Posted on: September 28, 2020
WI 524 | Passive Income

 

In this episode of the Wholesaling Inc. podcast, we tackled something rarely talked about—Airbnb. Kyle Stanley is an Airbnb expert, and in today’s show, he covered all there is to know about Airbnb.

If you’re considering getting into Airbnb and don’t know how to go about it, you’d surely love today’s awesome episode. Kyle not only talked about the essentials of Airbnb, he also shared some of the techniques he has used to build a successful Airbnb business.

So many gold nuggets in today’s episode so you better have a pen and paper handy!

How To Generate Passive Income Through Virtual Investing With Kyle Stanley

Episode Transcription

If this is your first time reading, welcome. You are about to read an awesome episode. If you are a loyal reader, welcome back. Thanks for joining us. I have an Airbnb expert. His name is Kyle Stanley from Fresno, California. Kyle, how’s it going?

I’m good, Lauren. Thanks for having me on. I’m excited to talk.

Me too, especially because Airbnb is not something that we talk about a lot on this show. We are primarily a wholesaling show, so we’re talking more quick wholesale deals or flip deals, flipping contracts, however you want to take it. Airbnb is something that interests me, which is why I wanted to interview you because I teach all things virtual. I am obsessed with different investing techniques that you can do virtually.

Airbnb has always been something that I was interested in and it is something that you can do virtually in a passive way. I wanted to pick your brain a little bit about how I can get into the Airbnb business, the pros, and the cons. Why don’t you start by telling us a little bit about yourself and how you got started in real estate?

It’s a long windy road. I was a sports anchor for a local TV station in Colorado right out of college. I found out right away that I did not like taking orders from other people. I found out that I want to be my own boss. I started my own business. I didn’t have a mentor and didn’t have any help. That business lasted probably about 3 or 4 years too long out of pride and ego. I just wanted to make it work and I didn’t want to quit. I didn’t want to be that guy everyone saw on social media that seemed like he was successful, but it turns out that he wasn’t.

One day, I decided to call that one quits. I got into a couple of other sales deals and they went okay. When I was 26, I heard the term passive income and I’d never heard that before, which now is a crime. I know 40-year-olds now that still don’t know what passive income is. I learned this whole passive income idea and I was like, “This is the ticket. This is how you spend time with family and provide for them at the same time.” That’s how I eventually want to provide for my family. I still don’t have a family, but that’s what I’m building towards now.

When I got into these sales jobs that seemed like they were going to be passive income, there was still a lot of work that was going on. You still had to motivate people. You had to get people to do other things. You had to rely on other people to be successful in order for you to be successful. I got to that point where I was like, “There has to be something more passive.” I kept hearing about real estate, apartments, owning houses, and all that kind of stuff.

Right in the beginning of 2019, in January, I went to a flipping convention thinking that I would educate myself because my goal is passive income, but I walked out of there like, “Flipping is what I want to do right now. This is going to be the active income that allows me to go buy other houses that will allow me to have this passive income.” From there, I did a self-inventory and I was like, “I’ve been doing this Airbnb thing as a room out of my house, which I learned through real estate is house hacking.”

I didn’t realize that I’ve been doing real estate for a few years now. I started my Airbnb in my house in 2015, so in May of 2019, I got curious. I listed my entire house on Airbnb and made $450 in one weekend in Fresno, California, which is a head-scratcher. Why would people want to come to Fresno? I have never looked back since. I got an education and mentors. I got the whole nine yards and went all-in with Airbnb while flipping houses on the side.

For me, it went fast. Now, I’ve been doing this Airbnb business. We should gross over $35,000 in our business for Airbnb alone. I went from my best month being $1,000 in Airbnb for my first four years to fast forward, I was grossing $15,500. It moved fast. It became something that I got excited about because I could systematize it, make it virtual, make it passive. It’s something that I’m passionate about sharing with other people.

WI 524 | Passive Income

Passive Income: This whole passive income idea is the ticket. It will help you spend time with family and provide for them at the same time.

 

That is a lot, especially since those numbers are exciting to me. There’s so much that’s interesting about Airbnb. One is that the gross rent you collect is way higher than renting it to a standard tenant. Is the dollar sign why people get into Airbnb?

Yes. I don’t want to call it a shortcut. I just want to get places faster. I knew that if I wanted to call it $10,000 of passive income in Fresno, I was going to have to have close to 50 houses. With Airbnb, I’m averaging about $1,000 of passive net income per home, so I could do that with essentially ten homes that I own and get there in 1/5 of the time. To answer your question, take the amount of rent that you expect to make in a home and 2.5x to 3x that and that’s what you should make an Airbnb on a typical rental.

Is that a for-sure thing? Is there an art to where your rentals are? Tell me about that.

Airbnb works more often than it doesn’t, but there’s a few things that you should look at when you’re talking about your area. First of all, the number one thing I talk about with all of my students and in my Airbnb groups is, “Are you in a vacation area or are you in a need area?” It’s a want versus a need. In Fresno, people come here because they have to, not because they want to. They don’t exactly vacation in Fresno and can’t wait for the family to go there. It’s usually a business trip. It’s usually, “We got to go visit grandma and grandpa.” It’s those kinds of things.

For that reason, during COVID, I didn’t get hit. We still had a lot of people that were still booking our places out. We went from 100%-ish occupancy down to maybe 95%. It didn’t hit us that much. From there, it is understanding what’s in your area that would attract people. For us, it’s business, national parks, and family, which is the top three. That’s going to help keep you steady with Airbnb. If you’re like my buddy who’s in Newport, you’re legitimately just getting vacationers. You’re getting all those types of people that are going to come on the weekends. They’re going to pay top dollar.

Understanding your market is the number one thing, and then understanding your city laws. Some cities don’t allow for short-term rentals. Short-term rentals are usually defined as 30 days or less. Those are the things that I would be looking at. There’s a great resource out there. It’s called AirDNA. I would download that. It’s going to be subscription-based, but it’ll tell you exactly what you can expect to make on an Airbnb in your area.

My office is in Newport. There are a lot in Newport right now. There’s a ton of Airbnbs, but it’s hard to wrap my head around because these houses are extremely expensive. These are $2 million homes and above on the peninsula. Are they cashflowing?

For me, I don’t have a Newport business, but I have a mentor who’s in Newport and has over 30 listings. If he’s got a place that has called a $5,000 mortgage, he’s expecting to gross $10,000. If you still put in all your utilities, all your expenses, everything, he should be netting on a bad month right around $2,000 or $3,000 still. That’s just with one location.

What is the process of getting an Airbnb? What do you do? Do you contact Airbnb? Do you have to contact your city? What’s the process?

Easy. You go on Airbnb.com, start a profile, and you’re up and running. If you’re in a city like Newport, I do believe you have to get a business license. You have to get a permit in Fresno. They’re talking about getting those started, but they haven’t quite started those yet. I would be looking for a place that does need a permit. We’ve got a place outside of Fresno called Kingsburg. Kingsburg, people were doing great with Airbnb over there. One day, Kingsburg said, “We only have a couple of hotels here in town and they’re suffering because of this. We’re going to eliminate all Airbnbs unless it’s owner-occupied.”

There’s no such thing as knowing everything before getting started in something. You have to learn.

All these people were SOL. They went from a great business down to nothing because there was nothing in place for these cities to say, “We see what you’re doing and we like what you’re doing, but we want to be a part of that and we want to get a little bit of the income, but we also want to make sure you’re doing it legit.” Those cities are better to do it in that are already established like that. Nashville is another one. Vegas is another one that completely eliminated all Airbnbs outside of owner-occupied. That’s a scary thing. Newport will never do that because they’re earning income off of these Airbnbs. If they’re taxing the guests for occupancy tax, that’s good for you because they don’t want to eliminate that income for their city.

I did a lot of business in Nashville and I used to stay in Airbnbs because I preferred them. They were way better than the hotels. Are they all gone or is it that no more could be opened?

Here’s what you’ll find. If you go onto Airbnb and research Oakland, Nashville, and Vegas, you’re going to find tons of Airbnbs. I don’t think it’s policed well. The cities probably don’t do a good job of going on there and enforcing this. However, in the rules, they’re not supposed to be doing that. You’re dealing with a high-risk situation if you try to start something up in Nashville or Oakland or Vegas or something like that.

The other thing was I had thought about doing an Airbnb on a home. I ended up selling it. It was the house that I bought and raised my kids in. It was fairly close to Disneyland. It was in Orange and it was near Downtown Orange by Chapman College. I was thinking, “There’s not a ton of Airbnbs down here. This might be a great idea.” There’s always fear. Fear always comes to us. The first thing I thought was, “My neighbors will hate me.” I live there. I know my neighbors. We thought, “My neighbors will not appreciate that.”

In fact, we had somebody on a couple of blocks over who had an Airbnb and their neighbor went through the effort of putting up a sign that said, “No short-term rentals,” or something like that. “You’re not welcome here.” I was thinking, “I don’t want to start that drama in my neighborhood.” I didn’t do it and I sold the home, but I totally could have done it. I still kick myself that I didn’t do it. What would you have done? Do the neighbors complain? Do you have issues like that?

My goal is always to be the best neighbor in the neighborhood, especially because a lot of my Airbnbs are not owned. The fancy term is rental arbitrage, which many people have heard of, where you take over a landlord’s property and then sublease it on Airbnb with their permission. In the past, I’d talked to neighbors. I stopped talking to neighbors because you know how it goes. Talk to a neighbor, you give them your number, and suddenly you’re getting calls from them all the time, “The grass looks overgrown,” and stuff like that. It’s like, “I don’t want to deal with this stuff anymore.”

Most of the time, we are the best neighbor in the area because we care about its upkeep. We don’t want one of our guests showing up and being like, “This place is a dump.” We want it to look great. We want our guests to know, “There are noise ordinance rules. You got to stop making loud noise at 9:00 PM. There are no parties allowed.”

I let them know about this and then I also tell them, “What if instead I rented this out to a long-term tenant and they passed with flying colors, but then suddenly halfway through the lease, they get addicted to drugs or something like that? Now they have parties at their house every single night. I can’t kick that person out.” You’re stuck with them until the lease is up. With Airbnb, if someone has a party and they’re supposed to be staying there for another 2 or 3 nights, as soon as they break my rules, I call Airbnb. Airbnb calls them and says, “Unless you’re going to get out of there, the cops will be called. You’re not allowed to stay there anymore.”

You have to inform neighbors if it’s necessary. I say it because we stopped doing the whole neighbor thing. We noticed that when we told neighbors what we were doing, they didn’t have that relationship with us. They got a little bit more scared rather than just letting it happen and them realizing, “This short-term rental thing is not that big of a deal. We see a lot of people coming in and out of there, but they’re not doing anything. They’re not loading up tons of cars on our parking lots or our driveways.” It got to the point, Lauren, where we were like, “Maybe we don’t have to tell them.” We can 100% just let them know if they ever have any issues, “Here’s the phone number to call.” That’s been our approach.

We do that a lot. Fear comes first, especially when it’s something that you don’t know much about, which I don’t. You might look at what I do and go, “How do you wholesale houses virtually? What if this? What if that?” For me, I look at something new and I think, “What are the fears that I have?” I’m asking you, how about you put the kibosh on my fears so I can now gather the courage to try something like that or my students or whatnot?

WI 524 | Passive Income

Passive Income: Understanding your market is the number one thing, and then understanding your city laws.

 

Here’s the thing, no matter what you do for business, you’re never going to have a business that has no problems. There are always going to be problems no matter what you do. We are at a point in our Airbnb business where we have the least amount of problems and the most amount of properties that we’ve ever had because we’ve learned from experience. There’s no such thing as knowing everything before getting started in something. You have to learn not always the hard way, but a lot of us push ourselves to sometimes learn the hard way. We don’t hire that mentor, take that course, and don’t do the research. You still learn it.

To me, one of the things that I’ve learned since getting into real estate is that everything is fixable and if it’s not, it’s not worth your time and energy. If you’re putting all this time and energy, and it’s something that is going to happen at the end of the day, there’s going to be a party at an Airbnb. If you and I probably rented out houses when we were in college or after, we probably had a party there. A long-term tenant is going to do that, like a short-term tenant.

If you can get in the mindset of, go for it, try it, and understand that there are solutions to everything, you’re going to learn that, “Our last two guests have had parties. What did we do wrong to allow these guests in?” You take inventory of yourself and what you’re doing in terms of pre-qualifications for the guests or communication that you’re sharing with the guests.

Maybe you’re not being strict enough to know that these guests are going to come in and feel free having a party. Maybe you need to bring in stricter communication and pre-qualifications to ensure that that’s not the type of guests you’re going to attract. Lauren, we had plenty of parties with our guests, plenty of issues. We’ve had those things happen. It’s going to happen, but what do you do once it happens? You have to learn from it.

I’m virtual. Everything I think about is, “How do I do this in Nashville?” It was something I was considering doing in Nashville. I lived in California and had three properties I was building in East Nashville. This was before they had shut down Airbnbs in Nashville and they were doing well. I was thinking, “Maybe this is something I could do.” How can you Airbnb homes virtually?

A lot of people talk about property managers. That’s an option. If you have 1 or 2 properties, you can hit someone up like myself or an Airbnb property manager that does this across the nation. That’s a great option. You’re going to make less because property managers and Airbnb usually charge between 15% to 25% of the gross. They’ll still make more than a long-term tenant. That’s for sure. If you want to build a business with this, if you want this to be a cashflowing machine for you and something that you have your hand on a little bit more, then you can do that.

This is a learnable and teachable business that you can learn and then you can teach to an assistant, teach to someone that you’re grooming to be your manager. That’s exactly what I did. I had a cleaner that was a stay-at-home mom. I had time between 11:00 to 4:00 every day. That’s our turnover time. I said, “I’m going to start you out as a cleaner, but would you be interested in eventually being promoted to an assistant or a manager that’s taking care of communication? That’s my runner that goes to each of the properties, manages all the cleanings for the other properties and oversees everything.” Her answer was yes.

I groomed her for about 4 or 5 months to where now, if an issue comes up, if I’m away from my phone, I’m not freaking out. I know a lot of Airbnb business owners that are married to their phone because they’re worried that a guest is going to have an issue. You could get financial freedom with that, but you’re not going to get time freedom with that. You got to have someone right there with you that either you’re outsourcing or teaching in-house to be able to do exactly what you do so that this can be passive. It can be virtual. I can say for myself, Lauren, there are properties that we run I’ve never even been to because I trust my team that much. When I see the pictures and when they report to me, I trust what they’re saying. Until they give me a reason not to trust them, I’m going to keep on doing this thing virtually.

Everything is fixable. If it’s not, it’s not worth your time and energy.

I truly believe everything can be done virtually. You have to just take different measures and different precautions. You can fix and flip houses and have rentals virtually. The easiest is having rentals virtually because you get a property manager to oversee your portfolio, so essentially this falls into the rental category. You just need a different type of property manager that specializes in that.

Is there a sweet spot? As you were talking about the different types of returns that you can get, “If you’re in Newport and your mortgage is this, you should be able to get that.” My brain always goes right to the numbers, margins, and returns. I have to imagine if you can get a decent rental return in the area, but maybe there’s something that draws people to visit, like a college or something, is there a sweet spot to look for in a territory if you intended to do Airbnbs?

Yeah. I used to have a defined answer for that. I used to think next to an airport, a college, a theme park, and all that kind of stuff. Honestly, at the end of the day, what I found is as long as you’re in a safe neighborhood and AirDNA shows you that you can make X amount of dollars with this, you don’t have to worry about all that extra stuff. That’s the first thing. Your guests need to feel safe.

Those are things that can draw in more people. For example, I was telling everyone, “As long as you have an Airbnb in Fresno that’s right next to the airport or right next to the college, you’ll do great.” I then got curious and I got the furthest thing from next to an airport, next to the college, and I do just as well with that one, which is another 5 miles away.

You’ll find that if you do it, it’ll surprise you. People get scared all the time with this. I have investors that are ready to pull the trigger and then, for some reason, their emotion gets in their head rather than just looking at the stinking numbers. They’re like, “It doesn’t make sense to me why anyone would come to Fresno, so I’m out.” I’m like, “I showed you how I have eighteen Airbnbs here in Fresno that is all grossing exactly what you want and you still are letting emotion get in the way.”

Don’t get so caught up in those things. Look at the facts, go to AirDNA, and find out exactly what a place could go for with what you’re looking at. We’ve got a profit calculator on our website, FearlessKyle.com. Right there on the homepage, it’s got the Airbnb profit calculator that will show you exactly how to comp out something in your area. You just plug in all the expenses and it’ll show you exactly what you should make.

I’m going to go on that site and see it. I’m curious about AirDNA, too, so I’m going to do it. How can my readers get ahold of you? Are you on socials?

@FearlessKyle is what my name is on Instagram. That’s the best place. You can DM me. FearlessKyle.com is the name of the website. I’ve got a YouTube channel and a podcast, The Fearless Investor. If you google The Fearless Investor, you’ll find it. Those are the best ways to get ahold of me.

WI 524 | Passive Income

Passive Income: No matter what you do for business, there are always going to be problems.

 

Where did fearless come from? It’s funny how I kept asking fear questions and I feel like Airbnb attracts fear questions for some reason.

Doesn’t anything in real estate, Lauren?

It does, but I feel like Airbnb does attract skepticism.

Fearless Flipping was the first name that I had and we were only going to focus on flipping. It’s funny, you start talking about Airbnb and everyone was asking me for more information about it. It’s anything that’s new, anything that people don’t understand. COVID’s scary. We don’t understand it. Until we understand it, it’s going to be scary. Until you try Airbnb, wholesaling, or flipping a house, it’s going to be scary and there’s going to be those moments.

I remember the first time that I got my first Airbnb, my first flip under contract, the first time that I even said yes to real estate. All of those were these oh-shit moments. The thing is, you let fear control you or you control fear. To control fear, you have to understand that it’s going to take someone by your side. It’s going to take having resources and people and helping you to be able to get past making mistakes the hard way because when you make mistakes the hard way, that is when fear can be a real scary thing.

When you have someone right by your side, when you have that resource right by your side that gets you past that fear and reminds you, “Stop thinking emotionally and start looking at the facts. Here’s what you got to do next. Follow the steps, do that, and you’ll be successful.” That’s exactly when you can kick fear to the side.

Thank you so much, Kyle. I appreciate you sharing everything. I learned a lot. I now have no doubt in my mind that Airbnb is something you can do virtually. Thank you so much for telling us and being so open and candid. You’ve got his IG handle. If you guys want to reach out or learn more about Airbnbs, make sure to check out FearlessKyle.com. We’ll have to have you back.

That sounds good. Thanks, Lauren.

Thank you.

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About Lauren Hardy

Lauren Hardy is a Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.

Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.

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