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Episode 004 - The Seven Steps to Start Up and the Real Cost Involved

costs expenses Sep 14, 2018

[00:08] Over the last two centuries, nearly 90 percent of the world's millionaires created their wealth through real estate. Here to tell you how you can ride this wave with less risk, less capital, while creating greater income is your host, best selling author and Speaker, Michelle Russell.

[00:27] Hi, this is Michelle, the master of money mindset and I'm here with podcast number four of the short term rental revenue podcast and today we're going to talk about the seven steps to a startup and the real cost involved. So I am your host, Michelle Russell. I am the master of money mindset. I have a business called the prosperity process. You can find us online at www.theprosperityprocess.com and one of the questions I get all the time is how to make money with no money and there are a lot of ways to do that. I talked about that on previous podcasts, but the one thing I wanted to do was cover the fact that I think it's better and you'll make more money if you have a little money to invest. And so this, this episode is going to cover that really, really well because I'm going to give you the seven steps that I use when I create any short term rental and the costs involved.

[01:26] So first I want to say thanks for everybody listening and we just started this podcast and I can't even believe we've already got all these subscribers and people are listening and giving us great feedback and I'm super excited and I just wanted to say how grateful I am that you guys have embraced me and embraced this podcast. So while I thought it was really needed and I really wanted to serve this niche and this area, but I didn't expect all the nice letters and responses. And so I wanted to really say thank you. And if you're a new listener and you like this, I wanted to encourage you to please subscribe because that's how iTunes puts you higher up and allows more people to see you is if you've got a lot of people liking you, subscribing and making comments. So if you could do that for me, that would be really great.

[02:15] And also if you're new or even if you're a previous investor or you invest right now and you've got any questions that we can answer for you, feel free to go over to www.facebook.com/STRRevenue and leave a message there or email us at [email protected] Either place and we're going to get to your questions. We did a Q & A on Monday and there were only a few people who had registered for that. So we just went on a zoom call and did everybody's questions there and it was really fun. So I want to keep doing that on Mondays if I can. Um, although right now I'm in Florida, but I'd love to do that for you. I think I can set aside time because here if I do it at 5:00 PM west coast time, then it's 8:00 PM here, so I can totally do that on Mondays. Even the month I'm here.

[03:06] and I wanted to, oh, I wanted to thank Kylee because Kylee, I'm going to do a second part of this - we had a new listener. Kylee, I'm not going to use your last name because I don't know that you gave me permission to, because I could see your last name because you left it in the Facebook messenger , but Kylee, I wanted to say thanks and I loved all your compliments and stuff and I've got your questions covered.- So this episode, the seven steps to a startup, I'm going to do a bonus session and I'll post that Monday for you, specifically Kylee and anyone else who wants to listen to it with the detailed, detailed steps and costs of every little item that we just did for a new short term rental that we have down in Tucson. And so that will give you exactly the prices.

[03:55] And I emailed Kylee this, but if anybody else wants it, just email me or message me and I'll give you a little breakdown on an excel spreadsheet, including the links to the places that I got them, if they're available, like if I got it at a garage sale or goodwill, it's definitely not going to have a link to it. But if I got it on Amazon, I'll even include the link and you can get the product right there on Amazon. So I'm going to do a bonus podcast and I'll air that on Monday for you, Kylee, and anybody else. Like I said, if you've got questions or something just let me know. Alright, so this episode is the real cost of startups and the bonus episode. That'll be episode number five. And that'll be the real life breakdown. Just the business specifically because Kylee asked for it,

[04:43] So that's for you Kylee. Alright, let's break down the types of expenses really quick. We're going to see, we're just going to break it down into two categories. Obviously you can break expenses into a million categories, but right now we're just going to talk about two. One's going to be a one time expense and one's going to be ongoing expense, so you'll notice that a lot of these expenses might just, you might just occur them one time when you secure a property, you know, the money that you put down for first and last and the security deposit, you don't have to do that every month. You will have to pay them the rent on it every month, but um, or unless you pay for it all at once. I've done that with some properties too. But anyway, some of those expenses are going to fall under one of those two categories, a onetime expense or an ongoing expense.

[05:33] And, at the prosperity process, at my company, I love doing these little plans and pathways. I'm all about the pathways. And I did a Stu Mclaren course, one of his courses called Tribe, and Stu does a pathway and there's a lot of people. I mean, obviously everybody has done their own version of it, but I'd love Stu's because he made me do it visually and now I'm totally in love with that process and I took that and I took a little of Brendon Burchard's training and Brendon always said if you, if you do a training, give people, you know, like on an sss or you know, some kind of process, that all of the steps begin with the same letter. So I'm going to do that for you right now. So what we're gonna do is we're going to pretend that you're starting on this pathway to prosperity and when you're starting out, you have no money and no properties.

[06:28] Okay? And then, at the end of the pathway, we're going to picture this pathway and you can make it curvy or whatever you want to do, but at the end of the pathway, you're going to have money coming in every single month, right? You're going to create this residual income for yourself and you're going to have tons of properties, not just properties that you rent, but eventually you'll have properties that you own, as well. Because that is going to be included in this whole process. All right.

[06:55] The first step of our seven step process, I'm going to go over this real quick and then we'll get real detailed about them. Okay, so the first is Search. We're going to find and locate a rental property and do our due diligence when it comes to that rental property, making sure that there's no homeowners association or anything involved or city ordinances that prevent you from having a short term rental.

[07:20] Then we're going to Secure the property and that means we're going to get a lease agreement and we're going to make sure that our lease agreement has been either written by or okayed with an attorney so that we specifically have in the contract that we are, you know, exactly what we're going to be doing with the property so that no one can later on act surprised like, "You were going to rent that out? What? I didn't know that!" People do that, too. Believe me. So you want to make sure that you've got a legal lease agreement with an addendum, if you need one.

[07:53] And then we're going to Set-Up, or I'm sorry, Stage the property. We're going to take it and put furniture in it and dishes and all that stuff, right?

[08:02] And then we're going to set it up. That means we're going to set it up with all the utility companies, gas, electric, Internet, anything that you're putting in there, you're going to set all that up, the cleaning companies. You're going to get your cleaning companies set, your laundry company, all that's included in the setup.

[08:20] Then, you're going to Sync and Sell it, and that means you're going to go online and you're going to promote the you-know-what out of it. Probably on Airbnb, that's my favorite place to go. Airbnb, there's vacation rental by owner. VRBO, is a great one. That is a great site. And you can literally list your properties for a lot more money on VRBO. But I, and I don't know why, I don't understand it, but people pay more money there for the same properties, but here's the deal. You will get a lot more traffic on airbnb. You may have, you may be competing with a lot more people and keep your prices lower, but you'll fill up your property a lot more on, I believe, on Airbnb. I don't get any money from promoting them. Hey, if you guys are listening, then please, send me money. But, if you heed my words, I think you'll be a lot happier with Airbnb. Plus there's a lot of perks I love about Airbnb and I'll go into an entire show about that later on, but you're going, you know, that's the Syncing and Selling of it.

[09:24] Then you're going to Systematize it. That means you're gonna automate everything so that it can operate when you're not there. Okay? So that systematizing.

[09:33] And then, number seven is Shampoo, Rinse and Repeat. You're just going to do this over and over. Once you get that property done, you're going to, when I say shampoo it, you're going to clean it up. You know, loosen up the tight end, see what's working, what's not working. Constantly tweak it. You're going to rinse it all off, get it nice and shiny so that it's working and running on its own, all the little systems and processes, and then you're going to repeat it and you're going to go out and find another property and do the same.

[10:03] So imagine, if you will, and we can be really conservative here, that you're making $500 a month cash flow after all your expenses. So your net cash flow on a property would be about $500. Then how many of those properties would you need to make $5,000 a month? Yeah. Think, whew, that's a hard one right now. You just need 10. You need 10 properties like that and you'll be making $5,000 a month. Now, what would $5,000 a month mean to you and your family? It would probably make a huge difference. Actually. I remember, um, there was a statistic, and I've put it in one of my books about how less than $200 a month would have saved most people from losing their homes in foreclosure during the big crash. Just an extra $200 a month. I know that seems like such a low number, right? Like you could go out and get a little job at Mcdonald's for 50 bucks a week working a couple of days or something and have made that, but most people, if they only had $200 a month coming in, they would have been able to save their home from foreclosure.

[11:15] So imagine what your family can do with $500 a month or a thousand, $1500, $2000, $5,000, $10,000 a month. The whole point of this is to just duplicate that process and that's how it is with pretty much anytime you do real estate, you're not going to buy one property, fix it up, put a renter in there and then go, "Well, that's it. That's my real estate investment, right there. Isn't it pretty. It's making me about $150-200 a month in cash flow and they're paying the rent and..." you're not gonna just forget about it because once you do that, you know that you can just keep duplicating that process and making more and more money. Right? So let's get into all the steps. Okay.

[11:59] Step number one was Search: search and locate the property. And you're like I said, you were going to check all the rules and regulations. Check all the rules about short term rentals and a lot of cities are now starting to have rules and regulations and so you really need to check on that stuff before you sign on the dotted line. It's important. It's important to check about the HOA and it's important to double check before you signed the lease because people do, I don't want to say people lie about that stuff. I would say that they may be misinformed or uninformed. Let's give them the benefit of the doubt. Maybe they just didn't know that their HOA had a rule about it. You're the one who needs to do the due diligence and call up the HOA on a property that you're about to sign a lease with and make sure there's not. You're the one who's going to have to call the city or the county and make sure that everything is, is you know, in check: that you are following the rules.

[12:59] Maybe you have to buy a permit or license or whatever it is. You're the one who has to do that. Don't ever leave any of that stuff up to anybody else because this is your business, not their business. You need to cover your own assets. Okay, so that's very, very important. And you want to look for a location that's safe for guests so that when you pull up with a car or you know, walk up or get dropped off by a Lyft or something, that they don't go, "Holy crap, get back in the car! Get back in the car!" I have literally stayed at places that looks so awesome online and they even have pictures of the outside of this property, probably from 20 years ago. And then when I got out, I was like, oh heck no. And that's not what I said. But it was very similar to that. I'm not staying here. It's just not safe. I have, you know, my kids sometimes I even have my granddaughter with me. There's no way I'm staying someplace unsafe. So I want you to always think about, would you stay there? Would you put your mom there or a woman that you love, like your daughter or your sister? Would you want them to stay there? Would you want them to stay there alone? If you can't answer yes to that, do not get that property. You need a safe location. You need a place... and you need to check it day and night, too. There's a lot of locations that look really awesome during the day when they're completely empty. But then, at night, oh my gosh, it's like day and night. Yeah. Actually, it's really like day and night, which is probably where they got that term from.

[14:23] But you want to make sure that you check out the property at all hours; on the weekends, during the weekdays, at night, during the morning. Right? You want to check it all out, you want to make sure it's a secure sweet property. Okay? And that's going to be, um, a onetime costs involved in searching for the property of your gas money and your time, right? Just to go around and search for them and check them out. You'll check them out online. Now, a lot of those questions, you can get those answered before you hop in a car, right? Because when you're going to take a look at the property, you can ask about the HOA. Now there's a couple of reasons why you might not want to do that when you're first getting into the business. I do, only because my business, I've been doing it for a long time, so I honestly don't care.

[15:09] And I have, I have a lot of information for people beforehand if they have any questions. So if a landlord would be iffy about it and you didn't want to bring it up right away, I can totally understand that. Um, but you might, you know, the area when you look at a property so you can check on the HOA yourself. You can check on the city stuff before you go into your car and go for the ride. So don't waste your time going to a property that you already know is not going to work for you. That's a waste of time. Okay? So let's go to step number two, Secure. Securing the property. Now you've done all your due diligence, right? You're going to have your lease agreement. It's probably going to be written up by your attorney or some kind of addendum that you got online.

[15:54] We have those in with our course, but our course is not open right now, but, um, we provide those, but there's a lot of people who do. And you only have to do that one time. That's a one time fee. Your attorney can draw that up for you. You can use that over and over and over on all your properties. You don't have to do that over and over and over again, right? Just one time. You might have annual city permits or county permits or something that you have to pay and um, those would be annual fees and this is where we, you know, I'm going to put insurance in with our Setups, but there's also going to be insurance and I'm not gonna, I'm not gonna go into that heavily right now only because we've got a whole episode on that coming up.

[16:36] But basically, I want you to remember that when you get insurance for a property, now Airbnb has their own insurance policy. That's certainly a great policy but it's not going to cover everything and it's all up to them whether or not they cover anything. So, you really want to have your own insurance policy and you want to make sure it's the right insurance policy. It needs to be for a Short Term Rental because if you just get like a renter's policy that covers the items that you own inside a property that YOU rent and live in. But if you opened that property up to other people as a short term rental, that doesn't cover the fact that they might go in there and steal something. So, um, you want to make sure that you have the correct insurance. And like I said, we've got an episode completely and specifically all about that coming up.

[17:32] Okay. Um, so let's see the, the expenses that go in with that, you're going to have a onetime first last and security deposit on most properties and probably the one time fee with the attorney, because, like I said, you could use that form over and over again. Then you're going to have the rent and that will be monthly, right? And again, the permits, if you have any of those, those are usually annual permits. All right, let's move on to step number three. That's going to be Staging and that's going to be putting the furniture and stocking it and supplying it. And it can be expensive. Um, but why? I'm like, but why? You can furnish an apartment pretty inexpensively. I think the property that we did was, um, around $3,000. I want to say $3600, $3500, maybe $3200. I can't remember off the top of my head, but that will be in our, in our extras that we send you (Look in Episode 005 at wwwSTRRevenue.com for the free Excel Spreadsheet) Thanks to Kylee.

[18:33] Thank you, Kylee. And, anyway, but you can get furnished apartments as well. And sometimes, I mean obviously those, they charge more for a furnished apartment, but if you don't have the startup cash for the $3,000 or whatever it takes to stock up that apartment, it's going to save you a lot of money. So basically just go for it. I mean, I would sometimes, I would rather pay -all my properties in Florida, there's not one, there will be, because we just got another one down in the keys and that one we're going to have to furnish, but that will be the first apartment that I've had in Florida that I've ever had to furnish. All of them, I've purchased furnished, um, I rent them furnished and they're stocked with everything. The sheets, towels, dishes, everything, you name it. So those, those expenses are built right in.

[19:25] And, and I liked them that way because it's, it was easy, but we, we did it, like I said, we've got the step by step for the place that we did down in Tucson and that's going to help you out a lot when you take that. Most of those are one time fees, too. Others are not. Um, but you know, we'll give you that complete breakdown in episode number five, the bonus episode, but some things have to be replaced in time too. I want you to remember that because sheets and towels, they wear out. They get soiled or raggy or start to wear too thin. and you don't want those. So there's a lot of expenses that are going to, you know, you're going to have to replace them not every month or something, but they, they'll just have to be replaced in time. All right, step number four is Setting Up.

[20:13] Now that's going to be the utilities, the permits, the licensing, the parking stickers, the insurance, your cleaning crew, your laundry crew. Those are going to end. The cleaning crew is number one. Ladies and gentlemen, if there's one VIP in your business, it's definitely going to be your cleaning staff. That's the thing. We've got a whole episode coming up on that because it's that important. Okay? You want the best cleaning company that you can have and you want a relationship with that cleaning company. Um, and that's, you know, those costs don't come out of your pay anyway. When you work with Airbnb, for instance, if I'm renting out a property for $150 a night, my cleaning company might charge me $100 for that property to clean it up. That cleaning fee is not added in on, into my expenses in the $150 per night. It's actually a tag on fee at the end, a onetime tag on fee.

[21:12] And you can put a lot of expenses in there too. I mean, if you've got, let's say, you have candy or, um, we have bookmarkers with little flower pins and stuff that we do for Island BNBs. Um, there's a lot of stuff that you can do and add in the few cents there. Okay? But you're going to be paying, you're going to be paid for your portion, your cleaning company is going to get their portion, so you don't have to worry about charging and doing a lot of math there. It's just going to be simple, simple math. Okay, and the deposits might be, obviously they're going to be a one time deposits, but your utilities will be a monthly utility. Okay. They're the permits and stuff. They might be annual. The insurance, you can pay it annually, every six months, sometimes monthly. Whatever is best for you. Your cleaning crew, you're going to set them up with an auto payment system and they're going to be hooked up to a credit card so you never miss a payment because that's, like I said, your VIP one important company, you never want to screw those guys out of anything and you want to make sure they are paid every time on time.

[22:25] So they, my company withdraws the day that they're done cleaning and they've got, they've got a credit card linked to them, not just a debit card because I want to make sure that no matter what happens, those guys are covered. Okay? And those are your setups. Now we're going to Sync and Sell it and the cost for syncing and selling. So, um, that's listing your property on Airbnb, taking pictures. Now obviously you're going to take pictures of your property. You can do that with, now, cell phones are amazing. The cameras inside a cell phone. Just always make sure that you've got them in the horizontal position and, you know, like a landscaping position that's not the up and down, like if you're taking a selfie on your iphone or something. You want a really nice big picture because that's how they're posted in Airbnb. So you want to have those pictures posted in there looking really nice. Later on, you can even get professional pictures taken, but why do that right away? Just save that money. Do it yourself. You'll get really good at it. Just keep switching it up, too. I changed my pictures in my post almost daily and I'm not even kidding. I shuffle them around because it keeps my posts fresh, like something was just changed and then it puts it in a, you know, like something new happened and puts it up higher in the rankings. Like I said, I was talking about the vacation rental by owner, VRBO, you can list on VRBO, okay? And you will get a higher rent, but it's not as popular. It's like being an eye doctor inside of Costco gets you a lot more foot traffic than being an eye doctor, you know, on the second floor down in some rinky dink town where it's got one street, you know? Nobody's going to stop there and go see you. But they, everybody goes to Costco. You get the foot traffic; you're getting a lot of foot traffic on airbnb. And your place will fill up better and faster, I believe, on Airbnb.

[24:25] Let's see. Let's move on to...and like I said, those costs will come out of your bookings and stuff. Did I not say that? I'm wondering if I did. I did about the cleaning companies. Okay. So when you, let's say you, um, when you list your property on Airbnb and somebody makes a reservation and you'll see there's a breakdown there that tells you, it's a very, very low fee that Airbnb gets, a very, very low low fee. Okay.

[24:53] Step number six is Systematize and that's just going to be putting everything on automatic. Airbnb has their own concierge service that you can hire. You can do guesty. There's a bunch of different online services where you can systematize and put your business on autopilot, you know, like, like it's kind of like a property management company but not. They get a percentage of what everything is booked from. But it's totally worth it because then you don't have to be on the phone all the time or next to your phone and getting text messages. People will text message you, think that they're text messaging you, and they're actually text messaging a company that's working for you, and they'll answer them right away and that keeps your rate really high too. because your answer, you answered very quickly.

[25:49] All right, so those are my seven steps. I'm going to repeat them. Search, Secure, Stage, Set-Up, Sync and Sell, Systematize, Shampoo, Rinse and Repeat. Okay, so again, if you like our podcast, we're new and we're super excited that we're here and very, very grateful to all our new listeners. If you've got any questions, post them, please. We need you to subscribe. We need you to leave reviews. Um, leave us your questions. I'd love to get, and, oh, I will get...

[26:21] Oh, please, when you leave a question, let me know whether or not I can use your first and last name so that I know, um, you know, if that's okay because I don't want to do anything to invade your privacy. But again, I'm super grateful. Episode five is going to have the real life break down. It's probably going to be a very boring episode because I'm going to go line by line and, um, for Kylee, and she can have exactly the prices. If you guys message me, I'll send over that file right to you with the links on it. And if you like this, go to our website, STRRevenue.com, that's ShortTermRentalRevenue.com , or you can go to TheProsperityProcess.com and find us on facebook. We'd love to hear from you. Thank you again. God bless. Go and grow.

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