YFP REI 07: Short and Medium-Term Rental Property Investing

Short and Medium-Term Rental Property Investing

Rachel Gainsbrugh provides insight, practical advice, and resources for finding, managing, and growing your short-term and medium-term real estate rental portfolio.

About Today’s Guest

Rachel Gainsbrugh is on a personal mission to help pharmacists create a life they do not need a vacation from! When Rachel first started with rental property investing two years ago, there was a lot of trial and error in finding properties. She did not always win; a few times, it felt like she took one step forward and three steps back. However, every new endeavor has been more successful than the last! Her expertise lies in luxury, short-term rental investing, management, and education. As we know, passive income is the ultimate key to unlocking financial freedom, time freedom, and generational wealth for all busy professionals.

Rachel is passionate about pharmacists. It is Rachel’s goal to share with pharmacists what she has learned on her way to building a profitable luxury short-term rental portfolio that has provided an extra source of income as she aims toward the time freedom she has dreamt of. Rachel wants pharmacists to experience what it feels like to generate income outside of their daily job. That feeling does not get old! Financial wellness is wellness too! As healthcare providers, pharmacists often do not take care of themselves but need to. Rachel’s passion is to show healthcare providers how to invest in profitable lifestyle assets such as short-term rentals. She is on a lifelong journey to positively influence the financial literacy of over 1 million medical professionals so that they can have absolute freedom to live the life they truly desire and thereby allowing them to uplevel their patient care to extraordinary levels.

Summary

Rachel Gainsbrugh shares information for finding and managing short-term and medium-term rentals. Rachel shares the many reasons she loves short and medium-term rentals, a variety of tools and resources she uses to streamline the management of her real estate investment portfolio, and her tips for finding a great short-term rental property.

Rachel Gainsbrugh’s 5 Tips for Finding a Great Short-Term or Medium-Term Rental Property

1. The property should be 30 minutes or less away from a hotel. Hotels have already conducted extensive research to determine the ideal location for a short-term stay. A short-term rental takes advantage of the existing information and market.
2. The property should be within 30 minutes of a hospital. Hospitals often contract travel nurses who are typically contracted to a 16-week stay. Hospitals may also have patients who need specific treatment and must stay close to the hospital for a short period. This proximity provides good options for stays for those demographics.
3. The property should be within 30 minutes of an airport.
4. The property should be 30 minutes or less away from a college or university.
5. The property should be found in proximity to an industry that requires frequent travel, such as construction or film.

Mentioned on the Show

• YFP Real Estate Investing 02: Long Term vs. Short Term Rental Property Investing – One Pharmacist’s Perspective
• Join the YFP Real Estate Investing Facebook Group
• REI-USA: Real Estate Knowledge Towards Financial Freedom Through Community, Connection, and Collaboration
• Bigger Pockets Podcast
• Airbnb
• Dave Ramsey
• AirDNA: Short-Term Rental Analytics
• Vrbo: Vacation Home Rentals
• Corporate Housing by Owner: Furnished Rentals and Short-Term Rentals
• Furnished Finder
• TaskRabbit: Same-Day Handyman, Moving, and Delivery Services
• Rent Responsibly
• The Book on Rental Property Investing: How to Create Wealth and Passive Income Through Smart Buy & Hold Real Estate Investing by Brandon Turner
• Short Term Gems
• Top 75 US Cities with the Highest Profitability for Short Term Rental Investing in 2021
• YFP Real Estate Investing

Episode Transcript

Nate Hedrick: Hey, David, how’s it going?

David Bright: Hey, good, thanks, man. How about you?

Nate Hedrick: It’s good. It’s been another busy week. But it’s been a good one. And the weather is starting to warm up here in Cleveland and more real estate activity heating up with it. So it’s been good.

David Bright: Yeah, we’re finally starting to see some warmish weather here in Michigan too, which is nice. And the warmish weather I know makes us both think of getting out, vacations and fun stuff like that coming up, which I think ties in a lot to where we’re going this week with this podcast in short-term/medium-term rentals, which I know is something that you’ve been talking a lot about too more recently.

Nate Hedrick: Yeah. Honestly, between Jared’s episode talking a little bit about short terms and then this actual interview we did with Rachel, ever since I had this chat, my mind’s been racing about ways to look at short-term rentals. It’s something I’ve always kind of wanted to dabble in, but now that I feel like I have good connection points, it’s something that I’m taking a little bit of a harder look at, which is pretty cool.

David Bright: Yeah, and with this episode as well specifically, I hadn’t really given much thought to the medium-term rental space in terms of furnished rentals that more than a month, less than a year space, and so this has just really just kind of messed with my world of like thinking of all these properties that I probably could have made work before, but I just wasn’t thinking. So I thought this was just a really powerful episode today.

Nate Hedrick: Yeah. So for those that have not seen anything from Rachel, she’s all over the REI — or the YFP REI Facebook group, so definitely take a look for her there. But for those that don’t know Rachel Gainsbrugh, she is a — basically she’s a real estate investor, she’s a pharmacist, she’s actually an instructor at REI USA, a national real estate investing association, she’s been featured on Bigger Pockets before, she’s been on multiple other podcasts. So a lot of great experience. And her primary space and where she really operates is in the short-term luxury rental space. And she is just a wealth of knowledge in that area. And so we wanted to bring her on, talk a little bit more about short-term rentals, mostly so David and I could learn but also so you guys could learn along with us. So really excited about the tips that she brings. There’s a couple of good spots in there where she talks about just actual, tangible tips for how to do certain things. One of my favorite ones is the five tips for finding a great location. I wrote that down, and I’ve like got it pinned on the wall over here waiting to track down that perfect short-term rental spot. So really great tips throughout this whole episode.

David Bright: Yeah, there’s another one in there about checking in deeply to the local ordinances and regulations, that there’s a lot of nuance in some of the rules of short-term rentals in different markets where in some, it’s completely acceptable and normal and others, it’s very not acceptable. And so knowing those local rules for the city, township, whatever that would be. So a lot of good tips there to make sure that this isn’t something that’ll get you in trouble but something that you can leverage to move your investing forward.

Nate Hedrick: And this is really relevant too. There’s a lot of articles that have come out recently. I just saw the CEO of Airbnb put out a thing talking about how many rentals are going to be needed in the short-term rental space in the near future. And just the numbers are staggering. So this is a growing area. If you have any interest in this at all, this is a great episode. And if it’s something that you’ve never heard about and you just want to learn a little bit more, Rachel really breaks it down from a basic level right on up, which is a great feel for this whole episode. Alright, and with that, we’ll take you to the episode. Here we go.

Nate Hedrick: Hey, Rachel, welcome to the show.

Rachel Gainsbrugh: Thank you for having me. Thrilled to be here.

Nate Hedrick: Yeah, absolutely. We saw you, you’ve been nice and active in our YFP Real Estate Investing Facebook group. And we just saw the inspiration you were giving to a lot of the members there and some of the stories you were sharing, we said, “Oh, we’ve got to have her on the show. She’s going to be a perfect guest for us.”

Rachel Gainsbrugh: Well, I’ve been waiting for a group like that for a very, very long time, like-minded pharmacists interested in real estate investing. So I was thrilled that YFP decided to niche out a little bit and go into real estate investing. I love it.

Nate Hedrick: Yep, appreciate that. Yeah, that’s exactly where we’re going. It’s about as nichey as you can get, right? It’s a niche within a niche, but it’s a cool community we’ve developed. So for those that have not checked it out yet, make sure you look at the YFP Real Estate Investing Facebook page. It’s a great place to go, you know, really great community that we’ve been building there. So if you’re part of the audience and haven’t checked it out yet, head on over. So Rachel, I’d love to get started here with a little bit of your pharmacy background. You know, one of our loading dose questions here is really just that pharmacy piece first. And then we’ll dive into the real estate next. So if you can start with your pharmacy story and where you’re at today, I’d really appreciate it.

Rachel Gainsburgh: Yeah, absolutely. So I attended university at Palm Beach Atlantic in West Palm Beach, Florida. Went on to do a residency because I just wanted to make sure I had options after graduating and not necessarily be boxed into one particular setting. And upon completion of residency, moved to Georgia for an awesome job opportunity. I did a little bit of — I feel like a little bit of everything, a little bit of retail, I did a little bit of hospital. Loved, loved the IT side of things and so did a lot of implementations, so for EHR. It was real. You know? And so I did a ton of traveling from Georgia to multiple different states to do EHR implementation. And so currently, I’m doing some consulting with that still. But I work remote as a telepharmacist as well. Loving life, I really love what I do now. I don’t think I’m made for retail. I’m not really cut out for that. It’s definitely challenging, and I love the interactions when it’s like nice and slow and mom and pop, but when it gets too crazy and I don’t get a chance to spend time with my customers, then it’s like, ah, I’m missing out on that, that relationship piece, so yeah. That’s what I’m up to.

Nate Hedrick: That’s great. I’m the exact same way. I did — as an intern in a retail space, and the days where it would great crazy, like it just didn’t feel like a pharmacy sometimes. So I hear you on that.
David Bright: Well, one of the things that I love about that story is you found your niche in pharmacy, you found something that you really love, which sounds like you’ve also done with real estate. Within the wide realm of real estate, you’ve also found that niche you love. So tell us a little bit about your real estate journey and what you’re up to now.

Rachel Gainsbrugh: Oh my gosh. So I think my real estate journey, we would first have to visit my financial journey because after leaving pharmacy school, I was of the mindset, I don’t know, what was kind of sold to me was you’re going to graduate, you’re going to be rich. And I was like, yeah, sign me up. And so you’re talking to a poor girl from Haiti, the poorest country in the western hemisphere, you do this, you will succeed, you will. You know? And so up until that point, I didn’t really have any credit card debt or interactions, didn’t have any student loan debt. So I figured, well, that’s good debt. And so just sign me up. I signed up for the max of everything that I could possibly get. OK? And I was living my best life. Or so I thought. And unfortunately, after the fact, OMG, when the interest, everything came crashing in, it was pandemonium. I’m talking about — yeah, it was a disaster. And you know, I can’t blame the university or anyone else and even my parents, you know, they did not — foreigners, I guess I’m not even first generation, really. I’m zero generation. So we didn’t know. They didn’t know, you know? And so had no guidance, had no financial literacy in terms of student loan debt. Always knew to live beneath my means. I didn’t adhere to that. That’s like a core value, did not adhere to that. So finally, my husband and I, we decided we have to do something about this. We can’t have this hanging around. And so we took massive, insane, cray cray action. I’m talking about we took every possible job we could. I mean, we were working almost — it felt like around the clock. We did Dave Ramsey debt snowball, got rid of it all in a short amount of time. And we just took that massive action. And so once we got rid of it all, we were like, oh my gosh, this is the turning point. This is our turn, our time to do something with this. And so looked around, and a lot of my friends who maybe didn’t have as much debt, were just continuing to live their life, they had been investing in real estate. And real estate was always something that intrigued us. And so we thought, yeah, let’s do real estate. You know, I don’t understand NFTs or blockchain or nothing fancy. A lot of my friends, they trade and they’re doing options and I’m like, I’m on the couch going that’s not really for me. And I don’t do single stocks either, you know? That’s a little I guess leftover Dave Ramsey philosophy there that I still adhere to. But real estate, that was something tangible. I can go and touch this house. I get that, you know? We started looking, we started talking to as many people as we could, and we found a deal. It was in Alabama. I’m in Georgia. We drove four hours, OK, and we saw this deal. And it was $14,000 for this house. Three bedroom, two bathrooms, OMG, and so we’re like, oh my gosh, this is it. This is going to be the start. You know? So we pull up to the property, pull up to the driveway, but on the way there as we were getting closer and closer and it starts to look like the land that time had forgotten. You know? So OK, where am I? So sketchy. What, this little sliver? I mean, the road as you closer is like, OK, this looks like it’s up-and-coming, this looks like — and I started to use Zillow and survey and say OK, well how much are the homes in the area, the surrounding area, the neighbors? How much would they sell for? And I was like, you know, it looks like there’s a possibility. Oh my gosh, the house when we get there, it looks like someone had used like caulking around everything on the exterior. And the roof was kind of — and so we pull in, and then my husband goes up to knock — and I’m like, don’t knock on the door! I was like, don’t knock on the door!

Nate Hedrick: Let’s run.

Rachel Gainsbrugh: And the woman’s waiting for us. I was like, don’t even knock on the door. And so reset, and I’m like, that’s not for me. I mean, it doesn’t take much for me to get a little bit frazzled when it comes to like a full gut job. You know? Again, I work in my job, I love what I do, I sometimes put more hours in, you know? And so to do a full gut job, to engineer and micromanage a full gut job, that’s not for me at that time. And so we left, and so we started looking for other houses like OK, maybe not $15,000, maybe $50,000. And so that was a no go. And I kid you not, in our neighborhood, a home went for sale for $299,000. And the homes in that area are typically $400,000.

David Bright: Oh, wow.

Rachel Gainsbrugh: So we said, “Wait a minute. What’s going on here?” As soon as it went on the market, we put an offer in. And we were number seven. However — and this was in 2019, we just started a couple years ago — everyone else was asking for contingencies and things and all of the things. And we said, we’re not asking for anything. We’ll pay for closing costs because we live in that neighborhood. We knew absolutely what that home was worth. And so it was a family member, the parent had passed away, family member was living in South Carolina and they were just wanting to offload it. And so the rest is history. We turned that puppy — it needed a roof. We found some guys to put on the roof. Seven, eight days later, we were rocking and rolling. And so we turned it into a short-term rental — well, executive short-term rental. This is in suburbia, so not in a vacation location. And so we absolutely loved it and started to invest in more and more properties. And I’m a little bit tired, I had a photo shoot just now, so we just launched another property and the guests are checking in tomorrow. So there’s — it’s like havoc here.

David Bright: Cool.

Nate Hedrick: A couple of things that you said there that I really like. You tried to dive in with kind of this like, well, if it’s cheap, it must be good, right? You know, Brandon Turner I think famously says, “Just because you can buy a $2,000 house doesn’t mean you should buy a $2,000 house.” Right? You had that same moment of like, this is not for me. This is not the type of investing I want to be doing. And what I like about that is that you keyed in on what works for you guys and pivoted toward something that was going to work for you. And then once you found it, you really dove in and said OK, this is now our niche. This is the area that we’re going to start investing in, and we’re going to see where this can take us. And I think that’s extremely powerful. That’s a great story.
Rachel Gainsbrugh: Absolutely. And so it’s not right, it’s not wrong, but if you’re super handy and your spouse is super handy, I’m a mathlete and my husband, I guess he’s like an English-lete. And we just, we’re not handy. We’re bookworms and so if you’re super handy, yes. Do it.

Nate Hedrick: Yeah, lean on your strengths. That absolutely makes sense. I love it. Now that we know you kind of walked away from the fix-and-flip, the $0 to buy the house but $100,000 to fix it up and you’re moving into this short-term rental space and you said luxury short-term rental, for our listeners, you know, I think most people think of rental properties, they think of that long-term, you get a house, you fix it up or you just make sure that it’s ready to rent, you have someone there for months and months and months on end, and that long-term rental property is kind of the one that most people think of. But when you think of short-term, you might think of Airbnb or VRBO or one of those. So can you talk us through what is a short-term rental? And why is it the route that you guys decided to go after looking at the options?

Rachel Gainsbrugh: Sure. So short-term rental is a property that you rent for less than 31 days I believe is the technical definition of it. But for those who are actual investors, I would say, you know, typically, like you said, a year is going to be the typical. Anything less than a year, six months, eight months, that could be considered as a short-term rental as well or maybe even a mid-term rental. We have a new definition within our vocabulary since the days of COVID. So not just less than 30 days, it could be three months, especially since we do serve travel nurses and things like that. They typically would book for 10 weeks is their typical contract. So those are mid-term rentals. And so for me — and this is something that I should have shared a little bit earlier — so for me, in order to really take advantage of the time lost or the opportunity cost of not investing in real estate early on, I knew we had to do something massive. I knew we really wanted to up our savings game and up our revenue. And so we looked at, we analyzed long-term rental. I mean, we really wanted to, but when we found out that short-term rentals, they typically gross 3-10x the revenue of a long-term rental. That was it for me.

Nate Hedrick: Yeah.

Rachel Gainsbrugh: All bets were off. I was like, yes, this would be a such a great way to drastically increase our revenue potential and our savings. And so for me, that was one of the benefits. Now, I have about seven or eight benefits for short-term rentals. So if you’re going to have a short-term rental in a vacation location, I mean, the obvious benefit is, hey, I have somewhere that I can go vacation. The other benefit of short-term rentals, I’ve been doing this for a couple years now, I have never had to technically evict someone in terms of going to court and going through that situation. But I do have a constable on retainer to immediately evict if there’s a party at a location.

David Bright: Nice.

Rachel Gainsbrugh: So it’s not going to be a long-term situation. So get out, like, now. So yeah. And I have control over my short-term rental. My other favorite thing is for instance, if the tenant starts off great and then they turn out not to be great, you guys kind of own each other for a year, 18 months, I’m like mm mm. I prefer to be able to have those short terms. If I love you, I love you. If it doesn’t work out, hey, you’re going to be out in a few days. So we’re good. Flexibility, so say the in-laws come into town and then the other in-laws come into town and then my house is like at capacity. At Thanksgiving, I block off my calendar, and now I have another property that our family can stay at. And then picky guests, with long-term rentals, they come into the home a lot of times and they love it. I know, I used to rent. We rented an apartment. And we loved it, and then after it was done, we’re like, oh look, did they really lay that tile correctly? Did they really? Uh uh. Short-term renters, they love me through and through. 14 days, they’re out. You know? They don’t have enough time to over-evaluate my tilings, which I don’t lay tile. But I do lay flooring and luxury vinyl plank. And the other thing is your property is so well maintained as a short-term rental because you’re going to be having that property professionally cleaned multiple times per month, even, or once a month at least, right? And if a tenant complains, oh, you know, something’s wrong, we fix it at the double. Long-term rentals, OMG, I’m in a mastermind with a lot of friends who do long-term rentals. OMG, the things that has happened over the course of the year the properties are rented, I can’t even — I can’t even. So yeah. Those are the reasons why I love short-term rentals.

Nate Hedrick: Now you’ve gotten me convinced. I want to switch all my long terms to short terms now.

Rachel Gainsbrugh: Come on. But it’s a lot of work. Of course there are advantages and there are definitely challenges as well.
David Bright: Yeah, one of the things that I think you’ve already mentioned that’s one of the big differences is the price point. Right? Like you’re not necessarily going and buying this $16,000 and turning that into a short-term rental at $100 a night or something like that. So can you walk us through what the numbers generally look like on an example either short-term — I’m also really fascinated by this medium-term thing of more than 31 days, less than a year, so how kind of all that might shake out.

Rachel Gainsbrugh: Yeah, and I’ve got to tell you, that’s my husband’s favorite is the medium-term as well because the turnover is less. And so the medium-term I think really became a la mode around COVID where there weren’t a lot of opportunities to travel a ton and people were typically staying at a place for a number of weeks to months. Typically someone’s coming by to visit real quick and party, it’s 3-4 days. And so that changed the whole spectrum of the guest average that we had. Additionally, when we had relief workers coming to assist with the COVID surge in Georgia, we know those were my travel nurses, those were the medium-term folks. And also for locations that have regulatory restrictions, and so you’re not allowed to host in a short-term rental every 4 days. But perhaps based on your ordinance, it can be 30 days or higher, then that would definitely fall into the mid-term. So there’s definitely several use cases for the medium-term. And you know what? I mean, I’m launching one, the one that we launch tonight is going to be a medium-term. And that client, we seem to be the specialists for insurance claims really. And oh my gosh, they’ve been gangbusters. Whether it’s for a house fire or a tornado that came through and the family is displaced, there are so many use cases for short-term rentals. And so as far as the numbers are concerned, it is going to be based on so many factors. And a lot of the analysis that I do is on AirDNA.co. That’s one of the primary sources that I utilize for my analysis, AirDNA.co. Additionally, I just go on Airbnb.com and I’ll remove my cookies and I’ll hide my, you know, account so that I can see really what’s going on around everything because they tend to — they try to make all my properties float to the top if I’m looking. But if it’s not me looking, I want to know really what’s going on. And so I go incognito. I’ll go to different neighborhoods and to see what’s going on. Are there a lot of Airbnbs? Is there a demand for Airbnbs? And so on and so forth. And what the — and so that really drives the numbers. And the data doesn’t lie, you know? And so I’m a big believer in starting in your own backyard. But for instance, I will give you an example. The property that we bought for $299,000, monthly, it grossed about $5,000 a month. OK? So sometimes it was $4,000, sometimes it was $7,000. So that was one of the peaks. But it grossed that amount. However, times have changed there. It’s a weird environment right now. That house that we were renting, it’s a similar house, a little bit bigger, but we’re charging $11,000 a month.

Nate Hedrick: That’s crazy.

Rachel Gainsbrugh: They’re overnighting the check. It’s crazy.

David Bright: Wow.

Rachel Gainsbrugh: Yeah, so I wouldn’t feel comfortable personally asking a family to pay that, but insurance, it’s a whole different conversation. I hope no insurance people are listening here. But it’s a whole different conversation. And so 3-10x your revenue with short-term rentals.

David Bright: So with that, like I know like Airbnb and VRBO, places like that, for more of the vacation rental type thing or even that short-term. But how do you market to a medium-term tenant? How do you find those tenants? And how do they find you?

Rachel Gainsbrugh: I think what a lot of people may not understand is that Airbnb is such a disruptor in terms of the way that we live and we travel. So Airbnb is the Google for short-term rentals, for vacation rentals, for temporary housing. And so I would say the vast majority of my clientele finds me on Airbnb. Insurance agents find me on Airbnb. Now, I do believe in diversification. I market on other platforms such as Corporate Housing by Owner, and that is a paid platform. You pay before you list. Airbnb, you pay after you list. They take their cut out in the proceeds after you get bookings. But Corporate Housing by Owner is definitely a viable option. It’s not the most affordable. But it depends on this asset that you have. If it is of that asset class that’s more expensive, it’s definitely going to pay for itself with one booking. However, if I’m marketing, I do have a two-bedroom basement house hack that I have. I’m not going to market that on Corporate Housing by Owner because I don’t want to pay. And so Furnished Finder is another platform as well. It is a paid platform. Furnished Finder.com is where I find all of my travel nurses. And so I list there, and you know, it’s kind of like they come to me and they ask, are these dates available? So it’s not as sophisticated as Airbnb where someone can look and instantly book. You do have to kind of have a conversation. And so that’s how that platform is set. So I would say Corporate Housing by Owner and Furnished Finder are additional ways that my guests have found me.

Nate Hedrick: Those are some great tips. We’ll make sure to add those recommendations to our show notes because I think for anybody looking to get started, those are just some great ways to jump in and ways that, again, until tonight, I have only think I’ve heard of AirDNA. So you’re teaching me a bunch tonight, which is awesome. I appreciate it. One of the things that I really like about this — and I want to make sure we talk about it — is that a lot of pharmacists say that — not everyone, really — but pharmacists have been saying that the reason they want to get into real estate is to diversify their portfolio. Right? They feel like they’ve got their 401k contribution, they’ve got their Roth contributions figured out, but now it’s time to diversify into something else. And so they look at real estate as kind of that next option. What I like about what you’ve done is that you’ve not only diversified into real estate, but you’ve diversified within real estate. And by that, I mean you’ve gone to different markets. So can you tell us a little bit about the different markets you’re in and how that provides strength to what you’re doing? I think that’s — I think it’s really inspiring.

Rachel Gainsbrugh: I don’t know if it’s the most brilliant move, but what I do is I’m trying to really leverage — and if you’re a Dave Ramsey-er, close your ears. I’m leveraging my 10% down. That 10% rule, you can purchase a second home in each of the different markets. So you can have like 10 second homes. When I scrape together 10%, I jump into another market and I look for a property to invest in. And so that’s been basically the strategy at a granular level. But again, I start — you have to have a vision, right? I start, I begin with the end in mind. What do I envision my life being? And it’s not necessarily having 8,000 doors or — at first, I thought it was, you know? Because I still have shiny object syndrome. Like today, I was asking someone, “Oh, tell me about storage.” But I’m like, stay in your lane. Stay in your lane. So for me, I envision myself, you know, we all want to retire one day if we’re blessed enough. And then so where do I want to go? You know? That’s my vision. I want to have and control the least amount of properties that generate the highest profitability. So for me, it could be anywhere from 7 or 8 doors and maybe 3 doors, depending on the property type. So I don’t want a lot of doors per se, but I want to travel. I want to see, spend some time maybe in California, three months in California, and three months in Arizona, and three months in the Poconos. I love seeing the Florida Panhandle or maybe in the Smokies. So those are — that’s really my strategy is I scrape up my 10% down and then I go and I invest in another market that I’m interested in.

David Bright: Yeah, so I’ve not bought a second home personally, so I don’t know these mortgage rules real well, but are there requirements to that being a second home? Like do you have to stay there personally? Or are there any things you have to be careful about when you’re buying a second home on a second home mortgage versus a traditional investment property mortgage?

Rachel Gainsbrugh: There definitely are. And I wish I could speak to it in great detail. I’m not the most well-versed either. But I actually have a mortgage expert coming on to a webinar to explain it all to us. So definitely legit in terms of the way that it’s structured. And according to the rules, you can live in there I believe less than 25% of the time and you can rent it the other portion of time, but do not quote me. Definitely the mortgage brokers or the lenders that are well-versed in the vacation rental markets, they know all of those rules. So I’d reach out to someone who’s an expert.

Nate Hedrick: Yeah, and that’s a really smart way to play it, right? Talk to the mortgage lenders who actually know this stuff inside and out. You know, I tell this to everybody I talk to like, you do not need to be an expert in everything that you do. Some of the best things you can do is just go to the lender and say, “Here, I’m looking to do this. Help me figure out how to do that.” And let that expert drive you, just like someone coming into the pharmacy is not going to say, “Well, I googled this a whole bunch. I think I know the answer,” right? The better response is to say, “Hey pharmacist, can you help me pick out an over-the-counter medication,” or whatever. So that’s a big point right there is talk to the experts, let them guide you. That’s great.
David Bright: Yeah. Other question off of that is — and I know you spoke to this a little bit earlier about kind of the difference in eviction and some of that that could happen if you have a tenant that doesn’t really take very good care of your property. So tell me a little bit, I don’t know if you have any horror stories or anything — maybe you don’t want to spook the listeners too bad — but is there anything that’s gone on where you’ve been able to make quick repairs or make a quick rebooking? Or how do you salvage some of those less-than-desirable situations?

Rachel Gainsbrugh: Yeah, absolutely. And you know, communication is key. So if a guest reaches out and they say, “You know what, last night, I took a shower, it was cold. I didn’t have any hot water,” you know? True story. And so they’ll send that message to me on platform. I’ll pick up the phone and give them a call. You can resolve a lot, you know, with communication. Gave them a call and said, “We’re on it. I’m calling my team, and someone will be there shortly.” Before getting started, definitely build a team. And that’s one of the first things that I do. When I put an offer a home, I start looking for my team in that particular area, my boots on the ground to definitely be there for my guests if anything arises. So my team is typically three handymen, three plumbers, a couple of cleaning companies, two or three cleaning companies. I utilize the TaskRabbit app, just to get someone to, “Hey, I’m going to get an Amazon package that’s delivered at this place. Here’s the code to get in. I need you to make it look like this picture.” That’s what they do. And I do have three concierge VAs that support me as well so that my communications are always on point because there’s a timer. So if you have a team, you don’t have to do all of it, right? You have a team, and you structure things so that you have your folks on retainer, you’re not paying a ton for all of that, but you have a team and they know that you’re going to continue to give them steady work as it comes. And as you continue to build your portfolio, you end up with people that can count on you. So I definitely leverage my team for those kinds of situations because think about it. So if my house, the plumbing went out, well, do I really need to be here? I’m still going to call someone to come and fix it. I don’t have a clue. Not a clue. So when the water had issues in Tempe, Arizona, I picked up the phone and I called a plumber. He went there and he took care of it.

Nate Hedrick: So you mentioned some really great tips there. And I think the biggest one is that you’ve almost taken the idea of property management and moved it to VAs and TaskRabbit members. It’s such a cool way — it’s so different than what I’m used to. And I think it’s really interesting to see your perspective of your property management almost looks like the cleaning crew, individuals that you can contract out, the having a constable on retainer. Like that is basically you getting property management without having to have a property manager it sounds like. So that’s some really great tips and some really great insight and how the rental space is different on the short-term side than the long-term side.

Rachel Gainsbrugh: Yeah, absolutely. And of course, insurance, you know, you self-insure. You want to make sure you have the proper insurance if something were to happen. We had a shower glass door that just completely broke and shattered. And so if you have the right insurance, definitely that will help support you.

Nate Hedrick: And then one of the things I want to make sure we talk about too because it’s so important in different areas, especially in the short-term space is reviews. So talk to me a little bit about I think I’ve heard — and again, I’m bringing you as the expert at this point — but reviews make or break these listings, right? I mean, that has to be the end-all, be-all of making sure that you get that continually rented and make sure you’ve got vacancies down.

Rachel Gainsbrugh: Oh, absolutely. And if your reviews fall below a threshold and it’s not a really low threshold, you will be banned from the platform.

Nate Hedrick: Wow.

Rachel Gainsbrugh: And so your reviews make and break your whole business. And this is a business. And additionally, your revenue is also based on your review because if you have great reviews, you can definitely demand a better pricing, higher pricing. But if you have poor reviews, you better drop that price so that someone will come in and be appreciative and give you some great reviews. And so reviews really make or break your business. And guess what? The cleaning team, my cleaners, oh my goodness, the reviews are really — I believe they really hinge on a lot of what the cleaners do.

Nate Hedrick: Interesting.

Rachel Gainsbrugh: And so there’s not a lot of room for error. So when I go in to a market, I’m always looking for cleaners, good cleaners, quality cleaners. I kind of do a — I’ll call it a little bit of cheating — I kind of do reverse engineering. I’ll find all the top self-managing properties, and I’ll find their reviews if they’re in the 4.8 and higher, I make friends with them.

Nate Hedrick: Nice.

Rachel Gainsbrugh: And I kind of nurture that relationship because at the end, all I want is their cleaning person.

Nate Hedrick: I love it.

Rachel Gainsbrugh: Network, network, network. Anyway, but I want to know about their cleaners because honestly, it’s the cleaning person that makes or breaks the reviews. If someone finds a bug on the carpet or they find hair, all of that is all up in your review. You know? The cleaning team is so key.

Nate Hedrick: That’s great tips. I love that.

David Bright: Yeah, I’ve always thought of short-term rentals as being that beach house or that ski house, and that’s about it. But I think you’re really opening up a lot of brainstorming when it’s these medium-term rentals and other things like that. So this could work in a lot more cities than I think a lot of people generally realize. So for someone that is thinking about trying this out in a town, other than making sure that the rental is furnished, like is there anything else that they need to think about as far as identifying a really good house as a candidate for something like this?

Rachel Gainsbrugh: Here are my five characteristics of finding properties in a particular location: So the property must be at least 30 minutes away or less from a hotel. So think about Hilton and Marriott, right? They spend millions on research to determine where are the best places to place your hotel. I don’t have a million in research. Let me go ahead and use and leverage their research. So if I’m within 30 minutes or less of a Hilton, that’s definitely going to be a viable option. Second of all, hospitals. 30 minutes or less in proximity to a hospital, that’s definitely going to be a viable option. You have travel nurses, you have families coming in for someone who has chronic illness that requires a special treatment at that particular location, right? Airport, 30 minutes from an airport, 30 minutes or less from a university, and then the last one, the fifth one, is going to be some kind of industry that requires a lot of travel. So if there’s a lot of construction going on, for me it’s the film industry. So at one of our properties, we had HBO come in and film an interview, and that’s a whole different — talk about nichey. That’s a niche within a niche. And that we won’t have time to talk about my pure space ventures. And so those are some of the characteristics. But before we dive into that, regulation, regulation, regulation. I would say if someone’s interested in a particular county or city, call your county clerk’s office today and ask them what are the short-term rental laws in this city? And then call Rent Responsibly, that is an organization that is really doing a lot of grassroots efforts around the short-term rental arena, and ask them what their — what information do they have surrounding short-term rentals in this particular location. And it’s going to be very address-specific. So for instance, on my block, it can be A-OK, but the block over, it may not be OK to short-term rent. And if you are in suburbia, just say no to HOAs. If there’s an HOA, no. If I were to go on Zillow tonight, if I don’t have a ton of resources or a ton of networks, I would put in the search properties that are like at least .5 acres or more because what that does is it gives you a little bit of space between you and your neighbors. And those typically, in my particular area, are not a part of HOAs. So I would look at those types of properties. But if you’re right next to your neighbor and they’re like looking, and that’s not the best environment for a short-term rental. I hope that’s helpful.

David Bright: Yeah, I think there’s a really good tips in there. I love the paying attention — like I think a running theme is pay attention to the rules and follow them, with mortgages, with townships and cities and counties and all that stuff, some space in there I think makes a lot of sense. Are you finding that two- or three-bedroom or parking situations or like any other kind of characteristics about the house itself that you would recommend?

Rachel Gainsbrugh: I will tell you my favorite house is a house — I’m always looking for the multi angle. So if a house has a finished basement, I’m all in. I love that. Or like the Tempe house has a casita or the beach house we’re building has a carriage. I am all in because what that does for me, one transaction — and I know all the multifamily people are like, duh — but one transaction is going to provide me three lines of business. And I say three because — so the main house is one, the carriage or the in-law suite or the granny flat is the second, but then the entire package is the third. That gives me three lines of business, and that gives me three listings that I can place on the market.

Nate Hedrick: That’s great.
Rachel Gainsbrugh: So I love, love that characteristic. If it is going to be a larger home, yes, you have to make sure you have ample parking. If it’s just a smaller home where you’re going to serve maybe 4-5 guests, you may not need as much parking. But the beach home is going to serve 14, and so I have a long driveway and so a ton of parking. That is definitely very, very important to take into consideration.

Nate Hedrick: Rachel, that’s all awesome information. I really appreciate those tips because I feel like I can feel like years of knowledge and experience is just being boiled down into this 45-minute episode, so that’s really cool. I appreciate it. So from here, I want to go to our final infusion questions. These are three questions that we ask all of our guests. It’s kind of a rapid-fire section here at the end. So Question 1 is what is one tangible strategy that you use to make sure that your investing works hand-in-hand with your career as a pharmacist?

Rachel Gainsbrugh: My strategy is to focus on revenue-generating activities and delegate everything else.

Nate Hedrick: I like it.

Rachel Gainsbrugh: So that’s why I have the VAs, that’s the cleaning crew, they’re good at that. So I focus on revenue-generating activities, whether it’s structuring a loan — and I’ve actually been doing a little bit of property management too, so helping out with that as well.

David Bright: And just real fast, for those that may not be familiar with the term, what’s a VA?

Rachel Gainsbrugh: Oh, sure. It’s a virtual assistant, so someone that helps with emails from guests and helps with the communication piece.

David Bright: Perfect. Perfect. OK, next question is what’s one resource that’s been most helpful to you in your real estate journey, whether that’s a book, podcast, person, author, website, whatever that would be.

Rachel Gainsbrugh: That’s such a great question. To me, it was actually the book on rental — I think it was called “Rental Investing.” I forget the name.

Nate Hedrick: “The Book on Rental Property Investing” by Brandon Turner?

Rachel Gainsbrugh: Yes, “Rental Property Investing” by Brandon Turner.

Nate Hedrick: I love that book.

Rachel Gainsbrugh: And you know what it did for me? It just — I felt like — I’m very analytical. I live in spreadsheets. I’m a spreadsheet jockey. But when I saw that table where he outlined how much a roof repair would cost, how long it would last, that spreadsheet, it changed my life because when you can put it on paper, it’s no longer an unknown. You know, ‘Oh, don’t buy a house that needs plumbing.’ ‘Don’t buy a house that needs a roof.’ You know? So that took that away for me. It’s like, oh, these are just numbers. OK. I got it.

Nate Hedrick: I agree. If you could only read one book and have to buy a property right afterward, like that is the one book. There’s a lot of them that are good resources that supplement it, but I felt like once I read that, I had the knowledge and the data that I needed to make that decision. So I completely agree with you. Great recommendation. Alright, and then the last one: What is one piece of advice that you’d give a pharmacist that is contemplating a start in real estate investing?

Rachel Gainsbrugh: Start by starting. You know you’ve been thinking about it. Just start by starting. Surround yourself with the people and YFP Real Estate Investing group, leverage their enthusiasm, hang out there, ask questions. But start by starting. Don’t live in analysis paralysis for any longer. This is your year. So just do it.

Nate Hedrick: I love that. Great advice. Well, Rachel, I know that you’re active in our YFP Real Estate Investing Facebook group. Where else can people find you if they want to reach out?

Rachel Gainsbrugh: So I’m in the process of launching my website, shorttermgems.com. And so I actually have a report that I scraped together with AirDNA and some travel boards. So would love to offer that to your listeners. It’s shorttermgems.com/best2021, where you will get the 75 best places to invest to get your next short-term rental. So 75 U.S. locations.

Nate Hedrick: Nice. I need that.

Rachel Gainsbrugh: And you’ll be surprised what you’ve found. Yeah, yeah. Some really off-the-beaten path places too that are up-and-coming. So definitely check that out.

Nate Hedrick: I’ll be sure to. I’m like, after this, I’m jazzed. Again, I’m only in the long-term investment space, and so now I kind of want to look at a short-term rental. I know my wife’s been wanting to do one for awhile, and so maybe this is the moment I needed to get off the couch here. So I appreciate it. Well, Rachel, it’s been really great talking to you. And I really appreciate you being on the show. I suspect this will not be the last time we hear from you, and I’m sure we’ll be bugging you in the YFP Facebook group. So again, appreciate it, and I’m sure we’ll talk to you soon.

Rachel Gainsbrugh: Thank you. Appreciate you guys and all you do. I really hope everyone is sharing the group and the podcast with others and subscribing and giving reviews because a lot of people need this information, y’all. So please, please share this information with others.

Nate Hedrick: Thanks, Rachel.

David Bright: Thanks so much.

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