TITLE: “Ignite Your Real Estate Fortunes: Insider Strategies from Elite Investors”
EPISODE:185
“Unless you go out of your way and mess up, you’ll be okay; unless you go out of your way to find an amazing deal, you’ll probably still be okay.”
In this episode, John Errico and Ryan Goldfarb share their real estate investing journey from working in the corporate world to focusing on short-term rentals, single-family, multifamily apartments, and commercial investing.
Listen as they share their amazing partnership and journey through the ups and downs of real estate investing!
Key Takeaways:
[01:50] Introducing John Errico
[03:57] Introducing Ryan Goldfarb
[08:04] Most fun part of John and Ryan’s real estate investing journey!
[14:14] Focusing on short-term rentals and value-add construction projects
[21:26] Returns to expect when investing in Atlantic City
[27:52] Strategies John and Ryan have to make managing short-term rentals less stressful
[31:42] Their advice to aspiring real estate investors
[35:15] Connect with John Errico and Ryan Goldfarb
Quotes:
[13:27] “Trying out new things was an exercise in figuring out what I don’t like.”
[26:18] “Short-term rentals are like layering and operating business on top of real estate investment.”
[32:58] “There are always reasons not to do something, if you want to do it and if it’s something where you want to put your money… you just have to do it.”
Connect with John and Ryan:
Website: https://brickxbrick.podbean.com/e/ep-1-meet-the-partners/
Tired of living deal to deal?
If you are a real estate investor or business owner who is tired of living deal to deal and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David
Transript:
Speaker 1:
It’s very, very hard to make a ton of money in real estate on unlike a single deal. But in the same way, it’s very, very hard to lose a ton of money in real estate on a single deal. The sort of risk profile of any given deal is that unless you go out of your way to mess up, you’re gonna be okay. <Laugh>. Yeah. Unless you go out of your way to find an amazing deal, you’ll probably also still be, you know, okay. And, you know, okay, might be whatever metric you want. So people get sucked into analysis paralysis. They get sucked into like envying someone else’s deal or someone else’s project or whatever else. And I certainly have been a symptom, have had that, that problem too.
Speaker 2:
If you’re a real estate investor who’s sick and tired of living, deal to deal, then welcome home. Hear from everyday real estate investors just like you, and discover how they’ve completely transformed their business by taking a profit First approach. This is the profit first for r e I podcast, where we believe revenue is vanity. Profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.
Speaker 3:
Hey everyone, this is David Richter of the Profit First, r e I podcast here with John, Erica and Ryan Goldfarb really excited today cuz they’re doing some awesome things in the real estate world, which I know can help you. And I’m excited to learn about their journey and then have them give their value and insight to you as well too. So John and Ryan, thanks so much for being on.
Speaker 1:
Thank you, David. Appreciate.
Speaker 3:
Yeah. Well then let’s jump into it, like, tell a little bit about your background, what you’re doing in real estate. Like, I know there’s, I, I could go into the bio, but I’d rather them here exactly like where you are now, where you’ve come from, you know, like we’ve got some like Ivy League degrees here, and we’ve also got some, like, just boots on the ground in the real estate and investing world. We’ve got millions of dollars of capital raise some lots of stuff across the board. So to just go into it, John or Ryan, you can Yeah. Take it and run.
Speaker 1:
First of all, thank you David, so much for having us on the podcast. We are very excited to be here and chat. I, so my background, I’m a, an attorney by education and experience. Okay. Although, when I say that, I usually say I’m a recovering attorney <laugh>. So I if you, if you mentioned Ivy League, I mean, not that it really matters, but I, I I went to Yale for undergrad in, in Cornell for law school. So that’s my like, academic background. But I left the practice of law some time ago to do technology startups. So I was in that world for a few years in California. And then in about, in 2014, I bought my first place here in New Jersey, but a two family in Union City. I was house hacking it before I really knew what what that meant.
I was living in the first floor, wrenching out the second floor, moved to the basement, rented out both floors and I, I just expanded that into a small portfolio in, in Hudson County here in New Jersey. Bought some stuff in New Haven, Connecticut. Started working with Ryan this is maybe now about maybe four years ago at this point. And ultimately sold almost all of the stuff that I had in north Jersey and in Connecticut to start investing in Atlantic City, New Jersey. That’s where I focus. Ryan and I both focus most, most of our efforts right now. We have a small fund, a private equity fund that we deploy in Atlantic City in the opportunity zone there. So it’s an opportunity zone fund, and primarily the focus is on redevelopment. So short term rentals single family, small multifamily, some commercial stuff. We’re doing some ground up development stuff pretty soon, although we haven’t broken ground on that yet. So yeah, it’s it, it’s you know, we’re, we, I think we have about it’s this is not a flex that, I don’t know this number, but I think we have several dozen properties that are operational in Atlantic City right now and, and more listings than that on Airbnb. And we have probably that same amount coming online within the next hopefully 12 months.
Speaker 3:
Cool. Ryan, you wanna give just a high level update where you’ve come from to where you are?
Speaker 4:
Sure. first and foremost, thank you David for, for having Yeah, for sure. It’s great to be here. So my, my real estate career started out of college. Kind of in parallel with starting my first job. I bought a turnkey rental out of state in Memphis, Tennessee. At the time I had just graduated college and was starting a job in commercial real estate on the debt side. So I was essentially doing underwriting of commercial mortgages on multifamily real estate. And a few months into that it was pretty obvious to me that that wasn’t what I wanted to do with the rest of my life. So I started kind of laying the groundwork for what would be next. So I ended up lasting about three years there, but during that time, I picked up a few flips, a few rentals, and kind of set the stage to do real estate investing on a full-time basis here in New Jersey. That’s about the time when John and I originally met. This was like 20 15, 20 16. We were doing similar things in a similar area. I was a little more focused on flipping at the beginning. That sort of evolved into doing rentals doing some taxing investing, doing some wholesaling and then ultimately with John doing short term rentals. And you know, fast forward to 2018, I think that was when we first started working together officially we started actually a construction business, which we quickly realized was not what
Speaker 1:
We wanted to. I do not advise
Speaker 4:
<Laugh>. That’s one thing John and I are certainly in agreement on. So that, but, but the construction business was the catalyst for doing property management management together and ultimately doing the real estate development together that we’ve been doing now for the last four or five years.
Speaker 3:
Okay. So why don’t do the construction tell, tell us your horror story or stories.
Speaker 4:
Honestly, I, I don’t think we lasted long enough doing it on a third party basis to even have the true horror stories. Oh, okay. But it was very, it was very evident from the get doing even a few third party jobs, that it was not a dynamic that we were excited to make part of our regular existence. Everyone has the highest expectations. Nobody wants to pay for, you know, nobody wants to pay despite those high expectations. And a lot of it is kind of a race to the bottom. You’re just generally competing on the basis of cost. Yeah. And most people want quality, but don’t want to pay for it. So unless you’re in a specific niche like you’re doing roofing or you’re doing larger commercial projects where people are, where your clients are businesses who are a little less price sensitive we quickly realized it was just not a market we wanted to
Speaker 1:
Be in. Yeah. The, the way that I think of it as like the line between doing construction as like a job for yourself and the line for a and it being like a business that you can operate. Mm. I, I think that if, if you’re like a mom and pop person where you’re just looking for a job and you say, I do roofing, you can make a fair, a fair living doing roofing as a construction, you know, in the construction business, if you wanna be a general contractor, you need the sort of scale and efficiency and operational expertise and all of that. That is way beyond our level of both expertise and interest <laugh>. Right. So you know, and, and we’re not we weren’t out there, you know, hanging our own drywall, you know, we were subbing that out basically. So yeah. I, I mean, we still operate the business in, in a sense to continue our, our, our projects. It’s, you know, like half business, but we don’t do it for third parties, you know, other people anymore.
Speaker 3:
Okay. Well that makes sense. That sounds like, yeah, the typical real estate investor wants these high expectations, but then yeah. Doesn’t want to pay for them. So I, if you’re listening to this, and you probably fit right into that group, because that’s how we all are, is I remember back in those days, just in making sure that, you know, you’re, you’re getting a third party contractor and you’re still trying to make the profit on your flip that you bought. It’s like, it’s just can become a nightmare. So that sounds like the mo the least fun part of your journey so far in real estate investing. What’s been the most fun part of what you, you’ve gone either one of you for, you know, the real estate investing world?
Speaker 4:
Yeah, I’d say over the last year or so, we’ve really tried to focus on not just property in Atlantic City, but a specific caliber of property in Atlantic City. So our, our mission has become that we want our projects to serve as a catalyst for redeveloping the neighborhoods in which we operate. And short-term rentals provide almost an excuse to do that because we can, we can achieve a higher, a high enough yield on a project that it justifies doing an amount of work that no standard investor or no flipper would, would ever undertake. So we’ve really tried to push the envelope on the design front. We actually have an in-house designer now who she’s remote, but she, she does some really incredible work and I would say the most fulfilling part of what we’ve been doing over the last years, at least to me, has been seeing some of her creative visions come to life and seeing our team kind of accomplish that, you know, with, with John and I at this point, just as a relatively small part of that.
Speaker 3:
Okay. Cool. John, would you agree with that? Or did you have a different, do you have something different on your journey that you were like, ah, this was my favorite part, or anything like that?
Speaker 1:
Yeah, I, I, I think to echo Ryan’s sentiment you know, the, the motto that we’ve used with our business is rebuilding Atlantic City. Yeah. And obviously we’re, we’re a component of, you know, I like to think that we’re a component of that. So the changes that have happened in Atlantic City, you know, even in the time that we’ve been investing there, which I like to think that we, we’ve been a you know, hopefully a part of bringing about are really inspiring to me. And that’s really fun. I think one of the coolest things about real estate is that it is tangible, you know, coming from the startup world where everything is kind of intangible, right? It’s like a website or a concept or whatever to own like a brick and mortar property and then see that property change and then see that change cause other properties to change. Cause the perception of the street to change, cause the neighborhood to change that is really cool. So, and, and, and we’ve only been investing in Atlantic City really for about I’ve been investing for about four years and, and really seriously for about two years, maybe three years. So it’s it’s really, really fun to see that change happening.
Speaker 3:
Yeah. That’s cool. I like that a lot. You know, you’re not just not just out there making the money, but then in seeing the actual end product too, it’s very fulfilling. And seeing like, okay. And like, even like Ryan said, seeing something that a designer takes, and especially if you’ve got a high end designer or a designer who knows what they’re doing, some pretty cool things that can happen in absolute, in real estate space. So, yeah. No, that’s, that’s cool. Let me ask this, why, why’d you go from tech to real estate? You know, John, why did you go from like, the startup world too, the world of real estate investing?
Speaker 1:
Yeah, it’s a great question. So a couple reasons come to mind, but you know, that sort of more significantly, I think one the culture in, in tech investing, which I, I, you know, I, tech startups, tech investing, all that sort of stuff, which I think has now been coming to light, you know, maybe unfortunately a little bit through recent events with the startup world. But you know, I, I found it to be really not something I, I enjoyed. Okay. There’s a lot of toxic ness there. There’s a lot of just bravado and kind of like bs that eeks through a lot of startups and investors and whatever. And I, I didn’t wanna be a part of that. A and then b to my point before about tangible nature of real estate, okay. You know, it felt like a lot of startups, a lot of startups are, are having this big vision about, oh, we’re changing the world and we’re doing these amazing things and, you know, whatever.
And, and maybe some startups actually are doing that, you know, that have real impacts on people’s lives. But 99% of startups are like, you know, you’re not changing the world by making it more efficient for me to, you know, auto respond to my emails or whatever. Right. I mean, maybe in some very, very remote way or something. Sure. But with what, with what we do I like to think like, for example, again, in Atlantic City, like I can see the tangible changes. There’s no question that a property that we’ve renovated or redeveloped is better than what it was before. And that has a ripple effect on other properties. And so that is really, really gratifying. It’s sort of the entrepreneurial nature of being in the startup world combined with that. You know, I really feel as though my time is being spent in a significant way.
Speaker 3:
Yeah, no, I like that a lot because that’s, I think that speaks to a lot of people that are in the real estate investing world. Cuz if, especially if they’ve come from, from another industry to this, it’s, there’s so many different things, you know, the benefits of working in the real estate world. Right. So, Ryan, you jumped around from different exit strategies. Was that because you were trying to pinpoint what you were good at? Or like that you liked and enjoyed what made the most money? Like, cuz I heard flipping, I heard wholesale, I heard, you know, now the design stuff that you’re doing and construction, which was not a fun part. It sounded like, you know, of the journey. So like, were you trying to get like what, just different exit strategies under your belt? Or like what was the long term play there? Like what works in the real estate world?
Speaker 4:
Yeah, I, I think for me it was, I, I didn’t go into it with an explicit direction of where I wanted to go. I had a sense of where I wanted to end up, but didn’t know exactly how I was gonna get there. And I think a lot of trying out new things was an exercise in figuring out what I don’t like. Yeah. So I quickly realized I don’t like flipping. I’m okay with flipping as a small component of what I’m doing. Right. But to live and live and die by flipping is really tough because the, the results or the the outcome is binary. You either lose money or you don’t. I mean, you either make money or you don’t. Yeah. and I think,
Speaker 3:
I think you said it right the first time, but yeah. <Laugh> lose money or you don’t
Speaker 4:
Right. <Laugh>. and you know, like long-term rentals, we still do, we still have a handful of those. But it’s not exactly something that, that gets me excited. Yeah. similar with things like wholesaling and taxing investing. But with short term rentals and with doing the types of heavy value add construction projects that we’re doing I feel like there’s a, there’s more of a, there’s more of like a driving force than like a a, a bigger vision behind it all. It’s not just a means to a paycheck, it’s a means to something bigger.
Speaker 3:
Yeah. No, that’s good. I like that cuz it’s not just about the dollars and cents at the end of the day, it’s about feeling fulfilled, like you both said a couple times here and how real estate’s a tangible and tangible stuff that you could see that gives you that as well too. It’s not just some website, no, the
Speaker 4:
Dollars and cents don’t
Speaker 3:
Hurt. The dollars and cents do not hurt. That’s for sure. So let’s talk about dollars cents since it’s the Pro first RIA podcast. Have you ever had it either one of you a time where you’re like, oh my gosh, there’s more going out that’s coming in. Maybe that was during your flipping years, Ryan, or that flipping time or like other times, but, you know, did you ever feel like, what the heck is happening? I thought real estate was the path of freedom, not to headaches, probably in the construction world, but I’ll let you guys take it from here.
Speaker 1:
Yeah, absolutely. I mean, I, I think, I think it’s something that Ryan and I talk about a lot in, in almost every context. So certainly the construction context was not a particularly profitable endeavor for us <laugh>. Yeah. but you know, I I, I think where we are in our business right now just for context is that, you know, we have the construction company, we have a full-time construction manager who runs that. And so obviously we pay that person’s salary. We, you know, we pay subs and everyone else. Ultimately it’s from the project itself flowing through the construction business. But, you know, we, we paid at the construction level, we have our property management company where again, we have a full-time operations person who runs that. And then we have cleaners, we have handy men and people, we have all the other, you know, ACC Mazda that come with running a property management company.
And then we have sort of our holding business or company, which is where we own the assets that we manage or do construction on. And so we have a lot of different pockets where money flows in and out. And it’s very common for us in any given week or month or whatever to look at some of those entities and be like, well, there’s not any money in this pocket. Right? Like, there maybe there’s some money, some money in some other pocket. Maybe there’s money that’s owed here or there or whatever else. But, you know, I, the dynamic that Ryan and I talk a lot about is that, you know, we’re, we’re sort of for us in a transition phase between that stage where it was Ryan and I doing everything, or we were the construction manager, we were the property manager, we whatever, to running a business where we hire people, but we’re not yet at a point where a lot of these businesses where it’s like, well there’s so much free cash flow where we can hire someone to do kind of our job and still also make a lot of money from doing it.
And there’s that too. And then the seasonality element is, is another element too for us because we, we do short term rentals in, in Atlantic City that’s in the summer, right? So this is our slow season. We’re, we’re just ramping up into a time period where people are going to Atlantic City. But like February is I think our very slowest month. So, you know, it’s just just a time where there’s no money coming in and our expenses are very comparable. We self to pay the mortgage, pay the taxes, pay insurance, you know, every month. So yeah, it doesn’t matter if we don’t even there,
Speaker 3:
How do you get through it? Do you plan in advance or is that like most investors who just like, oh, it’s a low time, we’ll do something else or get a loan or whatever. Like how do you get through those more difficult times or the slower times of the season? Do you plan for those?
Speaker 1:
Yeah, I mean we, we try to, I, I think the, the what in our, again, because we do short term rentals right? We can benchmark our performance in every, any year with a prior year we’ve been and expanding, expanding our business. So, you know, the, the, the hardest stuff for us is not necessarily that it’s a slow time period, it’s that, well, you know, we, we have this construction project for example, and we thought it would be done in November, but now it’s, it’s February and it’s still not done. And so the expenses that we thought we would bear in November, were now bearing in February and March. And the carrying costs, you know, maybe we have construction loan or whatever that we thought we would’ve, you know, we would’ve refinanced it by December or whatever. We’re now not even yet in the process of financing it.
Right. So that’s the hardest stuff I think for us is that, well we have this like overage basically we didn’t account for that because all of our planning was, you know, like at, at latest would be done by November, maybe December. Right. But now we’re still in February and maybe March and it’s still not done. Right. And so that, that’s the sort of stuff that I think drives us insane. So yeah, we’ve gotten loans and we have to get extensions on loan, on on construction loans, all sorts of stuff. And that, that is very stressful. Yeah. Particularly in a high interest rate environment. Like Yeah. If we have to like get an extension and a, a loan that we got maybe a year ago, which is much more favor of interest rate than today. Yeah, that sucks. That really hurts. Yeah. Right.
Speaker 4:
Yeah. And, and to piggyback off that, one of the major cha or another major challenge that we have is that our operations are all incredibly co-mingled with one another. Mm. So even if on paper they are separate and even if we, we try our best to kind of operate them as separate businesses, at the end of the day they all kind of sink and swim together. So one example of that is, as the owner of a given vacation rental property in Atlantic City, the sum when the summer is great and revenue is high because we get compensated through the management company based off of a percentage of rent, the revenue for the management company is also similarly high. Whereas in the winter, in a month like February, it’s the flip side of that. Yeah. the revenue is low for the owner of the property, which is us and the revenue is also lower for the management company, which is also us.
Speaker 3:
Yeah. So do you plan for that as well too? Cuz it sounds like you take the hit on the personal side, so it’s like gotta even that out a little bit throughout the years to do you, what do you do there? Do you set aside some for the slower times for yourselves or like, cuz obviously that’s the, that’s the ups and downs of real estate it sounds like. Yeah, a lot of people have.
Speaker 4:
Yeah. We, we definitely keep aside some cash to, to account for the seasonality and the, I mean we, we like to have cash around just for worst case scenarios anyway. I think towards the end of that period, like if our slowest months are probably October through no through February and by the time February gets around, oftentimes depending on how weak or how strong the winter was, we may or may not have depleted those reserves. Sure. So we generally try to have a plan B and a plan plan C for additional liquidity if in the event that that comes up, whether it’s a line of credit or the ability to borrow against something else or to float cash from another, another vehicle or from our own finances.
Speaker 1:
Yes.
Speaker 3:
Do you mind me asking, what do you, so during a typical year, even with the slow months, what do you typically gross on a property in an Atlantic city for a short term rental? Or are they so different? Cuz it sounds like you’re doing a lot of customized houses too, you know, like with these designs and like the actual going above and beyond. But is it like a hundred K in gross or 200 or like 50? Or like what does it, like if someone was thinking about investing in Atlantic City Yeah. In short term rentals, what kind of returns or at least gross rent could they get?
Speaker 1:
Yeah, I mean, as you said David, that there’s a huge range depending on the type of asset that you have. But like, so the smallest stuff that we have are small one bedroom type of bargain. And the largest that we have is we have an eight bedroom. Oh wow. Ha like a mansion. Yeah. <laugh>. So, you know, I I think that the range rank, and correct me if I’m significantly off, but I would say at the very, very low end, you’re probably gonna get, you know, 30,000 or something like that, 25,000, 30,000 from the smallest place. The biggest places that we get are, you know, 160 k plus you know, we could even get to like 200 k depending on Wow. On the year or the seasonality. So, and obviously the, you know, the basis the cost of those assets is similarly all over the place. And you know, again that’s, that’s gross, right? So we have, yeah. We have expenses and whatever else I, you know, I I think typically we say that our expense ratios may like 50% on average. Right. Okay. So if you just look at that and you say, okay, well 50% of that is gonna be operating expenses and caring costs, whatever else the other 50% is, is money that we could take home. In reality. Yeah. You know, there are capital expenses and other things that Right. That come up every year, but Yeah.
Speaker 3:
Yeah, exactly. But it sounds like if you’re able to do that, you’re still biding out the long-term rental that you could do even for the mansion. Is that right? Would you say?
Speaker 1:
Yeah, absolutely. Yeah. Okay. Yeah, in Atlantic City for for sure. That, that, that’s the appeal of doing it in Atlantic City is that oftentimes, or at least, you know, besides recently when, when, now that people know what Airbnb is, it’s prices have adjusted somewhat, but you know, you’re buying basically at prices that anticipated more or less that, you know, you could rent it at a certain amount and if you could rent it for triple that, then that’s your arbitrage. Right? Yeah. That’s, that’s the advantage.
Speaker 3:
Good. So it sounds like you’re actually doing that with, if you can get 50% opex that it’s pretty good, you know, like being able to have that left over and, and do that and actually cash flow it. So I’m sure some years are better, some years are not. So it’s just depending on where it is right then, but no, I like that. It sounds like it’s been a good journey. And how many units do you have in Atlantic City now, did you say? Understanding,
Speaker 4:
I think our total, our total listing count I think is 30. Oh wow. Seven or something like that. That’s across New Jersey. Yeah. We have maybe about nine of those in North Jersey. And then we have another I have a number somewhere. I think we have another like 78 units in some stage of renovation, 48 of which are in a single building that we own.
Speaker 3:
Okay. Is that gonna be a short term place or is that gonna be
Speaker 4:
It’s gonna be a short term rental hotel. Hotel more, more akin to a hotel.
Speaker 1:
More can do like a boutique hotel. Yeah, yeah. Yeah. But it’s, so that’s big. Like our big, big project we’re, we’re minority owners of that project. Okay. but we’ll, we’ll ultimately be, you know, managing and sort of responsible over the execution of it,
Speaker 3:
But 37 others that you own now that’s where it sounds like it’s cut becoming more <laugh> where you have to step out and have other people take over. Cuz that’s a lot of units, you know, like I managed I think 18 at one point with a guy I was working with and that was a lot cuz it was just us internally.
Speaker 1:
So Yeah, the hard part for us is that, you know, it’s, as Ryan said, it’s 37 and, and those are pretty dispersed. So it, you know, it might be, you know, there’s a house that’s one listing, there’s maybe a two family that’s two listings. There’s another one family. So, you know, you’re, if you had 30 say, you know, 37 apartments and they’re all under one roof, right. You have one literal roof, you might have one HVAC system or whatever, you have one waterline coming your house. So for us it’s like, you know, when you have 37 Indi, it’s not exactly 37, but just say 37 individual roofs and water heaters and furnaces and, you know, all that sort of stuff. That is where a lot of the, the, the thing that drives us crazy comes in because it’s like, you know, for, to have every clock chiming and and synchronize at the same time is really hard when you have 37 separate assets. So there’s always something, you know, going wrong in some manner of, of speaking. And that that’s what makes it like a full-time job for someone to manage it. Yeah.
Speaker 4:
Yeah. And, and beyond that, we we’re located in the northeast where housing stock is, is older, so mm-hmm. <Affirmative>, these are, you know, 37 different units in buildings that were built a hundred years ago and have probably undergone a half a dozen, mostly terrible low quality renovations. Renovations. Yeah. So the, the properties that have been the least operationally intensive for us are the ones where we’ve obviously gone in and done a full gut renovation after buying it. But the majority of the other one or the other ones where we’ve done less work there’s always some kind of lingering issue. Yeah. and then on top of that, because we’re doing short term rentals, it’s not frankly in, I think our experiences has wor this out. Short term rentals is like layering an operating business on top of a real estate investment. I, I find it somewhat misleading to even consider short term rentals a real estate investing strategy because it really is, is running a business outta Right.
Piece of real estate. Yeah. And there are a host of other operational concerns that come with that because if you, I was even, I was listening to someone or reading the other day from another SDR operator talking about home warranties and like if you, if you buy your house and you buy a home warranty kind of insulates you from the downside risk of hot water heater going or an appliance braking or, or whatever. But with a short term rental, even if you have a home warranty, your guest who’s paying $3,000 to be there for three nights doesn’t care if the home warranty company can have someone come out in a week to fix it. Right. And fix while they’re there. Yeah. So you, you just, you have to, you have to like build in that premium across the board. Everything is more expensive when you need it done well and you need it done fast.
Speaker 3:
Yeah. When it’s a business, when it’s actually a business and not just a, not just a place of, you know someone’s house in someone’s living quarters, it’s someone that’s coming in and on a short term basis. So. Okay. Last couple questions here. What what would you say to someone that’s getting this, the short term rental? Like, do you use some of these systems to help automate some of this? Cuz like you said, this is a business, so like what pieces have you connected that’s made it more of a business and made it a little bit less stressful for you? Do you have anything set up right now? Like Right. Connections or automation or whatever? Yeah,
Speaker 1:
Yeah. I mean, we’re, we, I I think that that question is something that we, we are obsessed with <laugh> because you know, we only have so much time and obviously we wanna, you know, we’re expanding, right? We’re, we’re gonna have more stuff that’s coming online. So we, yeah, we’re big advocates of technology. We have a pretty developed tech stack at this point that helps us manage our short term rentals. You know, everything, we use Slack for team communication. We have guesty, which is a channel management software essentially coordinates bookings through Airbnb and VRBO and direct bookings and all of that. We use a bunch of different analytics tools. We have VAs and the Philippines that help us with guest communications. Oh, good. Copywriting, social media, all sorts of stuff like that. The designer that Ryan mentioned, yeah.
Is, is a, is a VA in essence. But we, you know, it, it’s we’re, we’ve taken the opinion to sort of speak to the, like, you know, where does the money go? Kind of profit first mentality of you. Yeah. saying, you know, we’re, we’re, we’re really putting a lot of our potential profits from the business back into the business right now under the hopes that we can scale with our current infrastructure without really adding a lot more headcount. Hr, which is really kind of where our costs are for our business, right. So we, we think that we have a team right now that could maybe accommodate double the amount of, say, properties or listings that we have in Atlantic City. But obviously right now we have half of that total. So, you know, we’re sort of paying the, the operational costs for that team when we have half the properties that that team is kind of can, can can accommodate. So we’re hoping that within the next 12 months when that stuff comes online, it’s like, okay, well, you know, we’re able, now we have this kind of, you know, everything is kind of you know, every incremental property that we got in is just profit to us. There’s, there are fewer expenses per se. So that, that’s our, our goal right now as a business. We’ll let you know in 12 months how that worked out. <Laugh>, right? Yeah. That’s where we’re shooting. Yeah. Yeah. Need
Speaker 3:
To redo it in 12 months and see where you are because yeah, that’s I get where you’re coming from and then I gets fun when you can add those. So what about all those units that are coming on the line? Is that gonna double it or is that just gonna get you to where it’s more breakeven
Speaker 4:
That Yeah. That, that scale should get us, that should disproportionately impact the bottom line. If, if that, you know, when we get to that scale, the sort of marginal cost of each listing or the, the expenses per listing should go down tremendously. Which means that for each successive booking that we add, there’s even more profit in there. Yeah. I was talking to someone the other day about this, but I, I, I feel like we have the tech stack of a company that has like 500 listings under management, right? So we can, I think, scale it pretty quickly and pretty efficiently. Obviously there’s some, there are some personnel issues to account for in doing it, and then we’ll probably need to hire at least another person to do guest communications and we’ll certainly need reinforcement on the maintenance side, but the hope is that the infrastructure is there and it’s scalable.
Speaker 3:
Yeah. Yeah. Awesome. It sounds like you’re on, on your way now. We just have to interview you again 12 months from now and see if it was worth it or if this is gonna be another construction call and it’s like, oh my gosh, that was horrible. Just kidding. <Laugh> sounds like you’re on, like you said, you, you come from the tech world, so it’s like more of like, you’ve got a lot of the stuff that I feel like a lot of people struggle to get upfront that takes away their time from like, being able to actually do the things to grow the business side of it. Sounds like you’ve got some of those systems in place. We used Guesty, which was a great platform. Yeah. So I like that recommendation. You know, just things like that to just really help you get a handle on what else is going on. So this has been awesome. Thanks for being here today. I just wanna ask one last thing. If you were to going to talk to a real estate investor right now in today’s market, what advice would you give them?
Speaker 1:
Well, you know, my, my general piece of advice to everybody that, to anyone that wants to become a real estate investor is just to do it. I was having a conversation over lunch with somebody yesterday that was thinking about going into real estate investing. And you know what I, what I said to ’em about real estate investing was, it’s very, very hard to make a ton of money in real estate on like a single deal, but in the same way, it’s very, very hard to lose a ton of money in real estate on a single deal, right? Yeah. Like the, the, the sort of risk profile of any given deal is that unless you go out of your way to mess up, you’re gonna be okay. <Laugh>. Yeah. Unless you go outta your way to find an amazing deal, you’ll probably also still be, you know, okay.
And, you know, okay, might be you know, whatever metric you want. So people get sucked into analysis paralysis. They get sucked into like, you know, envying someone else’s deal or someone else’s project or whatever else. And I certainly have been a symptom have had that, that problem too. So you know, there, there are many reasons not to do something, right? Like, you look at the interest rate environment and you say, oh, interest rates are really high, man, I should have bought 12 months ago, or I’m gonna, I’m gonna wait another 12 months. And, you know, okay, like, maybe that that’s fair, but like in 12 months from now, is there gonna be something else? Right? Maybe 12 months from now, there’s some other issue, right? The economy’s not doing great. This and that, whatever else, you know, if you don’t short term rentals, maybe there’s, the bus has really exploded or, you know, I don’t know, whatever.
So there’s always reasons not to do something. I mean, if you wanna do it, if it’s something where you wanna put your money, if it’s what you wanna do as a, as a even career or whatever, like, you just have to do it. You can’t, you can listen to the podcasts are great, you know, we have our podcast, you know, these are great sources of information and I listen to podcasts too all the time, but like, the learning that I got from doing it is not comparable to what I would listen or read about or whatever you like have to do. And this is coming from someone with like a lot of education. Like, you have to do it. You know, I, I’m a big proponent of
Speaker 3:
That. No, that’s great. Ryan, you got anything? Last remarks?
Speaker 4:
Yeah, I, I think my answer to that question will say a lot about the working dynamic between John and I. John’s response was essentially just do it. Yes. And my, my response was going to be underwrite the absolute worst case scenario and then ask yourself if you can live with that. And if you can live with that, then go ahead with it. I think that’s especially true in times like this when interest rates are high and the, the health and outlook of the economy are a little more suspect than they’ve been in the last few years. If you are okay with that downside, if you have the, the means to weather a little bit of a storm or you just are kind of willing to, to suck it up then go for it.
Speaker 3:
There you go. We, that’s why you have to have the yin and the yang here. Like, you got, John needs Orion and Orion needs a John, you know, like it’s a, it sounds like this is a really good fit. So no, that’s great and that’s great advice on both ends. Make sure you do take action and make sure that the action you’re taking is the best action, so you don’t have to go backwards as well too. And that’s what we wanna make sure we’re helping you here on the Profit First r i podcast, making sure that you know where all your dollars are going so that way you don’t have to start all over again or maybe in the hole like some of the people that we’ve interviewed, but have caught out in that hole with Profit First. So just wanna make sure you have that.
Thank you so much. If you’re listening to this episode for tuning in, again, if you’re needing help on the financial side and wanna make sure you can underwrite the worst case scenarios, but also take action on it as well too, and make sure you’re getting out there, head over to simple cfo.com. We can help you get those numbers in order to make the best decisions possible and actually take the action. So go to simple cfo.com, book a call there. Then last question here, is there any way to get connected with you guys, like either a website or social media or however they, you know, can get in touch with you?
Speaker 1:
Yeah, so we we have our own podcast that David will be appearing on not sure temporally when that will be relative to when this comes out, but yeah. It’s called The Brick by Brick Podcast, brick X Brick podcast. The easiest way to contact at least me generally, is through email. So my email is john jhn liberty hudson.com. And I, I love, I, you know, we have our own podcasts and whatever. I love talking to people about real estate investing or any advice Atlantic City specifically, so definitely don’t hesitate to reach out.
Speaker 4:
Awesome. Yeah. And you can find, if you’re interested in, in traveling to Atlantic City you can find any of our listings at our direct booking website, which is atlantic city vacation rentals.com. I can also be reached via email. Mine is ryan, r y a n liberty hudson com. You’re not
Speaker 1:
Gonna throw the Twitter feed, Ryan, the, the, the Twitter account.
Speaker 4:
<Laugh>, no, <laugh>, we don’t know another 10 minutes for
Speaker 1:
Me to explain. Ryan has a Twitter Twitter handle that is very difficult. If you, if you heard it, you would be like, what? You have to spell it out, so, okay.
Speaker 3:
Okay. Well then maybe we could put in the show notes or something so that way it doesn’t have to try and try get
Speaker 1:
It
Speaker 3:
Out on here. But that’s so they gave the contact info, they gave the direct booking sites, so if you’re going there, check out there Airbnbs and their short-term rentals, the case rentals out there. Good stuff. Thank you so much guys for being on today and providing the value that you did. And if you’re listening, remember, make Profit a Habit in your business. Thanks so much again, guys.
Speaker 1:
Thanks. Thank you, David.
Speaker 2:
This episode of The Profit First for r e I podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call@simplecfo.com right now. We’ll see you next time on the Profit First for r e I podcast with David Richter.
