In this episode, we have the special honor of speaking with Matt Landau. Matt is the Founder of VRMB, Vacation Rental Marketing Blog, and the Inner Circle which is an online training resource, where he’s been working with hosts and helping them generate more bookings.
Matt entered the vacation rental space in the middle of 2006, pre-Airbnb, and owned and operated the only luxury accommodations in Casco Viejo, the historic district of Panama city where he lived. Without any hospitality training, educational resources, and guidance, Matt did everything wrong.
Matt shares with us the things that owners and managers should do right now during this crisis and how they can take advantage of this time to be able to sustain their businesses.
Video Transcript
00:00:00
We think our revenue management tools while maybe not as robust as other things in the market is the most accurate read on how the market’s moving over the next year. Right? Like where are those blips in demand? What is the current occupancy rate? What do you think that rate will be when we get here? Like, should you hold out? Should you get rid of it higher? That’s all super important, right? If you’re running a business, how you pricing those, that asset is separates. The Los,
00:00:30
This is six, the Rental success stories podcast. Are you an investor? That’s looking to have your professionally managed go cohost it.com for more information, welcome back to short term rental success stories. I’m your host, Julian Sage. This is a show where I talk to hosts about their journeys and starting and growing the short term rental business. My goal is that you’ll be able to walk away with practical information. That’ll help you become a better host and learn how to scale your business. Like any exceptional host. We all strive for five star reviews. So please go on over to iTunes and let us know what you enjoy. This really helped support the show. If you haven’t done so already going over to our Facebook group, the host nation to connect with the community.
00:01:09
Hey, what is going on? Host nation? I am super excited to be back in with you this week. This has been a super exciting week because just a few days ago, I finished a conference called veterans live, where I was able to speak with other military members and other people that are in the veteran space about short term rental investing. So I created a new presentation trying to just take everything about short Rental investing and this whole concept that we call the RCB model of investing and teach it to these veterans. So I only had 30 minutes to be able to do this. So I was talking very fast, but the feedback that I got from everybody that was at this conference was amazing. And what we’ve decided to do is I’ve actually updated our masterclass. So for those of you that don’t know my business partner, mentor and friend Jon Bell, who is also the cohost of another podcast that we have called the Vacation Rental machine podcast.
00:02:05
And in this podcast, we’ve been teaching people how to be able to create a Vacation Rental machine, a business that’s able to run on autopilot using other people’s properties. So the whole model that we teach is this concept called RCB investing, where we’re utilizing things like Rental, arbitrage, cohosting and buy and hold and able to operate all of this within the same type of business framework. We have some really unique ways of how we’re utilizing Rental arbitrage and cohosting in our own business. And we’ve decided to be able to teach other people how to do that. So that’s what I taught on this training to these veterans. And they were just like mind blown. So like I said, we’ve decided to update our master class where Jon and I are actually teaching you these different concepts. Now there’s a lot more in this training. It’s actually a 90 minute training where we go over quite a lot of things such as RCB investing the four pillars of recession resistance and how you can actually take your short-term Rental business and make it recession resistant based off the things that we’re teaching.
00:03:04
We also go over the 10 steps of the Vacation Rental machine Formula, which is everything that you need. If you plan on scaling or starting this business. And at the end of the training, we also give a free gift, which is our 10 step Airbnb startup to scale checklist. So if you’re just starting off or you are scaling or looking to diversify your short Rental portfolio, this training is taking everything that you need to know in this business, putting it all into a very condensed and just action oriented, fast paced training, where you can just take away so much. And we also give you a resource at the end that you can use for yourself in your own business. If you’d like to attend that training, then go to Short Term Sage dot com slash masterclass. And you can actually register for that recorded training where we go over a lot of different things.
00:03:52
So it’s super, super powerful, and I’m excited to be able to hear your feedback. Just let me know what you like about the training, or if there’s anything that you think could be improved. I am always open to feedback. Now, this conversation was actually recorded prior to COVID 19, and I withheld uploading it just because of how we were pivoting the podcast and some of the different content that we were putting out. But I feel like now it’s an appropriate time because we’re also looking into different markets and looking to invest right now. Markets are starting to recover to where they used to be. And if you actually wanna follow Jon and I, as we go over in detail, looking at market recovery, you can also listen to our Vacation Rental machine podcast. We’re in the next episode, we’re actually gonna be doing market research and identifying markets that are recovering and analyzing properties in those types of markets.
00:04:40
But because bookings are starting to come back and markets are starting to recover. This is actually a perfect time to be able to introduce Scott Shatford. Scott is the founder and CEO of air DNA. Air DNA has over 10,000 active subscribers and analyzes over 10 million properties. Scott was actually a host himself prior to starting air DNA. And we actually get to hear Scott’s story about how he started and how he was actually teaching people how to be able to start their own short-term Rental businesses. And then Scott went on to found air DNA with all of the market research that he was doing for his own properties. So Scott had eight shorter Rental properties in the Santa Monica, California area until 2015, when they were shut down because of regulations with 15 years of experience, as a data analyst, Scott realized he wanted to discuss data instead of just purchasing or subleasing properties.
00:05:31
So in this episode, Scott talks about what Rental arbitrage looked like in 2012, how air DNA started. He also talks about how air DNA pulls their information and what kind of information you can expect seeing on the platform. We also discussed how you can utilize the information on air DNA to run a successful short term rental business. If you like my show notes for the episode, go to Short Term Sage dot com slash STR six three, or if you like my show notes sent directly to your inbox every week, then go to Short slash show notes with all that being said onto this week’s conversation. Hey, welcome back, host nation to another episode of short term rental success stories. In this episode, I have the special, special honor of speaking with the one and only Scott Shatford Scott, if you please wouldn’t mind introducing yourself and let us know who you are and what inspired you to get into short-term rentals.
00:06:16
Yeah. Happy to thanks for having me, Julian. Yeah, I’m Scott Shatford founder and CEO of air been in the data analytics game for the last five years. But for the couple, few years before that, I was pretty early in on the Rental arbitrage game. So at about eight properties in Santa Monica from two 12 to 15 before they shut me down. But I’m, we get into all of those fun details here in the show.
00:06:47
So, so Rental arbitrage in 2012, what, what did that look like when you first started? Was that a common term? Was this just pretty, was that pretty new back then?
00:06:56
It definitely wasn’t a common term, right? It was, it was really easy business back then day, which was the beautiful thing, but we didn’t really know what we were doing. We didn’t know really how to think about this whole world. And it was definitely sort of at the trailblazer side of this thing. And so there was lots of learning, lots of failing and, but it was a really interesting time to be in the business. Cause it was right when you could sort of just throw anything on Airbnb and demand was so much outpacing the supply in the marketplace and the prices were so much lower than what the hotels were charging, especially around big events. And it was just, it was the easy in times as I like to think of when it was just, it was easy. The expectations were a lot lower. Everybody was sort doing it for the first time. And it was when have to, as hard I, as you do, it’s just much more competitive space. Expectations are lot higher. And so I think it just, you know, continues to get more difficult as there’s more professionalization in the space.
00:07:57
So when you first started, it wasn’t super popular, like you said, you could throw really any property up there. And as long as it was, you know, better looking place or a little bit better price, you could, you could do pretty well. When, when did it start to become a little bit more competitive. And when did you realize like, oh, I can’t just pick up any property and, and throw it on there or do you still think that that’s still the case?
00:08:18
I, I don’t think it’s the case anymore. And I think it was really just when the reviews started to suffer, right. It was essentially the same property, the same decorations, the same, you know, see in the, you know, the towels and the cleaning and everything like that. But the reviews were sort of like slowly getting worse and worse and worse and just expectations for just like cleanliness were the first thing that got me. Like it was sort of your staying in somebody’s apartment and you deal with a little bit of like, whatever this hotel property, but people, you know, after a couple years they were just expecting it to be as clean as, you know, a hotel property, they were expecting towels. Right. And that definitely difficult. Can’t this S part of, you know, I wrote a whole book on the subject, you know, that Airbnb playbook back infourteen, which all my learnings and a nerd in short term rental. And I’m it, you know, became more, you just, just everything that goes into having a more crowded marketplace, you gotta stand out somehow. Right? You can’t just be another place that the same stuff you gotta figure out, like, what is your unique niche or how you gonna market to BES or families, or think a harder about to market your place to really keep the same level of numbers over time.
00:09:54
So when you were picking up these properties, were you just like finding anything or did you have the type of mindset that you have now with, you know, you have over 10 million properties that you’re pulling data from, but when you were just starting off in Santa Monica with these eight, I mean, what were you doing to be able to tell like, this is gonna be a profitable property.
01:10:13
Yeah. And that’s, it’s a good question. I was, I was fortunate enough to really be at one of these super hot spots for short term rental. I was the, the brief story is, you know, I was, I, I was living in Santa Monica right in the middle of the third street promenade, which is like this massive tourist destination. All the hotels are a Vacation Airbnb. What’s that bang Airbnb. Airbnb, And I was like 90 booked for the four months. I was on that trip and I was charging three 80 a for the property. And I was making like 8,000 a, maybe another all in. So this massive arbitrage opportunity. Right. And like, I didn’t know that was the word for it, maybe at the time, but there was this sort of the light bulb moment at that point in time was like, how am I making 4,000 a month while being in like Bali, this is too easy.
01:11:17
And so I didn’t at that time to think too hard about where to go. I knew that I could probably open 10 places next door and have similar success. And so that’s kinda what I did. Right. It was just like Santa Monica’s great hotels are expensive. People can’t afford to go when they want. So they go stay in like some other part of LA and take the, or whatever. And so that part was easy to open up my first, you know, it just sort I knew was working and sort the Genesis, their DNA started when I was thinking about, OK, I gotta diversify. I gotta get outta Santa Monica. Things are looking weird with the government like this. Like they might be some fishy and just as any good business owner, anyone diversify your investments. And so that’s when I started looking, you know, down in orange county or up in Santa Barbara, and that was the Genesis. OK. Now I need all California. And the, where is this arbitrage opportunity? The, and then during that exploration phase, talking of other Airbnb was light bulb set.
01:12:30
So you were looking to, I, I got expanding your Rental arbitrage business, and you were looking at all these different areas. What was the type of data that you were pulling? Because obviously now you have like a full team and you’re, you’re pulling all this data that’s available that Airbnb kind of like, I guess, has in the back, but you were scraping this probably manually. What, what were you doing to be able to find good deals?
01:12:52
Yeah. It’s, it’s very what we’re doing to honest. Right. It’s just trying to understand exactly what a property’s revenue occupancy rate is. They’re hospitality is one metric that sort of matters, but it’s just a, a combination of ADR occupancy. And that’s what I was trying to get to. Right. If you look at a calendar, you know, I was looking at calendars, looking how book they were three months in advance, right. That’s everybody does likey, but you know, what do the last three months, or like, how likely are those others? You know, those other, in back easier the the day, because you could look back a year in a calendar in the like scraping hitting the, you could look at like you year and not available anymore where they don’t anything beyond yesterday, you can’t at yesterday anymore. Right. And so it was pretty easy. You just go look at the last 12 months sort, look at how many reviews were, how many reviews they were getting on a, this looks like a fulltime Rental, fulltime Rental.
01:14:14
This guy’s a job. He’s, he’s sort like, like top performers, fulltime properties and their unavailability was listed on platform was only time in the us. And so, yeah, just kind of back into it, and then you could sort of overlay that, right. And Zillow was the easiest place to get that data. They got a free open, you can go to Zillow slash research, I think. And they just got like, here’s zip code, one bedroom property, and six is due, you know, cost much. So you could just do really quick Airbnb versus the cost of the properties and sort of what jumps off the
01:15:07
Were, were you looking for like a certain type of a certain type of number? Like if you saw that, you know, if you were looking on Zillow and there was a property for rent, let’s just say in California, it’s, you know, $3,000, but you saw that these properties were renting, you know, on Airbnb for let’s say six, were you looking for a certain number or how, how are you determining, like, this is gonna be actually a really good deal.
01:15:30
It was all relative to me at the time. Right. I didn’t know what to expect. I didn’t know if like two times is good or three times is good or maybe there was four times somewhere. Right? I mean, but really I was looking at three times at the time, so I could, the scenario’s expectations. There’s more out there shame on me for publishing on the data. So like people know the good markets now, so there’s not many and knows. So I think you Rental is what people are for these days. I think three is, is pretty hard to find unless you’re taking some crazy risk in legalish areas. Right. And that’s lot where the opportunities are, unfortunately is, you know, you gotta figure out, I think lot people, like if they’re in New York or they’re in places where like you can make it killing, just don’t expect to have your doors open a year from now. It’s only places that you can sort of expect to get maybe still three times long term revenue, long term revenue.
01:16:30
And I, and I know you guys do a really good job. Like you just recently published an article about some of the top places compared from rent to, to what the actual profit on Airbnb is with that article though, is, I don’t know if you, if you were the one to write it or if you were involved, but are those things taking into account like, like regulations, like if New York is on there, is that specific to, I guess that has to be in relative to where the regulations are, right?
01:16:58
Yeah. And I’m, I’m not super intimately familiar with the post. It really is a simple calculation for that post. But you know, like San Francisco or York pops into like the top place to buy, you sort of like gets systematic rating system that are the Rental arbitrage thinking regulation cause regulation, you know, one, it would be outdated six months from now. If we did that article one, it’s very nuance. Two, there could be homeowners association. So other things in some of these markets would make it totally legal. And so we found just for having something that’s like, it’s best not to include regulation cause it’s outdated. As soon as you write it, that being said, you know, we’re being much more thoughtful about how we can gather that information because we know from especially the investor community, it’s almost now regulation first opportunity second, and there needs to be somebody that’s, that’s publicly doing this.
01:17:57
Cause we know, you know, B, CASA’s got a team like, you know, dozens of people just looking at regulation. A lot of these other big firms do too. Cause that’s really the name of the game now is understanding what the regulations are, what maybe the loopholes are in that regulation. And how does have sustainable supply in those markets? Do you have hospitality or, you know, what, what, what are the workarounds like in terms like commercial zoning or other things like that? So, yeah, I think we’re being thoughtful about how to approach that in the future, but it’s not in that term article
01:18:27
When, when you first started scraping for this data, were you just using Airbnb? Cuz now you’re, you’re also with Aird you pull from like HomeAway VRBO, but you’re not accounting for, for all sites, correct?
01:18:39
That’s correct. Yeah. We, we, well, one’s just how hack can we get to data, right. And there’s some things about some of the other platforms, how much unique supply you’re gonna get if you get off Airbnb and VRBO, like what if you’re not listing on one of those two, like you’re probably not doing that great. Unless you’re like a or maybe mega mansion doing, you know, over 10,000 a night, you know, may, might not be one of those two platforms, but majority let’s call it. 90% of relevance in the us is be on one of those two platforms. And so once you start getting more platforms and you know, matching them together and to figure it all out, you know, the, it becomes more complex. You sort of pull a lot data sources. And so we’re focused on those two at the moment. Probably no plans in the future sort go beyond those, those two players.
01:19:30
So, so when people are interested in using air DNA, like you said, there’s people that are, are investing into these properties, but the data that is being pulled from air DNA, it’s just kind of like, what is it just the average, if you could kinda explain how is air DNA pulling this information and a person that is maybe gonna be investing into a property? What type of information can they be expecting to be pulled from, from the platform?
01:19:54
Yeah. I mean, we can get into the intricacies of how it all works. So it really is looking at every single property’s availability in the world every single day and looking at the changes to that calendar. Right. And so we’ll ping every calendar in the world. We’ll see, okay, Hey, next weekend was available yesterday, but not available today. And the last available rate was three ninety nine. Let’s call on all three, right? We based off the host, you know, performance, they have seven properties they’ve been on the platform for three years. The average length of stay is typically three days in that market, 20 different things. It goes through to say, okay, that’s the reservation? You know, we were able to build this algorithm and the only people to build the, a, this is cause back in when we started is because Airbnb had a bit of an oversight in their system and was actually all the reservations on the, for about that in were about reservation.
02:21:06
Reservations, knew exactly the length of day is how far in advance they were booked. And so we were able to sort, then when they shut that down in October 15, build an a, now we also have partnerships with three properties that give us their daily booking information gets from tens of thousand of people. So we get this data from all these different sources say, Hey, you know, what does a booking look like in Myrtle beach? Right? And with this person. And so it’s all, it’s all pretty sciencey these days. I got a good data science team. I never figured out how to do this on my own. That’s for sure.
02:21:38
So is it, is it pretty, pretty confident for people that are coming into this space? Let’s say they are interested in Rental arbitrage and they’re looking up and market, let’s say there’s not a lot of properties in that area though. How, how is air DNA able to give numbers if there just, maybe isn’t a lot of information in a particular area.
02:21:57
Yes. Good question. And so, you know, what, what can you, so sample size is, is, you know, we’re not gonna get every property. Perfect. Right? Some, some properties are just weird, right? There’s a consultant and he stays at his house every weekend and he rents it out every Monday through Wednesday. Right? Like the algorithms gonna on that’s doesn’t make right. So there’s outliers, no matter this solve to problem problem. So we get to a small sample size, it can be an issue, but you know, I think if you got over 10 properties, there’s enough, there’s enough there to give you a good read on that market, how those properties are doing. What we do is we extrapolate the biggest problem. This is that short term rental Rental might be short term rental for seven days outta the entire year. Right. And how much do you wanna extrapolate from that one week of booking to say this property would’ve earned thousand if it was available full, but we do do a lot of that saying Kate, that’s a little of book for 30 days and that’s, so we take like small samples and make pretty good predictions on like what that property would earn full time to get a bigger sort of sample set, even in small markets.
02:23:04
But I say, if there’s over like 20 properties, I mean, I feel pretty good about what the data says.
02:23:11
So, so just, just to kind of recap what you’re saying is like, if there’s an area where regulations are really strict, if people just see other people listed on Airbnb, maybe they don’t realize that there are regulations. So they purchase air DNA, air DNA is gonna be showing them based off of what the property will do during that period where they’re only listed or is this like a general for the whole year? Let’s say it’s only listed, you know, you’re only able to list for six months.
02:23:41
Sure. No, that’s good. And I I’ll try to be clear. I live in the data all day. So there’s on our side. If you go to CD. Right. And what you’ll see in the map is basically us saying, here’s the property. Here’s how many days it was available over the last year. Here’s the rate ADR. And here’s how much revenue we, that, that property generated that will our estimate of what that property did over the last 12 months. No, no like additional round, you know, rounding effort days that it wasn’t available or doing any like special magic there, you know, on our Rental product or revenue potential that we put together that like really analyzes every single market and says, you know, let’s do this match mash up between Zillow and Dame and day, we do a lot of this sort of, you know, rounding up. Cause property’s only available for three months only available for GRA and jazz and Christmas, like, okay, how much realistically, this made it available the whole year of nobody wants go nobody when know, you heat, the Orleans, to go to wants new Orleans. Right. And so that’s the lot of the sort the going on to understand market performances is that especially when looking at the arbitrage opportunities.
02:24:51
So, so if you were to have, if you were to tell somebody or help someone to get into investing for this space, when do you think is a good time to be purchasing air DNA or starting to really dive into the numbers? Should they be looking at the numbers right away? Or should they be doing other things before they start diving into how profitable an area might be?
02:25:10
Yeah. I mean, I say, Hey, we got a lot of good block content. Like we’re not trying to put this all behind the locking key. You know, we we’re the Rental arbitrage content that you just talked about. We’re spending a month working in the best places to buy properties. I really wanna make this interesting deep dive into regulation, into management, into like the differences between the long term Rental short term rental, how you do a calculator, how do you really forecast expenses? You know? So like I really, so we really are into giving away a lot of this good information for the beginner, like where, where to target the right market, how to think about the right type of property that is maybe better for and Rental better or undervalued because in a school district you’re sending your kids to school. Doesn’t those cools. Definitely.
02:25:54
I so know, You definitely go to the blog and check that out when you’re sort of thinking about the investing, where to go, where’s the best cap rates, that sort stuff, you know, we really do think about market mind, really being a operational tool, right? And we know that people on a benchmark, the performance, did I have a terrible winter or is everybody gonna have terrible winters? That’s really insightful when you’re saying, you know, general markets slow down versus I need to pick up my game and get more competitive. I need to buy some new furniture. I need to do better dynamic pricing, whatever that is. We wanna help people price their properties. We wanna help people be able to get more people to their platform, right? With like Rental different tools. Here’s how much we think your property would do as a Vacation Rental we’re guarantee you 80% of that revenue if you come to us.
02:26:38
Right. So we really think of ourselves, the operator tool, not an investor tool, but 30% of our subscribers are investors. So you, there’s definitely a big use case for that. Just like, think about underwriting, a new property. Think about estimating what this new investment would do. You know, there is, there’s a lot of use cases for the investor. So we, a lot of residential, real on the platform as well up. But our sort of our roadmap is more of this all encompassing revenue management, market intelligence, benchmarking, all those sorts of tools all in. Once you can really understand your market and how you, how you’re performing against your market.
02:27:14
You know, a lot, a lot of people are, are looking at the short term rental space and they’re saying, man, there there’s, there’s a lot of potential here. And air DNA is it’s really kinda like the first tool that people think of when it’s like, how do I get a good idea? You know, before, like when you first started out, you were scraping for the data manually going into the Airbnb and looking at the calendars. You know, now we have the luxury of having a tool to be able to help us give more accurate information. But there is a lot of money. A lot of people are investing their, their life savings. You know, a lot of time, a lot of energy. How is, is air DNA a tool that you can just solely depend on or are there other things that you should be doing to be able to help you come up with a good investment strategy.
02:27:58
Purposely we don’t really do a lot side outside of the short term rental data, right. If we really wanna get into like the best investment side of things, like helping people get the property, get the agent, get the insurance, get the lender, find the property manager. Like we would go down that path. Right. So there’s a lot to do outside of just understanding where to go and what type of to look for. And so yeah, you gotta go to a lot different places, right? You gotta find out like, OK, maybe Biloxi, Mississippi is the best place, but oh, there’s no good manager in Biloxi or whatever. Its like, there’s still a lot of legwork. We don’t the homework for you. So data one are we know, you point, point at the moment, you know, we think we know we’re the best data point, but we also know this isn’t like an API to Airbnb, but was that easy?
02:28:44
You know, we wouldn’t be as valuable as we are. Right. Because we’re doing a lot of the hard work that you just can’t do or wouldn’t do quite as accurately yourself, but are there, are there errors in some of the data, you know, are there those outliers for sure. And so you should, you know, kick the tires a little bit, make sure it makes sense, make sure that one bedroom, you know, isn’t really a year that doesn’t outliers data a from think I So perspective. perspective, you know, I think we try to solve the full suite of problems, but it’s not just the data problem you’re trying to solve.
02:29:21
And you said with, with, you said previously with managing, is this because you came from a Rental arbitrage type of background and a lot of the people that know about air DNA it’s through this space, but cohosting and managing other people’s properties, being a short Rental property manager is something that a lot of people also wanna get into. Is this a tool that property managers can utilize to be able to for, for their clients, if they were to analyze a property, is this something that they can be using as well?
02:29:51
Yeah. I mean, I think it’s great for, you know, cohost and, and I should probably know more about that whole business model than I do, but it’s, it’s great. You talk to somebody and say, Hey, you know, here’s what you’re doing. Here’s what the market’s doing. Right. Here’s what I think, you know, my expertise, I can, another of revenue on this property, I’m we’re that’s it if even do, could Rental no has Rental history, I think that’s super important for getting new customers on board, you know, and we really think our revenue management tools while maybe not as robust as other things in the market is the most accurate read on how the market’s moving over the next year. Right? Like where are those blips? How during pricing competitors are how of the, during those blips? What is the current occupancy rate? What do you think that occupa rate will be when we get here?
03:30:42
Like, should you hold out, should you get rid of it? Should you price it higher, lower? Like that’s all super important, right? If you’re running a business, how you pricing those that asset is, is I think the, of the game, right, that separates the winners and the losers in this game, in my opinion. So we have a lot really good forward looking stats on when you can really crank up rates. When you need to get rid of properties, like, you know, low season, just get rid of it nine months advance be the bottom percentile, get of it. You’re occupa, not your, just of it. So like some of those insights are super helpful just on the revenue management side of things, which I think is half the battle and, and running a good business here.
03:31:21
And, and that’s one of the things that you guys are actually moving into now too, is you’re getting into the dynamic pricing.
03:31:27
Yeah. We are getting into dynamic pricing and you know, we don’t, people don’t want, think that hard, right? The average cohost doesn’t have an economics degree or not a mathematician, right? Don’t about plugged Airbnb solve, but you know, people have different needs and desires from properties. More, some markets operate weird, like long story short. We are, we do have recommended. So if you come to our website, your, I, we, what the best for your over the next months, you know, a lot of data science behind that, we feel pretty good about it. In most markets, we launched it in thousand markets our first day and we’re about six months into it. So it’s definitely learning curve. We’re trying to figure out where it’s doing well, where it’s not well, but sort for it get people where know month bucks 20 a month, you know? And in some markets it’s definitely worth checking out. See if it makes sense to you,
03:32:33
You know, you’re pulling all of this data is, is air DNA a little bit more, would you say it’s more accurate when there’s a lot of properties within a particular area? So let’s say something like Miami where there’s a wide range of people that are maybe listing properties for very cheap. It’s very expensive. Does that do, does that maybe skew the data or if someone’s just looking at one particular number, let’s say it’s like, you know, 160, but the price range is from like, you know, $40 up to, you know, a thousand. How, how does somebody know like what they could be pricing their property for?
03:33:05
Yeah, no, it’s an interesting question. Right. And so for the purposes of revenue management, right? So let’s say you are in, so you’re in a market. It doesn’t really matter how many properties you have. Right. I think the hardest part is trying to say, what is the quality of my property versus my competitive set and how you wanna define that competitive set. It’s probably gonna be in Miami. You gotta get down to the proper zip code and maybe, and three bedrooms. If you’re looking at both of those, cause we both accommodate seven to 90, whatever it be. And so then at that point, you know, you need to figure out where you think your property fits into the spectrum, right. Are you exactly average? Is your place just like sort of the average property in that market? And that’s fine. That is how it is, you know, a lot of times, or, or you sort of a more exclusive luxury property in that comp.
03:33:56
So that’s sort, the research you have to do is looking at those comps saying, Hey, you know, I think I’m on the upper scale. I think, you know, people, the average charge at two 40, I think I’m sort of property. And that’s my, that’s my range. Those are my people, right. I need to follow those people around the pricing game. And so that’s one of the only thought that, you know, when you’re looking at tool without loading up your property and doing that analysis for you, that’s the sort thought process need go. So if you’re, you know, I’m the, so And properties. hundred that that that’s, you know, that’s sort of the only thing that the user has to say, like be honest with themselves is say like, you know, how, what is the quality of my property? The recommended great section is a whole story. We geeked out on that forever about how to analyze historic performance booking week, times price, all that stuff is sort of scaled up where we think you are within a and
03:35:04
Yeah, so, so what, from what it sounds like you are when you’re, you know, because when you, when you go to air DNA and you’re just using the free, the free version, which is probably what a lot of people do, you know, they look at like the average daily rate and in a particular area. And, but that doesn’t tell you, like, you know, what’s the size of the property or, you know, what, what type of quality property it is. So when people are looking at this, you know, it, it might be challenging for them to be able to know like, Hey, I’m looking at a property that’s renting for, you know, $2,000 a month. Am I gonna be able to make a profit? But it’s you start using the comparables by finding people that are within a certain tier is how you’re able to identify if it’s gonna be well priced.
03:35:47
Yeah. I mean, it’s all, you know, very intentional in the product. You know, it is helpful for somebody just trying to understand the general marketplace, but you know, you’re not gonna go spend 5,000 or 5,000 without really understanding the comp how to drill down relevant properties, you know, people to Rental Rental market, but in order to get action information outta the tool, you know, you gotta call your credit card. Unfortunately,
03:36:21
It’s, that’s good. That’s good. And are there, are there people, are there like any, like what, what type of people are using this data? Is this like something that just smaller investors are using or are there like really big players that are utilizing Aird to be able to help them make decisions? Like I know there’s a lot of companies out there, like there’s like Saunder and lyric and they’re, you know, picking up these large apartment complexes, are they using the same type of data or they doing something different?
03:36:49
It’s the same data. So, you know, those guys SA BICA all the customers and you know, there’s a lot, there’s a lot of those guys that are our customers. The, I think the only difference is is that, you know, for our market product, you know, most of these, you know, small time operators or cohost, you know, don’t have a data science team to do these pretty visualizations, right? So we give you the package reports. I thought through the data, what’s the most interesting. And I, you know, we put it into a prepackaged thing for you, you know, can you drill into every single property’s details? Can you export it? Can you do your own custom stuff? No. Right. And that’s why these bigger companies want the data. Cause they wanna build their own visualizations. They wanna mash that up with other data sets. They have about new construction, new home construction. Right. And so they’re doing their stuff. The only difference is, you know, market the visualization tool and they’re raw into its core core, its at And essentially. essentially it’s the same exact data just being presented to the user in market.
03:37:53
How important do you see data being, you know, like when you first started out, like you said, you, you could pick up any property and, you know, throw it online and you, you were able to make profit, but like you said, now you’re looking at a lot of people are trying to do like, you know, double the note value. Do you see where do you see data and moving forward as more people start coming into the space?
03:38:16
Yeah, no, it’s a great question. I mean, I don’t think it really, I don’t really, I see it changing a whole lot in the future. I mean, I think as it is more competitive, you know, as there are more people in the market, you know, the hospitality is really cyclical, right. And we’ve been blessed to be in a, in a cycle, which is 12 years of like straight, you know, up the right. Right. And that doesn’t happen forever. Right. And so I think where a lot of people have been able to have the luxury of not being particularly data will find soon who know stock market down a thousand points today with coronavirus. But you know, I think when, when times get tough, people have to figure out is, but things, arbitrage opportunities only go one direction. Unfortunately, that, that is, they shrink, right. Arbitrage opportunities only go one direction.
03:39:22
I think that’s very important to remember, especially as like technology gets better, gets better. Like, you know, the, how much cost operate properties gets to cheaper, like that only shrinks over time. Right. And so this is more competitive, right? So expectations have to Bell big shuffle up, right? In these bigger property management companies that, you know, hand had ambitions of having thousand properties management, you know, I just don’t think it’s gonna happen. And I think that’s the one benefit for the cohost community and small local property manager is this is best run. As a small business is best run with local knowledge and local talent. And, you know, there’s only, it’s hard to scale this business and it’s hard to and maintain. So I think there are some really, there’s a bright future for the smaller operators. The you 60 of properties around the world are managed by somebody with less than properties. And I don’t, I don’t see that changing anytime soon. I think that a lot of these big players gonna hit some tough times as it’s sort of not a growth at all cost game here in the future. So I’m not sure where I went off my, but that’s, that’s my thoughts in the marketplace.
04:40:40
So, so you think, you think that we’ve reached the, the pinnacle of what you’d be able to see on a return for an arbitrage unit. And right now it’s more like squeezing a lemon.
04:40:50
I know that’s not really like, you know, probably a popular sediment. Right. But I do think that there’s no real way that the arbitrage opportunity will get bigger over time. There is no way. And so you still have to be thinking about, you know, your three year plan to zero arbitrage. Right? I do think that there’s, there’s always gonna be arbitrage. It’s hard, right? There’s, right’s always be arbitrage. Arbitrage is for people that this really, really efficiently really effectively and figure out the process to still make that arbitrage opportunity work. Cause that’s the only reason it probably still in a lot of markets is cause one there’s rest and two it’s hard and they don’t wanna figure it out. So they’re willing to sort of like let that arbitrage opportunity exist in the margin.
04:41:40
So, so what you’re saying is that a property, even though you might not be able to get a super high return, what, what people need to start doing in the future is figuring out how can they lower their operating costs? How can they save money on their expenses, use economies of scale to be able to pull as much profit out of a property. Because right now, the only on the, on the, on the profit side, it’s just gonna go down.
04:42:06
I would imagine. So. And I think that’s, that’s the perfect explanation. And I think that’s why people are dumping tons of money in a SA and, and, and is because this does work well in economies scale, it works much better if you have two units in building than if you have two in different units, right. That doesn’t work well. Right. And so that is the, that is the rationale between this investment. And then this is a hard problem to solve. And if you can, it really well, really efficiently is a nice arbitrage opportunity capitalize, but does come in if you down
04:42:45
And are you doing anything to be able to cater air DNA and the type of data that’s available for like, like we were talking about with cohosting people that maybe are interested in purchasing properties and turning those into short term rental, is that information that you can pull from air? Or is it, are you, are you not catering towards that specific demographic or market?
04:43:06
Yeah. So currently we sort of only get down to the market level, right? Here’s the right zip code. And we think two bedrooms in the zip code are the best. One of the best investments in the we’ll be launching in the few weeks, like our sort of really solid attempt and like answering this question in the us for best place to invest and all of the things you need to think about to, to invest in that property, we’re also making some moves into how do we get people investing in short term? Rental is hard it’s cause, okay, great. Called Moab, Utah, the best place to invest. Great. I live in Pennsylvania. Like, I don’t know anybody in Moab. Who’s the agent, what’s the broker, how am I gonna get lending? Like, what’s that all like, who’s the property manager. Right? And so we do now that problem exists and we aren’t ready to reveal what we’re doing there, but we are making some investments in space.
04:44:00
Very interesting. So you guys are, are maybe positioning yourself to become a hub for people that are looking to invest so that they could get connected with the right people, have the right tools and then also be able to price their properties the right way.
04:44:14
That’s exactly right. Yeah. I think we, you know, we can’t fight the tide, but I think we really realize that this is the short term. Rental is really a new asset class, as they say in real estate. Right. And so it is something that is here to stay and we have the best to help people buy those properties. We just can’t take our customers customer. Great Mo good luck. You that’s customer experience that maybe give you in a loan if you have another property or can prove Rental Rental is gonna those really help, not people manage their property, but find the next property that they manage this virtuous, where it’s like helping you operate it and price it and benchmark it and then find your next property, then do it all over again. And sort of what’s that flywheel that you can create for the
04:45:16
Customer. So kinda, kinda like the, the credit karma for the Airbnb space.
04:45:21
Sure. I’ll take it. I’ll use that.
04:45:24
And is, is air DNA also available for, let’s say people wanted to invest in overseas? Is that something that people can use it for?
04:45:33
Yes. I mean our data, I, I really try to make everything we do at here DNA, like very global nature. So, you know, we do track every property globally on the real estate side. Things just its harder. Right. Cause there isn’t Zillows and truly, and Redfin out there, right. There are just differing degree of quality and comprehensiveness of real. And so I think, right, we’re the actual investing side. We’ve gotta just sort of figure out the model in the, and then maybe go, go to Australia, go are options, but it gets complicated. It gets complicated once you get outta the us, just because the availability of the cost, the, and just how good is. It’s just, it’s a big question. So you is just as good, but you know, the users would have to sort of have a different way of getting whatever the home price value data is or the Rental price data and do that sort of mashing up that information there themselves, this point.
04:46:31
So, so is, are, are you saying that when you’re analyzing properties outside of the us, you’re having to look at different data points or you have to scrape different information? Or is it, is it the same?
04:46:41
It’s the same. They’re getting like Airbnb and VRBO. Right. We can understand what that short term rental revenue is for that property. I just can’t tell you in France, is that good? I dunno. Is that like a terrible place to invests 3 million? You’re gonna do 60 in revenue. Don’t right. And so don’t that cost basis to sort of build into these best places to invest. I can just say, Hey, it’s growing fast. It has high occupancy rate. I dunno it has high revenue, but it’s in Monte car. Nevermind. It’s a terrible place to invest. Right. And so that’s, that’s the hard part about the international, just having that cost base real estate.
04:47:17
So, so the same, the same, I, I guess, are you, are you, because what you’re saying is for the investor, like if you’re purchasing a property, but are you pulling that information for like the Rental, the Rental, like the average daily rate for different properties overseas? Or is that not something you’re doing it?
04:47:34
Yes. Sorry if I’m not being clear. So any of the data that you would see market minds the exact same today as it in the, and international the exact same product as new city or Zimbabwe it’s same. That just doesn’t exist. Hometime
04:48:13
Moving the space where you’ll actually able look at individual property and what the return on the investment will be based off of the purchase. If you do you plan on short term rental, it
04:48:25
Sure. Yeah. We have a product right now. It’s one of our, it’s one of our beautiful little babies it’s called Rental. And you put in any address in the world and we’ll tell you what that property will do over the next 12 months. Now, you know, what a property earns in revenue, you probably know better than most is, is very highly subjected to a lot of things, right? How’d youe it how’d you manage it? How you how’d you price it? Like what, all that stuff. Right. So at triangulating based on they’re how you’ll give you’ll a lot more, right? Cause we know that 1, 2, 3 main street is worth the hundred thousand. We can look at other and sort triangulate based on the intrinsic intrinsic value of that property. Where in Metro Spain, I dunno, it’s close by. I dunno if this one has the, and this one, a gutter over there. I the like So know. accuracy accuracy will always be a little bit less accurate outside the us.
04:49:26
Well, what I’m asking is like with, with the property, if you were to put in the address, the Rental, I don’t believe it. It’s actually showing you if you purchase a property for, let’s say 500,000, this property could short term rent potentially for, let’s say, you know, $200 a night for that 80 for the average daily rate, thus your return on investment for that property could be X amount.
04:49:48
So Rental will tell what the ADR occupancy would of that calculators. So what you can figure out is your cap rate or your cash return, you can, in some basic estimates, that’s probably are right. Like once you got costs, like now it’s just like management. So we do know the end user is just see some more of that. So we’re that out and product.
05:50:23
Awesome. And, and just, just kinda wrapping up, I mean, you’re where do you, where do you see short term rental going in the future? I know that there’s a lot of people that are coming into the space. A lot of new management companies, a lot of people like SA lyric that are, you know, capitalizing on the Rental arbitrage, but where do you see it in like five or 10 years? Cuz you mentioned before, you know, if you’re looking at a property, you kinda have to have that three year mindset. You know, how, how, how long can an arbitrage property go for, but do you think that this is something that could be going for 10, 20 years?
05:50:56
Yeah. You know, I wish had like better news. I mean, I think that there is, there’s a timeframe where we’ll see just a natural evolution and professionalization of an industry, which has traditionally very antiquated, right. In, of manage properties, properties operator to speed for a while. But I mean, I it’s become jaded running your company lately. Cause you see that the cars are always gonna be stacked against the small, the small. When you think about regulations, you think about technology enforcements. When you, how you have to buy a whole multifamily building to get Airbnb in it, you can’t just rent one anymore. You gotta buy the whole building. That’s not, you know, plausible for me and you. Right. And so, you know, doom, but you know, commercial is, you know, when this gets really popular and as this becomes a really a better way to monetize space, it’ll only sort of get the big boys in here.
05:52:04
Right. You know, get Blackstone in to go buy all the properties and then put ’em Airbnb and have board. And so, you know, I think just tuned from that. Cause, you know, as companies like invitation homes or created like residential homes as an asset class, you will see people coming in with billions of dollars to buy short term rental. The one thing they’ll never wanna do is operate the Rental. I don’t think right. They don’t wanna do the maintenance on it. They don’t wanna do anything to the maintenance and operations. So I there’s still always will be an opportunity for local operators to have very, very beautiful and profitable businesses. But the real estate side of things, you know, I think will be gobbled up by, you know, much more institutional investors than, than ourselves at some point
05:52:50
In time. So, so you’re saying that in the future, the arbitrage model’s gonna be maybe squeezed out a little bit by these big operators that are just picking up properties and they don’t, they don’t care about maybe as, as large of a margin as a smaller operators are looking for. And the cohost model is maybe more, more in line with, for future profitability.
05:53:12
Yeah. So I, you define your cohost model, right? If you cohost model is rent, you know, renting a five bedroom home in Myrtle beach and like having that as, as a property. I mean, I think it’s a beautiful business, right? I think it’s a beautiful business to have a real job. You a and have that really about rent, metropolitan, big, small operators, you know, up to building owners, bad neighbors. Like just like just, I feel like that model is, is gonna have more challenges. So it just depends on how you sort of classify cohost. I would say I, I still like traditional Vacation Rental Rental markets, large homes, group travel. I think that’s all gonna have a really rosy future, but hotel comparable stay in cities. You know, I think unfortunately the hotel lobby is too powerful and to win those battles in the top, like cities around the,
05:54:17
Where, where do you see, where do you see us in the cycle? If you could kind of say like, if you started back in 2012 and you’re, you’re kind of projecting the future that you know, more people are gonna come into the space, where, where are, where do you see us right now for arbitrage investors?
05:54:33
Where do I see you in cycle? You know, I think, I don’t think your cycles any different than the general hospitality cycle, right? I think we’re all gonna live and die the same, same, same life. And right. It really is unknown at this point in time think unknown is we know hotels. It’s a fact yesterday with coronavirus and all that stuff. It’s a fact, right? The cycle is sort of over 12 years of having increased year yearr occupancy now. Right. And so that interesting, I think we know is, are right. obviously Obviously you can make a case for business travel to one bedrooms in New York city that’s beated, but you know, we don’t really know. And there are a lot of theories out there that maybe short term rental are more resilient, right? They’re drives, they’re more affordable sort Vacation and maybe travel in groups is also a better discount to like actually having a great state, cheaper price. So I think it’s still unknown in terms of like how much they or not. Don’t this point
05:55:54
Look looking at the data would basically would, would seeing the profit kinda shrink, be an indicator of the, the, the lifeline of the arbitrage model. And have you seen the profits shrinking down pretty dramatically recently or is it pretty steady?
05:56:12
I don’t actually have the real numbers on that. I would say we do launch this thing called the STR index and it’s something we launch quarterly at this point in time sort of shows year over year, month over month by Citi and metropolitan. We’re a previous two, three years. And so I think we see it flattening out and that is just because, you know, their supply and demand are just growing much more congruently now. Right. People’s I’ll so just much more like dynamic and like much more rational marketplace now. And so I wouldn’t say that, like, it’s gonna go down, I just see it sort like relatively flat as the continues to catch demand for traveling in the future.
05:57:16
Do, do you see in other other markets that maybe are not outpacing out the, the demand, like, are there particular areas? Cause like right now, a lot of people and a lot of the highlights on all these reports are more metropolitan areas, but are there other markets where the, you know, you still can see that three times return off of that investment.
05:57:38
Yeah. New York city, but that’s the problem. Right. And every time I sort of find a city, I’m like, whoa, that’s a cool new city. I’m like, oh, right. Like, like Charleston, like, you know, like, oh Charleston, that’s great. Oh yeah. That’s, can’t go there. And so, you know, I just stub a lot of people that like, Hey, I just need the license be on for 12 months. I’m looking for a quick hit and they’re gonna go Charleston and go like bribe the guy who owns the property. And I’m fake name in there. That’s not a sustainable business, but you know, there is always between that’s the market. Anytime you go to a top, there’s always gonna risk you. Even if we thought was fine and Phoenix now is gonna be like day cap, all of people dump, you knows there’s, that’s completely a running cohost cohost business by the way. But it’s, what’s, industry’s, there’s lots of outside have been Vacation Rental. The beginning of whole is based off the investors going there. And the other people, you know, are honestly looking at international or some other options outside the us this point in time.
05:58:58
So, so you’re seeing international there there’s a lot more potential gain,
05:59:01
I think. Yeah. I think there definitely is. Yeah. There’s just, yeah. I’ve got office in Barcelona. Like it’s just, you know, it’s just a different game. The us is in terms of like taking risks, having like, you know, being at the cutting edge of something like really trying to figure out, you know, something that’s innovated a new model. It just isn’t there as much as it is here. And even in Barcelona where exploded in Paris, like they had these massive, you know, they have massive unemployment. So people are always gonna be scraping by trying to find a good business opportunity. They just aren’t as I, not as professional I’ve south, like there’s, there’s lots of opportunities everywhere. And I just sort of noticed that us is, you know, it may bad front all my European customers, but they’re sort five years ahead the curve. And so there’s always an opportunity looking Mexico and like there’s always opportunities outside the
05:59:55
What’s the most revealing thing that you, that you’ve seen from analyzing all the, like, if there was something that was just like, wow, I, I just was, you know, no, nobody else knows this.
06:00:07
I’ve for your show here. Julian, what is the most interesting thing I’ve seen? if know don’t I God, I’ve I’ve got the amazing nugget for you. I think, I think the one thing that is interesting is that I I’ve, we’re doing some research on it right now is that short term rental are moving markets in a way that nobody’s really looking at or analyzing. And by that, I mean, home values are either rising to meet. What is the sort of revenue generated by those Vacation Rental, right? Or if regulation goes into place syncing really quickly to sort of have this like supply in the marketplace and nobody in the sort of the real estate market really analyzing exactly like what is the impact of real estate? Like in Palm Springs, we made it the legal and, you know, thousand properties came on the market overnight or the opposite, like in Galveston, Texas. So in Gatlinburg, Tennessee, where there’s still like an amazing margin there, how quickly real estate values are, are catching up to what is that cap in the marketplace? And so I think that’s a, I dunno if that’s a really fantastical stat, but I think it’s something that’s underappreciated is that short term rental are moving markets in a way where home values are very dependent, what the short term rental activities markets.
06:01:29
So, so, so just to kind of wrap this up is what you’re saying is that, that there’s, there’s a lot of opportunity in people being able to purchase properties and seeing a return that people really aren’t looking at. Because right now a lot of people are just thinking the arbitrage space, you know, how much can I rent a place for? How much can I get for the profit? But what you’re saying is that people, maybe aren’t looking at the, the power of purchasing a property and the return that that can bring in.
06:01:57
No, I mean, so I mostly work with people buying, buying properties, right? And so what, what we’re basically saying is that you can always bake in general appreciation for a property, but if you’re buying the properties in the right places, GA Birtch S the Destin Floridas or whatever it might be, that can sort of predict more appreciation of that property as people buy, noticing that flow there real sort of, valuations, traditional but but as a cashflow commercial business, it has a new valuation. And so residential real estate that can be short term rental will eventually be valued, more commercial real estate with caps. All that’s interesting now is as RealD
06:03:05
Planning the tool that help those properties like
06:03:11
Bell,
06:03:12
Is there a timeline for that one?
06:03:16
I mean, I think over the next three months, you know, so it’s February now. So by the summertime, we’re gonna have a lot of, we’re gonna have a lot of cool tools. Must help people buy the properties, but do further analysis and calculators and all those sort
06:03:28
Things. Awesome. Awesome. And I think, I think people would Lynch me if I didn’t ask you this, but where, where should people be and where, where is Scott SHA investing in his, his properties?
06:03:39
Yeah. Yeah. That question. Yeah. No, it’s great question. I’m have a terrible answer, right? It’s like it’s in the blog. It’s a secret. I don’t around like the three markets that I really like my pocket. It just is what its, so go check out the blog post. Like I said, we’re coming out really deep dive soon. So I, sorry. No spoilers
06:04:00
Here. I’ll I’ll I’ll include, I’ll I’ll include a link in the description as well as for those that are interested in, in checking out air DNA. But I just wanna thank you so much, Scott, do you have anything else that you wanted to share before we, we end this conversation?
06:04:13
No, I’m good. Yeah. Everybody come check out the website. We got a lot of blog content, all of our contents free in our mind products, go check it out and you know, hit on social media or Facebook. If you have any complaints or praises, I’m here to hear them.
06:04:31
All right. Thank you so much, Scott, for coming on the show and until next time host nation, keep on hosting. Hope you host benefited from the show. If you found value, please going over to iTunes, leave us a review and let us know what you enjoy about the show. If you like to talk to host that have been featured in these episodes, as well as the community, going over to our Facebook group, the host nation.
