STRSS 32 – Transitioning from being an employee to having your own short term rentals w/ Michael Cotroneo

Video Transcript

00:00:00

If you don’t have a house that you own yet, if you’re renting house, watch as many videos as you can on it for first place, don’t get emotional about it. Don’t go. I’m going to find this place.

00:00:13

This is episode number three, two of short-term mental success stories. Podcasts. 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 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 that we all strive for five-star reviews. So please go on over to iTunes and let us know what you enjoy. 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? So I’m just super excited because I have some special news.

00:00:58

John and I are actually putting together a little mastermind group called BNB empire builders, where we are going to be working with just a small amount of people to really help them stretch and grow. So if you don’t already know John and I have a local meetup in the DC area where we are helping people that just come out once a month, we’ll go out there and we’ll just catch up and see how people are doing. And we’ve seen people just progressed so much. Like they came to us, they didn’t know anything about Airbnb or rental arbitrage, but they wanted to get in on the space. And then through some, you know, through some direction, through some kind of motivation and accountability, we’ve been able to help them to acquire their first properties. And now they are short term rental hosts, and we want to be able to do that with other people with other BNB empire builders.

00:01:43

So we are opening up for a very limited time because we can’t have too, too many people. So it is first come first serve. And we, you do have to fill out an application because we all are also looking at, you know, what is the type of person that is going to be joining our mastermind group. So if you are interested in finding out more and actually joining that, it’s going to be really cool. We’re going to be doing live Q and A’s. We’re going to be answering your guys’ questions and helping you stretch and build your BNB empires. So if this is something that interests you, then go to Short Term Sage dot com backslash store, and you can apply for that. So as you all know, investing in short-term rentals can take a lot of risks when you’re investing a lot of time and money into it.

00:02:21

And that’s exactly what Michael. Michael was a full-time employee who bought his first single family home in Houston in July of 2017, where he rehabbed it and turned it into a long-term rental property later on, he realized that doing short term rentals was a lot more beneficial since it’s giving him a higher return on his rental income. In addition to a duplex, Michael also invested in RVs and currently owns multiple properties in Arkansas. In this episode, Michael shares his experience and transitioning from working as a W2 employee to owning and managing multiple short-term rentals. Even some of them are RVs, which is just super cool. He talks about the contrast of investing between single family homes, RVs, and the differences of rehabbing homes for short-term rentals versus long-term rentals. If you like my show notes for this episode, go to Short Term Sage dot com backslash STR three two, or if you like my show, that’s sent to your inbox every week, then go to Short Term Sage dot com backslash 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, we have the special honor of speaking with Michael Cotroneo. Michael, would you please introduce yourself to the host nation, let us know who you are and what inspired you to get into short-term rentals?

00:03:32

How’s he going to answer it? So my name is Mike. I’m an Airbnb host with me and my wife who is still in a bed. We have listings in Houston and currently I’m in a cafe traveling and seeing what I was about as we used to teach. And we got out of that. And now we just do short term rentals for a time now.

00:04:03

So your, your full-time renters now, or you’re full-time short-term renters previous to that, you were teachers. How long were you teaching? And then when did it, when did, how do you, well, first, how did you find out about short-term rentals? What got you into that?

00:04:17

Yeah, so we’ve been on every meetings, 2014. We so like, you know, we would stay in something that was nice, but affordable. We would stay in the us, Mexico, sometimes Asia houses, guest suites, you know, basic stuff. And that’s kind of a bit of how we learned, you know, that Short Term wrinkles. You don’t have to have like a high-end house, like there some amazing guests that are going to have.

00:05:05

Okay. And when you, because you were full-time teachers, when did you realize, okay, this after w when did you get your first unit? And when did it start to realize, like, this is actually going to be a profitable full-time business.

00:05:20

This is going to be a story we had to move over to China for a year, came to the us, Houston myself for 30 years now lay about two years. So after about two years of teaching me hit that point where like we had two roping attacks, re returned all the stuff that you need. And so being a fan of bigger pockets, we decided to jump in Houston. I had getting into, again, we had never done ever, ever. And this was one I did not rehab. So about a month later, we had hurricane Harvey in Mexico. During that summer, the, I want to say, I’m going to say 20 17, 17 hurricane Harvey happened. And then we went to contractor.

00:07:04

And then, so we go through that three months of trying to work, right? Like just absolutely ridiculous showering, literally living with like in the entire house, upstairs for the hot water, have to literally reset the hot water heater every time that you’ve used, what types of craziness, the shower, Clover, bodily showers. And then we had the Columbus winter in Houston. We had a tractor, he finally got the house fixed up enough to rent, and we decided, okay, we’re going to move that out of here and get a Short Term property manager. Some of the people who would do short-term rentals didn’t mean like we would get in that area. So we decided, you know what, let’s give it a shot. So we went down, went to Ikea furniture, set it up over downstairs.

00:08:38

Once we got it, set up, someone came in blankets pillows, the entire bag set up, trying to move the laundry and the laundry was outside and then sitting in our room. So that was crazy. So we’re not cameras outside. And at that point, you know, we see what family that was already done already bringing up about eight minutes down the road. It just, we had so much demand so much come to find out later on after learning is not the way we want to do like the whole place consistently, like 95%. At that point, I was like, well, we have this great stuff about two years ago in 1992, Corona honesty. And we drove up to Maine and I was like, look it up and just see how this, and we’ll make up that one. And I mean, it became one of the top Airbnbs in state. And then at that point, you know, we, we had our own single family house and we wanted to make some money off of that. And so we actually turned that we, it was a three bed, two bath, two, sorry. Yeah. So two bedrooms and one bathroom, and then there’s like that bedrooms. And we turned that into its own private guest and then speaking too much.

01:11:04

No, no, I think, I think that, that was really, really interesting story, Mike, I think, wow. You had the crap beat out of you when you first just started getting off, you know, and I think that that’s pretty cool though, that, you know, sharing your story here and how you, you got this duplex to, you know, your first investment on a teacher’s salary, you move in there, you’re dealing with awful contractors that, you know, always seems like the first contract. There’s always the worst contractor deal with that. Then you’re struggling. Like, should we Short Term rent? Long-term rent decided to short-term rent and then somebody steals all your stuff. Did you get that money back? Did Airbnb reimburse? You know, what, what, what are some things that maybe you could have done that would’ve allowed you to get that money back?

01:11:48

So at that point we were on air. So that, that, that would have been a big thing. Let’s see. But also, I guess, honestly, probably one of the contractors guys, I can’t really say, you know, it was just like done, done at that point. It was like $1,200. I was like, let’s just do it again. And I’ve come to realize the things like the most difficult thing. That’s, that’s when you’re about to get your biggest pay to rehab. Are these the ones that are in the best shape to fix that? That’s when I’m like, I’m gonna make the most money off of this type of struggle

01:12:48

With the duplex. If you, if you wouldn’t mind talking about some of the returns on that, how much did you invest in that place? Is it completely paid off? And then what were the monthly returns?

01:12:56

Yeah, so that one, we did that on an investment tool. What’s it like 180 2. And it’s winter, as long as where the rehab, if you get a good contractor and the contractor doesn’t get paid, gets paid through the day. And so keep that in mind you, as the actual customer, don’t write the bank, not paid, the contractor didn’t get any money. There’s nothing that she could do it back because I mean, it was ridiculous. And then, so for the rehab, we ended up not being able to use all the money that we were gonna use from the bank. So we ended up having to do because of just some weird paperwork stuff there, I’m gonna use that to pick up some of my own money. So at the end of the day, I want to say $65,000. So let’s see what does that two hundred and forty two fifty with everything. And now I’m on about 300 or three and that gender find more and more and more.

01:14:58

And so you’re your first short-term rental investment was, was a heck load of trouble. You, you went through a lot of work to be able to get that up, but the returns on that, like you said, you know, it was kind of that diamond in the rough and after for working on it, you you’ve created something that is generating a good amount of cashflow. How much is that, that unit making now?

01:15:17

So after mortgages and everything, we make probably about $2,200 a month, 300 a month,

01:15:33

Right? Yeah. But the beauty is short-term rentals. Now I wanted to transition to your second venture, which was the RVs. And you kind of found a pretty unique niche in that. How, what, what, how much are you investing? Are you doing the renovations yourself or are you contracting that out? And what’s the return on the RVs look like?

01:15:53

Yeah. So I do, I have had some similar with, like, I just don’t feel like not that many, almost like 2,500, this was way above that damn line. We fixed that up. My mom’s and my cousin sent about a month and a half fixing up and we drove back to Maine for a summer. We drove it down to key west. We got some good usage going out. And then we had that behind our house just because we had nothing to do with it. And, and it was $5,000 in it. It makes like 1500 a month and there’s people in it right now.

01:17:29

And from there, you kind of realize like, man, this is a really good return on investment. The amount of time that you may be put into the duplex is do you think that it’s actually worth more investing into like res than it is maybe the, the, the rundown duplexes, right?

01:17:46

It’s like two different strategies. So if you’re looking for, and just straight up cashflow, I’m 32 now. And so that percent, that, that would be great. So these, I really used to take that cash right back into the business, or w two jobs for that paycheck into Airbnb money into that business. So at that point we had the duplex, well, those were consistently, so then I found another a hundred dollars and I put that back there. I think we have run a new one and I put about $2,500, my kitchen shower, because I was a nightmare painting the outside the, the Houston. And that brings in one metric, I’d say average about 30 to 30 on nights, weekends, excuse me, for like, for Ben for like 50 to 60 a night.

02:20:06

So, so because you’re, you’re targeting a lower price point. Have you noticed that the, the quality of the guests has gone down or is it, is it okay?

02:20:14

Yeah, that is one thing to watch out for your guest can be a bit of a handful. There’s not enough space. There’s not much damage. We’ve seen some weed, a bit of trash, you know, dirty dishes. They can mess up. So nothing major, just, you know,

02:20:42

You, are you leaving the RVs there all year long? Cause we actually had another guest, Chad Miller, he does Airstreams and he would actually take them down to Florida during the slower season. And so it’s like he’s getting full, you know, full season coverage with his units. Is that something that you do?

02:21:02

So with Houston deep south, most of the years, we just, you know, when do we see for the summer five, we put heaters for winter time, also good mainline in it. And yeah, I mean there,

02:21:36

Yeah. I, I really like, I really like what you said about the, you know, the contrast between the duplex and the RVs, because with the duplex you’re, you’re building that generational wealth, you’re building something that can take you a lifetime, the RVs, you know, they’re eventually going to fall apart or you’re going to have to maintain them and you know, the, how much you put into it. It’s not maybe not going to increase the value too too much, but I like the contrast that diversification. When did it become a, when, when were you able to step away from your w W2 job and how was that transition?

02:22:07

Oh, so that transition is right now the same week we stopped working like to teach. And so now, so we figured we spent about a month and a half in Houston, you know, just, just kind of making sure everything’s good. And then, so we flew to Mexico about a month, just in case while I was gone, I was gone the BNB XYZ, but I was able to manage everything from here. I say, okay, well, let’s go now again, here. If I needed to buy a bag, it’s like nine hours reading her. And so as we kind of see that, everything’s fine. So by September Julian come spring of next year, change times and that’ll be like, needs to be and like an eight hour.

02:23:51

So I think that that’s a very, a very small, very smart approach. You, you kind of dip in your water, you’re going a little bit farther into the deep end, into the deep end and seeing how, how that works. And you know, it really does make a difference. You can be here or you can be over there if something bad is going to happen, something bad’s going to happen. But I think for you, it’s building up your, your self-confidence where it’s like, okay, we can kind of let this kind of sit by itself and let it kind of do its thing. How does that, how does that feel? You know, doing that, that transition now

02:24:18

Really good. Yeah. It’s it’s, it’s, it’s like a dream really.

02:24:25

That’s awesome. Yeah. I mean, that’s so cool doing, doing podcasts in Metagene Columbia while your events are making money. That’s, that’s, that’s a good, good life, good life. So I also wants to hit on, because you’re not just managing the units in Houston, but you also have multiple properties in Arkansas. And with those, you decided to more of a rental arbitrage approach. Correct.

02:24:51

So one of them, some money saved up and I was looking at Airbnb’s Hotsprings first thing I did, I pulled the brown on air BNB. I was like, huh, like I know houses, not that much money. And so I have some DNA. And if you guys don’t know that that is like an Airbnb software, I wouldn’t pay for it every single month then just to see him. And then I did some more research and Airbnb said over the past three years, 300% year over year for the past three years, between little rap last spring. So I just started looking around.

02:26:02

I bought the first house for $6,000, $6,500. It was in rough shape. And then my wife’s cousin, you know, heard about what we were doing. He wanted to jump in and do rehab and he’s up in Vancouver, Canada. And then we made a, you know, those houses there, he puts in money. I have all the guys to do the rehab. I run the rehab, I take care of the decorating, you know, and I manage it afterwards. And then when we refinance it strategy, you know, he gets that money back. It was an inhale and it sort, it wasn’t as bad.

02:27:04

It had so many issues. Trisha was, you know, again, the biggest, the biggest tail. It is one of the top of the windows, maybe from the ground up. And now it does really, really well. And then we ended up budgeting 37,000 to fix it up in a costing like 60,000 things about at the end of the day, money back money for the rehab and him, he has no money whatsoever. I have no money and I may have another house that, another two that I am suddenly, I got another tune that I haven’t started to rehab yet. Another one had to put that same planner. I find it, he buys it rehab, and then we refinancing as much money as

02:28:53

Well. I, so I mean, that, that, you’re, you’re going through. It says very, very, I mean, that’s very challenging dealing with contractors, dealing with all this while you’re working a full-time job. It’s like, w w w what is it? What is it, what would you say is the most challenging part of being able to scale this type of business model? Because yours is more of like the, the, the, the, the Birtch approach, but with an Airbnb flip to it,

02:29:20

I say the hardest thing. So having good contractors, that’s really our time, time, time, time, and I guess, money, we had no money, you know, perhaps yeah. But time. And then I’d also like to buy something else occupying that’s around, you know, 200, 300,000. But the way that when you’re waiting, it’s a bit more, I have to wait to be able to buy something else of that, like price range. Yeah. So I guess the hardest thing would be time and contract.

03:30:13

And have you found the secret to finding reliable contractors yet?

03:30:25

My present, he does really well. He’s like the contractor, he does things like say saving money. Cause you issues. He has like, he has like my mindsets in his neck, which, you know, took a little bit of time. But again, I have two houses that I haven’t been able to touch it because he’s so busy, like a contractor with my partner. And so that’s a bit of a challenge there because I’m kind of in like, you know, team.

03:31:16

Now you said that your units, like your RV, you said that was the number one in Houston, Arkansas, you had the number one house there. What, what are you doing to be able to set your units apart to really stand out amongst everybody else?

03:31:28

Yeah. So we’ll, we’ll do something interesting. And like the inside is a, it’s like an Aqua green and a, has like a light, like a chip inside white, like prying chip. And so when I’m pulling these out, I have in mind doing stuff, I’m like, what can I do in this one bit of space here that when I take a photo, when I’m over here to make a space, and then for, I made the whole that inside pink that found out most of our guests that stay in those RV seem to be like a like, and you know, it’s nice, bright pink, cute. So I guess I always had that. I have that running on Airbnb.

03:32:51

And what do you do for the, the Arkansas house?

03:32:56

Kind of the same? Yeah. So with the houses, I do, you know, furniture that’s stands out like in Berlin, in this room when I was on air BNB, guest, guest like that. So like for example, one of the bathrooms and one of the counselors it’s like underneath me and my cousin had the funny idea, let’s put some really deep lights under that stuff and then plexiglass and then like loop under that tub. And so we did, we did that. That would be something like, see in photos and go with this. What is going on there? I want to stay there, but it’s happening underneath that.

03:34:01

So say you have guests that are staying with you so that they can check that what you have going on with the tub.

03:34:06

Yeah, yeah, yeah. Dinosaurs versus cars. Let’s get this something else.

03:34:20

That’s, that’s funny. Yeah. I’ll, I’ll, I’ll include a, your, your listings in the description, all the, all the hosts that have been on the show, we would like to include their, their listings for other hosts to kind of get a feel for what, what you have going on. But that is very cool. Is there any, I want to go back, what would you say? Because I think there’s probably a lot of people, a lot of people that listen to the show are, you know, maybe working a full-time job and they want to be able to transition to real estate. And your, your model is more of like the, the, the Burr, the Burr methods. So for people that are just starting off, what is the most challenging part of starting that business? And how did you kind of overcome that

03:35:00

The most challenging parts? Is it better to say it’s kind of all a challenge? So like buying the house is a challenge. Finding it is a challenge is figuring out what kind of furniture have installed that you want to do. That’s a challenge and an air BNB. They do not hold your hand, like to be a waiter back in like college. Even for that, like for Outback, they would sit me down. Like two days, watch videos is a huge challenge. And so many people don’t do it well, but even if they don’t do it, they still be making money.

03:36:01

I guess the biggest challenge, I guess, getting started in Urbana, I want to be making enough money on won’t be to stop having a W2 job. You have to break down little tiny steps that they’re going to do impossible. Like, why don’t you start? Like I started two years ago and I had no idea. Two years later, I would be literally at this point, I’d want to buy my first house. I want it to be an investment. I’m not buying up a whole, my lab, the numbers make sense, you know, made to be a long-term rental right here, maybe possibly. And just went through those steps. I mean, it was a challenge. I taught in the, in the scrub there’s Rick in Houston. At that time I lived in Katy, right. It’s about 25 minutes away. And an anchor in a downtown Houston.

03:37:21

We’ve been there for like a year, year and a half. And I drove around and down neighborhoods that I’ve never been to just scout is, I guess, I guess it’s not driving for dollars. I have no idea. I was just like, I’m gonna drive around and find stuff. And I ended up, I ended up like way up and like, I ended up laying down what sunny side even existed and just looking for, to like something five, 10 years down the road. And I can see is like right next to downtown to downtown, it looks like there’s some really nice neighborhoods, but this one had just been there. And I found that just by spending days, riding around, you know, and my wife at the time. Yes. That entire time, my wife is not a high maintenance maintenance, because she also said that that would be something that I had motivation and, you know, downpours. Anyway, I guess the main thing is break it down into steps, take that first step and then just keep going from that. And there’s no way that you can actually get started.

03:39:16

Yeah. I think, I think, I think what you said, you said is a really nice, you know, you, you, you, you, you’re going to, you have to jump, you have to do it and you’re either going to sink or you’re going to swim and you’re, you’re, you’re going to have to learn along the way. You’re not just going to come into the pool and learn how to swim right away. But hopefully you’re not putting yourself into a position where you’re going, you’re going to drown. So I think, I think you were smart about that. You had that W2 supplement that income and you’re, you’re in the shallow end, you’re swimming and you’ve been swimming all along this point in the shallow. And then now you’re ready to kind of really take that to the next step. And you’re, you’re really ready to swim into the deep end. That is some exciting, exciting stuff. Michael, is there anything that you do that has helped your guests leave positive reviews,

04:40:00

Ask for a five star review. It’s really that simple and, you know, guess wouldn’t really take advantage of it. It didn’t really seem to matter. I know I’m sure you have like a high end champagne or somebody would really do it, but really just, just ask once they lead, ask, ask for feedback and typically in the messenger and not review. Yeah. Just like Richard says on STR just ask for a five star.

04:40:49

And is there one house rule that has saved you before?

04:41:00

Yes, I guess so we do charge. And so sometimes guys would probably be sneaky if you don’t have the right amount of guest in your book. And I have a camera on the outside the front door, it will be a two times charge because I used to just, you know, it would be exactly, but I was going to make some books and brings two expert guests for three nights and I stopped. I stopped mentioning it in my greeting. I say, how many callers, my initial message that I use, the smart, maybe double checks for guests is that right? Just to make sure or whatever. And at that point they don’t have, they either don’t realize it. Aren’t trying to be honest. I just want to mention it. I started to mention it frustrated me like walking into a negative road just for me. I just let it slide. I send myself an email and I put there like once a month, like Phoebe and Airbnb nine times out of 10 will either take it from the guest Airbnb.

04:43:16

No, that’s a really good tip that has been shared two times in the fee because your, your time is worth something. You know, you’re not just, you’re not just trying to just collect what extra that if normal person went through the process that they would be, that you’d be receiving, you know, you’re, you’re charging, you know, because they are either like actively trying to hide something or they’re actively not reading your messages and not, you know, communicating with you. I think, I think that’s,

04:43:42

There was an extra cost rounder. So, you know, that’s that you deserve to be paid. And so, you know, I had some gas, you know, that like, you know, things like an extra guest fee, you know, this and that, you know, get a procession goes down, you have the one ticket that risk. So you deserve to get paid

04:44:31

Truth. Michael, speak the truth. If you could give one piece of advice to someone who’s trying to start their Airbnb business, what would that be?

04:44:40

If you don’t have a house that you own yet, like something that might get your house, watch as many videos as you can on it, don’t get emotional about it. I’m going to find this place where you can move your owner occupied or sit down and then turn any other stairs. Bedrooms, location does matter. Then I’m finding more and more on air. It’s really not that important to be able to work almost anywhere, really unique that way. Yeah. I guess the main, first house as an investment to do that, if not find a family residence, my wife got a teaching job, right. And so we bought another house, another house that was expensive one in a year because of air BNB.

04:46:50

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

04:46:57

I just want you to do it differently. I guess I made that into a long-term rental that I happen to be able to work out as an error rehab. If you’re watching this, if you’re thinking about doing your as backup, whenever you bind that first place, you need to be better. I had to go back Short Term mat and set things up.

04:47:55

And w what, what are some of those, those key differences between rehabbing a home for short-term rental versus a long-term rental

04:48:03

Cosmetic things. And then there were some, some, and you’re going to see that because each bedroom on its own surrogates, because use the hairdryer in their bedroom, the bathroom. And if that’s hooked into a couple of rooms, chances are because guests will use it and they cosmetic things, you know, don’t just, your house is a bunch of crazy colors. Don’t, don’t just make everything like Chan or like there’s some interesting stuff, arranger, bedrooms, bad center. What I mean by that is don’t worry about like, in that bedroom and a, your room and then use materials that can handle renters, luxury vinyl tile.

05:50:00

Okay, great. Yeah. Thank, thank you for the, thank you for those steps. Really, really good stuff. I think it’s pretty interesting hearing the perspective, you know, from a, a, a flipper that is with the short term rental mindset. Cause a lot of the times when, when we speak to people, they say, oh, usually it’s long-term rental first short term rental. And they kind of flip flop in between. Usually long-term rent is the primary motive, but you you’ve kind of changed your, your mindset and the way that you, you, you build your houses. So that’s pretty unique. W what’s a question that I should ask the next professional, maybe someone that is at kinda maybe like a similar level or the next level, or doing something different, just something that, that you would like to know,

05:50:36

What is your exit strategy? So like, for example, let’s say Airbnb goes, whatever reason, there’s a reason somebody else comes up and is a bit easier to work with when issues pop up. So I guess, what is your exit strategy? Because like I say, Short Term, using this as a cash properties paid off 20 years and have that income on them, maybe move into doing easier. This is what happens with the public. And, you know, just your property management, I guess, like, what is your short term rental money, but so I can run as you’re running

05:52:14

Great, and a really, really good question. And being, being a, a, probably a big fan of BiggerPockets, you’re probably a very avid reader. What’s, what’s a book or something that has really changed your business or your mindset.

05:52:29

I think it was bringing to her then voted the one on, on distance. That one has so many good strategies. There’s a new book by David also recommend reading, especially if you don’t know anything about Birtch. And then the main one, the one that literally changed my mindset entirely rich dad, not read which that you are cutting the legs out from under you. That is the biggest mindset change. I mean, it’s unbelievable.

05:53:23

Very nice. Well, thank you so much, Michael, for the recommendations for taking the time out from traveling and doing this, I wish you the best of luck. I’m excited to see where you’re going to be going, and definitely I’ll include everything best ways to contact you in the show notes. And let’s, let’s stay connected to the host nation. 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 hosts that have been featured in these episodes, as well as the community, going over to our Facebook group, the host nation.