Boroughs & Burbs, the National Real Estate Conversation
Real estate: the ultimate game of risk and reward.
It's the biggest investment most people ever make
Fortunes are won and lost every day.
How do you stay ahead of the game?
Who's buying, who's selling and why?
You need an edge.
Boroughs & Burbs
This podcast is your secret weapon, giving you the insider knowledge and strategies you need to succeed in the high-stakes and cutthroat world of real estate.
The Boroughs are New York City.
The Burbs are wherever you are: Connecticut, Austin, the Hamptons, Carolinas, Florida and beyond.
From Palm Beach to Palm Springs, Manhattan to Malibu
we travel the country pressing the experts in every luxury market to expose the pain, find the deals, and occasionally predict the future.
Don't settle for mediocrity - tune in to Boroughs & Burbs Thursdays 3pm Eastern and start dominating your market.
Boroughs & Burbs, the National Real Estate Conversation
Boroughs & Burbs 171 || Airbnb Investing
In Season 5, Episode #171 of Boroughs & Burbs, we’re joined by Derek Gisriel, founder of LevelUp Stays, to discuss the booming world of Airbnb investing. With the short-term rental market continuing to grow, Derek shares expert insights on how to successfully invest in Airbnb properties, from selecting the right location to maximizing profits. He breaks down the key factors that make an Airbnb property stand out, including design, amenities, and guest experience. Whether you’re new to short-term rentals or looking to level up your current investments, this episode is packed with tips to help you succeed in the ever-evolving world of Airbnb. Don’t miss it!
The Burroughs are New York City. The Burbs are everywhere else. Real estate is the ultimate game of risk and reward. It's the biggest investment most people ever make. Fortunes are made over a lifetime and lost in a day. And we're not playing with monopoly money. How do you stay ahead? Who's buying? Who's selling? And why? What do they know? We want the truth. You need an edge. Burroughs& Burbs is your secret weapon, giving you the insider knowledge and strategies you need to succeed in the high Welcome, everybody. Burrows and Burbs, Season 5, Episode 171.
SPEAKER_03:Airbnb investing. Very excited about today's show. Let me hit share and cover a few things. That's our show. You're going to find us burrowsandburbs.com. I want to thank our sponsor, Grace Farms. You'll find them at gracefarms.org. That's the famous river building on 80 acres. Pritzker prize-winning sauna designed that to look like a river. And it's just awesome. So if you're in the area, come visit it and find out about their mission. Design for Freedom is working to eliminate forced labor in the building's material supply chain. So check out designforfreedom.org. I want to thank Scott Hobbs and the folks at Hobbs Inc., a friend of the show. You can see some of their amazing houses, on their website, Hobbs Inc. That to me looks like it could be a castle in France, but no, that's just a typical house that Hobbs Inc. built. They build... The most amazing houses. And I guess if you're interested in building a 30,000 or 50,000 square foot house, he's considered the best in the tri-state area. Although they're also doing them in up in Rhode Island and in the Hamptons. And Hobbs Inc. is now in New York City as well. So check out Hobbs Inc. That's me. And that's my mother. And we are The Angle Team, and that's my wife, and there's a few others of us, but you'll find us at theangleteam.com. And here is my partner, Roberto. I just have to say, Roberto, by the way, this is Roberto, and you'll find him at robertocabrera.com. And he says in his monthly newsletter, we are due for a breakout year. And so we're going to ask him a little bit more about that.
SPEAKER_01:say hello roberto where are you hi everybody i'm on the upper west side of manhattan uh where it's winter
SPEAKER_03:can i just say i was watching one of those netflix real estate shows last night and the two stars were on there uh and they were talking and one of them said yeah i've sold a hundred million dollars with real estate in my career and my wife stopped the show and she turned to me and she said a hundred million dollars roberto does that like every year of his career i mean roberto just sells two townhouses in manhattan and and hits that hundred million dollar mark like all the time are you killing it this year
SPEAKER_01:roberto you know things are warming up just getting just getting warm what quiet
SPEAKER_03:I know, that's why you're a$100 million man, because you're the epitome of discretion. And if anybody has a$50 million,$100 million townhouse in New York that they want to buy or sell, you're the man, RobertoCabrera.com. Without further ado, let me move on to my guest, Derek Gisrael. There he is at LinkedIn, and you see that we help Airbnb owners double their income in 90 days, or we will work for free until we do. So we were intrigued by that. We wanted to talk to him about that promise and his business, Level Up Stays, and how people can make more money, more productivity in the Airbnb environment. It occurs to me, boom, I looked up Airbnb statistics, and you can see it's been pretty much on a very, well, here, I'll pull up this one. This shows that it was taking off like a rocket, experienced a bit of a lull during the pandemic, but has recovered by 2022 and continues to grow in terms of growth and profitability ever since. So without further ado, welcome, Derek. Glad to have you on the show.
SPEAKER_02:Thank you. Great to be here with you all.
SPEAKER_03:By the way, one more bit of housekeeping. Roberto says that we're going to do an hour of content in 45 minutes. So everybody talk at double speed, okay? Hey, there's Scott Hobbs. You missed us saying all kinds of nice things about you. You're going to help us co-host today, right?
SPEAKER_04:I'm checking the recording. I'm not sure I trust you guys.
SPEAKER_03:You shouldn't. All right, Derek, tell us about Airbnb and Level Up, Stace.
SPEAKER_02:Sure. Well, look, as we were talking before we went live here, there are so many different ways to be into real estate. I mean, you've got mobile home parks, parking lots, long-term, short-term, commercial. And really, short-term rentals, it's one avenue that people choose. And that's the path that we chose as investors ourselves. First and foremost, we always knew we wanted to be in real estate. The question is, which avenue do you take? And Lauren is not with me today. Lauren's my wife, but she's kind of the design ninja aspect of the business, which I'm sure we'll get into. Very important aspect of curating a great guest experience and standing out from the competition. But we started with a single five-bedroom house, very small vacation rental market outside of San Antonio, Texas. And now that's grown into a property management company due to the great results we had with their own properties and helping others have the same exact results.
SPEAKER_01:So you participate in this yourself. You acquire a property and do the short-term rental.
SPEAKER_02:Correct. So there's really three different ways that you could get into short-term rentals. One is ownership model. You obviously own the house and you're gaining equity as well as the profitability. You can arbitrage, renting and then subleasing, or you can do a management model. And so what we figured is, well, let's start on our own first with our own money and our own real estate. Let's figure out what's the playbook, develop up all the systems, the processes and document that. And then through, you know, through kind of natural progression, we had owners reaching out to us saying, you know, hey, this this one house you guys took the best year was sixty four thousand in revenue. And now you're doing one hundred and ninety thousand. We would like the same results from from our own homes. And that's how level of property management was born and helping other owners get the same results.
SPEAKER_03:I've been a guest of Airbnb and I've been a host. And it's harder than most people think. What's interesting to me is that we're in luxury markets. Roberto's in a market where a lot of his clients own more than one home. I'm in a market where a lot of people own a summer home. And often when they're doing the calculus on buying a second home, third home, fourth home, they tell themselves, well, I can always cut down on the cost of this by Airbnb-ing it. I can just... put it up on the website and recover half of my costs. I think I'll buy that beachfront home in Myrtle Beach that I love to go to once a year, and I'll just Airbnb it the rest of the time. Is this how most people get into being a host? They say, I just want to recover a little bit of the money, a little bit of the cost on the home I'm already enjoying.
SPEAKER_02:Definitely, that's one strategy. Look, you can be an active host, an active participant in marketing. the home and answering guest messages and, you know, before the stay, during the stay and after the stay, dealing with the housekeepers and the maintenance. At that point, you're really like running your own like small hotel right at that point. Or what a lot of our clients, they're actually investors, they're doctors, attorneys and lawyers, and they don't necessarily care to do to be in the mix of it, to be kind of in the middle of everything. And at that point, that's when they engage with our services, with property management in general, where they say, hey, look, we wanna be able to utilize this asset throughout the year And then at some point during the year, multiple times during the year, then we want to be able to use it also and offset at least some of the costs or sometimes all of the costs and then some at that point.
SPEAKER_03:So what you're saying is most of them, by the mere fact that you call this an asset, means that there's no emotional connection, right? They chose the property because it's a performing asset, not because they have a love of that particular place. and it's a place that they want to go.
SPEAKER_02:That's a really interesting point because, you know, one of our fundamental beliefs is we allow data to drive our behaviors, meaning, you know, what I do, one of my favorite topics is revenue management and pricing. There's a whole strategy behind pricing. You see it in hotels. You see it in airlines. You check it one day. It's different than the next. A Tuesday is different than, you know, let's say a Friday or whatnot. Changes dynamically with the demand And, you know, having the correct strategy in place obviously is going to affect the results pretty tremendously. You know, in a very old school vacation rental market, you may have summer rates, winter rates, fall rates, and holiday rates. But what we've seen is ultimately that may not keep your house full or, you know, because people aren't willing to necessarily pay X price, but are they willing to pay X price? pay a little bit less, or can we charge more, even more than we were in the peak season? So, you know, ebbing and flowing with the market and taking a look at demand seasonality, you know, that's really connecting that with your design, the amenities of the house. That's how you build an incredible short-term rental business.
SPEAKER_01:It has to be very, like, not labor-intensive, but I don't know what word I'm looking for, but it's very time-consuming, especially for short-term, specifically, because even if you rent something long-term, 90% of the issues happen in the first week. Where's this? This doesn't work. How does that work? And then slowly people get the nuance and they get used to it. They understand how things work. This switch, you have to do this to this switch and that to that switch. So repeating that formula on a short-term basis over and over again has gotta be a little onerous if you're an owner, for sure.
SPEAKER_02:Yeah, it's, you know, look, you're in the minutiae. So you're in the deal. To your point about light switches, yeah, there's a process for light switches. Believe it or not, there is a process to that. We outline most of the finite details in a custom guidebook that's delivered electronically prior to their arrival. The question is, does the guest read the guidebook? Most people, as you know, may just skim through it until they have a question. But that's That does kind of help us, you know, automate the process somewhat and then, you know, give them everything they need prior to their arrival, recommendations in the area. If they've never been there before, our favorite, you know, coffee shop and restaurant and these type of things can be delivered in a very nice format, you know, prior to their arrival and as soon as they check in. It
SPEAKER_03:sounds to me like you've gotten it down to a no-touch format. check in, check out, that they contact you. There's a marketing piece. Then you execute, right? They pay and they book the rep. You send them the instructions. You give them instructions on how to check themselves in a lot of the time. They do so without ever meeting a person And then they check themselves out without ever talking to a person. I've experienced that when I went to go to, my daughter was at St. Andrews University in Scotland. And all the hotels in that small town were booked because there's a lot of golfers. So you book an Airbnb, there's a touchless check-in. I never met the person. And that's been a typical experience for me in Airbnb. And that's a person who Airbnbs that room, that apartment, I think 52 weeks out of the year. It's a pure business for a lot of these, what I call vacation destinations, golf, and certainly for college towns where the hotel industry is not keeping up. So talk to me about the touchless and the labor involved in turning over that apartment week after week after week.
SPEAKER_02:Yeah, so I'll touch on two things. First, the touch touchless aspect. And secondly, the make ready, keep things in new condition aspect of it versus like a long term tenant or long term strategy. So when we when we look at, you know, on on the one aspect, when we talk about the touchless, you know, post COVID and you know, COVID changed a lot. Right. Um, and one of the things was less touches, less, less touch points, um, love it or hate it. This is, this is where we're at. Right. But, uh, one thing is it's certainly streamlined the process. And as we are researching, because when we go into a market, when we invest in a house and we buy a property ourselves, we're doing tons of research prior, or we're helping an investor do the research prior to their purchase. One of the things we're looking at is the top performing properties in that market. What are they doing right? And, you know, success leaves clues. What can we learn from that? And then we'll also look at like the bottom margin. What are the worst performing houses doing and reading like the reviews of the guests and, you you know, honestly, there's some situations where people actually mentioned that, you know, the owner or, you know, the property manager, whatever that is, they met them at the house. They, you know, we're late five minutes late. It's inconvenient. These types of things that many people don't want, they wanted things on their own time. And when they arrive things to be prepped and not have to wait on anyone or, or certainly even meet, people nowadays, right? There's that aspect of it. And then on the long-term versus short-term, look, at the end of the day, you get a long-term tenant in a home, it could be years before you see the inside of that home again. And, you know, you hope, you obviously screen them and do background checks and credit checks, and you hope that you get someone in there that's going to take care of it as if you did. But what if they don't? And so with short-term rentals- I had
SPEAKER_03:that experience. I rented a place and we checked them out and the tenant then proceeded to black over all the windows and install grow lights and grow 5,000 marijuana plants in the house. And nobody knew this for a couple of years. So yes, there is a risk to not going in the house over the course of a year. You don't know what your tenant's doing in there. Was it profitable? I'm sorry. Not for my client, the landlord.
SPEAKER_02:For the tenant, maybe.
SPEAKER_03:Times have changed. While you're talking, I want to illustrate the point. So I'm going to pull up your website and let you tell us and take us through sort of case studies.
SPEAKER_02:Sure. Yeah, absolutely. So, I mean, you could go, like, if we want to scroll, let's take one of our newest properties that we're just getting live right there, that last one there, you could click on. Yep. Yep. So this one we're calling Squeeze the Day, in which you'll instantly see the top five photos, the most important, the most critical, because you only have seconds, if that, to grab someone's attention. And I mean, we all scroll, right, endlessly. So that's on social media or booking an Airbnb, you're scrolling normally. And so what we want, our goal is to stop the scroll. stop them from scrolling, grab their attention through, in this case, vibrant colors, and deliver an experience that possibly they wouldn't get in a hotel-like setting, and or competing with other Airbnbs in the area that are dark, dimly lit. They're taking photos on their iPhone with their grandma's couch. maybe not like the best experience there, right? So, and this is a great home to just show like, you know, the design and the overall amenities with the lifestyle photos, which is kind of what we're looking at here. That's gonna grab someone's attention.
SPEAKER_03:Fascinating to me as a realtor, because I would not take this photo to sell this home. but maybe I should, maybe I could learn something from the Airbnb crowd about lifestyle photos. I mean, typically we strip all of the people and fruit and knickknacks out of the photo and try and give just the facts. I love your lifestyle photos here.
SPEAKER_02:But ultimately it's like, what are we selling? We're selling an experience, we're selling time. We're selling time to a family. You know, most of our clientele, our guests facing our guest avatar is what we call it. Our families, they're traveling with their kids or they're traveling with other families and we're selling an experience and time within the home.
SPEAKER_01:What struck me first was that there's a TV in the first four or five pictures, a TV everywhere. It's like, you know, if it's World Cup, it's like we're renting this house because there's a TV in every room.
UNKNOWN:Mm hmm.
SPEAKER_01:I mean, that was the first thing that struck me, really. Because there's a TV over the pool.
SPEAKER_02:Over the pool, which is fairly unique, you know, all-weather TV, so you don't see that a lot. Can't
SPEAKER_03:you be in the bathroom
SPEAKER_04:watching TV anyway?
SPEAKER_03:No, I see. You're right. Now I'm beginning to notice the TVs. Yep. Is the TV important?
SPEAKER_02:I mean, it's one of our requirements. We definitely want a TV in each bedroom, a smart TV generally, streaming device. How much time that people spend in front of it versus at Disney World? I mean, who really knows? But it's an option, right? And what we're doing is we're giving people options. They could play foosball or they could play in the pool. um completely up to them but you know the the experience is is really what it's all about and and more importantly that's going to reflect in reviews five-star reviews that will future that will propel the success the five-star reviews snowball and um will shoot the listing up to page one two or three on airbnb
SPEAKER_03:I noticed that. I pulled up Airbnb.com and I found this is what they presented. And it's funny, this first one struck me as not a professional shot. This is, it looks like, you know, they took a photo of the house with the propane tank in front. I thought that was a
SPEAKER_01:snowman. Sorry.
SPEAKER_03:Yeah, that's a propane tank. This one next to it is very cute. with the red and the trees and the hot tub right out in front. And it's funny, why do they think I want, I guess a winter vacation? They're only presenting me winter vacations and it looks like they're all local to me. I haven't signed in, but I guess they know my location and they're presenting and they're guessing based on my location what I might wanna try.
SPEAKER_02:Supposedly that this is an AI factor that is trying to personalize this to whoever is actually viewing it to get, you know, look, any online shopping is all about conversions, right? And there's something called cart abandonment where someone adds something to their cart and they just never end up booking it or buying it. And Airbnb is trying to figure out a way to personalize it or cater to that. The other thing that you'll notice here is nearly all of these have a badge on the photo called guest favorite. And guest favorite means generally speaking, it's the top five to 10% of houses in that area are going to show first. Because Airbnb knows that these hosts and these homes are consistently delivering a five-star guest experience. And love or hate hotels, one thing they do well, they're fairly consistent. Otherwise, you wouldn't have huge brands. And so that's what they're trying to do.
SPEAKER_03:Here's a market you're familiar with, Galveston, Texas. And I'm seeing exterior shots, some of the time, some of the time they're showing me the view of the beach, and sometimes they want to show me the interiors of the rooms. What do you think is, which ones of these are getting it right and which ones are sort of missing the mark?
SPEAKER_02:So, you know, you've got to stop the scroll. And it really, it's like, which of these photos, the question comes down to which of these photos are most appealing. And generally that's gonna be of contrasting colors, or amenities that are offered or distanced to some attraction. And in this case, let's call it the beach. You know, this house that's completely like taken at night, I'm not sure that that's really going to, you know, catch a lot of people. I mean, it looks like a fairly big house. Obviously they
SPEAKER_01:have a lot of reviews. It's a horrible picture. It's a horrible picture when you consider the next picture that shows the house like beautiful in the sun. During
SPEAKER_02:the summer. day and you know you can see like you know obviously how dark this living room they didn't turn the fan off the fan is spinning um but look they have 500 reviews could you imagine how many reviews they would have if we just spent six hundred dollars on a professional photographer and you know just redid the photos
SPEAKER_03:This looks like somebody who's in love with their stuff. They've taken a close-up shot. One of their first pictures is a close-up of a bowl and a cabinet.
SPEAKER_02:And obviously, they're passionate about something, right?
SPEAKER_01:Right. Garrett, can you talk to me? First of all, how do you solicit reviews? And what do you do about bad reviews?
SPEAKER_02:So we've got a set of messaging and check-in points within the stay, right? So, For example, after the guest checks in at 8 p.m., let's say check-in is at 4. At 8 p.m., we're going to send a message to them and say, hey, we just want to check in. Just make sure everything is a five-star experience. If there's anything you need, please reach out to Lauren and myself. We'd be happy to take care of you. And that's just a quick message to just say, hey, thanks for staying with us. We just want to make sure everything's great. Most people reply and say, you know, everything's great. If there is an issue you. That is the time to fix it. Right. And it's prompted by us asking. We don't not at the end. Oh, you know, you had this issue. Oh, great. It's at the end of the rental. Nothing we could do. Right. So that's at the beginning. And then after checkout, Airbnb will send a guest a, you know, at 3 p.m. Normally the day that they check out, they're going to prompt them to leave a review. So we'll get ahead of that message to the guest and we'll say, Thank you so much for staying with us. We hope you had a five-star guest experience. If you don't mind, it really helps out our business. Just write a quick review. It really helps us out. And thank you. We hope to host you next time. Something along those lines. That's sent slightly before they're prompted. Is this
SPEAKER_03:an AI or do you have to do each one of these?
SPEAKER_02:This is automation within our property management system, which is personalized with our name. and that type of thing.
SPEAKER_03:So whether or not you're on vacation or paying attention, this is happening automatically.
SPEAKER_02:We send thousands of automated messages. They don't feel automated. They feel like they're from Lauren or myself, but it definitely does take a lot off our plates. But more importantly, it provides a sense of consistency. And when guests come back to stay with us, they know what to expect from us and those check-in points. And last year we hosted a little over 6,000 guests, 99.6% five-star review rating And what I'll share with you, it's not just because, yes, we're asking for them to write a review, but that still means we have to deliver a five-star guest experience. Otherwise, you know, regardless, they're not going to, you know, write that.
SPEAKER_01:How do you overcome if you just happen to have a really, really crummy review? How do you manage that? What's the, you know, what's the strategy to kind of, if anything, because maybe it's an anomaly to bury it or to, you know, to, what can you do about that?
SPEAKER_02:You know, I would say preemptively, we wanna try and if possible, get ahead of it and asking like, is everything okay? You know, obviously during their stay, right? And I would say most people, they're gonna say, depending on how you ask it, you know, hey, Derek, the house is beautiful, but we noticed X, Y, Z. Cool, look, we're in hospitality. Things inevitably will go wrong. Pool heaters, HVAC, plumbing, all kinds of stuff, right? it's how responsive you are, how quick to respond, and then the solution provided. And look, ultimately, if we mess up, we have to fall on that sword, right? Whatever that is. And that may ultimately mean that you've got to eat a day of rental or some kind of discount for a future stay, not necessarily to buy the review because you don't know that they're still going to even leave a review or a five-star review, but ultimately, What's the right thing? If this was you and your family and you were inconvenienced for this, what is the right thing? And that's what we ask ourselves. That's kind of our guiding principle.
SPEAKER_01:So you said it was you and Lauren. How many properties are you dealing with?
SPEAKER_02:So we've got myself, we've got Lauren, and we have an amazing executive assistant. Her name is Valeria. She works remotely for us. And Valeria kind of is the magic behind the scenes, coordinating the housekeeping and the maintenance and some of the guest communication. And, you know, currently we're at 27 properties you saw on our website live. And we're in the process of onboarding, you know, a small boutique hotel outside of San Antonio we've got going, and then we've probably got another five to eight properties that we're gonna be adding within the next month.
SPEAKER_03:So I see two in Florida, is that correct? And the other 25 are in Texas?
SPEAKER_02:So we now have six in Florida. And then we've got Galveston, Crystal Beach area. Crystal Beach is just a ferry. You know, that's a little ferry that will take you to Crystal Beach. In my opinion, it's, you know, an up and coming Galveston area. And then we have some in the Texas Hill Country. That's where we started. That's Concan, Texas. And then we have some by Waco. So Lake Whitney, we've got some properties actually on the lake there and outside of Dallas.
SPEAKER_01:Can you clarify something for me? Because this is all very foreign to me. So you use Airbnb, you take these properties, you put them on Airbnb. Why wouldn't you put them on VRBO or one of these other things? And is there... And amongst, is it all the same or is it not? Or does it matter to you which they choose or are you doing the choosing? And then also, is there a problem with the industry that Airbnb is like the Coke of, you know, it's in the sense like, you know, can I get a Coke? We have Pepsi. Oh, sure. No matter. Sure, that's fine. But like Airbnb is like, you know, you talk to anybody, you know, at a dinner and say, oh, we just got an Airbnb. And it may not be an Airbnb. It might have been something else. But like, can you just talk to me about that?
SPEAKER_02:Look, Airbnb is one channel and obviously we want to have many channels and we want to have maximum exposure. So the other channels are booking.com, which is the world's actual largest OTA or online travel agency. Not as popular in the United States versus Europe. We get a lot of people that use booking.com that come to Kissimmee and to Central Florida. You've got VRBO, which is what we list our properties on. Google Vacations, fairly new in the last couple of years, but Google Vacations is making a play at vacation rentals, similar to what they have already done in airfare. And that's another location or spot that you can advertise on. And then we have a direct booking website. And then Q3 of this year, we're launching Marriott Homes and Villas. And Marriott's obviously a great brand, but they've also gotten into short-term rentals, not as direct, but allowing top property managers with a great portfolio to list their properties and to make sure that their brand standard is where Marriott sets it to be.
SPEAKER_03:Can we review for a moment? So I've bought a property. I've hired a professional management property manager. The property manager is going to handle putting my property on multiple channels, including Airbnb, VRBO, Marriott, Google Vacations. et cetera. So they're going to, is that what you would call syndicating the listing? So one listing, many places. Roberto books the listing that says, okay, I'll take it. And it's on the Marriott portal. Then your software, A, automates the communication to Roberto. Automates the communication to your property manager who's going to take care of housekeeping and any of the other services that are connected with Roberto Stay. So the communication, the housekeeping, other services that are promised, and automatically your software is going to take it off of the calendars on all the other channels.
SPEAKER_02:Have I
SPEAKER_03:missed anything so far?
SPEAKER_02:There's a lot that can be automated, yes. And there's actually AI bots you could plug in and they'll respond like to your guest. We have not done that. We don't, at current state, we don't think that their responses are good enough. But you've got, you know, there's could be, Someone books, they have no questions. You actually never even hear from them. Or you've got someone that books and they have 50 questions and you answer all of them before, during and after the stay. And, you know, so somewhere in between is a normal stay. But then, yes, you're coordinating your housekeeping after checkout and any maintenance related issues and prepping that like new for the next guest.
SPEAKER_03:And your software, though, helps me manage multiple portals. Having multiple portals gives me many more outlets, many more eyeballs on my property, much more competition for my property. But obviously, if I've booked it on the first week of February on one portal, I've got to remove it. I've got to have a calendar management system, a communications management system, maybe AI, maybe not. What other things are we not thinking about yet?
SPEAKER_05:How
SPEAKER_03:about the economics of this? If I'm used to getting$100 a night, what am I going to pay Airbnb and what am I gonna pay you to market that$100 night?
SPEAKER_02:Sure, absolutely. So most of our properties that we have are three, four or five plus bedrooms. The ones that Lauren and I just closed on are a five and a six bedroom. In the Texas Hill Country, we did a full movie theater in one of them. We did an arcade in the other one with a golf cart that's included with the rental. So for the most part, we're catering to full-on families. Those houses, for example, sleep 28 guests. Those are big houses, six, seven bedrooms on that end. On the revenue side of things, that is a whole nother... whole nother deal and and the thing is is like it's something that you actually have to practice like yes there are software we use a software called price labs and you plug in you know the address and how many bedrooms and how many guests count and it will give you it's like flying an airplane so it will give you a in a rough altitude of kind of where it thinks you should be based on the seasonality and on the demand july 4th maybe 400 a night and a you know all off season, Wednesday, January, maybe$100, right? But it's really ultimately up to you or whoever you hire or engage a property manager to daily check what are our competitors doing? What's the market doing? And how can we maximize not just average daily rate, but also with occupancy? If we set the rate at$1,000 a night, but no one stays there, that does nothing. that you don't get a five-star review, you're not generating any income. So really we're trying to find where's the market at, right? Much like selling real estate, I would imagine, is we're trying to figure out where is the market based off of the comps and then how can we ebb and flow to maximize the overall income at the end of the year, not necessarily in that period.
SPEAKER_03:It sounds like absolutely 100% of the time I should do this with a professional property manager who's going to automate calendar management, communications, interface with the services. And it sounds like I would be foolish not to engage with AI-based pricing tools or a savvy property manager who's already used those tools and has already internalized what those tools could tell him.
SPEAKER_02:You know, look, ultimately you can do it on your own, but just understand like that should be a fairly full-time job. I mean, you're juggling... you know, guest communication, maintenance, housekeeping, as we're talking about, but also looking at pricing, but like, how do you get good at that? You have to learn and you have to take courses and you have to figure it out and test and analyze and AB testing and, and you're figuring it out. If you want to do that full time, like absolutely. Most people have their own thing that they're great at. For example, being a doctor, being an attorney, being a commercial real estate professional, whatever that looks like. And it doesn't necessarily pay to try and spend all the time to figure it out because their other thing is worth way more. They're way more valuable to that thing than trying to figure out, you know, what's the play on short-term rental.
SPEAKER_01:What does your expertise cost? That's what we want to know. What's the overhead on this? This thousand dollar room. Is it, is it, you know, I don't know if it would be calculated, you know, is it 25%? Is it 15%? Is it a flat rate? Is it a, you know, in order for me to optimize my property, I have a property that's probably worth a thousand dollars a night. Let's just for the sake of numbers. And I, you know, I decide, you know, I'm going to try to do this on my own. I do it and I'm okay at it. I'm going to make whatever I'm going to make a thousand dollars a night. If I use you and it's, easy. I don't even have to think about it. It's functioning. It's taken care of. It's just it's I do not have to think about it. What is that? What is the luxury of that service cost me?
SPEAKER_02:Sure. So I'm going to give you an example and then I'm going to answer your question directly. So The other day I was speaking with an owner that signed up for our property management services. He has an eight bedroom house, sleeps a lot of people. And since he bought the home, he's a full time real estate agent. Since he bought the home three years ago, year one did 75,000, year two, 65,000, year three, 55,000. not headed in the right direction, obviously, which is what opened up the conversation with our services. But when we pulled up the comps and we took a look at the home ourselves and we looked at what's the actual potential for this eight bedroom home, it was somewhere between$100,000 to$120,000 a year. So then you take a look and say, okay, well, what's the cost? For him, the cost was somewhere between$60,000$50,000 a year by not either knowing the right skills to get him to that 120 or$130,000 a year, or by engaging the wrong property manager that didn't know those skills. And it was costing him 50,000, 60,000, 70,000. And so when you look at what is the cost, the cost is not knowing the cost is, you know, the inexperience and picking the wrong manager. Depends on the market. You know, it's generally our services fully hands-off around 26%. And our properties...
SPEAKER_03:Does that include Airbnb's fee? Meaning all in the cost of you running my portfolio, or let me use your words, running my assets... My assets, I'm going to pay you 26%. You're just going to take care of it.
SPEAKER_02:That's correct. And here's the thing is you've got Airbnb charges the guests 15%. They charge the host 3%. They're making 18% on every booking, right? So what we do is we go in using our property management system and we say, okay, well, what are the fees that are charged? Because VRBO charges differently than booking.com and Airbnb is different, right? So then we'll have, let's say, a base rate. Let's say our nightly rate is$1,000. Well, on Airbnb, because we're being charged 3%, it will be 3% higher. Right. And then your VRBO is slightly different price because they charge us slightly differently. And ultimately, that's going to bring net net down to, you know, what our thousand dollar night goal is or whatever that looks like.
SPEAKER_01:I have two questions. So in that first example, the guy was making seventy five, sixty five, fifty five. you would get him up to about 120. So instead of him making 50, like 60 some thousand, he's going to make 90,000. So he actually makes more money.
SPEAKER_02:Yeah. And then the difference in, I believe the difference in percentage when we took a look at it was something like three to 5%, we were quote unquote more expensive, but compared to what? For to deliver 50 to$90,000 more. I mean, our average home outperforms the market two to one in occupancy and revenue. And that's just an average home that is just competing against the market.
SPEAKER_01:So the same house could be listed on several different sites at different prices.
SPEAKER_02:Definitely, and it should be because you have different costs associated with those channels, right? I mean, if we have a channel that's charging us 10%, well, you know, someone has to absorb that at the end of the day. So, you know, depends on the channel. Um, and, but you know, our system will tie all that in and say, okay, well, our ultimate goal is a thousand bucks a night. So on Airbnb, it may be a thousand 30 on VRBO. It may be 1100 booking.com. It may be 1180. But
SPEAKER_01:why wouldn't you just go? Why would, if for hypothetically say Airbnb is typically the best deal, how come they're not taking all the market share and no one's going to vrbo or vice you know i'm just using as an example i'm not saying that's the the case
SPEAKER_02:i would say in some markets they are they are um and look you i'm not sure if you've seen recently you've seen a i've seen a lot of vrbo commercials that are hitting to the core of because you know airbnb you can list a whole house or you can list a room within that house. Like some people rent out a room, individual rooms, and VRBOs play on the marketing nowadays is, you get the whole house and you don't have to deal with like this weird host that's like living with you, right? So there's different marketing plays, but each market's different. What we're seeing is like, for example, in the Texas Hill Country, VRBO can be the majority kind of channel that's delivering most of the bookings compared to Airbnb.
SPEAKER_03:I've got one question and then I'm going to ask Scott Hobbs what he's learned. We have a lot of wealthy people who watch this show and they're thinking, okay, this is interesting. I could buy real estate. I love buying real estate and I can hire somebody to take care of it for me. What kind of return are you targeting when you spend a million dollars on real estate expressly for the purpose of getting into the short-term rental market? When you're evaluating properties, what kind of return on investment are you targeting to when you're buying a beachfront in Galveston or Florida. You seem to be agnostic on what town, as long as it returns, what return are you hoping for now?
SPEAKER_02:So the way that we actually got into real estate is, and one of the reasons that we got into short-term rentals, yes, it was exciting. We could focus on design and the experience. That's great. But Lauren and I, myself, we were involved in acquisition. We were part owner in a residential solar company. We were in sales and through that acquisition created a tremendous amount of tax liability. There is something called a short term rental loophole, which I'm not going to dive super deep into, and I'm not a CPA, but it worked out for us. And that one five bedroom house that we closed on, we did the renovations and got it live saved us around$225,000 that we were going to write a check to the IRS. And we still wrote a check to the IRS because, you know, it was, it was certainly above that, but that's a massive amount. So there, there are tax implications, you know, and one of the great things about real estate, love it or hate it is there are rewards for being in real estate.
SPEAKER_03:So what's the return you want when you're
SPEAKER_02:going to go buy your next property? coop that 250,000 and then basically start making above that amount. The market shifted. You've seen real estate prices go up in the last, since we bought our first property. So that's impacted returns, but- Not in New
SPEAKER_03:York City.
SPEAKER_02:Our goal is somewhere between 20% to 30% cash on cash, meaning between ideally three years, I have all my money back and then we're making money. Those deals are not just floundering around there. You have to have amazing design, which is one of the things that we've took a look out today. You have to be able to stand out in the marketplace and or buy something that people don't see the vision for and add all the amenities and add the design and then get it out to the market. And the market's like, holy crap. This is an amazing house.
SPEAKER_03:Scott, what kind of return did he just say? Did he say that if he puts his money in and he gets his money out after three years, is that a 33% return?
SPEAKER_04:A little bit less, but yeah, it's an excellent return. Are you excited by that? Well, as he points out, I mean, as with any business, this involves work. And in anything that involves work, it helps to have a really good professional helping you out. I mean, because again, as the examples put forward, if you or I were to do this, we'd be that$55,000 one. But if you go ahead and you get the right professionals that help you out, you invest more money, you have the staying power, you market it right, you do the sales, you have a lot more opportunity to actually do well. It's the old, it takes money to make money. I think being a self-operator, if you got into this business, then the 25 to 30% is, potentially realistic, but again, it takes somebody who's a real expert who's both doing and managing and getting everything together.
SPEAKER_03:Derek, could you deploy money for Roberto, Scott, and I? Can we give you a million dollars and be your partner and get that kind of return? Can we really get our money back in three years and pile more in and more in? I mean, do you have the capacity to manage 27 more properties efficiently and get us nearly that kind of a return?
SPEAKER_02:Look, Lorne and I closed on almost$2.5 million of property last year. We're in the process of closing on another property. these are the returns that we want and we expect, and we'll figure out a way to get there. And in regards to capacity, you know, we started with one house and now we have 27 and we've got some in the pipeline. And as we're incrementally adding, we're adding new systems and processes to maintain the standards of level up, to maintain the five-star reviews, to keep that success going. We're slowly building upon the success and we're figuring out as we go.
SPEAKER_03:But if I gave you$5 million, you'd have a tough time deploying that efficiently?
SPEAKER_02:No, because there are opportunities I mean, look, the United States is huge. The world is bigger. And what I would say is there are deals out there for great operators and people that have an eye for design and that will focus on the right amenities in the right market. And you can do it. We're doing it. And it's out there. They're not a dime a dozen. You're not going to find them all over the MLS by any means, but you got to put in the work and you have to do your research and you have to find either the right market or you've got to find partner with the right person that knows that market.
SPEAKER_03:I'm convinced. I'm going to turn to Scott and Roberto for the last word. Go ahead.
SPEAKER_01:I got more questions. So if you had... Like if you had five or$10 million out regionally, outside of the kind of the regions that you're in, are there other regions that seem to be like, I don't know, Tallahassee, Jacksonville, are there certain spots that you are interested in? So
SPEAKER_02:I think Florida is a great market for, I think Texas is an amazing market for a lot of different reasons. I think Florida is a great market. It makes me sick to my stomach regarding hurricanes. I don't think I'll ever get over that fact. But ultimately, you look at destinations that people travel to. And if you have people traveling to an area, there's an opportunity to capitalize on that. If you have some little small Midwest town with 300 people, probably be a little bit harder to capitalize on that. Although your property values may be substantially less there. Where we're looking at in the future, so we've got one that we're currently in the period of setting up in San Antonio, three quarters of a mile from the Alamo, amazing location. Spurs is building a brand new arena right across the street. So we're in the long game on that house. Definitely believe in that. We'll do a barrel sauna, putting green in the front of the yard, a cold plunge, a hot tub. It really will be an amazing house. Allison, you can walk to the Alamo in 10 minutes. And looking past that, I think there are probably going to be some interesting deals looking into the Midwest. In particular, we're interested in lakes. And especially lake properties that the lake is not going to recede. An example of this, there's a lake outside of San Antonio that is almost completely dried up. And that's not really a place you would probably want to sink money because what happens to property values when the water disappears? So we want to find something that's sustainable, but that's got good tourism and good seasonality.
SPEAKER_04:Quick cultural question. So family and I just went down to San Juan in Puerto Rico and you go to old San Juan, which is a beautiful historic type place. And as the locals point out, there are now no more locals there. All of the apartments are bought by Airbnb. And instead of having a thriving, vibrant community, you have Airbnb land. Is there anything under, I don't know if you have an opinion under that. Is the reality, this is just real estate and you're making an investment and it is what it is. And this has happened in Prague, it's happened in Paris, it's happened all over the place. I mean, is there any opinions on that or ways to, any ways to think about that?
SPEAKER_02:Yeah, I mean, I'd say, look, when you have an amazing cultural epicenter, which is, you know, what you're describing and that has a ton of history, inevitably as property value goes up, if you don't have some restrictions in place on short-term rentals and some regulation. For example, in San Antonio, it's 12.5% of a block face maximum could be, and normally a block face has maybe one, two, three houses. So really you're talking about one out of three or four that could be, have a permit of a short-term rental. I think some regulations are good. I mean, you certainly don't want, you may not want a whole lot of Yeah. They sold because they got a great, you know, hopefully probably a great return. They got an investor to buy their house that they built, you know, 50 years ago that cost them virtually nothing. And you see the gentrification in some parts of San Antonio also. In fact, the east side of San Antonio is one of the most gentrified communities in the entire United States. And there's a lot of debate about that. And, you know, the free market as it is, other than doing density restrictions, it's like, well, you know, in a lot of ways, these people that used to live there, they also capitalized and they were offered something for their house, which was obviously way more than what they had into it. And they felt it was a good deal. I
SPEAKER_03:want to thank our fabulous guest, Derek, at Level Up Property Management. I'm going to share... screen. If you like this show, please tell your friends. You'll find us at burrowsandburbs.com, and you'll find us on Apple. You'll find us on Spotify and YouTube. I want to thank the folks over at gracefarms.org. That's Hobbs Inc. that I told you about at the beginning of the show, and these are his five offices in New Canaan, Connecticut, New Jersey, New York City, the Hamptons, and South Jersey. You'll find me at theangleteam.com, robertocabrera.com. Make sure you go check out his latest market report. And again, thank you, Derek Gisriel. This was an amazing show.
SPEAKER_05:And
SPEAKER_03:people can find you at Level Up Stays. Thanks so much for doing this. Thank you so much, Derek. Really appreciate it. It's awesome. Great show. We're going to have you back next year. And you're going to have how many properties?
SPEAKER_02:Well, the goal before the end of the year is a minimum of 50. So it just depends on how much you fund us.
SPEAKER_03:You got it. All right. The word is out. Thank you, Derek.
SPEAKER_02:Thank you. Bye.
SPEAKER_03:See you soon.
