STRSS 34 – Repurposing Shipping Containers to Vacation Rentals w/ Anuj Datta

Video Transcript

00:00:00

My overall business strategy is occupancy. I want to operate on 90 to 95% occupancy. I feel like volume equals value.

00:00:09

This is episode number three, four of the short-term rental success stories podcast. Are you an investor that’s looking to have your home professionally managed, go to cohost.com for more information. Welcome back to short term rental success stories. I’m your host, Julian Sage. This is a show where I talked to hosts about their journeys and starting in 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 hosts. We all strive for five-star reviews. So please go on over to iTunes and let us know what you enjoy, because it really helps support the show. If you haven’t done so already going over to our Facebook group, the host nation to connect with the community. Hey, what is going on? Host nation? I am super excited because of the couple of things, one because of our awesome guest today, but I’m really, really excited because we have officially just become the number one short term rental podcast on iTunes.

00:01:04

That is so, so cool in 33 weeks because we got it by the last episode, just after the last episode released, we made it to number one but 33 weeks 33 episodes. And now we are the number one short-term rental podcast. That is just so cool. I am so honored and so proud of the community that we’ve been able to build up. The host nation just keeps on getting bigger and better. I love the host family so much, and we’re just doing so many cool things. I, I, I love talking to every single host on the show and talking to the people in the community and educating people. It’s just so exciting and so fun. And then just the amount of possibilities that like I never would’ve thought of, you know, now having a property management company, doing turnkey arbitrage properties, which is really cool.

00:01:51

And if you are interested in learning more about our turnkey arbitrage program, then go to co-host it that’s C O H O S T I t.com cohost.com. And you can find out more about our management and our, our arbitrage program. It’s just so, so cool. The BNB empires builder’s mastermind group that is just like, I love, I love the host family and I love our community, but I can’t help everybody. And the people that want to be helped and really want to grow are endless group. And that’s really who we want in this group is people that are looking to grow and really serious people. And I know all of you guys are serious. If you’re listening to me, it’s just talk for an hour with other people. And I know you’re serious, but these are the people that are looking to grow themselves and increase their management, increase their clients, take on more rental arbitrage properties.

00:02:41

It’s just so cool. So I’m just super proud. I’m super honored. I’m humbled. Thank you so much, everybody. So now what’s next with the show now that we’ve reached this huge, huge milestone, I would love to just know more about what you all are looking for because I’m trying to provide as much value as I can do you guys, and I would love in the host nation group, send me an email, whichever way, Instagram, YouTube, whatever it is, let me know what it is that you’re looking for and how we can best serve you, because I want to try and provide as much value as I can. I am all in this for you guys to be able to give you exactly what it is that you’re looking for, but we’re going to keep on rolling out with awesome interviews. I’m going to try to pick people’s brains even further.

00:03:21

I don’t even know if that’s possible because I have a pretty good talent of just really diving into people, but I’m going to try to just scoop out as much golden information and try to provide that to you as much as humanly possible. So I need more humans is, is one thing I need more people helping me, but I am going to just try to provide as much value so that you guys can become the best host that you can. And I would love to be able to have you all the short-term mental success stories, podcasts, because that’s, that’s really what this all is all about. This is about becoming your own success. If success means for you having one property, having 10, having a hundred, starting your own management company, being financially free, whatever success is to you, that is what I really would want you to be able to strive for.

00:04:07

And that’s what you know, through the show. I hope everybody can achieve that level of success. And speaking of success today, I had these special, special honor of speaking with a news, a news prior to jumping into short-term rental, investing owned various franchises, such as gas stations, a subway, and a checkers. If you don’t know what checkers is, it’s like a kinda like a burger king. It’s like a, they offer like shakes and like, kinda like a shake shack, I guess, because of the overhead costs in the business. And then we decided to sell off all of his businesses and move to Houston to jump head first into real estate, without prior having any real estate experience, just jumping in and getting into the short-term rental game. Anousha now has 10 listings that he owns himself. Three of those are shipping containers that he’s turned into these beautiful and very unique, tiny homes.

00:04:53

He’s currently grilling his management company and taking on more clients. So he’s going all into the short-term rental game, a new stocks about how his background in business helped him start his short-term rental business and how it got him being able to go so smoothly. We talk about a lot of the similarities and differences between franchise management and ownership and short-term renting. And if he could go back and do it all over, which one would he would do initially, he also shares his ideas of converting a shipping container to a short-term rental property. And what are the challenges that that is brought on? And what did he do to make his stand out from everybody? Else’s it’d be like my show notes for this episode, go to Short Term, Sage dot com backslash STR three, four, or if you liked my show, that’s sent directly to your inbox every week, then go to Short Term Sage dot com backslash show notes.

00:05:37

Last little note is that the BNB empire builders mastermind is going to be closing its doors very, very shortly guys. So if you are interested, go to Vacation Rental Machine dot com or just go to the store on the Short Term, Sage, fill out an application. If you are interested, we are going to be closing this off very soon. We are limiting this to our early adopters, so that allows us to be able to work with you a little bit more one-on-one with John and I we’re going to be doing a kickoff call. Actually, today is one. We’re going to be doing our kickoff call. So we’re really excited to be able to start helping people grow and grow their portfolios. But we are limiting this to just our earlier adopters that we can help really just figure out how we can provide the most value to you guys. So if you are interested again, go to Vacation Rental Machine dot com or go to the store on Short Term Sage and fill out an application and join before we close off the doors. So with all that being said out of this week’s conversation, Hey, welcome back host today. I have these special, special honor of speaking with a news, not the news. Would you please introduce yourself? Let the host nation know who you are and what inspired you to get into short-term rentals?

00:06:45

Hi guys. My name is. I am, I’m originally from New York. Now. I operate my businesses out of Houston, Texas. I have a 10 listings that I own myself and I have one listing under management. I’m currently growing my management company to take on more clients. And I come from a business background. I come from gas station, so my franchises, checkers franchises. When I was in New York, I ran those businesses and I decided a few years ago to sell off my assets and move to New York, Texas to get into the real estate world. And I purchased an apartment complex. And when my first lease was up and I converted into Airbnb and actually there’s a story behind my first Airbnb unit it’s that the tenant had the place immaculate. It was like, it was a great news I saw. And I was like, this is, this is good to go. We can just list this right away. So we’ll make a deal with him for his existing furniture, which was great for him because he didn’t want to move anything. And I made a deal for a thousand bucks on his existing furniture. I added just a couple of beds and a TV, and then I had the listing going. And so my first experience was great because it was kind of low cost way to get in. And we started the listing. I saw the, the revenue opportunity. Adam started learning the business right away and I saw,

00:08:17

So you, you came to Houston purchase that apartment complex with the intent to long-term rent it.

00:08:23

Yeah. Yeah, I was going to, I was actually, it was in the apartment complex. I had one kind of storage space, which I was going to convert to Airbnb and try it. But actually the first rental came up, the first lease came up. So rather than renewing that lease, I made a deal to buy the existing furniture that the tenant had and just converted that to an Airbnb unit. As a, as I saw that happen and saw the revenue come in and how, how it was, it was a no brainer to kind of everything. So I have the apartment complex right now with 10 units. Three of them are the shipping containers and then the rest are just wrong. You know, regular

00:09:05

I’d love. I’d love to be able to talk more about the shipping container. You actually shared a, your video in the host nation. And I thought it was just super cool, super original and super cheap, too, super affordable. Like that is someplace that I would like to stay if I was in Houston, definitely right up my alley. I think it was like 29 bucks a night right now. Like, wow, what a good deal. But I want to talk a little bit about that more in coming up, but I want to go back to original because you you’re, you’ve been hustling, you’ve been working, you been a franchise owner. What, what made you give up that whole franchise life? That those businesses to take on a short-term renting in real estate

00:09:43

Labor. And there’s a lot of overhead labor, a lot of moving parts when you’re running restaurants, when you’re running gas stations, 24 7 business, you know, when, when I noticed overhead costs where the correlation with the labor and kind of heavy work, you know, I didn’t want to deal with when it came to running a franchise, running restaurants, I wanted to kind of downscale that and then grow back the right way. And it’s harder when you’re in the franchise business for gas station business, because in the restaurant franchise business, because you know, you can’t, you don’t have the cream of the crop, the labor, you know, you’re typically paying minimum wage labor, and that’s tough to deal with. There’s a lot of turnover and there’s a lot of issues that come in, anybody in that business. And a lot of people do really well, but for me, it just wasn’t there. It wasn’t the labor pool.

01:10:39

So you, you owned a gas station. How many, how many gas stations that June

01:10:43

I own I bought and sold a lot. I, what I did was I actually underperforming gas stations, underperforming subways, and I turned those into businesses and then sold those. So I basically throughout time, throughout the nine years that I was in these businesses, I turned over about 20 businesses. So I had like 10 operating and at any given time,

01:11:11

So you owned a checkers and a subway, some gas stations. I mean, it’s, it’s, it’s pretty interesting because what you’re basically doing is you’re taking these properties, these, these businesses that are rundown, not performing, and you’re adding something to it in order to make them optimal. It’s a very labor intensive, like you said, but what is it, what is it about taking a business that is maybe run down in, do you find that similarity and like real estate, because you purchased a multi-family, is there similarity in how you’re able to take something that is rundown and making it, you know, profitable?

01:11:47

Yeah. I mean, if you want to increase revenue, you gotta be empathetic, right? You got to realize what the, what the customer needs. So a lot of these underperforming businesses, they, they just weren’t, the previous owners were not thinking about the needs of the customers, the cleanliness of the place, you know, so it was a low hanging fruit. It was just kind of easy to go in there and doing things and implement the right merchandising and the right customer service, you know, service with a smile and, and things like that. And we were able to turn those businesses around and in a short term turnaround, a lot of times businesses. So I think it’s in Airbnb, or whenever you do, you have to put yourself in the shoes of the person who’s going to be paying you and you guys, you know, you gotta see what what’s good for them, what works for them and do, you know, go towards that and just bring a new service catered towards your clients.

01:12:52

I mean, you, you you’ve been, you’ve been in the franchise business since 2007 and you first got started with Short Term renting in 2017. So that’s a 10 year span. What about the franchise? Like was, was the franchise business worth the amount of labor that you were getting, like was the returns on that, like a lot better than maybe short-term renting or

01:13:17

Because of cost or less cost or more in a franchise? Because like I said, when you have a lot of labor to kind of manage you, then your labor costs are higher in New York, you’re pretty high rental costs as well. So I see more profitability within the short-term rental space for myself, just because of the efficiency in the way that the operation is being run on the, on, on the franchise side is, you know, there’s, there’s, there’s definitely upside, but your margins, like, especially with some where, for example, your margins are really tight. You know, if you’re, if you are operating a like 10% revenue, if your operating profit margin is 10% of revenue, you’re in good shape when you’re really untied, profit, same thing in a gas station, business, convenience store, depending on the amount of tobacco products you sell, which are usually low margin products, you know, your, your margins can be tightened in that space as well. Gas and gas margins are pretty tight as well. So I definitely see better profit margins in the short-term rentals.

01:14:22

Now, you know, obviously, you know, running, running a single franchise, you know, such as like a checkers or, you know, and then a subway and gas stations, they all operate differently. I’m sure that they all have their unique things to them. What about the business though? Have you been able to take away, like, what are the big things that you’ve taken away from running these like big businesses with, you know, a lot of expenses, a lot of employees, all this, and then converting it towards, you know, short term renting, which is what a lot of just like mom and pop, you know, just your, you know, your everyday is able to, to up and run.

01:14:54

Yeah. The systems and protocols, you know, there’s when you’re running a franchise, you have a system in place, right. And that’s kind of what you pay for when you’re, when you’re running a franchise, you know, same thing with gas station inventory controls is something that I’ve brought over here. Merchandising doesn’t really translate well into the short-term rental space, but, you know, merchandising was what was a big pull for customers. You know, you got to set up the stores in the right mate. You gotta, you know, keeping everything clean, keeping everything in order. But once the systems like the POS machines, all those systems that are in place to kind of keep your inventory together, bringing those kind of systems and implementing them in a short-term rental game has really done well. And that experience has really translated well into this.

01:15:50

Now for your first long-term rental property, you purchased a apartment complex, and then you subdivided it coming all the way from New York to Houston and dealing with this project. You know, how, how was that in order to get that property to where you wanted it to be so that you knew that you could start becoming profitable?

01:16:13

Well, I mentioned I just subdivided the apartment complex last year. So I was running short-term rentals. Like for two years prior to that, I saw the upside of the short-term rentals. It made sense to kind of invest in. So as far as what was, what was the initial question?

01:16:35

How, how, how has that, how has that process with finding this multi-family? Was it, was it like a turnkey property or did you have to invest a lot into the development?

01:16:44

Well, initially it was, it was turnkey when it was it’s an older property. So there was definitely so much investment that had to be made within the plumbing, within some of the infrastructure. And then I made investments as far as dividing existing units that I had initially built. So I had six units, which I converted into eight units within one building. And then I had put another unit into another building that I have right on the same property. And then after all of those units were cash flowing, I decided to build the shipping containers. As far as comparing from Houston to New York, Houston is much easier to deal with building permitting standpoint. Building permits is actually classified as a single family house, even though they use three separate units, it’s classified as a, as, as a single family house. And I had to go through the whole permitting process. We had to run the water meter, run, all the plumbing runs, run all the electric.

01:17:50

Now off off of a multifamily. Ha have you, have you found that it’s, it’s more profitable investing into, let’s say a multi-family than like single-family homes? Cause I know a lot of people are purchasing single families and turning those into, you know, into short-term rentals, but you decided to, you know, because you were originally going the long-term multifamily route and now you’re going short term rental. Have you found it a profitable venture or would it be easier going single family?

01:18:23

I like the ease of operation with multifamily, you know, because you can, if you’re condensed within units within one space, you’re cleaning people, aren’t running across town, cleaning different listings. So, so you save a lot of time and as compared to, if you have one listing here and then another listing across town, so, you know, for my future investments, I’m actually going to do exactly what I did, which is just kind of small, you know, 5, 6, 5, and 12 unit multi-families and then convert them all into Short Term.

01:18:55

Now, when, when you have a multi-family, you know, because you have 10 units now, is, does that, have you been able to justify being able to have like a full time cleaner or are you still contracting that out?

01:19:08

I have a full-time cleaner there. They’re not my in-house employee. I do contract it out, but like, that’s just the way that it operates on paper is kind of like they are my employee. Once the system that I liked is that I don’t have to deal with hiring several different employees and deal with, you know, giving people time off and things like that. I’d have a contracted out to one person and that person coordinates all the different cleaners that got to come in and do the cleaning on a daily basis. It kind of takes that off my plate so I can focus on.

01:19:44

So you’re, you’re able to pay your cleaners a minimum, minimum wage rather than a contract price. And they’re basically,

01:19:53

I pay somewhat of a premium because I feel like you kind of get what you’re paying for. So I, I pay, I pay somewhat of a premium for them, for, for the cleaners. My system is set up is I pay a fixed rate. So I have a fixed rate that I pay on a weekly basis. And no matter if the person has to clean 10 units or they have to clean one year, so, you know, it works out for them as well. And it keeps me kind of right in control of my costs. So I know, so my labor is more or less just to fix.

02:20:24

And what have you done to encourage them to want to keep working with you? If they know like this week, it’s going to be pretty easy, but next week it’s going to be hard. You know, how, what, what keeps them from saying like, okay, well I’m out of here or anything like that.

02:20:38

I mean, I, I, maybe I got lucky with the person that I’m dealing with and they just do a great job. They just do a job, consistent income for them.

02:20:56

Okay, great. And now I wanted to get into the shipping containers because if you haven’t, if you haven’t seen a new, just shipping containers, I highly encourage you in the video description. You can go to the show notes page, check out his listings. And then in the host nation Facebook group, he also shared the video. I’ll include that in the show notes as well, but it is very unique. Very cool. What, what inspired you to, to start that and create that? Cause that, that the, how it looks and how it’s set up, it looks very complex. It looks like it took a lot of time, a lot of effort, a lot of energy into that.

02:21:29

Yeah. Well the inspiration was, I liked the idea of repurpose use, you know, initially it was used for one thing and then we converted it into something else and it has a completely different use. It’s all, you can even translate that to people, right? Like we all have kind of a purpose on the planet to do something, to fulfill our dreams, our desires that would make our goals happen. Sometimes in life, you lose that initial purpose. You kind of forget, you get sidetracked, you know, why, you know, you can always find your purpose. And that was, that was an inspiration just to repurpose use of it, you know, giving, giving people something unique, something, something different, just like a different experience that people enjoy.

02:22:24

No, and I, I think it’s really cool and I love it in the video there. I think one of the highlights is like on the side of the building, it says like, what is it? Does it actually say like repurposed or something like that Find your repurpose. So, you know, just, just to kind of maybe walk people through that, haven’t seen the video. Do you mind kind of walking through how the structure is of, of the, of the container?

02:22:50

Sure. So these are three eight by 20 shipping containers. So this is tiny space. There’s one shipping container on the bottom and then two candle lever on, on, on top of the one on the bottom, we have a little kind of barbecue area. We have a deck in the middle of the shipping containers on the top, in the middle. And, and we have patios for each one little sitting area and patios because since we have such a small interior space, we want to use exterior space. So people can kind of have the best of both worlds where you can be always in a nice, nice luxurious kind of interior, small interior, but also you, you can hang out outside as well and just have a space that kind of flows together and is conducive. So that kind of idea behind it is micro luxury. So even though it’s a small space, we, we put every all high-end funny and we put, we put high end finishes in there, high end tile work, you know, frameless glass, shower doors, just to give, give people, you know, when you see a shipping container, what you don’t expect, something kind of beautiful, something high end with high-end finishes.

02:24:03

So we decided to go with, with the, with the micro luxury constant

02:24:08

Now, I mean, it is very unique and very like it, it just pops and it stands out, but the prices that you’re listing on it, like I saw it was like $29. Is that, that, that seems very affordable. Have you, have you, have you found that because of how affordable it is that you haven’t been able to get people that maybe appreciate that or just looking for a cheap place to stay or what’s the reasoning behind the, the,

02:24:33

So I just put these on the market last month. So I want to know, get some kind of traction and get the reviews and, and, and kind of get the exposure going. I definitely have some outside that I can take. My overall business strategy is, is occupancy. I want to operate on 90 to 95% volume equals value. So if I can stay occupied in my business, stays consistent. I think in the long run, there’s going to be better. So I kind of suit my pricing according to having the maximum amount of occupancy for my spaces. Now, the $29 $30 also does not include the cleaning fee. So I don’t like to have longterm stays. I like to have just quick in and out. One day, two day, three days stays, you know, kind of like a hotel. So the actual average daily rate that comes in on those containers. Now, just the one thing they’re having a little bit of data. It’s like Cynthia, $60 a night. So that’s the actual average that’s coming in

02:25:35

Now with, with a project like that. I imagine that, that it was very, maybe cost intensive. Is your return on that? How, how, how soon would you be able to get your return on work? Like,

02:25:48

Yeah, my ROI is looking like three to four years. If I’m operating on a, you know, 25 and 30% return, I’m happy with that on.

02:25:58

Okay. And then what about the apartment complex? What’s the, what’s the ROI on that one

02:26:04

And the apartment complex. And since I’ve taken, since, since I’ve converted and made it, I’m basically returned, returned, maybe three fourths of the money on it. Wow. Yeah. Yeah. And that was three years ago, you know, when you have a lot of units in one space and all my space, or either studios and one bedrooms, you can work on economies of scale. So you can, if I want to do the volume, I know I’m going to charge a little bit less than the market, but as long as I can retain my occupancy, I can always adjust my pricing and the pricing, you know, it’s always kind of different depending on what the market is offering. And it’s just about achieving the occupants.

02:26:50

Does, does a container home, does it, does it have like the same like type of like equity as like a single family home? How does that work?

02:27:00

So it’s, it’s an investment property, right? So, so equity will work based off of income and your value because I’m not, this is not for the purpose of selling to somebody. Who’s like a single family home family who’s going to live there. So if I wanted to sell it or refinance it, then they’re going to evaluate this place based on the income that it produces. So for me, it’s a very good equity play because it’s cashflow is so good, you know?

02:27:36

Great. And w what has been the most challenging part of starting your short-term rental business?

02:27:41

The design part, I do my own designs of like, I have one phase, which is like a Rubik’s room, so I painted it all. Like it’s called a Rubik’s studio and it’s like, basically a Rubik’s scoop, so you’re living in there. So my whole thing is on one gym, a different design in a different flavor for every single space that I have. And that’s what we’ve been able to achieve, but that’s, you know, you gotta be creative, you gotta kind of think outside of the box and, you know, that can be a challenge at times, but I guess that would be challenging. I don’t know, challenging is the right word, but that’d be the most interesting part.

02:28:20

Yeah. Going back to the design concept, I, I, I don’t, how, how did you even find the right person that would be able to create this vision of yours for this container home?

02:28:31

Well, I looked around, I knew I wanted to do something out of containers. Right. Initially going into it, then I shopped around for architects and I found an architect who can make it happen. And, and, and then they put together plans and I gave my approval, and then we went to building the project and I subbed everything out to different people. But so, yeah, I just did some research and found the right architect and he made it happen.

02:28:59

Okay. So you, so you’re actually a contractor in the, in the Houston area.

02:29:03

Well, I only for myself, I don’t do any jobs for anybody else, you know?

02:29:08

Okay. I’m sure that a lot of ears perked up and they’re like a reliable contractor that can like, can do work.

02:29:15

I haven’t ventured to work for anybody else. I don’t know, maybe down the line,

02:29:21

But what has been the most challenging part of scaling this business?

02:29:26

The most challenging part of us scaling this business? Initially, it was about the consistency of the cleaning until I, you know, about a year and a half ago is when I found on the, on the cleaner that I have and that I deal with, which has really made life much. But prior to that, I was not able to find a consistent, cleaner. I had people, I had some issues with some inventory and, you know, that was the most kind of challenging part, getting the consistent, cleaner in place. Once I had that, then I knew that this business can be skewed. So that’s, that’s what I think is definitely one of, you know, one of the most challenging parts, getting the right clear in place, and you can always pay somebody, you know, $12 an hour or whatever to do your cleaning, but, you know, you have the issue, are they doing the right job? And like, how involved do you want to be in that part of your business? You know, if you can find somebody consistent, they do the right work, and then you can focus on growing and scaling your business. It really alleviates the kind of day to day type of operations.

03:30:33

Yeah. Coming from a guy on news that has dealt with just so many people that you have had to hire and turnover, have you, what have you found to be most successful when screening and hiring cleaners for your business,

03:30:47

Reliability and trustworthiness? You know, you, you have to be able, you can, you can track your inventory, you know, your supplies. You can, you can always track that, but at the end of the day, you gotta be able to trust the person and they gotta show up to work. They have to be reliable. So some of the system that I have set up, like I said, party that my cleaning, when it’s in 365 twenties, 24, 7, 365 contracts. So if there is, I never have to, I just have to communicate what has to be clean. And essentially I’m going to automate all that I have already going to calendar that’s besides the point, anyway, they just come in, they do the work and they go, and everything’s just kind of automated. And you don’t take that off my plate.

03:31:36

Do you have a system in place for finding the right people for the, for the job

03:31:40

Craigslist? You know, I used it. That’s how I got successful. Initially. I was just talking to local people, you know, when I was running businesses, what I did was have job fairs. So when I had to hire a big pool of labor, I had job fairs. I sent it out by marketing the local neighborhoods. And, and I had people just come in and just, you know, rather than little by little, because let’s say I opened up a chapter in Queens, New York in 2013, I needed to hire like 40 to 50 people, you know, between part-timers full-timers management. So the most effective way was to have a job fair, having set up and then just interview people on the spot and just kind of almost hire.

03:32:28

And how, how do you, if you let’s say you’re meeting with a cleaner you’re meeting someone that you don’t know, and you, like you said, you have to find that reliability and that trust. How do you do that? If you need to just start getting your business up and running right away,

03:32:43

Some is trial and error, man, you know, you, you gonna, you’re not gonna know if somebody is reliable, they can tell you that they’re reliable, but you’re not going to really know until you put them in place and get them into the business. So when, when I put my ad out and basically for the person, for the company that I have now, that was what I specifically stated reliability and trust. Those are the two words that I used and it, luckily I got the right people, but prior to that, it wasn’t, it was inconsistent with my cleaning as you, my reviews, we’re at like 84%, five star. Then when I got the new cleaners and now have 92%. So you know, all that stuff in the long run.

03:33:32

And what have you found most successful when you do find that person that is reliable and trustworthy, how do you, how do you retain that person and want them to, and get them to keep wanting to work with you?

03:33:44

Did you pay them more than the bottom level, right. And you, it’s just human, human nature. You know, you just treat everybody with respect, you know, and if they can see if somebody who’s working with, you can see that, Hey, there’s some upside in this and there’s, there’s a long term play. Because for me, it’s all about long-term when I build a business relationship, I want to have people to deal with as long as you can make them realize, listen, there’s a term play here with you. And then with me, and there’s a long-term vision here. We can grow together. That’s really clear that I have now. I mentioned, you’ve been thinking about flirting with them in a management deal for a short-term rental, just so you know, they have some upside for themselves. Cause she was saying, you know, I can’t be a cleaner forever. I, you know, I want to do different things. We’ll come on and work on something together. We can work together for the long run. You know, just thinking rather than like Short Term plays, I would say

03:34:54

No. And then, and that’s awesome. The, the, the, you know, allowing you to clean cleaner, the potential to move up, but that, is that a conversation that you bring up once they’ve been there for a while? Or is that, do you use that to kind of maybe entice them to work with you?

03:35:08

No, no. That’s not an enticement. That’s somebody. I know that I could work, work with people for being with me for a while. Even when I was in the franchising game, I had, you know, managers that are brought up into partnership, made the junior partners, and it’s actually easier to run that way because then if you have a partner who’s working there, running it on an, on a day-to-day basis, you know, you can focus on the bigger picture. So I like doing that and it helps, it helps everybody out. And somebody who was just coming in and making this, you know, sort of limited amount of money, goes fast themselves and do the right thing. Then, then they can move up. That’s what it’s all about.

03:35:49

Yeah. I love that, that mindset that you have, because really, you know, that, that shows with how you, how you treat people and how you’ve kind of scaled up the business, the, the, the franchise mindset of, of how you’ve been able to apply what you’ve learned, you know, through franchising, towards your business and how you treat your employees.

03:36:06

Yeah, yeah, yeah. That’s, it’s all about putting yourself in somebody else’s shoes. Empathy is a big thing. You know, if you’re always just kind of selfish, looking out for yourself, there’s, there’s definitely a space for the bottom line and the bottom dollar and making a profit without a doubt. We’re in business. That’s what we’re here for. But if you can do it and bring other people up with you and be considerate and be empathetic towards their needs and their families, then I think you have.

03:36:37

And is, is there anything in your units that saves you time and money?

03:36:43

I mean, I don’t know if I have anything different than anybody else, as far as it saves me time and money. I mean, I, haven’t pretty systematic. It’s systematic. It’s kind of like, okay, these units have to be cleaned today. Okay. You know, these codes have the access codes that we changed today. Like I know a lot of people use access on their phones and things like that. And people have to download apps to access different things. When I knew it kind of automated where way cleaner knows when I use the last four digits of somebody’s phone numbers or somebody’s phone number in between every cleaning, we just change that code every time that gives us safety. That gives us security. So kind of things like that, where it’s, I wouldn’t say fully automated minutes. So then just those systems, the calendar sharing, where somebody can just see your calendar, where the cleaner can just see your calendar and just look at it. You don’t even need to communicate and kind of what’s going on. They know exactly what to do, and you have no issues with misunderstanding or anything like that. I think that that was, that was a good thing.

03:38:03

And with, with, with the franchise type of mindset, do you, do you have a way that you are kind of already analyzing how you can maybe scale this up? Is there, is there some, maybe something that you’ve kind of taken away from your previous experience that is making you look at as at the real estate hospitality side a little bit differently,

03:38:23

You need to pay attention to your numbers. That’s a really important thing. You need to pay attention to the, to the revenue coming in. You need to pay attention to your labor costs. You need to pay attention to your supply. You know, the way, the way that you look at it in the restaurant business, in foot franchising, businesses, you have a total amount of revenue. Now, what percentage of that revenue is your labor cost? What percentage of their revenue is your supplies causes you, is your product cost. We presented you with their revenue is your utility costs were percentages your rent. So you have your pie and you say, okay, what are my costs on this pie? And then what is my net return at the end of the day, based on the revenue that I’m doing. So that’s kind of the approach that I’ve taken with his business as well. See you see what, see what the revenue is trying to get, make that pie obviously as big as possible, and as far as down your expenses. And then once you have an idea and you can see what those are, you can see, Hey, where, where can I save money? Where can I be the profit side of this?

03:39:26

Does it make more sense to you to keep on replicating the same type of format that you have or diversify into different types of investments?

03:39:35

So, for me, I’m working on the management and my business. I’m also working on the arbitrage end of the business. And then, but, but my, my real estate investment side, I want to do the same exact thing on my next purchase, which is going to be, you know, taking a smaller apartment complex and converting them into Airbnb units. So on the real estate investment side, I want to do that, but definitely have the management going and the arbitrage. I, I want to have different types of assets. I’m not really big in the single family. I read them.

04:40:13

Okay. And, and why is that just because of the ease of all the units together, or

04:40:18

Exactly ease of operation, a economies of scale, you know, those are the two main things

04:40:24

And for a w what have you done to be able to help your guests leave positive reviews?

04:40:31

Hospitality is something that I was raised with. You know, I come from Indian, that’s my background. And Indian people are just raised. If you have guests coming into your house, you know, you just treat your guest as your God. So, you know, and you treat them with that respect. You, you make sure that everything is taken care of for them initially. Like, I didn’t have too many amenities, like coffee and little by little, I started adding a lot of different amenities just in putting yourself in somebody else’s shoes for one of the things that was actually a game changer for me, as far as the hospitality goes was I put in all my units. So somebody walks in, you know, they’re, they have fresh water. They don’t have to worry about a water tap. They don’t got to buy water bottles. I was noticing that people would come in and they would meet like, you know, by 24 pack of water. And they have like 20 water bottles because they can’t take it back with them wherever they go in. And that’s probably annoying. You walk into a place and you’re like, damn, I need water. And you know, you gotta go to the grocery store, you got to go by the water. And then you’re not even going to finish the whole thing, taking five gallon, water coolers, and every single unit. And that actually was a game changer.

04:41:53

So just recognizing that what people are are requesting just from their actions, you’ve been able to modify your business to basically,

04:42:04

And paying attention to the reviews. You know, like, what are people telling you by your business? Taking their feedback, know don’t get defensive about it. Don’t think, oh, this person doesn’t know what they’re talking about or this and that. Not just say, Hey, this is what’s good for my business. So the point is with small things, such as like water and coffee, and like, what else? I mean, those are two, many things I could remind now, but when those type of small things, they’re really small investments for bring you great reviews and returns. One of my big, big things in STR is exceed the expectation under promise over deliver. So if that even works with pricing, so if somebody is coming in at a value price, they’re going to come in and say, wow, I, you know, I paid this much and look at all of this that’s coming from now. What is that going to translate into? It’s going to translate into great. And that’s what this game is about. If you want to be consistent in this game, you gotta have great reviews.

04:43:01

And is there, is there one house rule that has maybe saved you before

04:43:07

Quiet hours? Initially? I had no really house rules, quiet hours after 10:00 PM. And, and I, one thing about house rules is you gotta be very straight up. You cannot be unclear. You have to be very clear about what your house rules are, what your guests expectations are. And because we’ve all dealt with parties. If you’re in this business, you’ve dealt with parties. But if you can, from, from the pre-booking phase, without the people who want to do parties and house rules, then that’s a much easier way to run the business.

04:43:42

Yeah. I, I can’t imagine because I think you’re one of the first guests that is, is actually renting out a full apartment complex for the intent, just the short-term rent it. A lot of people that are in the rental arbitrage space, they, they maybe rent out a unit out of, you know, maybe a few, but your whole apartment is, is short-term renting. Have you found, what has that been like dealing with or managing a property that is just solely short term rental with multiple people, you know, side by side.

04:44:13

That’s good. I mean, at the end of the day, it’s kind of like a little hotel, you know, so it’s been good. And you know, so short term rental is a business, so you have the business aspect of it, and then you have the real estate investment aspect of it. So it’s like two different things. So the essence out of one asset, you have to, you, you have a business asset and you operating business, which is bringing your in income. We also have the land and the structure, which is your heart asset. So I love it because it’s like double values. If I wanted to have a successful STR business, I want to go home business and retain myself as a landlord and rent from somebody who just wants to know that’s an option that’s available. And I’m thinking maybe down the line, I would do something like that. That way you can sell your actual business for some, for some money. And obviously it will be a running furnished, fully running business for somebody to come into. And you would obviously work out all the terms as far as what the rent is. And it can be a win-win.

04:45:24

I think, I think, you know, the ideal, the ideal situation, every everybody wants to get into multi-family, multi-family, multi-family, that’s what people really want, but it is also very challenging to maybe find those properties because everybody already wants those. And people are willing to spend a lot of money on those properties. Have you with, with the property that you purchased, were you willing to just pay top dollar because it wasn’t a turnkey property or how does really someone get into a position where they are able to find that multifamily and be able to short term rental,

04:45:58

Oh, you’re not going to buy a multi-family property basis on the cashflow or short term rental, because then you’ll be way over paying, because the way that multi-family properties are calculated is something about the cap rate, which is basically your profit is your net operating income after expenses. So for example, if somebody isn’t just for easy numbers, if somebody is buying a hundred thousand dollar property multi-family and it’s nudging them $10,000 annually, then you’re working on a 10% cap. So, so when you’re looking to buy a multifamily on my next one, I’m not going to be looking to look and talk to the seller and say, Hey, I can make this much money off of Airbnb. And, you know, give me the price based on that. No, you’re going to in cash, you’re going to analyze it based on the income that’s coming in and what the net return is on that income, and then make a deal based on that.

04:46:53

You gotta be, I guess, a little bit more educated on it when you’re in that family. I’m also a real estate agent as well. I’ve been in the real estate game for a while. So you got to analyze the numbers. You got to analyze the experiences that are coming in and you don’t add in you don’t do it based off Short Term, because that’s your potential. You don’t pay for your own potential. You’re paying for existing as what is the business bringing me right now? What is the net income? And what’s my return based on that. So, so you saw a cabaret back to Capri on category is, is, is it is your rate of return, but it’s also an assessment of risk. So if you, if, if you’re buying a property, you know, 12% in any given market, that’s going to be a higher risk kind of lower-end property, where your turnover on tenants is not going to be like, you won’t have the best tendency in place.

04:47:45

Whereas if you’re buying something at a 5% return, you should buy theoretically, you shouldn’t have better tendency. You shouldn’t have as many issues because you’re, you’re buying it at a lower rate of return. There’s an inherent risk in the higher cap. So the higher cap rate that somebody is buying it, the more inherent risk is in the asset. And you as a buyer is your job to analyze and find out what is that risk? Like, why is this deal so good when you know what’s going on in the ICU, the guy next door is selling it at double the price. Why is this deal? So, you know, these are the things that you’ve got to kind of analyze.

04:48:22

So when you purchase this purchase, this property, you went in there with the intent to a long-term rent dip, and then you converted to short-term rentals. Would your cap rate maybe change? Would you allow maybe a higher cap rate now, knowing that you are going to be short term renting it and the returns on that is going to be significantly more than a traditional long-term rental.

04:48:42

I can do my own analysis, but I will never bring that into deal negotiation because if I’m buying something that’s, long-term rented and they’re, they’re marketing their property. And at a certain cap rate, I’m not going to say that, Hey, I can come in here and they’ll be a can I can come here and double cash because that’s my own potential. That’s what I’m going to be bringing to this property. That person wasn’t able to do it, the seller wasn’t able to do it. And that’s why they’re selling it at a certain rate. So I wouldn’t bring that into a negotiation. I will only base it off what the longterm market gives me, because at the end of the day, you need to take that into consideration. Anything can happen in this world. We know it’s always changing with regulations and just different, different things happening. Airbnb is going to go public next year, who knows what’s going to happen with their fees and their rates, you know, getting charged to 5%,

04:49:35

Right? But I’m asking, I’m asking you when you’re analyzing a property, would you now knowing that you can get a much greater return on a short term rental? What’s your flexibility for maybe a higher cap rate where, you know, the, the, maybe people are looking at this as maybe not as good of a property to invest in. Are you going in there with a different mindset now? Maybe.

04:49:55

Yeah, because I want vacancy, right? A lot of people, they don’t want vacancy, but if you’re going to do STR you want makings, so you can make a better deal on something that is vacant, that that has some vacancy. And

05:50:07

So you, so you’re saying that because, because, because you, you now know that short-term renting has such higher returns on investment, that you’re willing to work with a property that maybe has a higher cap rate where other investors might look at that and say, oh, no way. I wouldn’t touch that with a 10 foot pole to you. And now you’re looking at this. Well, I might actually be able to use the returns on for short-term renting, fix the property up and then get it to, you know, if I do have to long-term rent it a lower cap rate,

05:50:35

But I wouldn’t buy base. What I would look for is, is, is a deal, right? So I would look for, if somebody wants a long-term rent something, right? And then they want to buy an asset and they just want to hold it in place and have the renders in place and get buy in on a five or six cap. That’s fine. I’d be looking for the deal that is actually a lower, a lower cap rate, but that has vacancy. So a sorry, a higher cap rate cap rate, but a higher cap rate, which has vacancy so that you can just get in there and you can turn those into short-term rental units. You know, you’re looking for the best deal possible. So the best deal possible is going to give us most likely a higher cap rate and you get in there and then you can,

05:51:25

Now, now multi-families, you know, they can be, they, they are a bit more expensive and a lot of people might have to go with like a hard money lender when you are working with someone that is going to be up front of you, the cash are you, I don’t, I don’t know how you, how you structured your deal if you just purchase it with cash. But if you are going to pitch to a hard money lender, and they’re going to be analyzing that deal for you, are you talking with them about the potential of short term rental and how that could impact or does it strictly have to be off of the traditional long-term side?

05:51:58

I haven’t really worked too much with hard money lenders, but if you go with a bank, so what I’ve done is use my own cash purchase when I purchase and then refinance and just pull that equity. So what’s, so what’s great with the bank is that when you’re cash flowing on the short-term rental side, they’re going to evaluate your property at a higher level. So you can essentially pull out more equity than that. If you just had long-term leases in place and you’re making less revenue, it actually works out better on the, on the, on the refinance side. If you’re going to work with a hard money lender, or if you’re going to work with any lender they want to perform, because you’re going to say, okay, well, what are you going to do with the place? So of course, you’re gonna, you’re gonna show them, Hey, this is what I can do as far as revenue goes and how much I can produce. So yeah, you want to show lenders as much revenue as possible, where the lender can say, Hey, this is the existing, this is what’s coming in. Now I’m willing to lend you based on this. I don’t know what your upside is. I don’t believe you in your upside or anything like that. Something like that.

05:53:03

Yeah. But you would definitely want to pitch you a higher, higher revenue to the lender, for sure.

05:53:08

So you think it’s easier for investors to be able to get into the multifamily space now with, with short-term renting, being more, more common, more well-known than it was previous,

05:53:21

Is it easier? And every deal is different, right? So yeah, if you have that game plan in place, if you say hell, I’m going to buy this place I’ll place, which is less than 50% vacant. So therefore I can get a great deal on the place because it’s like banking. And then you come in there and you turn them into short-term rentals, then that’s the play. That’s the play. That’s why I’m saying when, when I’m going to buy something, I’m looking for some vacancy. And so therefore something has vacancy. I should be able to get a better deal on.

05:53:55

Awesome. And what would you do differently if you had to start from scratch?

05:54:08

It was so much, I guess I had a letter kind of trial and error kind of getting into this property. I had to, I’m going to think about that since I had to start from scratch in the past, when I was in businesses, what hurts you in business is getting overleveraged when you, when you have a lot of debt and you’re, you got to pay those, you know, those, those payments, it hurts your bottom line. You’re usually paying higher interest rates. So, you know, from my learning, from, from what my experience has taught me, don’t get overleveraged debt is good and then can, doesn’t be a good thing. And it gives you buying power and it gives you scalability. You we have to call me with less. You can make good cash on cash returns, but that’s a slippery slope. We can, you can always kind of get too much in over your head and you get over leveraged. And that’s when people get in trouble. Anybody who, who in business in general, if you look at big business, small business, real estate, whatever it is, people who operate on too much debt typically get in trouble.

05:55:27

Okay. So staying away from overleveraging yourself is something that you would do differently.

05:55:32

Yeah, yeah. Yeah. Cause when I was in, when I was in New York running my businesses, I definitely had some leveraging issue, which was, I kind of worked through those issues. So I wouldn’t, I wouldn’t be overlevered.

05:55:46

Okay. And then what about for the short term rental side?

05:55:50

I think that, I mean, I’m not saying everything you did was great, but like I think the steps that I took on, probably take the same approach. If, if I buy another apartment complex with tenants in there and there’s at least this combo, I would, you know, obviously terminates the leases and then little by little grow is flowing and then turn and turn those long-term rents or long-term leases into short-term place. Awesome.

05:56:19

And w w where do you see short-term rentals going in the future?

05:56:24

I think it’s going to change the whole game of living in housing. Kind of like see what Airbnb has done and Uber has done, they’ve taken the transaction out of the deal. So it’s not like I got to give somebody money and let’s say I was just sitting here and apartment complex had a desk on site. Okay. You want to stay here? Let me give me a hundred dollars and they’ll go walk inside. It takes out that it takes out then uncomfortability of kind of the transaction between people everything’s kind of handled, taken care of on the platform. So I think, I think in the future, people may not even need to sign leases. People might just read on Airbnb, it’s going to change in the process of changing 10 years and look at how much progress has been made. So I think the future is wide open and I think he could just leave literally change housing habits and shelter habits with people.

05:57:19

Awesome. And what, what question maybe do you have for someone that is maybe at that next level or doing something maybe a little bit differently than you? What question would you have for that PR for that host?

05:57:33

My business is not fully automated. My business is semi-automated. You kind of got to think about the automation all the time. So I would definitely, and there’s definitely a host who have obviously many more units than I do automated their businesses really well with them. So, you know, my, my main question lies within the, the automation aspect and kind of how to get the business fully automated that you can take yourself.

05:58:01

Okay, great. Great, great. And do you have any books that you recommend? Do you have anything that you listen to or follow that, that you would recommend to someone that is maybe getting into the space,

05:58:13

Thinking grow rich? I’m reading that right now, Napoleon hill. I think that’s a, that’s a pretty famous one mastery by Robert Green, the laws of human nature by Robert Green Marcus for release, the meditations of Marcus will release, which is a great book on stoicism. Just being, not letting things affect you that much. And just, and just focusing on what you can control and then things that are out of your control. You know, don’t even waste too much time on, you know, there’s so many books, man.

05:58:50

I love it though. I love it because a lot of the stuff that you’re talking about, I love, I love, I really love that about you. And it was just that throughout this it’s, it’s always kind of come back to character and how you treat people and you know, how, how you present yourself. I think that that’s, you know, it says, says a lot about you. The, the books that you’re saying would help you in this business are maybe not those optimization, you know, real estate, the number crunching, because obviously you have a lot of experience with that, but you’re saying it goes back to the person, you know, how your character is, how you present yourself, how you treat people,

05:59:23

How you are as a person, you know exactly what you said about your character and people only going to do it with you in the long run. If you’re a personal character, if you are your word, if you, if you say, if, if people know that this guy says something and I know what’s going to happen, or I know he’s going to stay true to it, then you know, you’re going to solve a lot of problems.

05:59:42

Awesome. Well, thank, thank you so much for taking the time to, to educate us and, and, you know, share it, share your wealth of experience and knowledge. I just think that is so cool. I love what you’re doing. I, I wish you the best of success and thank you again. And until next time, host nation, keep on hosting. Hope he hosts benefit from the show. If you found value, please go on over to iTunes, leave us a review and let us know what you enjoy about the show. If you’d like to talk to the hosts that have been featured in these episodes, as well as the community go on over to our Facebook group, the host nation.