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[00:01] Over the last two centuries, nearly 90 percent of the world's millionaires have created their wealth through real estate. Here to tell you how you can ride this wave with less risk and less capital while creating greater income, is your host, best selling author and Speaker, Michelle Russell.
[00:21] Hi, this is Michelle, the Master of Money Mindset, and you are listening to the Short Term Rental Revenue Podcast...
and in today's episode,
we are going to be finishing up our Q and A session. But before we do, I wanted to remind you that today's podcast is brought to you by audible. You can get your free audio book download and a 30 day free trial. If you go to audible trial.com forward slash s t r revenue and remember there's over 180,000 titles to choose from, including the ones I'll be mentioning today, but you can use your iPhone, an Android, a kindle, you can download the MP three s for your MP, three player or put them on your computer. This is a great way to listen to at least a book a week just like I do. So thank you. Audible. All right. Today, we are going to be finishing up the Q and a session that we started last week and we've got some really great questions.
Speaker 2: (01:18)
It was really hard to decide which ones were who are going to split up and put it in one session. So it's kind of weird because these questions weren't all in the same order, but they, we put them in an order so that they could be the same length of time on each of the podcast. So we kind of broke them up. So if they sound a little bit off, that's because we changed them just slightly. But the first question I wanted to bring you was about the Airbnb plus. AIRBNB has a new tier level called plus. So when you list your property on Airbnb, it goes out amongst all the other properties in, in Airbnb land, right? Okay. So people look up usually by destination or by a city. And the only thing that you to separate you would be whether or not you were a super host.
Speaker 2: (02:13)
In order to be a plus, you're going to have to be a superhost. And being a super host just means that you have very few cancellations. Um, most of the time it's zero to one in the last year that your ratings are a 4.8 and higher and 95% of your booking requests are you reply back to them with a positive yes, accepting those bookings. And let's see, I think you know, that's it. Once you're a superhost, you can apply for something now called a plus level. Now plus level gives you another batch. So it's not just the super host badge. It will give you an additional badge called a plus. And that plus has a really cool bonus because the layout and the templates for your property are going to be different and they're going to be featured. Okay, so the plus homes are featured now, when they first started this last year, if they only had 13 cities, they only had it available in 13 cities.
Speaker 2: (03:15)
Now there's close to 250 not quite 250 but clothes. Now, 250 cities might seem lock like a lot of cities, right? But guess what? There's over 180,000 cities inside the airbnb platform. So that's not a lot relatively speaking. You have to apply for this and you actually have to pay for them to come out. They come out personally, airbnb sends someone out personally to your home. And like I said, you have to be a super host first. Then there you pay the hundred and $50 or 149 or whatever it is. You fill out the application, they come to your home and then there's like a hundred point checklist that they do. Now I'm going to have a link on the website to the hundred point checklist and to the application. So if you want to fill out the application and go through that application process, you can do this because once you are, um, one of the plus members you will get, like I said, you'll get place, tire and featured right above everyone else and you'll have that differently out.
Speaker 2: (04:26)
But they say that you'll get seven times the views of other properties of other listings and, and that's a lot of views. But get this, they're saying that you will have 70% more nights booked. Then the regular listings, 70% more nights booked. That's a crazy percentage of nights booked. And these properties are almost all way more expensive because they come with a type of concierge service from airbnb. People can call airbnb and they, they, it's, it's kind of like having a concierge at a hotel. So it's a, it's a better service on a better type property. Now these properties are not just any type properties. They're not just going to accept you. Like I said, it's a $150 for the application to fill out the application to have somebody come out and look and then this hundred points test that they go through. Now the hundred point test that they go through is, is going to focus on three requirements and that's design the fact that the property is well equipped and that it's well maintained.
Speaker 2: (05:38)
So you know, it has to be impeccably clean and impeccably designed and it has to have all these, I mean just this huge list of requirements for each and every room. So they want to make sure, I mean there are things in here like the fact that they don't want TV wires to be showing cords to appliances and yeah, I mean none of that can show that it's going to be impeccably clean. You're going to have things like filtered water or bottled water. You're going to have, your kitchen is going to be fully stocked. The rooms have to feel cozy and inviting. These properties will be, and I'm going to say this picture perfect properties, PPP picture, perfect properties. They're going to be Pinterest, pick picture, perfect Pinterest picture, perfect properties because these properties will be something that you would see in a magazine. They are going to be unique.
Speaker 2: (06:36)
They have to have one design, one theme that flows through the entire property and they just want the standard to be above normal, right? So well equipped means that you know, you have to have a really great mattress, not just any mattress. I mean they're going to test your sheets, your mattresses, your pillows, how many towels you have, the types of towels, shampoo, conditioner in separate bottles, full bathrooms. That these aren't just, you know, partial bass or half baths. It's kind of crazy. There's a lot, a lot of stuff in there. And the kitchen, you know, cutting boards and different appliances and how many pots and pans you have and whether or not you have spatulas and sponges and cleaning brushes and dish soap and a refrigerator or a full size refrigerator. If it's a full size kitchen. If it's a kitchenette, they let you have a partial size refrigerator.
Speaker 2: (07:33)
But like the beverages you have to have a coffee, coffee mate, makers, tea and tea kettles serious. You gotta be serious about, you gotta be really serious about your business to do this. They want you to have, they have a TV or projector with functional cable or streaming. So the smart TVs that we talk about that would count because that's streaming. Netflix is, is considered streaming Hulu, Amazon, those are concerned streaming. So that does count. But they want your wife to have a minimum speed and they want air conditioning and fans and I mean you name it, they want the best of your check in. So we could go on and on. The most important thing is they want it to be extra clean. They want the quality to be impeccable, and that's what they're looking for. They're looking for something that they can put out there and put it in front that's going to bring in a higher dollar.
Speaker 2: (08:31)
That's what they're looking for. They're looking to satisfy the newer clientele that's coming on airbnb. So airbnb, when it first started out, and I'm not sure if you guys realize this, but vacation rental by owner was one of the first ones on the market and those were vacation hogs. Pretty much all vacation homes were pretty similar. And then when airbnb started, it was in bedrooms and it was kind of a cool thing to just be able to crash somewhere. So it was kind of like an how I, that kind of the classes that if I say an online hostile, but it pretty much was, it was like, you know, you could just go someplace and crash. You didn't have to pay a lot of money. But the more people that get into Airbnb, the more hosts and Uco, especially over the past few years, the better the quality the properties.
Speaker 2: (09:21)
So the property quality is getting that, you know, the competition there is getting more and more stiff every year. More and more people are coming out and they're designing these places. So it's not just a bed and it's not just a kitchen, it's not just, so here's a nice clean place to stay. This is really what they're trying to hit is the new style of people. The new customers that are coming into airbnb want a very high quality stay comparable to a hotel and they want to make sure that it's as luxury as if you were to go stay at a spa or a resort. So they wanted to come, they want to compete with that and the prices are going to compete with it too. And the standards that they're setting are going to be very, very stiff, but it'll pay for itself in the end.
Speaker 2: (10:12)
So if you are that kind of person, you can just go on and if you're just interested in looking at, it's really kind of cool to look at all the things they have. Most of us have that, but whether or not the place looks like they want it to look. Um, you can see the videos that they have in there of the places that they have. And it's quite, it's quite a, it's quite competitive. Let's just say picture perfect Pinterest picture. Perfect. That's what I would call it because it looks like it could be in a magazine like HGTV or something. So that's the question about Airbnb plus if you have any questions, just go online. You can check it all out for yourself and if you want to apply for it, good luck. Good luck to Ya. So thank you nick for that question.
Speaker 2: (10:56)
And also I wanted to just add real quick that the average night so far when you look online for the, um, plus properties is about $250 a night. So if your property is down there like a hundred dollars night, you'd have to, you'd have to really, you know, you're going to have to raise your standards just a little bit. And that's okay. Cause man, I'm telling you, if you could raise your standards enough and get it in there, even if you're only renting out, you know, 30% of the nights at 250 a night, you can still, you can still bank some, some really good cash there. Alright, so Ryan's had a question and I think there was a couple of other people who asked something similar to this, but Ryan had asked about subletting apartments. So when it comes to subletting an apartment, all right, so there's basically three ways, three main ways.
Speaker 2: (11:51)
I mean, there's probably a million different ways that you can do an airbnb. You can do it with a property that you own. So if you own a home, you can rent out a room or part of your house or your whole house or, uh, you know, Caseta or a guest house that you have in the back. Or if you have a, if you own a property, it's yours to rent out or you can rent a property. And that's what I do with a lot of the properties that we have that we don't own. Obviously we don't own it, we're renting it or you can cohost and that means working with the owner and kind of just divvy up. Um, they're going to be the one who puts the furniture in. And a lot of times that's a really good deal for people who are selling their homes.
Speaker 2: (12:35)
So Ryan's question I believe, was just directed at those of us who are renting houses from a landlord and it was specifically about contracts. So in a rental contract, they're, there usually is something that does not allow subletting in, in a standard rental contract. So what you want to do is add an addendum and care. Lida and I talked, we talked for hours on the phone about all the things that we're going to cover, but one of them was an addendum. Now we're going to put on the website for you guys, it will be a sample addendum. It's not going to be anything that you can download and go out and use. For sure. You're going to want to write your own and you're going to want to have your attorney go over this. Remember, it pays to use an attorney. It really, really does because they protect your, your assets and they're going to protect you.
Speaker 2: (13:33)
Every single state is different. Even sometimes cities and counties inside states are different, so you really have to do your due diligence when it comes to your addendums. The first thing you're always going to check is make sure that having an airbnb or having a, a short term rental is legal. Wherever you're deciding to do that, that is the first thing you check before you even go look at properties. Obviously you don't want to waste your time before you even check out whether or not it's legal to have one there, but once you do and you start going looking at properties where you know it's legal, where you already have checked and made sure it's legal, then you want to have that addendum in your, in your Handy Dandy Notebook, right? Your Handy Dandy pat backpack when I go into any property to look at a property I carry with me like a little folder and the folder has a few things in it about my business letters.
Speaker 2: (14:32)
It has testimonials from other landlords that have used me and we have like a cute little brochure that we've made up. We have a, it's like a little arsenal. It's like your little tool belt. Okay, so my tool belt also includes an addendum and that addendum, you know I am ready to sign their lease right away. I will sign their lease today and give them a check to put the down payment and get that property locked in right away. But I have to have my addendum carried with me and that addendum is very plain English. It's, it's very clearly written, but it tells them exactly what I'm going to do with that property so that there's no, there's no question about it. Later on they can't come back and say, well Gosh, I had no idea she was going to rent this out to two people at.
Speaker 2: (15:22)
They absolutely do because when they signed that addendum, and if they don't sign the addendum, then I don't sign my paperwork either. So it's like the addendum gets signed right away. Okay. And if they say they want to look at it, don't sign the lease before you have the addendum sign, those two will always be signed by you together. Why? Because if you sign a lease and then they leave saying, we're going to check out your addendum, and then you're like, okay, can you get that a denim back to me? They could. They could be like, what a denim you, you now have a legal lease and the legal contract. So those two gets signed together. Always, always together. If you have an LLC, if your business is incorporated, guess what guys? It's a business. It's a corporation. So it's different than a residential lease.
Speaker 2: (16:14)
You'll need a corporate lease. So once you put your business into an LLC or once your business is a business business, a legitimate business with an ein number and everything, then you're going to have to have a business lease. Do you understand that? So it's not going to be a regular residential lease with an addendum. It's going to be a corporate lease and it can also have an addendum. But make sure that you do that. Obviously there are a lot of, what did Ryan column, Internet lawyers and Internet attorneys. Absolutely. There are. There's a lot of different things that you can look up. Oh, but honey, it's so crazy because if you think about it in some city or state somewhere, almost everything is illegal and some stuff that's illegal in one place is perfectly legal and another. So obviously sometimes I don't think anybody is harmfully line to you on the Internet.
Speaker 2: (17:11)
It's just that they just don't know about every single place. You have to be the one who checks all this stuff out. So I can never, never state it clearly enough to you to, to do your due diligence. Due diligence means doing the work behind all of you know the investigation. You are the little Columbo. I don't know if you guys are old enough to remember who Colombo was, but he was this detective and he was incredibly smart and that was before the Internet. So now we have the internet and that can help us look almost anything up, but it's super easy to find out if if things are legal in in your state and your county and a lot of times even your cities, it's going to come down to Hoa fees. Those are the hardest ones to find. But if there's an Hoa, you just definitely have to check the CC and rs about the Hoa.
Speaker 2: (18:02)
But you can, most of the time you can Google our short term rentals. Legal and Texas are short term rentals. Legal in Oklahoma are short term rentals, legal in Arizona. And as soon as you do that it will pull up a bunch of news information, just start reading and then once you find out, yes, oh good, it's legal there. Now go down to your county, then break it down. Right. So our short term rentals legal in Maricopa county or if you're in Georgia are you know, short term rentals, legal in Dekalb county. What you want to do is just break it down to down to the counties. Then just keep going. Now go to the city and then once you get to your little subdivision, now you want to check the Hoa. Is there an Hoa and that's usually a question you're going to have to ask the landlord or the real estate agents who showing you, is there an Hoa involved here?
Speaker 2: (18:59)
Is there some kind of association and they'll be, if it's an apartment complex, you know we don't usually even deal with apartment complexes, although the ones that we do, I can't say their apartment complexes, they're different. The ones in Orlando are specifically built for short term rentals and those are condos. They're a little bit different than an apartment, but we don't deal with apartments because most of the time apartments have cc and rs that reject short term rentals all together. But then there are places where you'll have condos that want, you know, that's pretty much all they have are short term rentals. When you get to places that have a high population of visitors coming in. So Arizona and Florida, my two favorite states for for these, you'll find a, I mean their legal almost everywhere you go there are cities starting to fight it.
Speaker 2: (19:54)
But here's the deal. At the same time, there's always people pushing back and if there's somebody who's coming to your city, if you have a short term rentals somewhere and they're trying to make it illegal, you need to step up. You need to let this state and the city know that bringing in that income isn't it? It's extremely important. In Arizona, our governor help pass these laws because specifically he understood the fact that visitors, winter visitors are extremely important to the economy here in Arizona. We need them to come and we don't have enough hotels and resorts in certain areas, especially like when they were hosting. We've hosted like two super bowls, two or three. I'm asked my husband, I'm sure he would know. But, um, we've had the pro bowl, we always have the fiesta bowl and where they built the football stadium is way out in the middle of nowhere to the rest of us.
Speaker 2: (20:53)
The majority of people who are our ticket holders are in the East valley and they built it way out in the West Valley and then they promised as it Glendale, I think they promised they were going to build hotels, but they never hardly ever did. There's like just a few hotels out there. So here they were hosting one of the biggest football experiences in the entire United States a couple of times and people didn't have places to stay. So people were renting out their homes for thousands of dollars a night. And like, I'm going to go stay at my brother's house, you know, somewhere so that these people can run to my house for that much and why not? But it just let you know that a lot of cities, they need those hotels, they need those rooms right where they don't have hotels. And that was the same thing that started that whole problem that we touched on a few weeks back about Hawaii.
Speaker 2: (21:43)
That's how the state realized that him, they were like, Hey, we've got this many more visitors flying in, but we don't have that many more hotels. That's what gave them the, they're like, Ding, Ding, Ding. If we do the math, we can realize that there's a lot of illegal bnbs going out there, a lot of illegal short term rentals, so you're the one who's going to have to do the due diligence to find out whether it's legal or not. Then when you go to look at the property, bring your addendum and like I said, we'll have one for you to kind of copy and take that verbiage, but take it into your attorney in your town, in your state and say, Hey, can you adjust this to work for me? Because that's what you're going to have to do. That will not be a be all end all thing that you could just download and use it wherever you are because it's not going to work in every single state.
Speaker 2: (22:36)
It's not going to work with every single rental. Okay? You're going to have to check it and make sure it's legal where you are because everything is different in every single state. Okay? So I'm just going to give you that. It's actually relatively easy. Um, I'm trying to remember the question that Ryan asked specifically, but he was talking about a gentleman who said that he had over 20 properties, or maybe it was more than that. I'm personal friends with somebody who owns 90 properties down in Tucson, and that's not an unimaginable number. It's actually a very easy number to get to. If you're consistent, you have to, here's the deal to you guys. You really, really have to start, you know, you start with one property, right? And then the, a lot of the times you're like, okay, it's very scary when you start investing in anything and real estate and stocks and bonds and gold and silver, the first time you do anything, it's very scary because there is some risk to it.
Speaker 2: (23:39)
And you'll get that, that little flutter. It's like jumping off a cliff into a, you know, the ocean below. You're like, oh my gosh, there's rocks and I'm going to hit the rocks are, you know, it is literally that frightening. I understand that. And every time you step up a level or you do something else, like extend yourself a little bit more, it doesn't get easier and easier. It's still scary. It's like, okay, now I've got to, oh shoot, now I've got three properties. Holy Cow. What? Especially when you're accumulating mortgages and you're buying these properties there, there were times w w I remember looking down one time and going, Holy Shit, we have millions of dollars in mortgages. Like millions. Like this is scary as shit. If everybody decides all it wants to stop paying the rent, we are screwed. Right? It's like that's not gonna happen, but it's literally the fear that goes through your mind because it is scary.
Speaker 2: (24:36)
It is. It's frightening. But here's the deal. You're, you're making educated purchases, you're starting with one and you get that cash flowing, you get it. You start to understand what works and what doesn't work, right? You're going to make a few mistakes, but then you're going to correct them. And then you're going to see the cashflow. It's like a scoreboard. It's like a game. And you can see if it corrects itself when you, when you adjust things and fix them. So when you get your next property in your next property, once you get three properties, it's time to sit down, sit down, and make a real plan. Okay? And when I say a real plan, say, okay, how much do I need to make this a full time job for me? That I can walk away from whatever I'm doing full time. If you want to, if you don't, you can definitely hire somebody to do this.
Speaker 2: (25:31)
But this is what I recommend. You know, I said to myself, how can I make this full time where I'm doing this all the time, where it's paying for all the things that I love to do because I travel all the time. And if you know me, you know, I'll spend an entire month in the fall in Florida at our place in Florida, B just to freaking do the Halloween stuff that they have out there. And you can ask my kids. I've done it every year for decades and I never miss a year. I go to Halloween horror nights. I go to the food and wine festival and I'm out there for more than sometimes six weeks and I literally have to get my business so that it's ramped up so that you know, I don't, nobody bugs me when I'm out there cause I don't want to be bugged when I'm out there.
Speaker 2: (26:14)
When I go on vacation, when I go somewhere, I usually go for a month and I don't want to be bothered for that whole month. I don't want my phone by me. I do not like my phone. Most people will start to realize that when they tried calling me, they go, Bang, you're really hard to get ahold of. I don't carry my phone around. It's I, it's not that I don't like technology. Yeah, it's great, but I don't want to be bothered. I am when I'm with somebody or doing something, I want to be 100% with them doing that. Whatever I'm doing. So when I'm doing my podcasts, my phone's off. I'm doing my podcasts. When I'm doing my business and I'm working with people, that's what I'm doing. If I'm down, you know, working with my contractors and stuff and they're explaining things to me, my phone is not going off.
Speaker 2: (26:58)
It's in the car somewhere. And when I get back, I checked my messages because when I'm with somebody, I want to be 100% there. Okay? So these things I take very seriously and my business, I take very seriously for that reason. I planned it that way. My business is what sustains my lifestyle and therefore I take it very, very seriously and I planned it all out. So here's the number of houses that I need or properties I need, you know, making x amount of dollars. I mean, I get very detailed about it to maintain this lifestyle. And then once I get that lifestyle, I don't go crazy, right? Then I'm planning my retirement. All right. Now how many places do I need to create an income or a revenue stream or, you know, make money inside my, my retirement accounts inside those in, you know, insurance policies inside those Iras, inside all of my retirement trusts and things like that. All of those things you have to plan. You have to plan them because they don't just happen. You plan them and then it happens. It's not like having kids. There are no accidents, right?
Speaker 2: (28:16)
Don't tell my kids I ever said that. No, none of my children were accidents, right? But, um, no, you really, really have to plan out what you want in life and write it down and then adjusted and adjusted a couple of times a year. Go in and plan and say, okay, let's see if this is your first year and you have one property now, by the end of this year, you decide you want to have four properties. That means that every three months you should be picking up another property. So when do you check it? In three months. Did you pick up another property at the end of three months? If you didn't, what? What did you not do? Right? You're, you're should be planning those steps along the way and you should have little areas where you're checking yourself and saying, at this moment in time, I should be right here on my plan.
Speaker 2: (29:07)
And if you're not, then you can adjust. Just adjust it and make sure now, don't beat yourself up because sometimes you hit it and sometimes you don't. Sometimes you'll, you know, you'll score and get two properties at a time. There's times where I have bought three houses right in a row. Boom, boom, boom. All neighbors, just like, I'm like, Hey, these are three good houses, three good properties, three good prices, and they're all next to each other. This is going to be easy peasy. I'm going to have somebody come in, they can take care of this, the lawn maintenance, all this stuff will be just like boom, boom, boom. And be really easy and nice. You want to be able to have a plan in place that allows you to correct yourself when you need to. Okay? And you also want to make sure that you're always living within your means.
Speaker 2: (29:56)
Now, if you're listening to, if you're on our list and you're listening to the, the ABC's park that we're doing for the people to build their, their first rental properties and get in there and do their first rental properties, that that's part of the planning process, number one, house number one, and then they're going to be able to duplicate that over and over and over again, but you have to have a plan guys. You really, really do. You have to, you have to be serious about it. You have to treat it like a business. You have to know what's going on and you always have to adjust. You have to be super careful. Now care leave is going to go over the stuff with you about how to protect yourself because there's all different kinds of ways. There's Llcs, there's trust, there's land trust. There's different ways to protect yourself and make sure that different, if something happens to you, that you're protecting your kids so that, especially if you live in the People's Republic of California, we always call it, if you live in California, you want to make sure that your properties don't have to go through probate if something happens to you.
Speaker 2: (31:05)
Because if they do, your kids are going to be taxed to death and they will have nothing left of all the hard work that you had. So your properties need to be inside different trusts and, and different entities to help protect the assets to help protect what, what income you've created and you know, the wealth and prosperity. Make sure that that is passed down from generation to generation. That is why all those things were created. They weren't just created for the wealthy by the wealthy guys, the game, the rules have been out there for everyone. You just have to read the rules and play the game. You know, now you're learning the game and these are all the different things. And so yeah, my sometimes seem a little confusing and like there's a little work, well guess what? That's the real world. Nothing comes easy.
Speaker 2: (31:57)
All those get rich quick schemes. They're bullshit. You know, they were, you felt it in your bones and you are right. You're, there's gonna be some work that you have to do and that is going to come in the form of due diligence. But a lot of stuff that you do when it comes to real estate, you only have to do once because once you check out a certain area and you know the rules there, you can just start playing that game in that area, right? And buy more and more properties in that area. And then if you decide that you want to move outside that area, you can do that too. It just takes a little more work. You're just going to have to do it again and again. So it's not difficult. It's time consuming, but it's not, it's not hard and it's totally, totally worth the effort.
Speaker 2: (32:43)
Okay, so again, we're going to have that form on there for you, but where are you guys going to do with it? You're going to take it to your own attorney and have them rewrite it specifically for you specifically for the state, county, city, blah, blah, blah, wherever you are. And you're going to make sure it's legal before you go in there and you're not going to sign the lease until they sign the addendum. Did Isaiah a denim? I've done dumb. And that question leads right into [inaudible] question. Now Rozak was asking questions about accumulating properties. That is your ultimate goal. Your ultimate goal isn't just the cashflow. Cashflow is excellent. And that is what I missed when I was selling my properties, right? Because I believe the market was super high and you sell high, buy low, and now you know you get your money ready for this new sale that's going to be coming and, and the prices are already starting to go down with a lot of markets, which is really great.
Speaker 2: (33:41)
But eventually what you're going to want to do is accumulate properties and start building a portfolio. Now the houses that you're going to hold, those are going to be the ones that you want to hold. They don't have to be held within your retirement accounts. They can be and that's great, but here's the deal. Those properties, the ones that you're holding for a minimum of two years or more longer, it'd be great to just accumulate them and keep them forever and ever if, and those don't have to be held in a retirement account because when once you start holding them, there's so much depreciation involved in that real estate investing that you can write that off, right it off, right it off, and you're going to be paying very, very low taxes. So those, those properties that you're holding for long term and sometimes indefinitely, but minimum two years, those can be properties that you personally have.
Speaker 2: (34:38)
And those will be the types of properties that you can use. So you can use them for vacation rentals that you stay in and you can have properties that maybe like the ones that we bought down in Tucson, those were properties for the kids when they were going to college. Right? So there they were at the University of Arizona and they're super close to the university and the little casita's and stuff in the back that we use for the BNBS. Those properties are like moms and dads who come to visit their kids. They're great, great properties for that use. And our kids could rent the front properties and they, they could be in them because they're not held within our Iras. Now when you're investing within your retirement accounts, you cannot use those properties that way. Okay. You can't stay in them personally yourself and you can't have your children or you can't benefit in any way from them personally.
Speaker 2: (35:34)
They have to be treated like a business. And also what's really cool about those properties is those properties. You can use the, and I'm talking about the properties that are within your retirement accounts. So let's just say it's a self directed IRA, Roth Ira. You're paying the taxes on the money that you use to invest within your IRA before it goes in. So every year you get to to contribute x amount of dollars. Let's say, I forget what it is now, but let's just say you're a single guy. It's probably 2,500 if you're a single guy or maybe a little bit more now. Um, I haven't been singing along like 30 some years, but oh, okay. So you're a single guy. You're going in there and you're investing your 2,500 every year putting it into your Ira. You always Max that baby out. Whatever you can invest in there, whatever the the limit is, that's what you're putting in there.
Speaker 2: (36:32)
Now, within that IRA, within that Roth Ira, you had paid your taxes on that money before it was put into there. So that money was taxed beforehand, okay? Now, now there's a pile of money sitting in this IRA and that you're going to use to invest in properties that have the highest capital gains taxes. Okay? So properties that you rent through the business, those have a really high capital gains tax because they're not properties you could write off like something that you're holding. You don't own it. So it's all business taxes and they're, they're going to have the highest tax rate. But you're not going to care. Why? Because they're being held within. They're being taxed within that IRA and a Roth Ira. It was tax before the money went in. So anything that is comes out later at the end, at your retirement, when you start drawing on it, it's not taxable.
Speaker 2: (37:33)
So it's not going to matter if it was, you know, a really high tax rate because it will be tax free income. All the money that's made within there will be totally tax free. So yet it, if you've got properties that are making a crap load of money within a business that you know, so you're paying a high capital gains tax, put those in your retirement accounts. Use your retirement accounts to hold those properties and make sure that you, you don't touch them, that you stay arms length away from the meaning you don't stay or they're your friends. Don't stay there. Your kids don't stay there. They're just completely for a business and you use them for that. They're going to be taxed at a higher rate. But guess what? You're not going to care because you're not going to pay those taxes legally because you don't have to because their texts there, they're inside that IRA and the Roth IRA was tax beforehand.
Speaker 2: (38:26)
Now you want to start those Roth Iras. Now people, if you don't have your self directed Ira by now, you need to set that up. It's one of the first things that you should do when you start investing because once you make a specific amount, and I'm trying to remember what the amount is, um, we'll go over, I'll have Caroline to go over it, but once you make 150,000 or 160,000 a year, whatever it is, once you make that amount, you cannot open a Roth Ira anymore. You made too much money. So before you make your first hundred thousand, you better have opened your, your Roth Ira. Um, otherwise you're going to be stuck with an IRA, a traditional IRA and a traditional IRA. They don't, you don't pay the taxes on the money going in, but you pay the map, the taxes on the money coming out. Now, there was an episode when we first started doing this podcast and you know, cause he was like a year ago or whenever it was, we talked about that.
Speaker 2: (39:25)
When do you want to pay the taxes on your IRA money? Okay, let's think of it this way. Let's say you put in $10,000 into your Ira and then you invest it over many, many years. And at the end you, you have $1 million, you've made $1 million off of the $10,000 you invested. And that can happen. Actually, it can happen pretty darn easy. And I can, you know, and you'll, you'll see, we'll, we'll start to do some online classes so you can see this in, you know, on paper and see how this happens. But let's just say for instance, and if that number is too crazy for you to just say 100,000 okay, so 10,000 in 100,000 out. Okay. When do you want to be taxed on that? You want to pay taxes on 10,000 or do you want to pay taxes on a hundred thousand hello? It's pretty darn easy, right?
Speaker 2: (40:19)
Do you want to pay taxes on 10,000 or a million? Because I'm telling you, if you do this correctly, you can literally have $1 million in the bank. When you retire $1 million in your IRA, it'll be super easy. It will be, I mean, obviously it's going to take a few years to do this. It's not going to happen overnight. It will take years and years. But if you're doing it wisely, you will want to pay your taxes beforehand. Do you understand that you want to pay the taxes on the 10,000 going in and not on the money coming out. And that's why, that's why the government has all those were the mandatory withdrawals where they're, they're forcing older people to withdrawal so much of their money out of their Iras every year because they're afraid those people are going to die where their money's still sitting in the IRA and they won't get that tax.
Speaker 2: (41:12)
They won't get the taxes from it, that it's going to be passed on to their kids and the government's not gonna make any money off of it. And their kids going to do it a different way. So that's why they do that. They want that money, they want their taxes. So you'll need to set up a Roth IRA right now. Okay, stop this podcast right now. Get on the phone call. I Love Equity Trust, Equity Trust is the company that we've used for a long, long time. And if you're really confused about this, I think I've mentioned it before, there's a great great book called the power of zero and you need to read that book or at least listen to it on audible. I'm telling you guys, audible is amazing and that book will blow your mind because when they talk about the power of zero, they're talking about the power of zero taxes.
Speaker 2: (42:03)
And you can use things like lurks. You can, I mean I all these weird names, right? They all sound very, very weird to you, but, but self directed Iras and a bunch of different insurance, there's ways to invest in insurance policies where you will be paying zero taxes legally. It's very, very legal. It's not hiding money. It's, you're paying those taxes up front or on the backend and when you have a Roth Ira, you pay him up front. The government knows that they, that's why they discourage it and that's why they limit it and make you do it before you're making x amount of dollars. It's like, well if you didn't do it before you made this much money, then you need to do a traditional one. That's why they have those rules set in place because most of the time there's a huge learning curve involved.
Speaker 2: (42:52)
It takes many, many years and by the time you hit that learning curve, you've already made 150,000 a year or whatever the limit is and now you're stuck with a traditional IRA and you're going to be taking your taxes out as you withdraw that money. So learn from us, okay, learn from the people who know and the people who can tell you, you really want to set up those Roth Iras before you make that money. So go find a company that does self directed IRA's only. So equity, trust, they specialize in that. And that's, you want a company don't just go, I know, I know chase doesn't. I know there's a bunch of places that do that now. Don't just go with anyone. Those laws are very specific and if you screw it up, you lose everything inside your Ira. You break one rule and everything that's in there has gone and the government takes it.
Speaker 2: (43:46)
So you need to have companies that have been doing this for decades, that they're responsible for millions and millions of dollars and they will tell you what to do and what not to do. Okay? So don't just trust your money with everybody. Find a company, a reputable company to work with that's going to help you self direct your Ira. And then you're going to use that money to invest in all kinds of things. But real estate is going to be one of them. And remember the things that you're going to, you're going to start, um, a little LLC. You'll open an LLC with the money. The self directed Ira will own the LLC. They will be the member of the LLC. And that money you're going to use. Remember for your highest taxed, um, rental properties. So the ones, especially the ones that you are renting from someone else, because you can't write any of that stuff off, those are going to be taxed at the highest rate.
Speaker 2: (44:40)
Those are the ones you're going to want to run inside your, your Iras, inside the LLCs that are owned by your Iras. Okay? Because why? Because there'll be taxed in front and not coming out. So all the money it makes will be an taxable. Now if you were holding on to that and doing it yourself, then Yup, you'd be paying a crap load of tax. But because it's going to be inside something like your self directed Ira, then it's not going to be taxed. No tax. Yay. No tax and no text is good. All right. And I'll have the link for that book for you to the power of zero. He also has book, Oh, it's something about blurps, but I can't remember the title of it, but I'll put that up on there too for you. So now to finish part two of that, you can take those, the money that you're earning, um, and you can roll it from one property into another.
Speaker 2: (45:37)
Kiyosaki talked about this for years. I mean it's in Rich Dad, poor dad, it's in a bunch of his books. It's basically when you are using your property as a rental property that you own, then you the, the more you pay off of that, the faster it gets out of, of more, you know, you pay off the mortgage. Now here's the deal. Remember, you can only hold so many mortgages as an investor and you know, thanks a lot. The law just keeps changing and changing, but it's less and less. You can have less and less traditional loans. Your business corporations, they can have more than you personally and that's okay. But the best way that that we invest is very nontraditional. It's very out of the box and it's literally buying properties at 0% interest all the time. And Maria and I touched on that and we're having another episode with that where she's going to go more and more into detail about that.
Speaker 2: (46:39)
For you. And so we don't have to get a traditional loan on it because traditional loans weigh us down and being self employed, no one likes you when you're self employed. Oo, it's such a lonely, lonely place when he was self employed and the wooden legs is out there. But we like us. So when you're self employed it's really hard. You got to, oh my gosh, it's really hard to prove your income. You're pulling records from all your rental properties, your pulling records from all these different places. There's no real, you know what banks love, they love the W2's and they love all that stuff and you're, you're dealing with a shitload of k ones and all these other forms of income that they just can't, the, the paper trail is, is way too weak for them and it's hard for them to get a traditional loan on you.
Speaker 2: (47:28)
So you're going to have to think of ways out of the box. And it's not that hard guys. It's not that hard. Once we go into it, you're going to love it. Okay. And I want to hold that episode off. Although Maria and I have talked about it and we've actually recorded part of it, we haven't finished it. And the reason why is it's really not the time. It's not the time that I want you guys to be going out and rushing and investing. It's still hasn't fallen enough for us. And what we're thinking, it's getting pretty close man. It's getting pretty close. We're watching all the stuff that's going on right now and we're like, Ooh, it's getting close. It's getting close. So, um, once, once it's time to start buying, you'll know and we'll show you how to do that and you can buy, you can buy properties all day long doing it this way and have as many loans as you want and keep, you know, taking those, those properties and putting them into different entities that Caroline is going to go over.
Speaker 2: (48:23)
We're going to show you how to protect yourself so no one can go after you. No one can just go and Google your name on, you know, on a county, you know thing and say how much, how many properties as person to own. If you ask Robert Kiyosaki a ton of times it's, it's always funny. I remember him just answering people. They go, well, how many properties do you own? And he goes, I don't know anything. I don't own anything. I be a barely on my house. I think. I don't even know if he, if I remember, he owned his out. The thing is you don't want to own anything. You want your loc tone things. You want your corporations to own things. You want your trust to own things you, you. All those things are are under some other entity so that they can easily be transferred if something were to happen to you and not make your children carry the burden of taxation.
Speaker 2: (49:20)
If you pass away and there's, oh my gosh, I mean probate court will kill people. That is literally what happened in America to these big farms. I was raised in the, in the Midwest and my grandparents, I mean they're all farmers. My, my aunts and uncles were all farmers in the Midwest. They have some of the best farmland in southern Illinois right now. Here's the deal. When my great grandfather and everybody who was, you know, they came over and they started buying property, how much do you think it costs an acre? We back in the day, like you're talking some, sometimes they were like a dollar an acre, 10 cents an acre. I mean, you can hear stories of how much people paid in Acre. Okay? Now let's just, just for shits and giggles, we're going to say, let's say somebody bought a thousand acres at $10 an acre, so that's $10,000 right?
Speaker 2: (50:17)
They got a thousand at $10 and that's $10,000 they paid for a thousand acres. Now, in this day and age, let's say that that property is worth $100,000 so if you have $100,000, right? So I'm looking at it in my head right now, and then, and then you multiply it by the thousand acres you had, that means add another three zeros. That means you have $100 million worth of property. That thousand acres is now worth 100 million. And what are the taxes on $100 million? Yeah. Cause if grandpa died and he left it to you in probate, guess what? You'd be taxed on $100 million. The value of that property. Now, if that property is held in a trust instead, it's not owned by a person. So that property, like a briefcase just gets handed to the next person who oversees it. And it never goes into probate. It never gets taxed on the new value of it.
Speaker 2: (51:26)
And that's how the American farmers lost all their money and how the banks took it over because they never told them the little stories of trust. They never told them how to protect their assets. That one little thing that every farmer was capable of doing was hiring an attorney and putting their property in a trust and they just didn't know about it. So instead of being taxed, what Grandpa paid for it, you know, the $10,000 they were being taxed on $100 million and they couldn't afford it and they lost the farms and they were barring a shitload of money when they were actually super, incredibly wealthy and the banks know it and the banks took it. That is the saddest story ever and that's not capitalism people, that's, that's been a thief and that's why we don't use them. Okay. Because we would rather not use the banks.
Speaker 2: (52:25)
We'd rather go around them because they have a history of harming people. Instead of saving them all they had to do, all any banker had to do when somebody borrowed against their farm or something and they say, Gosh, you know what? We need to borrow, you know, to, to buy a tractor or whatever. They would say, do you realize that your property is now worth like a hundred million dollars? Let's do this. First of all, let's set it up into a trust and then let's set up a business account and blah, blah, blah. I mean that's all they would have had to do and they could have protected those farmers and their land because they were wealthy and they just didn't know it and they just didn't know it. But the bankers knew it and they took advantage. Okay, so now that's the same reason why you're going to put your properties into these trust, into these accounts because you don't want anybody looking up on you know, any kind of county website shine to see how many properties you have.
Speaker 2: (53:22)
If somebody ever asks you how many properties you have, you say, I don't have any properties, my business, his own properties, but I have several businesses, my LLCs own properties, but I have several LLCs and it's none of your damn business. So that's what you want to say. So I think we covered that. We'll be able to roll those into there and I'll make sure I give you a notice of when Rias interview is coming up. That interview specifically, but I don't want to put it in here. I just didn't want to have it too soon because I don't want you guys jumping the gun and buying a bunch of properties right now when the properties are at their highest, when I know that they're going to be going down and I know there's going to be a bunch of desperate people trying to dump their properties, and that means there's going to be a bunch of sales out there because when people are dumping their properties, the sale, it's sale time, man, the sales are going on.
Speaker 2: (54:12)
It's like, okay, pull out your checkbook now. So that's when I want you guys to do it. So that's why we haven't put it out there yet. Also, your LLCs can be sold, which is really, really cool. Right after one of the hurricanes, we were investing, I'm trying to think if it was David or something. We were investing down in Houston and the city of Houston decided that they didn't like, which is really crazy to me. They didn't like all the investors coming in and taking these properties that had been ruined by the hurricane, fixing them up and reselling them and flipping them right. So an investor would come in, take a home that was completely destroyed or partially destroyed by a hurricane, fix it up, make it look beautiful, help improve the neighborhood and then everything and then turn around and flip it. But they didn't like that.
Speaker 2: (55:02)
They thought, well this is really sad. All these investors are making a ton of money. When actually they were cleaning up, you know, these places, they were cleaning them all up and making everything look nice again, but okay, whatever. So they decided to put these time limits on properties. Um, meaning that you would have to hold a property for a certain length of time. Well, most flippers, they only have so much money, so they have a time limit in which to get in there big, sit up and sell it and flip it and turn it around. So we call that, you know, it's just the turnaround time. So when the city said, no, you have to hold it for at least a year, I think it was 12 months. Um, but they were having everybody hold it for a long time. We just went in there and bought them with the LLCs and every single property was bought with a separate LLC and instead of selling the house, we sold the LLC who owned the asset of the house.
Speaker 2: (56:02)
So it was like, okay, well we'll do it this way. Then there's always a way to get around stuff. And that's usually what it's like. There's, there's tons of different ways that you can get around different things. As long as you're not technically, you're not breaking the law, right? Because you didn't sell the house. The House stayed within the LLC, sold the business and the business owned the house. So it's the same thing. You, when you have an LLC, you can sell that LLC to somebody else and the assets that go with it and everything that's in the business goes with it. So make sure that you create your LLC. It's what that's, there's a lot of reasons why you want to have one. Obviously for the liability, there's a lot more liability in real estate when you're doing rental properties. Then w I should say short term rental properties.
Speaker 2: (56:57)
Then usually longterm rental properties. Reason being if somebody is going to stay there, they kind of settle in and it's their place of residence. You got a lot of, a lot of wild people renting out a property for weekends, nights. They have parties, they are on vacation, they drink more. They do things that on vacation that they wouldn't normally do, so there's going to be, it's actually kind of sad and unless you're, unless you're used to renting over by the university, then you're like, dude, I've seen a lot worse. But it's like those college kids can really rent the property. When I rented college kids, I always have their parents sign the lease and I make mom and dad responsible for everything. Not the kids because the kids aren't going to fix it by my mom and dad will and if they're not paying it or if they're doing something and breaking the rules, I just give mom and dad a call.
Speaker 2: (57:48)
Boom, it's fixed. Cause Mom and dad are like, you want to continue going to college, you want to continue me paying for this stuff? Then guess what? You're going to straighten out your act. Yeah. You always want to make sure that you put everything in an LLC once you get it into an LLC that you have corporate contracts. Okay. Make sure you that you do that. And the last thing I want to reiterate is you never want to compete for last place. So right now we're getting an, a lot of people concerned about their bookings going down in Arizona, the bookings are going down because a lot of snowbirds start going home in the spring. So your bookings out in March, April and May, we'll start to dwindle because once it once may is past, you're not going to get many bookings. So if we're not talking about the season change, we're talking about your bookings going down guys, it, everything is changing.
Speaker 2: (58:43)
Airbnb is changing, everything is changing because more and more people are getting on the platform. We're having more and more newbies out there, um, opening their short term rentals and getting on the platform. And the competition is getting heavy. So you need to up your game. You do not want to compete for last place. Meaning don't keep dropping your prices. Why are you doing that? Stop it. Stop. Drop it in your prices. Raise your standards and keep your prices nice and high. Okay? So if you had a place that didn't have it, didn't, you know, it was just normal place. It just looked good. Go in repaints get professional pictures taken. You know, put new new paintings on the wall. New Bedspreads. I really don't like bedspreads. I always have these different throws on the bottom of mine, but some of my places do have bedspreads.
Speaker 2: (59:36)
But what you really want to do is you really want to, you want to make it exactly what we talked about when we talked about the AIRBNB. Plus, you really want to make it look nice. Why? The nicer it looks, the more money you can charge for it. Even little places, guys, you never want to compete for last place because why? Because you lower the price and then the next guy lowers his price and then you lower your price again and the next guy lowers his price and you can never, no one ever wins. It'll get to where you're both losing money and the person who goes out of business first, the other one finally gets to take a breath. It's not worth it. You never want to compete for last place. You don't. So when you're seeing your bookings drop, it just means you have to up your game.
Speaker 2: (01:00:22)
You have to get new pictures. Well first you have to straighten it out and a really good way to do this is go through your reviews, goes through a your reviews and see what people, what kind of messages they're sending you, especially in the private messages. If they're saying, I don't know, like if they're saying stuff like the bed isn't comfortable enough, get a new mattress. If they're saying like the pillows are too hard, get, you know, a set of soft pillows and a set of hard pillows so that there's four pillows on every queen size bed or full, you know, full size bed and above. You want to make sure that you're making everybody happy. You want to make sure that your sheets are comfortable, if whatever they're mentioning in there, fix those things and then up the game, up your game, right. Because wherever you are, your areas.
Speaker 2: (01:01:12)
I mean, I think when we started doing airbnb in Arizona, there were probably 5,000 airbnb listings. Now there is closer to, I think last year they said 7,500 and this year there was more like 10,000 or 12,000 or something. And I was, it was a huge number. It's just growing, growing, growing, growing all the time and then I wouldn't be surprised if it's doubled since last year so there's more competition. It means you just have to up your game. You want to give people quality, stop cleaning your own places, hire somebody. This is a business and if you, if you can't right now, if you just seriously can't, you're like I just really can't afford that. Then guess what? Pay Yourself. Remember to pay yourself. Pay Yourself as a housekeeper and add those fees on. You have a cleaning fee. Everybody should have a cleaning fee. There's no reason why you shouldn't and you should be paying somebody to clean your properties.
Speaker 2: (01:02:11)
This is not stuff you want to be doing because you're going to be wearing the big ass and if you don't know what I'm talking about, you haven't heard a whole all of this podcast because the s is the superman, right? The self employed, the people who think they can do it all, you can't do it all. You really can't. It's time to delegate those other activities and the non money making activities to other people. So up your game if your bookings are dropping, then up your game up your game and get your pictures fixed and get your headlines fixed and go out there and just, you know, the more quality you put in there, the more money you can charge. Guys, if your place, it could be a crappy little one bedroom in the middle of, I don't know, I mean I'm trying to think of someplace, not nice, but there's almost every place can be nice no matter where it is.
Speaker 2: (01:03:03)
So I mean, you can take a warehouse in, in a warehouse like neighborhood and make it look amazing and charge hundreds of dollars a night for it. You really, really can, but it better be clean and a better look. Good. And you better have quality pictures and you better have a really good title on there and great description, right? So make sure that you're doing those things. Do not compete for last place. Stop cutting your prices. Okay. Treat your business like a business. All right. So we're all done with this podcast today. I want to thank you for listening and I want to ask you really quick to do me a favor and please subscribe like us. Give us a review, hit us up and if you've got any questions, feel free to go to our Facebook page and you know, give us a question there or send a question to [email protected] we'll get back to as soon as we possibly can and remember again to read, read, read.
Speaker 2: (01:03:59)
And if you can't read then listen to audio books. They're amazing and we've got that really great deal from audible for you. So if you want a free book, a free book that you can download and 30 days to try out audible, just go to audible, trial.com forward slash str revenue and you can get your free book and your, your 30-day trial. And I'm telling you guys you will love, love, love audible. My favorite thing in the world and check out all the books and everything online on our [email protected] and we will see you next week.
Thank you so much for listening. God bless you. Have a great day. Go and grow.
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