about buying that first one?

Chris:
Yeah, so we had been looking at different properties probably for about six months or so in different markets, and as everyone knows in 2022, that’s when the interest rate started changing. So when I was running numbers on a property in a mountain area, like Big Bear in Southern California in February or March of 2022, the way I was running my numbers in August and September of that year were very different. And so I think with the interest rates increasing, it kind of forced us to be more creative and really take a second thought about where we were investing and how we were investing. Everyone I feel like was very much attracted to the big markets, the Joshua Trees, the big bears, the Smokies, those were all the markets we were hearing about, but I couldn’t help but think about what would be a market that we would have an advantage in, what would be a market that maybe we know a little bit something about that other folks. And so when I was looking at markets right after BP Con in the fall time, we were analyzing different markets and looking at where was there a good occupancy rate, a good nightly a DR rate for a short-term rental, but yet maybe not as much competition. And that’s how we landed on our market.

Tony:
You literally hit the nail on the head of the things that we’re focused on in our portfolio right now as you look for new markets because, so I’m in California as well. So Big Bear is a market that a lot of people here and SoCal. Why did you think Big Bear is maybe a place to potentially go?

Chris:
Yeah, I mean, so Big Bear is a great location from an investment standpoint. If you take the numbers out of it on paper, it’s between Los Angeles, orange County, San Diego, you’ve got tens of millions of potential guests and you don’t need all of them. You just really need 50, 60 guests that go back. Let me pause

Tony:
You there. So you just named a bunch of different reasons why Big Bear could potentially be a great place and every other of the millions of people who live in Southern California are thinking the same thing, thought the same thing. And I think that’s why there’s so much inventory in some of these SoCal markets because we are so close to Los Angeles, we are so close to San Diego, we are so close to Orange County that a lot of people when they said, okay, I want to buy a short-term rental, they went to these markets. What we’re looking for now as we identify new places is we’re looking at two different things, supply and demand. On the supply side, we really do want to focus on markets where the number of listings is probably sub 2000.

Tony:
Once you get above 2000 listings, that’s when maybe there’s a little bit more challenge there in terms of saturation. The other thing that we’re looking at is what is the percentage change of listings this year versus last year? If there’s a negative change and we’re losing listings, that could maybe be a sign that there’s some things going on in that market that maybe we don’t want to expose ourselves to. But on the flip side, if the percent change is so massive, there were some markets that are like 40% growth, is demand growing at 40% and is that sustainable? So we’re trying to find that sweet spot there. And then on the demand side, we’re looking at RevPAR change year over year. So for all of our rookies that are listening, RevPAR is a combination of your occupancy on your average daily rate. So we want to see a positive RevPAR change, but we also want to see a positive occupancy change because nationally, and if you go Air, DNA is a big data aggregator for the short-term rental space, they put a lot of data tools and nationally, a lot of places are seeing RevPAR increases, but they’re seeing occupancy losses.

Tony:
So it means that they’re less filled on a nightly basis, but they’re just trying to charge more to make up for that downside. I don’t want to be in a market where there’s less nights being booked. So we’re looking for a DR growth and we’re looking for RevPAR growth, and if we can check all four of those boxes, then it’s a market that we’re considering. And it sounds like even though I just laid it out in maybe a much more formulaic, systematic way, that was a process you went through as you were looking at these different potential

Chris:
Places. And one thing I noticed, Tony, those are all great reasons, obviously to find a market that you’re going to invest in. And the way I try to look at it is that’s the quantitative, but there’s a qualitative side I think, to how I invest and the properties that we try to choose. And one of the mindsets that we had going into picking this first short-term rental, knowing that it was going to be a property that we were going to use as a second home was if we made no money on this property, if we just broke even for not just a year or two, but period for the life of the time that we own the property, would we be happy with that? And that’s how we looked at it when we bought the property that we did, which was a cabin in Sequoia National Forest. Sequoia National Forest is about three and a half hours from Los Angeles. It’s an area that I used to camp a lot actually in as a kid.

Ashley:
Would you say that was part of your advantage

Chris:
Of a hundred of market, just knowing some of the sites and attractions? Right, because I think there’s lots of investors. Again, we listened to a lot of great investors like Tony and Avery, Carl, and a lot of these folks who talked about drivable destinations, especially national parks. And I love being outdoors. I love getting outside with my kids. And so I tried to think about where’s a place that I would want to go? And the qualitative side of Big Bear and some of those markets that I personally just wasn’t as much of a fan of is you’re so close to other properties, you’re wanting to get into nature and really embrace yourself into that. And I was thinking about it from the guest experience side where you’re trying to get away from the city, but I’m 15 feet away from another cabin with who knows what type of guests are there that same weekend that I’m there. And so it was important for us to find a market that had properties that maybe had a little bit more privacy. If you’re trying to escape, we wanted to be able to provide that for our guests.

Tony:
So you say that you land on this market, you said Sequoia National Forest, which I didn’t even know that there was a national Forest, and I know Sequoia, but it didn’t register that it was a national Forest. But anyway, you picked Sequoia. Walk us through the process of actually finding the deal and what did you see in that property make you say, okay, I think this might be the one for us to buy?

Chris:
Yeah, so again, we had been looking at a few different markets, including the Sequoia market for several months. We go to BP Con, we kind of must wrap the courage where it’s like we need to just do a deal. We had been surrounded by so many people and had so many conversations with people who were doing so many deals and just that inspiration that, hey, we can do this. We’re not just starting out. We’ve got one deal under our belt and it doesn’t have to be a home run. I think that’s one piece of advice I’d give to other rookies too, is you don’t have to become a millionaire on your first deal, just get in the game. A single is enough, right? And so I think that helped me with my mindset of having a deal that ran perfect numbers was foolproof. There was no risk. That type of investment doesn’t exist. There’s always going to be some amount of risk going into a deal and just getting the experience in and of itself. There may not be a dollar value to that, but my mindset was if I could get a short-term rental and learn how to operate it, that value, even if we make zero money the first year is going to be worth something. So

Ashley:
You pay to go to college. So this,

Chris:
I paid a lot more to go to college than I did for my first deal, I’ll tell you that. And so a few weeks after being at BP Con, we found this property that came on the MLS. So it was a public listing that we found. The property had only been on the market for maybe a week or so, so it was a pretty new listing. Now this is a pretty rural area in the Sierra Nevada mountains of California. So you have Sequoia National Park, which has some areas that have quite a few short-term rentals that are pretty popular that anyone can look up. This area is adjacent to that area. And so it’s not Sequoia National Park, but it’s Sequoia National Forest, so there’s no tickets or lines to get into the park, but the attractions are very similar. You want to see huge trees. We’ve got those. You want to see big rocks and mountains and rivers. We have those as well. It’s just not as crowded. And this is where the qualitative side came in. I personally love some of our national parks, especially in California. I hate going to national parks where I have to wait in line or I’m hiking shoulder to shoulder with other people and I feel like I’m at Disney. Disney land.

Ashley:
It defeats the purpose of Yama Nature.

Chris:
So when we decided to go into scoe National Forest, we wanted an area that felt more peaceful, like an escape. So we find the property where we look at it and we’re like, wow, this is much different than the other properties we’ve been looking at in terms of size, in terms of the quality of the property and the price range

Ashley:
As in good or worse

Chris:
As in good.

Ashley:
Oh, okay,

Chris:
Good for everything. But the price range, we were looking to be somewhere around the low to mid three hundreds for our first investment property. Another reason why we picked this market was knowing our budget, knowing what we felt comfortable with, and we knew we could get a lot more for our dollar than in some of the other more popular short-term rental markets. But this was, I think it was listed for 425,000 on the MLS. We made an offer site unseen just based on the photos and based on the location. The big thing that we were looking for in this mountain market was how accessible is it for guests? What would the experience be like in terms of the architecture and does it feel like a place in the mountains? I don’t want it to feel like a house that’s in the city that just happens to be rural, but does it feel like a true cabin?

Chris:
And then the third being views. I mean, I think that the big thing in a lot of mountain markets, whether it’s a view of the lake or a view of a mountain peak, there’s something about that when you escape out of the city and you look at something that looks like a screensaver. Thinking about the marketing side of that was huge for us. So this checked all of the boxes, and even though it had only been on the market for a couple of weeks, most listings in this area are on the market for months. It takes a while for a lot of these cabins to turn, but we didn’t want to risk it or try to really negotiate too much on price because again, we didn’t need a home run. We just needed a single, right. So we did negotiate it on price with the agent. I did represent us, so it was one of the first times I’ve used my license. Congratulations. Thanks. And so we used that and lowered the price point. So we ended up at a price of 400,000, $250 was the closing price.

Ashley:
We’re going to take one more short ad break and then we’re going to jump back in. Okay, let’s jump back in with Chris.

Tony:
That’s funny. Why two 50?

Chris:
I think that’s just what it ended up being. I don’t know. I think it was one of those things where the sellers just wanted to feel like they got hung up, and it was one of those, I’m not going to let you go or pride get in the way. Sure. You want 250. Okay, that sounds great. So we got an offer accepted and went to go see it afterwards that weekend, and we were in love. I mean, it was immediately you walked in and you felt like this was, I knew the place. And again, from the qualitative side, I just know that this is going to be a business and if I can connect with this place on an emotional standpoint and understand how someone would experience this place, it’s going to help me become a better host and provide a better experience for the guests that come through there.

Ashley:
I want to definitely get into that part of it, the operations of hosting. But before we do, let’s go back to you deciding that you’re ready to purchase your next property. What did it look like setting that budget setting, okay, here’s how much we have for a down payment. This is the loan we’re going to get. Give us a little bit of insight for a rookie investor as to you’re ready to approach your property. What are your recommendations for the things you should do before you’re going out and making offers to create your budget?

Chris:
So first, I mean, if you’re looking at a new market and you’re looking at purchasing an investment property, highly encourage you to talk to multiple lenders and mortgage brokers to get a better understanding of what you can afford. And like I mentioned, in 2022, things were rapidly changing with interest rates. So our budget started changing a little bit in terms of what our purchase price could be. So we made sure that we had a mortgage broker that we were comfortable with in terms of the lending side. We had decided how we were going to finance that property, and so we ended up utilizing a second home loan or a vacation home loan 10% down. So we wanted to get in with low money down, which you can do in most markets. If it’s your first property, as long as you don’t have two, I think it’s within 60 miles of each other, give or take. So you can’t have two of those loans in the same market, but for your first property you can. So we knew that’s how we wanted to do it on the financing side, but then we still needed to be a little bit creative in terms of furnishing the place because it had a couple of furnishings, but they were pretty old and most of it was empty. And the property we ended up purchasing, it was a 3000 square foot a-frame style cabin.

Ashley:
So

Chris:
For our first property, we definitely bit off, I wouldn’t say more we can chew, but we had a mouthful, a big build to furnish that. So in terms of furnishing, I mean we really had to get creative and running those numbers and then understanding, oh, this is going to cost quite a bit. We realized we couldn’t do it just by ourselves. So our first foray into partnerships was actually with family members. So I had my sister who ended up investing with us, a small portion for the down payment and the furnishing. So she was an equity partner, and then my grandmother actually gave us a small loan that we ended up paying her back within the first year. That also helped us out with those furnishings. So we had a debt partner and an equity partner that were both family members, which was good. Cool.

Tony:
And it’s a great way to bring people into what it is you’re trying to build as well, and maybe give them a taste. You said something super important. I want to make sure I circle back to that, but you said one of the first things that people should do is just talk to a lender. And I couldn’t agree with that more because I feel like so many rookies, they start investing all this energy into looking at deals and looking at markets, and they’re looking at houses for half a million bucks, 600,000, 700,000. They get a pre-approval and you’re like, you’re for $97. So it’s like, what did I do all this energy for? So knowing what you can actually purchase, and then going back to your question earlier, I asked you of the market selection piece. That’s such an important point because once you know what you’re pre-approved for, that might rule out some of the other markets you’re even considering beforehand.

Chris:
Exactly. We knew that we could afford up to 500,000 probably for this investment property, but what we would get for that amount or less than we wanted to be under budget in Big Bear or some of those competitive markets versus this market. It was a night and day difference, but also at the same time, we wanted to make sure that the data was there to support, that there was the tourism that we could get, the occupancy that we wanted, and so we made the decision to go in a market that was less popular, not only to necessarily avoid some of the large competition, but also I think because we knew that doing a lot of the data research on the other listings in the area, it was pretty slim Pickens if you wanted a good stay, a good vacation rental. A lot of photos were taken from phones and phones not from this decade. At the razor flip, the furnishings looked like they had been there for quite a while, and so we knew, wow, based on learning from experts that we have learned from over the last year or so about how to run a successful rental, I don’t think there’s a lot of successful hosts in this market that we would compete with. So we knew that it was kind of setting the bar low in terms of we just need to come in and have professional photos, and I think we’re going to do really well. Right.

Ashley:
Okay. So that’s great how you were able to involve your family, get them invested in this deal, and you’ve got this partnership, you’ve got your properties. How does it go from here? Is it wonderful and bliss? Do you happen upon any kind of roadblocks now that you’ve got your properties?

Chris:
Yeah, I would say we literally had some roadblocks that happened soon after. So after we went through furnishing this place, getting it listed, we were super excited. Got a lot of great feedback from guests right off the bat.

Ashley:
That’s always so exciting.

Chris:
Yeah, I mean, that was my favorite part is hearing from the guests of how well they experienced the cabin. But we closed in December and in March of 2023, so just a few months later, there were some historical winter storms that happened through all the West coast, but especially California, and so an immense amount of snow. And then rain soon after hit a lot of the Sierra Nevadas in California, which resulted in the road going up to our cabin, completely washing out. Oh my

Ashley:
Gosh. It was

Chris:
Unpaved. It was paved the main highway, but half of it had washed out just because of the amount of rain. I want to say that the amount of rain was something like 15 inches within a matter of hours. It was incredible the storm that had occurred, but unfortunately what that meant was no guests that could come in. So the worst case scenario that every rookie dreams of in terms of buying an investment property

Ashley:
And especially something out of your control, it’s not like it’s your own driveway. You can get somebody to come in and fix it. So

Chris:
A hundred percent it was the main highway, and so you could drive by and pass by, but you had to drive really careful. I mean, it was really sketch and for a little while we could have a couple of guests that could come through. They just had to kind of be escorted, but soon after the town put it to a close and they said, only locals, only residents can drive up this road. And so it was basically like that until maybe July of that year.

Ashley:
So from March until July,

Chris:
March to July, we had no guests, so we were paying for the mortgage and expenses pretty much out of our pocket. One of the good things about it was we were able to go up ourselves and enjoy the property quite a bit and make improvements to the property as well. So it was ready to come back as soon as the road opened. So end of July, the road finally opened conditionally guests had to show proof that they had a reservation for a cabin on the mountain, and just only a couple months ago is when the road finally got finished. So a lot of the attractions that were nearby, hikes, waterfalls, you could visit trails. A lot of those even within the last year have still not been accessible or have been difficult to get to.

Ashley:
Wow. I bet the locals loved that.

Chris:
Yeah, they did. They definitely did love having not as many Airbnb guests. And I think just to touch on that, there was a lot of friction when it came to the locals and them not wanting guests coming up the mountain for safety reasons. And in most tourism markets, there’s going to be that friction. One of the things that I’ve been really proud of is the reputation that we’ve built in our local area and community, because I always wanted to make sure that I had that respect of neighbors and make sure that we cared for them in a way that maybe they didn’t think an investor could. So much so that our newest property that we just acquired a month ago that we’re rehabbing right now, when the neighbors found out that we acquired their property, they said, thank God there was a long-term tenant that was in there before, and they had left the place a complete trashed mess.

Chris:
And so when they found out that we acquired it, we said, I reached out to them, let them know, Hey, we’re going to be doing some construction. Let me know if you have any questions or if it gets noisy, I’ll reach out to the contractor. And she texted back and said, we’re so happy when we found out you guys were the ones that bought the place. You guys have a great reputation up here for how you treat Chris and just the experience you provide and how clean you keep your properties. And so we’re grateful to have you as neighbors to hear that as an investor, a local person who lives there full time to say that is incredible.

Tony:
One last follow up question on the road closure. Looking back at it now, obviously totally out of your control, but is there anything that you would’ve maybe tried to do differently? Looking back on it now have come out on the other side?

Chris:
Yeah, no, that’s a great question. I don’t think so. We maybe would’ve pushed, I think maybe some rentals to contractors who were up there, and we did have a few contractors that came in. The challenge with that is a lot of those contractors wanted a really good rate for an extended period of time. They were saying that, Hey, this road’s going to be under construction for the next three years, so we want to rent it for three years or two years.

Ashley:
I wasn’t thinking that long and

Chris:
Sent it for a thousand dollars a month, I

Ashley:
Exaggerating.

Chris:
But we had to make the business decision that, hey, maybe we could have a contractor come in for a month or two, but as soon as this road opens based on the size of our property, it doesn’t make sense for you to have one or two contractors here. I mean, this is a cabin that’s meant for several families, right? 10 to 12 people. And so we made the decision that was a little bit risky that, okay, we’re pretty confident the road should open by end of summer, fall. Maybe we can make it till then and then we’ll get the normal expected rates that we had planned for.

Tony:
Yeah. How much money do you think you lost during that roughly four month period?

Chris:
Oh, so when we ran the proforma on the cabin, we were expecting within the first year to gross about 80,000. I think in 2023 we grossed about 42. So almost $40,000.

Ashley:
I mean that’s half of your prime season, March to July, I would think, for that

Chris:
Area. Exactly. Yeah. Our prime is basically from May of September, so more than half is within that few months.

Ashley:
Let’s go to the operations piece. So what are some things that maybe you’re doing differently than other hosts to really provide that wonderful guest experience?

Chris:
Yeah, that’s a great question. And like I mentioned, I think it being a second home for us, we’re really able to be able to anticipate guest needs right before they need them. So knowing that if there are quirks about the property, it would be great to spend a bunch of money and have an unlimited budget and fix all of those things, but at the very least, I should be able to understand the property intimately to be able to advise guests and anticipate those needs so it doesn’t become a hindrance on their experience.

Ashley:
Give us an example of that. So are you updating the guidebook, for example? At our one property we have this stove top. It’s an induction stove top where it won’t turn on unless you actually have the oven or the pan sitting on it to get hot. So I never knew that before this, and a lot of people, so we have literally step-by-step instructions into our guidebook. So is that what you mean, there’s something quirky about your property, you’re documenting it, or what are you doing to ease those experiences

Chris:
Guess? Yeah, that’s a good question. So I think some of the things we try to anticipate is, for instance, being in a rural mountain market, there’s no control over when internet might go out or the power might go out, it’d be great to have a backup generator, which is something we plan to do at some point in the near future, but at the time we didn’t. So we thought about, okay, if we were here and the power went out, what would we do? Right? Well, you want something to entertain yourself, so we make sure that we have games in the basement downstairs. We have a pretty large game room, which is really uncommon in this mountain market. We make sure that we have DVDs if the internet goes out. So maybe you can’t stream your favorite Netflix show, but maybe you’re perusing and you see, oh, there’s that dvd.

Chris:
I haven’t watched that movie in years. Or we have a library area where people can go and read. It’s this little nook that is very common on Instagram for a lot of guests to take pictures there. And so just providing different moments, I think, for guests to be able to experience the property in different ways. And we wouldn’t know that if we didn’t stay there and the idea didn’t come to us of be nice to play a game with the kids downstairs or my wife wanting to get away for a little bit and read a book and have some of that alone time. We created spaces for ourselves as hosts, and that is how I think we’ve been able to provide a different experience for guests. Just being thoughtful in that extra way

Ashley:
Instead of thinking, okay, kitchen, living room, bedroom, bedroom, bedroom, bathroom. You’re creating these little different studios in there.

Tony:
I guess. Yeah, I guess like a follow-up question to that, what do you see as the trends going into 2025 maybe that good hosts need to adopt to remain competitive because the landscape has changed, right? And I saw a stat maybe a year ago now and some change where 50% of the listings on Airbnb have all started post covid,

Chris:
So

Tony:
There’s been a massive influx of new people coming onto the platform. What are you seeing as the things that someone really needs to do from a management perspective to stay competitive?

Chris:
I mean, always constantly learning. Be a student of the game at all times. Learning from people who were doing it at a high level, and then be able to translate that into your portfolio and your properties. So maybe my property in our market, it doesn’t necessarily need a hot tub. I think less than 15% of the properties up there have hot tubs, whereas in other areas, it’s a necessity to even compete. But learning from other hosts and knowing that, okay, this is an amenity we should add that would provide an additional experience to the guests just constantly leveling up. I would encourage, if you’re an existing short-term rental owner, don’t set it and forget it. I think there’s so many different tech stacks and different systems that you can implement into your business as a short-term rental owner, which is great, but don’t set it and forget it. Continue to reinvest into your property, go visit it. Make sure that you understand how the guests has experienced it and continue to improve that. We have to continue to evolve as owners.

Ashley:
Well, you convinced me. I got to go stay in my a. Well, Chris, thank you so much for joining us today. Can you let everyone know where they can reach out to you and find out more information about you?

Chris:
Yeah, I’m not super active on social media. I wish I was, but you can reach out on Instagram at Chris Young, REI. Right now we’re working on a cabin that’s under rehab that’s pretty close to our existing cabin right now, so I’ll be sharing some more info to come on that property there.

Ashley:
Okay, awesome. And thank you so much for meeting us in person today.

Chris:
We appreciate

Ashley:
You making the drive in the LA traffic.

Chris:
No, it was so great to meet you both and to be here in person. Again, super thankful for both of you. You guys have both had an impact on my real estate journey, and we’ll continue to learn from you both I’m sure, for the years to come.

Ashley:
Thank you. I am Ashley, and he’s Tony. Thank you so much for joining us for this episode of Real Estate Rookie.