YFP REI 76: Short Term Rental Market Update with Rachel Gainsbrugh

Short Term Rental Market Update with Rachel Gainsbrugh

Nate Hedrick and David Bright welcome Rachel Gainsbrugh back to the show for an update on her real estate journey. They discuss Rachel’s recent appearance on “Buy My House” on Netflix, short term rental market forecasting for the near future, shopping for lenders, and how to determine if a short-term rental will work in your market.  

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.

Episode Summary

This week, your hosts of the YFP Real Estate Investing Podcast, Nate Hedrick, PharmD, and David Bright, PharmD, MBA, BCACP, FAPhA, FCCP, welcome back Rachel Gainsbrugh, a pharmacist and real estate investor. Rachel shares an update on her real estate journey, specializing in short-term and medium-term rentals, and how short term real estate investing continues to help her achieve her lifestyle goals as part of her financial plan. Nate, David, and Rachel discuss the current state of the short-term rental market, with Rachel providing insight into her forecast for the near future of the short-term rental space. With the recent changes in interest rates, Rachel notes that she has seen some buyer hesitancy, but encourages investors to consider the tax advantages of real estate investing even in a fluctuating market. For those wondering how to reach her level of success, Rachel explains how having a clear understanding of your goals for real estate, determining a strategy for success, and creating a plan to get there are the first steps. She provides pragmatic advice on analyzing the market for short-term rental viability using data to back up the decision-making process. Risk-averse pharmacists will be interested in examples of short-term and medium-term rentals that have been successful at a lower price point. Rachel closes out with a frank discussion about her recent appearance on the Netflix show “Buy My House” and how the use of some real estate investing tools landed her there. 

Links Mentioned in Today’s Episode

• YFP Real Estate Investing 07: Short and Medium-Term Rental Property Investing
• Short Term Gems
• Learn with Rachel
• YFP Real Estate Investing 18: Tax Strategies for Real Estate Investing
• YFP Real Estate Investing 54: Using Cost Segregation to Optimize Real Estate Tax Benefits
• AirDNA
• Netflix Series: Buy My House
• 75Gems.com
• YFP Real Estate Investing
• Join the YFP Real Estate Investing Facebook Group
• Your Financial Pharmacist Disclaimer and Disclosures

Episode Transcript

[INTRODUCTION]

[00:00:08] NH: Hello, and welcome to the Your Financial Pharmacist, Real Estate Investing Podcast, a show all about empowering pharmacists to achieve financial freedom through real estate investing. I’m Nate Hedrick, and each week, my co-host, David Bright, and I explore stories from pharmacists all over the country who are achieving their real estate goals, while maintaining a meaningful career in pharmacy. Whether you’re a first-time investor, or a seasoned pro, we’re here to provide education and inspiration about the world of real estate. 

Please note, this podcast is intended for educational purposes only, and should not be considered financial or investment advice.

[EPISODE]

[00:00:42] NH: Hey, David. How’s it going?

[00:00:43] DB: Good. Thanks. How you doing, man?

[00:00:45] NH: Good. We just got off an awesome interview with Rachel Gainsbrugh, someone we’ve had on the show before, someone in the short-term rental space, and it’s got me jived again, about finding STR, my continued never-ending search for my first short-term rental that I cannot find, so it was a good conversation.

[00:01:02] DB: Yeah, I know. I have been – as we’ve talked before, I’m much more in the long-term rental space. Like the short-term, the work involved in the short-term rental space has always had me nervous about jumping into that. But hearing some of Rachel’s stories today about short-term rentals at are more medium term – she mentioned one where she had someone stay in one of her “short-term rentals” for 11 months. I have people in long-term rentals that haven’t made it through 11 months. So this is starting to sound like more and more doable, like the gears are spinning in my head as we’re talking.

[00:01:02] NH: Exactly. For those that don’t know, Rachel Gainsbrugh, she was back on the show in Episode 7, way back at the beginning. She’s a pharmacist, she is an investor. She’s really in the short-term rental space and has been there for a while. She runs a whole business and coaching program around short-term rentals. Just a really influential pharmacist that we wanted to have back on the show to talk about the short-term rental space, what’s been going on in the market in the last couple of months, and also, to talk about the new Netflix show that she got to be on, which is pretty darn cool. Just an awesome individual and somebody that we were excited to catch up with. 

[00:02:05] DB: Yeah. She mentions too how, like a lot about her goals and how real estate helps her to achieve her goals. One of the ones that I know a lot of folks talk about is just finding financial freedom as a part of their financial plan. She mentioned how she stepped away from pharmacy, which was just kind of an interest – and not truly stepped away. She moved from full-time to a part-time consulting role. But just interesting to see how pharmacists balance that, because we certainly go through a lot of training to get where we are. A lot of folks love to stay in pharmacy, some folks want to go part-time, some folks step away, step back, but just that flexibility that exists. I love how her perspective wasn’t like anti-pharmacy in any way, but it was more just flexibility and how real estate empowered her to have that flexibility. I love that mindset.

[00:02:55] NH: Yeah, and it continues. You can see it throughout her conversation. She talks about how pretty much anything is figure outable. We talked about lending and how there was some new challenges there. She said, “Yeah, it’s figured outable.” Same thing goes with her career. If you have options, all of a sudden, you have options. Whereas, otherwise, if you don’t prepare for that and plan for that, you’re forced to make a decision. I really like that a lot.

[00:03:17] DB: Yeah. She mentions she covers a lot of ground in the interview too. There are some things on like cost segregation. There are some things on taxes. A lot of those more advanced concepts where we’ve done deeper interviews with other people just on those really specific topics, those will call out in the show, check out the show notes, make sure that if that fires you up a little bit like, “Hey, maybe there’s something here, maybe this is a fit for me.” We obviously couldn’t cover all of that in great depth in today’s episode, but we linked out to other episodes in case you want to go back, relisten to something else and catch back up with some of those concepts and terms.

[00:03:52] NH: Great. Well, hope you guys enjoy the show as much as we enjoyed recording it. With that, we will take you right to it.

[INTERVIEW]

[00:03:58] NH: Hey, Rachel. Welcome back to the show.

[00:04:00] RG: Hey, thank you so much for having me. I’m super honored to be back with you guys today.

[00:04:05] NH: Yeah, it’s awesome. We had you on, gosh, well over a year ago, way, way back on Episode 7. Really excited to have you back on just talking about all things short-term rental, promoting a show, all kinds of cool stuff that’s been going on your life. Why don’t you fill us in just a little 10,000-foot view on what you’ve been up to since we last spoke?

[00:04:24] RG: Oh my goodness, busy, busy girl. Thank you for having me last year. I just had such a great pleasure of helping other pharmacists get started with their short-term rental, so been busy doing that. I’ve had you on in our little mastermind as well, our small but mighty mastermind. I was able to get casted, actually for a TV show that is now streaming on Netflix as well. Just doing some investing, hosting our guests in our various locations. The boys are growing. Let’s see. Yeah, that’s pretty much it. So good stuff. \

[00:05:01] NH: I love it.

[00:05:02] DB: I know one other thing that we talked about right before we jumped on the show is that you’ve also had a shift in your professional world in pharmacy.

[00:05:09] RG: Yeah, absolutely. So cut back from the W-2 big time. I’m doing a little consulting and IT, but that has been really an eye opener for me. There are some definite limiting beliefs that I had to shift. The numbers made sense, but I knew I had to make a move. My goal is really to move more and more towards the things that light me up, and that’s what I had to do. So in February, I cut back on my full-time, and I am doing some consulting now.

[00:05:41] DB: I think that’s a really, something that doesn’t get talked about enough is financial freedom, and how a lot of folks seek that financial freedom through real estate as a way to have that opportunity. That if at some point, they want to go part-time in pharmacy, or they want to step away, or maybe come back later. But that provides options and that flexibility that you were able to achieve through real estate. It sounds like you probably had that before you stepped away. You stepped away more of by choice at some point. But the flexibility that real estate gave you to say like, “Today, I want to shift gears. I may go back later on, I may not, or I may just do the part-time consulting thing. But this is what is life giving to me right now.” Is that about right?

[00:06:24] RG: Yeah, absolutely. The thing is, it’s hard for me to believe that anyone goes into medicine, pharmacy, any of these helping sciences to leave, and to walk away, right? You don’t go in to walk away. It’s painstaking. There’s a lot of thought that comes into it. There’s a lot of education that we went through to go and get to where we’re at. So definitely, each individual – and I’m not – I don’t advocate. Honestly, I don’t advocate that you quit your job. I really don’t. I’m even surprised that I made that move, because this was my lifelong goal, is to continue to impact pharmacy on the clinical side. But you just have to figure out where you’re at in phases of life change. You start making your decisions based on really what lights you up, what are your goals at the moment, and you can only make the best decision for yourself with where you’re at, at that moment. This is what’s working for me, and I am loving it, I will continue to soldier on and be that advocate for myself and other pharmacists. 

[00:07:31] NH: I love that and I love that you’re able to do that. If you hadn’t done all the real estate, and all the things that go to set you up where you are today, that wouldn’t have been even an option. You might have been someone that said, “I want to make this change, and I just can’t, and I’m stuck.” That that’s what you want to avoid, so that’s huge.

[00:07:32] RG: I want to highlight that for a moment, please, because that’s where I was in very beginning. Like you graduated from pharmacy school, my husband has a degree in psychotherapy. We went to private universities with a whopping amount of student loan debt, like half a million dollars, and you don’t have a lot of options, but to work, and work, and work some more. Looking back, I don’t try to question myself too much. But looking back, our only, I guess thought process was, we’re going to work these two loans to death and pay them off. That’s what we did, between two, three jobs. At one point, we had five jobs between the two of us, and that’s not something I talk about a lot. But we want to get out of debt.

Looking back was, I was like, “Was there a better way to do that?” Now that I’ve got real estate, and you can make, you know – and I’m not trying to rah rah it, but when we first got our first booking in the middle of the night at 3:00 AM, it was like, we just made money while we’re sleeping. We didn’t punch a clock. Of course, there’s work that comes into it. I don’t want to ignore the hat. But it was like, “Man, was there another way to do that instead of working like all of those shifts around the clock to get that done?” So it’s definitely a different place to be when you have those options. Thank you for sharing that and reminding us of that. 

[00:09:12] NH: Yeah, absolutely. It’s a powerful thing to be able to see that dollar come in when you’re not, like you said, on the clock. So we want your take. You’ve got a ton of experience here. Then, give us your take on what’s going on in the short-term rental market then. We’ve got we spoke to you a year ago, over a year ago, we’ve had a huge change in interest rates since then, a huge change in market conditions. What are you seeing out there? What’s been happening?

[00:09:12] RG: Yeah, that’s a great question. I know there’s a little bit of buyer hesitancy due to the change in interest rates. What my conversations have been lately is really getting laser focus on the tax advantages. We’re still able to get anywhere from 70% to 200%, our cash-on-cash return or ROI when we leverage our tax benefits. As higher income earners, pharmacists, we do get some significant taxes, especially if you have a dual income at those higher income numbers. If you can get some of those written off with the STR exception, or loophole, STR loophole, don’t quote me on it, talk to your tax people. I’m not a tax professional. But these are similar to what the commercial real estate investors are getting. So you do a cost segregation study. This year, you’re able to get 100% bonus depreciation, or accelerated depreciation through your cost seg. Next year is 80%, next year 60%. That’s really been my focus.

Yes, the interest rates are higher. Yes, there are more fees. But if you can leverage those tax savings, you’re still winning. I’m paying more and more attention to my taxes. I’m paying more and more attention to leveraging those benefits that really the ultra-wealthy have been using for forever. The great thing about short-term rentals, there is that ability to leverage that for a single-family home. This is not a multifamily REIT with 100 units. This is a single-family home, short-term rental, or a condo, all of the furnishings, all of those can be written off. Written off, I’m using that loosely. Talk to your tax people. There’s probably a better word or way of saying that.

[00:11:31] DB: I think that’s a great reminder of engaging with professionals when things get complicated like that, right? We had Amanda and Matt back on Episode 18. They talked about a lot of the tax strategies, kind of a 30,000-foot view. Then, we had Todd from CSSI back on Episode 54, and he went into great detail on cost segregation to break those concepts down. If you’re listening to this, and you’re like, “Wait, how do I get these crazy tax benefits?” I would dig into those and start there and then start reaching out to a professional to figure out how this would impact your specific situation in real estate. But you’re right, I hear a lot of folks that find those tax advantages to be really helpful in that overall financial plan that involves real estate.

[00:12:18] RG: If you don’t mind, I wanted to add one more thing. Do you know how like – typically, with long-term rentals, you need to get real estate professional status, which a lot of us pharmacists, we can’t qualify for. Because typically, we’re doing full-time, our W-2. So it essentially is about the same benefit, if not better, because it’s a short-term rental. So long-term rental, you would need real estate professional status to get all of those benefits. But with short-term rentals, all you need to do is prove material participation, which to check off those boxes, you have to have the property in service within that tax year. Then there are a couple of other things, which shouldn’t be too difficult to accomplish that first year. Then the following year, if you’re strapped for time, you can have someone else manage it. But that first year, if you set it up, and you pretty much are in charge of the vast majority of the communication, and so on and so forth. Of course, there’s a checklist. But you know, real estate professional status is really something great to have if you’re able to swing it. But if you’re not, short-term rental is definitely the way to go.

[00:13:22] DB: Yeah. There’s probably some additional benefit. I know we’ve talked to different times on different episodes about just that participation, particularly at the front end, how you can learn the business that way really well, which makes it so much easier to hand that off to someone else and then be able to speak fluently with the person that manages that later on. So in addition to the tax side of things, which again, talk to your tax professional about all that, but there can be a lot of just value in understanding the business and diving into that. Because short-term rentals have a lot of nuances to it that is different from long-term rentals, is different from other areas in real estate. I know we mentioned interest rates is one thing that’s changing. Another thing that’s changing is the federal housing finance agencies fees for short-term rentals, how that jumped. I talked with another investor just a few months ago that had to beat a deadline to get something in before the fees hit earlier this year. Can you give us a little bit of background on those fees and how that has changed the picture over the last six or 12 months in terms of what people can expect when they go to get a mortgage on a short-term rental or a second home?

[00:14:28] RG: Yeah. So we’re leveraging second home loans still. So 10% down loans, and we probably won’t qualify very long for those, because you do need a full-time W-2, and all of those things. But we’re leveraging those and they haven’t been too terrible, honestly, those fees for the second home loans. I’ll have to look. My next transaction is going to be probably in a couple of months. I’ll have to look to see what that’s looking like and see what we need to do to navigate that. Because ultimately, everything is figured outable, right? So I do a lender shop. I like to have a great relationship, but I do like to shop for my loans. I will speak with 27 lenders if I have to, until I get something that is going to work for me and work for that particular deal.

My recommendation is always shop your loans. If one lender has certain fees that aren’t going to make sense for you, or for the deal, shop around. There are three different products that we typically like to use for short-term rentals. It’s second home loan, then we’ll look at a debt service coverage ratio loan, which is a DSCR loan. That’s a little bit more of a business purpose, commercial side type of loan. Those are still 15% down. I like to have a lot of cash reserves. So for my strategy, I prefer to put as little down as possible. That’s not going to be a good fit for everyone. 

The next lending product, rather, that I like to use is a bank statement loan. Bank statement loans, I haven’t leveraged one yet, but I’m looking at one. It’s when you have a lot of passive losses, or on paper, you have claimed a lot, like we were just talking about cost segregation studies. If you’re claiming your furnishings by the end of the year, that’s like $100,000, potentially of claims that you’ve made. So it appears on paper that you’ve got a lot losses. However, you have a lot of deposits from bookings, and things like that, especially if you have a track record. So bank statement loans are the lending products that are great for ultrapreneurs. So yeah, to shop your loans and figure out what’s going to make a good fit for you.

[00:14:28] DB: Yeah. I think that there’s a lot of value there, knowing that – I think most people are familiar that have bought their own home are used to going and putting 3.5%, or 5%, or 10% or 20% down in a home and then moving into it and are generally under the impression that that’s what a mortgage is. But I think what you’re describing is, there’s a lot of different flavors of mortgage. The second home loan that you mentioned is way that – and there’s all kinds of rules, talk with your loan officer, your mortgage broker about time that you have to spend in that home, and intentions and all those kinds of things. But if you use that approach, that can be a way to put only 10% down, versus a lot of other loans may require 20% or more percent down. But yeah, then some of these other loan types can be great if – as you’re mentioning the startup costs, for some of these investing strategies can be huge, and they can make you numbers in your first year really bad.

Talking with an experienced loan officer and an experienced mortgage broker that can help you find the solution, and just being transparent with, “This is my plan. This is what I want to do. What’s the best way to get there.” Again, going back to this theme of relying on professionals to help with really good advice to help you achieve your goals. I love that you laid out that menu of, it doesn’t have to look this way for every deal.

[00:17:54] RG: Exactly.

[00:17:55] NH: With that in mind, we’re talking about the interest rates changing, the different lending types changing. We’re also seeing prices that are softening in certain markets still sky high and others. Do you see those pricing shifts driving any specific strategies for short-term rental? Are there any types of markets people are targeting or types of homes? Are you waiting to kind of see what happens? What’s the crystal ball? I know you don’t have one, but what’s the crystal ball and like what to do over the next six months if you’re interested in the short-term space?

[00:18:24] RG: Oh, I love this question. Because I think a lot of us have maybe like impostor syndrome. When we see someone in a certain market, we want to run to that market. Or see someone in another market, we want to run to that market. It doesn’t really work that way. You may get a good deal, but we all know, in real estate investing, the deal that your friend just got, you’re not going to get that same exact deal. You just need to understand what is going to be a good fit for you, what is your ultimate goal and reverse engineer into that. Is it short-term rentals? Is it fix and flip? Is it bursts strategy? Figure out what strategy and then figure out how you can reverse engineer the lifestyle that you want, what do you want to do ultimately to get there. So understanding how to analyze any market down to the penny is the key. 

Number one, before we look at numbers, I would say, regulation comes before numbers. Having a framework of understanding what the regulations are, and not only what’s like solidify, but also what’s in the draft phases to get a temperature check on that market is your first step. You don’t know how many people have come back to me and say, “Oh my gosh, you saved my bacon from going into a market that had regulatory changes.” There was nothing published, nothing anywhere, because my step two is, you look for the municipality code. That is step one. Step two is you pick up the phone, you literally pick up the phone and call the County Clerk’s office and ask them what is in draft. There are so many changes, and it’s ever evolving, especially for markets that are not tried and true, established vacation rental markets. Those changes are happening every month. How would you know you know that there’s a change that’s in place, or there’s some flux there? You have to pick up the phone and call the County Clerk’s Office to figure out what is in draft, and then you take it from there. 

Analyzing the market, understanding the numbers. I’m looking at, first of all, if regulations are okay, the next thing I’m looking at is, what is my budget and what is the revenue that I’m looking to generate. I’m a big believer if you’re able to, and if there are no restraints to starting in your own backyard. I’m a big believer in starting your own backyard around the corner, 20 minutes away, close by so that you can kind of, like you said, go through the process of setting up and have an idea of what that’s going to look like. Some people – I have a client who lives in Hawaii, he started in Florida, because the cost maybe a bit too high. I have clients that are in California that started in the Georgia mountains, or North Carolina Mountain region or Tennessee. There are regulatory restraints. 

There are constraints that causes you to move out of state, and that’s doable and figure outable. But there’s definitely a way to start in your own backyard if those restraints aren’t there. Then you start to understand, number one, what is the travel pattern? Is there a need? So I do a quick search online to see what the occupancy rate is. Number two, I’m looking for growth in a market, because I want to understand if my market is dying or thriving. Because here’s the deal, everyone’s talking saturation, saturation. There’s like 7,000 more short-term rentals. Is that saturation, really? Because that’s a scientific and economic term. Saturation would be reflected if we have a significant increase in listings or the product, and a significant decrease in the revenue overall, so we want to look at both numbers. I analyze if there’s a 30% increase in product, I want to see a 30% increase in revenue also. If I don’t see that, and like maybe a 10% increase in revenue, then we do have saturation potentially, and this is a market that is not thriving, it is dying. But if there’s a 30% increase in revenue, or a 35% increase in revenue, that tells me there’s a demand for that market. People want to come here and they’re willing to pay the top dollar or even more to be in that market. Those are kind of the pillars to look out, so to speak, as far as what markets to go to next.

[00:22:45] DB: Yeah, that regulation factor I think can’t be understated. Because yeah, you can get yourself in a world of hurt if you buy somewhere thinking you can do short-term and then you can’t. Same with the dying and thriving, I love that concept. What resources do you use, or do you recommend that people use to understand if a market is dying or thriving as they’re looking across the country trying to figure out, where might I want to invest?

[00:22:45] RG: Yeah. That’s a great question. I am using AirDNA, which is the company that casts it, that worked with the casting company for the show that we’ll be talking about in a moment. But yeah, I’m using AirDNA. Within AirDNA, it’s broken up into three segments. We’re looking at the historical, which is the top portion, and you want to see the number of listings. There’s a month to month break down. So say, you want to look at July’s numbers, and there were maybe 3,000 listings in a particular city, and then you want to go down to rate. I think it’s rate or revenue you want to see in July of this year, how many dollars were generated in the market as a whole. So you’re going to have those two numbers, and that’ll be like your one subset. Then you want to look at July of last year, also the number of listings to compare the growth or the reduction. Then you want to look at the revenue generated from July of last year as well. That’s a starting point.

This is a market that has huge fluctuations, and you’re going to put some money on Escrow, you’re going to want to do month to month. You want to do July, you want to do August, you want to do all of the months just to see how that looks, because the markets are very much seasonal. So you want to look at that. This is not the free version. AirDNA has free version. So freemium is what I call it. You can look at occupancy, overall occupancy in the free version. Occupancy is my starting point. If it’s less than 40%, 50%, I’m not interested. It tells me there’s not a demand in this market overall, so I’m not even looking. But if it is 50% or greater, I’m very interested, and then I’ll go ahead and pay for a month. You can go month to month, cancel it, there’s no obligation, to get more granular. Especially if I’m going to be putting money in Escrow, then I’ll go ahead and pay to get a little bit more granular.

[00:22:45] DB: I love that. I feel like that’s a very practical tip as you’re trying to do that just back of a napkin analysis of, is there enough demand in a market to make a short-term rental successful? I feel like that’s a great tip. I love that. When pharmacists – obviously, we’ve talked a lot in the show too about how pharmacists are pretty risk averse, and they like to safe bet. I would imagine that you’re also running into pharmacists kind of like the Hawaii example of, “I don’t know that I want to buy a million-dollar house as my first investment ever in real estate, like that just gives me a lot of heartburn.” For folks that are looking for a lower price point, I know a lot of people think like the mountain house or the beach house, like that’s a short-term rental. But can you share other examples where people have made short-term rentals successful at a lower price point that might be a little easier for pharmacists to jump into?

[00:22:45] RG: I love that. That’s really where I started myself. It wasn’t the lowest price point, but I would say, it was a lower price point. Because good thing in Georgia, the cost of living is much lower than a lot of parts of the country. So our very first investment was 290k, was the property and we were able to get like a 5% investment loan down from a local bank, which was like a family office of physicians or something like that. So going local can really pay. But that was the first one. Today, honestly, I haven’t spent any greater than 462k, to date. I range anywhere from 175k to 462k. I do have a project down the pipe that’s going to be closer to the seven-figure range. That’s just from 1031 exchanging into bigger and better. But overall, I haven’t gotten greater than 462.\

What I stumbled upon, which is surprising to me, and this is a sector that I’ve become quite a little specialist and is the midterm rental strategy for insurance clients. That has been really, really thriving with the properties that we’ve selected in the suburban markets. When I say start in your own backyard, some of you are living in suburban markets. If there’s a deal around the corner and the regulations do not ban short-term rentals, that could definitely be an option. What I leveraged is a tool that’s a dynamic pricing tool, I turned it on. This was a property that was generating $1,800 a month as a long-term rental. The owner was the CFO for a sector of the federal government. She was coming up to a deadline, a tax deadline, had to sell it. It was on the MLS sort of kind of, because it was for sale by owner. She was out of state. There were realtors there wanting to list it. She just wanted to do her own thing, and were able to get the property locked down. 

So purchased that property, added probably $30,000 worth of work into it, just to update it. So as soon as I turned on the dynamic pricing tool for this $462,000 home, again $1,800 a month is the kind of rent that she was collecting. The tool for 30-night stay, and I was going to go 30 nights for that first month as I was working on onboarding a new cleaning team. The tool listed the property for $28,000 for 30 nights. I was like, “Okay, that is outrageous. That is ridiculous.” There’s AI involved in this. Okay, I’m going to have to turn it off and train it, but it got booked. It got booked that month and I was like, “What?” Then, the next month, it got booked for 21,000, then 15,000. Now, it averages at about 22,000. That’s the one that you saw on the show. 

The avatar for that was very surprising to me. The first avatar was the executive director of very famous zombie series. But afterwards, the avatar or insurance guest, so whenever someone within the same community school district encounters some type of catastrophic event that occurs to their home, based on their coverage and their policy, they can leverage an allotment to stay in a temporary housing situation, so larger family. Imagine a larger family and we’ve hosted a family of 10. She said to me, “Imagine cooking for a family of 10 at a hotel.” That’s not going to be comfortable. That’s not going to work. So our home has been used to house these individuals and we’re paid directly by the Temporary Housing Agency from the insurance adjuster.

[00:29:37] NH: I love that. This is the house that was on the show, right? We teased at the beginning. So you and Jesse went on, Buy This House on Netflix, definitely recommend checking that out. Tell us about that experience. What’s it like to be famous, Rachel? I feel like I’m talking to a celeb. It’s pretty cool.

[00:29:53] RG: You are too funny. Oh my goodness. No, it was a whirlwind, honestly. It was hilarious because that particular property, I think it garnered some interests with AirDNA. They saw the numbers on the back, and they’re like, “Oh my goodness, this house in this suburban area.” Like people ask, “What even is in this area?” Not much. These are homes, and schools, good homes, great homes, great schools. That’s it. But we did know that we’re going to have an influx of the film industry, that’s who we really thought we were going to be serving. But ultimately, we ended up serving primarily the insurance guests. That’s a midterm rental strategy, which is 30 nights minimum. Imagine if you have a fire, that’s going to be at least six months to remediate something like that. It ends up being really long-term. Sometimes we’ve had guests for 11 months. That’s a long-term guest. At those higher rates, but AirDNA, they saw that, they had the casting company reached out to us. I was like, “Okay, that seems cool.” Didn’t think we would get selected because we have no stage presence. It’s like, okay, imagine a pharmacist on a shark tank/real estate reality show, like not even. That’s not on the roadmap.

[00:31:16] NH: I think you guys killed it. 

[00:31:18] DB: It was awesome.

[00:31:19] NH: If two boring pharmacists like David and I can podcast, you guys are awesome. 

[00:31:23] RG: Oh my gosh. It was such a great experience. So they came, they filmed on site, at the property. Then they flew us out to Albuquerque, New Mexico on the set of Breaking Bad and Better Call Saul, which was interesting. It was just such an interesting experience, for sure. It wasn’t – just full transparency, it wasn’t as like glamorous as I thought it was going to be in terms of, “Oh, the flashy lights.” At one point, it was like a lot of waiting, and then a lot of hurry up, and then a lot of waiting. At one point, I was just like laid up on the floor. I’m not used to like being held hostage, to just stay here and wait. It’s like, “I need to go somewhere.” So that part, that’s when I was like – I was speaking with a friend who’s an actor, he goes, “That’s why you need a stand in. Someone to stand there to wait for you.” I go, “Yeah, I need a stand in.”

[00:32:15] NH: Maybe a few more shows, then you can start hiring a stand in next. I love it. Well, that’s cool. Well, I definitely encourage people to check that show out. If you’ve not had a chance to, it’s on Netflix. It’s called, Buy This House. Really awesome. The show itself is great. Then again, the episode with Rachel is really fun, because it was cool to see on there. So great stuff.

[00:32:33] RG: Thank you.

[00:32:34] DB: It’s fun too, because you said that that was taped a while back already, which is the natural delay. So you’ve already grown and done a lot since then. I’m curious now what looking forward looks like. You already kind of mentioned that you may close another house in the next few months. One thing that people are asking a lot is, are experienced investors still buying in this market? And then, has anything changed for you? What’s your next year or two goal looks like?

[00:32:59] RG: Yeah. The reason that I’m a little bit different from the other investors is, again, I have door for envy like everyone else. If someone comes up to me, “I have 100 doors.” I’m like, “Oh, that’s fancy.” But again, reverse engineering, what I want my life to look like. Less is more for me. I really believe from the bottom of my heart, you only need one or two just really well positioned properties as short-term rentals to be wildly profitable, like beyond your wildest dreams. Our approach is bigger and better. So we have reduced our portfolio a little bit, we’ve – anywhere from two or three properties that are older, not performing, we’ve shaken it up a bit. Then we’re moving towards bigger and better. So we’re going towards newer properties, because that’s the fad. Everyone wants the newest property. I have a waiting list for a property that has even broken ground. I was like, “Hey! I’m building this property. Who wants in?” They’re like, “I want to be first to one of Rachel’s properties.” They want the newest, and I’m like, “Okay.”

There’s definitely a demand when it comes to short-term rentals. You want to have a property that’s pretty well-appointed. For us, the properties that are requiring constant maintenance, getting the complaints, and we just can’t get over that edge, where we’re repositioning those and we’re piling up cash for newer, we’re building. So that’s what’s next for me. So having a beach build complete, and launching another, and of course, continuing to support my fellow brothers and sisters at arms in health care, creating retreat experience. We have a live event, small live event coming up like retreat style. Guests are tentatively Amanda Han, Avery Carl from the Short-Term Shop, as well as one a software developer from Rankbreeze, Kelvin Mah. We’ve invited him. We’re waiting for his confirmation. And Annie Sloan from Postcode, and what she has is another software product where you can upsell the items within your property.

Again, less is more. I’m minimalistic in that way. But what does that mean? That means that property you can really pour your attention into it, right? And just squeeze every bit of juice out of it. So if my guest says, “I love your mattress.” There’s a barcode, you can go ahead and order it, and it will be sent to your home.” And Rachel gets her cut backs as well for almost anything in the property. That is part of the process for us as well. Generating passive income within a pretty active income industry.

[00:35:56] DB: I love that. I love the intentionality, and the strategy, and just the thoughtfulness that you’ve put into – like you’ve said, making sure that real estate helps you achieve your goals and that you’re not answering to real estate, but real estate is helping you get where you want to go. I love that. If people want to learn more about you, the show, your coaching program, your business, where can they go?

[00:36:17] RG: The best place to go is grab my free tool, 75gems.com. That’s a list of my 75 cities with the highest profitability for short-term rental, which is an ugly spreadsheet, but everyone loves it. We update it quarterly with the cities that I’m looking at to invest in that.

[00:36:39] NH: Awesome. Well, Rachel, really appreciate you coming on, joining us again. Always an absolute pleasure to talk to you. Congrats on the show, and the success, and just again, wonderful to talk to you today. Really appreciate it.

[00:36:50] RG: You as well. Thank you so much for having me.

[00:36:52] DB: Thanks so much.

[OUTRO]

[00:36:54] ANNOUNCER: Thanks for listening to the YFP Real Estate Investing Podcast. If you liked what you heard on today’s show, please leave us a review, and subscribe to the show, so you never miss an episode. If you have a question, know someone who would make a good guest or want to connect with Nate or David, head in over to yfprealestate.com and join the growing YFP Real Estate Investing Facebook group.

As we conclude this week’s episode of the YFP Real Estate Investing Podcast, an important reminder that the content in this podcast is provided to you for your informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blog posts and podcast is not updated and may not be accurate at the time you listen to it on this podcast. Opinions and analyses expressed herein are solely those of your financial pharmacist, unless otherwise noted and constitute judgments as of the dates publish. Such information may contain forward-looking statements which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

Thank you for your support of the YFP Real Estate Investing Podcast. Have a great rest of your week.

[END]

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