Building Wealth through Vacation Homes By Shawn Moore
Real Estate Investing Podcast on REsimpli: Featuring Shawn Moore
Not long ago, Shawn Moore – a leading real estate expert in Utah and founder and CEO of Vodyssey, was joined by everyone’s favorite REsimpli Podcast’s host – Brandon Barnes, where he talked about short-term vacation rental; long-term vacation rental; Vodyssey; how he is helping people achieve financial and lifestyle freedom in vacation homes; why REsimpli is one of his favorite tools; and much more!
Wondering how to build wealth by investing in vacation homes without any hassle? We can help!
Not long ago, Shawn Moore – a leading real estate expert in Utah and founder and CEO of Vodyssey, was joined by everyone’s favorite REsimpli Podcast’s host – Brandon Barnes, where he talked about short-term vacation rental; long-term vacation rental; Vodyssey; how he is helping people achieve financial and lifestyle freedom in vacation homes; why REsimpli is one of his favorite tools; and much more!
Wondering how to build wealth by investing in vacation homes without any hassle? We can help!
- The incredible 23 years roller-coaster journey of Shawn Moore.
- All about short-term vacation rentals (an evolving market).
- Real estate tip about long term vacation rentals.
- How to build a vacation income portfolio?
- How to manage your budget as a real estate investor?
- What’s the future of vacation rentals?
- How to identify markets and cities to buy a home for your vacation rental?
- Do short term rentals need a county and city code?
- Have short term rentals got too much control?
- Should you manage your first vacation rental?
- How to underwrite short term rental property?
- What’s his crucial advice regarding data, sales, management, and operations?
- How to get in touch with him?
Brandon Barnes 0: 06
Hey, what’s up, everybody? This is Brandon Barnes. I want to welcome you back to the REsimpli Podcast, where we talk all things real estate. Super excited to have a guest today, Shawn. He is from Utah and doing some really cool things in the vacation rental space. Shawn, how are you doing today?
Shawn Moore 0:22
Good, Brandon. Thanks for having me. I appreciate it!
Brandon Barnes 0:24
Yeah, appreciate having you on that longhorn in the back, man. As soon as you turn that camera on, first thing I fought in.
Shawn Moore 0:31
Awesome! Yeah, it’s kind of fun. We got the big old longhorn hanging up.
Brandon Barnes 0:35
Shawn, tell us a little bit about yourself. Where are you located at? Utah? What are you all doing, and what’s your kind of space in real estate right now?
Shawn Moore 0:40
Yeah, right now, we’re in the vacation rental space, kind of a hot topic. I started getting back into this game and into the real estate space back 22 years ago. I’ve been a full-time real estate investor for 22 years now and kind of gone up and down a lot of different asset classes, different things that have got us through to where we are today.
Today, what we do is really focus on building portfolios of vacation rental homes. I started doing that back in 2006, so a little bit before it was popular to do it as popular as it is now, for sure. And so we’ve seen some explosive growth. It’s kind of the shiny object in real estate asset classes for the last couple of years for a number of different reasons, but we’re having a lot of fun with it. But, yeah, a long journey to get us here. Started really focusing on this space about ten years ago, and it’s been a really fun asset class. We’ve niche down from where we started originally 22 years ago.
Brandon Barnes 1:33
You’re right. It has been a very, like, the up-cycle of the market the last couple of years. Like, oh, I’m just going to Airbnb. Everything was just, I’m going to Airbnb. And everybody instantly became short-term rental owners.
Shawn Moore 1:46
Yeah, having a short-term rental the last couple of years was like having toilet paper during COVID Everybody was making money, as you know. And I know being around real estate, as long as we have, that’s not a normal market cycle. It’s not going to last forever. And so you still have to understand it as an asset class. That wave came in. A lot of people wrote it, and it’s starting to settle down a little bit now as we kind of walk into more of a mature and mainstream asset that we’re seeing.
Brandon Barnes 2:14
Yeah, it was people buying bad deals and then realizing, hey, I can throw some furniture in this thing off the Facebook marketplace, call it a short-term rental and save my butt on it.
Shawn Moore 2:24
Right. Yeah, exactly! Not knowing your numbers, and luckily for some of them, that market or that wave was riding high enough that they did get bailed out a little bit. The wave is going out a little bit now, though.
Brandon Barnes 2:35
Yeah, it has. And we’ve noticed, I was telling you before, we’re doing our first two currently, and we’ve noticed with my wife doing it, people just don’t treat them like they should as, like, a vacation rental. We went to one recently in Myrtle Beach, South Carolina. They didn’t have toilet paper. They didn’t have paper towels. They didn’t have soap. And they’re like, yeah, just go buy all that stuff. At the store, we spent as a group of us. It’s like $2,000 a night. It wasn’t just like a bedroom. I was like, you guys expect us to do our dishes and all this stuff, and there’s legitimately nothing to do any of it with.
Shawn Moore 3:11
Yeah, I’ve stayed in them recently and seen some of them that have like, you’re required to clean them when you’re done with them, and you’re getting charged a cleaning fee now. Those things are going to be a thing of the past. You’re not going to be able to get away with that moving forward.
One Airbnb, Vrbo, they’re cracking down on that kind of stuff. But also, the marketplace is going to the market is going to say, hey, listen, that is not how this works. You really have to treat it as a professional moving forward. It’s not going to be the way it was the last couple of years, where everybody and their dog had a vacation rental, was making money.
Brandon Barnes 3:44
My wife and I talk, it’s like, if we’re going to pay this money, I’d rather go stay in a hotel. Somebody cleans my room every day, right? And I can just leave. Instead, I have this massive checklist. It takes me an hour to leave in the morning and then pay a couple of $100 cleaning fee.
Shawn Moore 4:00
Brandon Barnes 4:01
So what got you in? You’ve done the traditional route, wholesaling, flipping, those kind of things. How did you transition from that into the vacation space?
Shawn Moore 4:08
It was a bit of a transition, so I’ll kind of take you back when it really started, back a long time ago now. For me, this is my 23rd year in real estate. When I really started, like a lot of people that are getting started, I didn’t have money. I didn’t have a whole lot of credit. So I was looking at wholesale deals, and so I did a couple of wholesale deals, put some money in my pocket, and didn’t stick with the wholesale game very long because I immediately transitioned into fix and flip properties. And so I took the money that I had.
This was back in the early 2000s, in 2000, right at the start, kind of going through that.com crash. Back then, rates were high, and you can still pick up properties for decent deals. Not a lot of people were buying. Things were sitting on the market. And so I was able to buy properties value add. And I did that for about a six-year run. About a couple of years into my fix and flip game, I was in my early 20s, and I was really getting pretty cocky, frankly, thinking I was a pretty big deal in the real estate investor world if you will.
And I would show up at real Estate Investment Club meetings and kind of sticking my chest out and talking to the other investors and wanted to mostly just talk about how awesome I was, right? And this old boy named George put his arm around me one day and said, hey Shawn, I hate to tell you, my friend, but you are not the investor that you think you are. He said you’ve got this job fixing up and selling houses. If you stop doing that, your income stops. He said you’re really not an investor until you start building something that brings in passive income.
And back then, at the time, it really hurt my feelings. My ego was shot. I was really pissed off. I went home, talked to my wife in private. I was like, hey, maybe George is right. Maybe I do need to start thinking about building some sort of portfolio of passive investments. And at the time, the most natural investment that I would make because of what I was doing in fixing and flipping single-family homes was buying and building a single-family long-term rental portfolio.
And so over the next couple of years, I purchased about, I think, I built my 52 homes. We bought 52 single-family rentals and started to build up our passive income. Keep in mind back then this was back in 2003, 2004, 2002. If you could fog a mirror, you could get a loan, and we all remember what caused that problem back in 2008. And so I was able to build a portfolio, though, very quickly. And my wife and I, my wife I didn’t actually at the time my wife had a real estate license, and we were buying a lot of these properties, investment properties with 5% down.
So we were getting 3% from commissions and only having to come up with like 2% on every property. So we were actually able to build that pretty quickly. I was managing these properties, and I started thinking man, I’m just not making that much money. I was making passive income. I was making about $100 a door, bringing in about $5,000 a month in passive income, which was okay. But my fix and flip business was making me several hundred thousand dollars a year, right?
We were making so I could do one flip and make five or six times what my monthly income was on the portfolio. And it was taking me more time. So at the time, back in 2005, I decided to sell everything and said, hey, I’m going to get out of this. I’m going to start going into a bigger game and start saying, okay, I’m going to now do development again more, putting more money in, bigger paychecks at the end, but still nothing passive. But I started getting into more of the development game. That led us to partnering and being not really partnering on the actual deal, but I went to a developer or a hard money lender to try to get some money for a development deal.
This hard money lender was developing a private skier and golf resort in Utah and really high-end, like $25-$30 million properties. They were all second-home vacation home properties for the well-to-do, to say the least. And we did that for about, he said, I’m not going to fund your deal, but I want you to come over and work on the sales and marketing side on this resort for us. So my wife and I did that, started doing that in 2006.
Well, in the end of 2008, all of a sudden, one day, the Feds come into the office, and the computers get shut down, the file cabinets get locked up, and the entire thing gets shut down. And we’re looking around, wondering what the heck happened. Well, the owners of that resort got indicted on securities charges, and so overnight, all of that shutdown. And we had since stopped our investment business. We had sold all of our properties.
And so we’re looking at each other thinking we were making really good money doing this resort stuff and thinking, what happened? This isn’t our fault. I actually threw myself about a six-month pity party and was blaming everybody else, was playing the victim until I lost everything, and I lost my house, I lost my vehicles. By 2009, we had nothing. And back in 2006, we had bought a vacation home for ourselves in the mountains in Utah, at a place called Bear Lake. This is a lake mountain town in Utah.
During the time I was losing everything, I actually started putting this property on KSL and Craigslist, which KSL is a local classified ad in Craigslist. It was, you know, at the time, Airbnb and Verbo were, were around, but they were more like urban area, like couch surfing and urban-type properties. And I started renting this property out. Well, this property made me okay money while I was losing everything else, and didn’t think anything much of it at the time.
But fast forward a few years, I started getting back into. I finally got done playing the victim and throwing my pity party. I got back into real estate, started hustling again, started doing some development deals, and we ended up having twins. And we struggled with kids for a little while, but we ended up having kids. And then every year, for their birthday, we go to Hawaii for the week of their birthday.
And we were in Hawaii. It was my kid’s fourth birthday, and they were just turning four, and I was on the phone on a development deal. I was frustrated. I was talking. I don’t even know what I was frustrated about. But as soon as I got off the phone, my son grabbed my hand, and he said, dad, if you don’t like doing the real estate in Utah, you should just come to Hawaii and do real estate here. Because every time we go somewhere, we look at properties, and we look at stuff, and we’re looking at these really fun properties, right?
And in his mind, he’s just like, if it’s bad there; it’s going to be good here because this is awesome, right? He didn’t think a lot of it, but at the time, I started really thinking about it. I started thinking what do I really like and what do I enjoy when it comes to real estate. I love the investment side of things. I love running the numbers. I love finding properties that work. And I also loved the resort side of when we were doing the resort vacation home, second home style. It was all about experience and having fun.
And I remember having this property that was making money during one of the worst downturns we’ve seen in real estate. And I thought, hey, there might be something to this vacation rental game. And so we actually decided that we were going to start to look into that and take it serious and build a portfolio of vacation homes for ourselves. And that was back in 2015, and since then, we’ve just been doing it ever since and full-time and building that portfolio. So it’s kind of a long run of what really led us here and what led us to saying okay and why are we going to niche down so far to be able to ultimately build this passive income portfolio?
And then we’ve seen this run. We were building it in 2015, really serious, pretty much full-time since then. And then, since COVID, we’ve seen this maturity just accelerate. And so all these different things have led to a pretty mature and mainstream asset class at this stage, and we’ve seen the growth phases throughout it. But I love real estate in general. For me, vacation rentals end up having they’re just fun. I enjoy them, I have a lot of interest in them, and they’re different. They’re harder to underwrite than a lot of deals.
A lot of people don’t realize that in the last couple of years, but they actually are lots of moving parts. And so I love being able to take an asset that we enjoy. And at this stage in our career, in the game, we still do some of those deals, like the fix and flip or the development deals, where we get big, lump sums of cash, and then we put them into something that can create passive income for us.
Brandon Barnes 12:34
That’s a really cool story and venture, and it’s amazing how something can just wipe out everything that you think you’re doing and you have no control over.
Shawn Moore 12:43
Brandon Barnes 12:44
But to touch, to rewind it a little bit, you talked about building this portfolio of 52 homes, 50 homes, whatever it was, $100 a door, five grand a month. People think when they get into real estate, hey, I’m just going to buy a bunch of rentals and make a bunch of money every month. A, it’s really hard to get to 50 doors.
Shawn Moore 13:04
Nowadays, especially with lending.
Brandon Barnes 13:06
Yeah. And B, it’s not that profitable in the long-term rental space.
Shawn Moore 13:11
Brandon Barnes 13:12
I like to look at my short, my long term rentals as just little savings accounts. I want to use the money. My goal is just pay them off, don’t leverage them. Just so that when I’m 50, 55 years old, I have a handful of homes paid off, that kind of help with the lifestyle because you’re right flipping. Get a check. It’s done.
Shawn Moore 13:32
Yeah. They’re bigger checks, right?
Brandon Barnes 13:34
Yeah, they’re bigger checks, but you can go through spells. My wife and I, we sold five flips last month. Then all of a sudden, you look at like, wait, we don’t have any flips closing for the next two or three. Like everything kind of ran on itself.
Shawn Moore 13:46
Brandon Barnes 13:47
And so it’s, it’s being prepared for those, those moments. It’s funny how kids are. Kids can see stuff that we can’t. Why is fun? We’re on vacation. Just do it here. It’s this simple. And a lot of times, it can be.
Shawn Moore 14:02
Yeah, sometimes it really is. They make us think of things that we never would have thought about. And just with some of the questions they ask. But even to your point, a lot of people, even with the flips, like you said, you close five in a month, and we talk about the five in a month. Well, a lot of times, somebody that’s new to investing will say, okay, well, I’m going to do five a month. I run the numbers. Oh, I’m going to make all kinds of money doing this. Right?
Absolutely, you can. I believe real estate is the number one vehicle for the average person to create long-term financial freedom and wealth over time. But we don’t talk about, like, the three or four months that, okay, we’ve got to make that work till we build that pipeline up again and have another month that closes. And so, MySpace is very similar to that with vacation rentals. People look at the summertime numbers or the peak season numbers, and then they don’t budget correctly for those slow times because most vacation rentals are super seasonal.
The long-term rentals, they take a lot of patience and time. Okay, I need to have a long-term plan because the future looks really bright long-term with these long-term investments. But sometimes, that short term, you’re not making a whole bunch of money in the beginning, and that’s when you’re putting in the majority of the work, you actually don’t get the reward until after.
Talk to somebody that’s been building long-term passive investments, and you will talk to a lot of people who sell them before they hit that twelve to 15-year mark. And you almost talk to nobody that sells them after that because now they’ve matured, and all of a sudden, they’re mostly paid off or are pretty close to being paid off. Rents have gone up enough over that time that now you’re actually making some decent money every month.
Brandon Barnes 15:43
Yeah, once you get that first one. A good friend of mine in Alabama built this. He stayed between 253 hundred long-term single family rentals.
Shawn Moore 15:52
Brandon Barnes 15:53
And once he got the first one to three, kind of paid off, is when the snowball of them happened, then now you’re taking three rents to pay a mortgage, and he would just go get commercial line commercial mortgage on him, pay it, and that’s what was able to grow. But it took him years to get the first one, then the second one, and the third one paid off. So the journey, the time frame that you built these single family rentals, short term, not even single family, these vacation rentals, there wasn’t financing in place for these either. I think there are some lenders now do vacation rentals, but in 15, there was not a vacation rental product that I knew.
Shawn Moore 16:33
No, there wasn’t. And so we were buying using traditional long-term investment type loans. So we’d have to put a decent amount down even back then with vacation or second home vacation loans that a lot of people use to get into the game. Now, back then, Fannie and Freddie hadn’t addressed whether short-term rentals were even allowed with them. And it was very like you were really in the gray area of whether you were going to be able to rent these properties out or not. Now Fannie and Freddie have addressed it, and you are allowed to do it.
You have to follow certain guidelines and circumstances to be able to pull that off. But yeah, there wasn’t a lot of financing options. So you were typically getting traditional long-term type investment loans, which have been around forever, putting a decent amount down, making sure that you could qualify with your debt to income. Now there’s debt service coverage, ratio loans, DSCR loans, all those different things that exist that we don’t have to use our own credit. The property itself qualifies for it, but back then, we had to qualify for every property when we bought one.
Brandon Barnes 17:40
What was a big piece for overcoming the hurdle of the amount of cash to build a vacation portfolio? Because you have to buy it, you have to renovate it potentially. Then you have to furnish it, which I’ve seen a lot of times. Furnishing doesn’t fit into the renovation budget. A lot of times, you have the cash outlay for furnishing. And then you have to go put 10, 15, 20 percent down plus everything else just to buy the property. So you’re talking a lot of cash that you’re exposing yourself to constantly. How are you able to start that challenge and grow from there?
Shawn Moore 18:15
Yeah, well, and I think that you have to look at it. Anytime you’re building a portfolio of something long-term, you’ve got to have a different source of income. And I never looked at our vacation rentals as this is the business I’m getting into and going to be my sole source of income. So what I’m trying to do is say, what other active income do I have? Is it flipping? Is it wholesaling? Is it development deals? For me, it was in real estate.
We were able to do development deals at that time. That’s more we were doing than flipping. But we would take development deal money so that active income, and we would put it into building these portfolios, and we wouldn’t touch the money. We’re not using the money for that. I always tell people when you’re building a portfolio of long-term assets, that first purchase is one of the most difficult. The second, that gap between number one and number two, that gap is probably going to be the widest gap that you’re going to see because now you’ve got to resave up the money.
You got to be disciplined not to take money from property one, let it do its thing, keep building your active income over here so you can put it into property number two. And then once that gap between two and three starts to get a little bit shorter and a little bit shorter every single acquisition. Because now you’ve got assets that are starting to build up like your friend did, right, those first few, and then you start to leverage them. So for us, that’s what it was. It’s saying, okay, I have a long-term plan.
What am I going to do with this active income, and how much am I going to allocate to build a portfolio for us? A vacation rental portfolio. But I think everybody that has active income should be thinking about what are you going to invest in for the long term as well. A lot of people, just out of habit or just out of the societal norms, is, I’m going to put it in a retirement account or the stock market, whatever it is, those are all fine.
Whatever your actual plan is for us, we see more leverage and putting it into real estate and something tangible, but that’s the game that we play. But it’s taking active income, putting it into something that will ultimately turn into passive income for you down the line.
Brandon Barnes 20:18
Exactly. Even if it’s $5,000, $1,000, whatever it is, it’s that discipline not to spend it. And you hear somebody like yourself or somebody else build this portfolio. They don’t realize the first one was tough to buy because they had to grow the active income to a certain point. And then I’ve heard that same thing multiple times. That first one to that second one is your longest gap because you spent so much money and effort and time getting that first one, you probably depleted the money that you’re investing into that stuff, and so now you have to build it all back over again. And people need to realize it’s not something that’s done quickly, but once it is started, it can grow faster as you have more assets.
Shawn Moore 21:01
Absolutely. We always over-anticipate what can happen in 30 days or a year, and then we under-anticipate what can happen in 3, 5, 10 years. And so if you actually just start that process, that’s one thing I love about vacation rentals for me personally is I still got a tangible benefit of personal use out of them. We go vacation in them a couple of times a year. So even though in the very beginning we’re not cash flowing or making a ton of money or we’re not planning on pulling any money out as far as a financial asset, we have a lifestyle upgrade because now we own vacation homes in these different areas that we can go use.
So it keeps us interested in them. At least for me personally, it keeps me interested, saying, okay, it still feels like a pretty good upgrade because I’ve got a vacation home somebody else is paying for. Ultimately we’re going to make some good money on, but we’re allowing it to mature over time. But while it’s maturing, I can use it personally and not really draw from that maturity of it got you that’s.
Brandon Barnes 21:57
Got it! The other benefit is somebody else is paying it down. And you can go to these cool cities that you like. If you like hiking, you can go to hiking destinations you can buy in the beach destination. So how do you find your houses now?
Shawn Moore 22:08
We build teams of other investors, like whether they’re wholesalers a lot of realtors in the area that specialize in us. I love working with other investors that are either flipping or wholesaling deals for us because they understand what we’re looking for as an investor. One of the things that I was able to when I lost everything, I was able to get right back into the game and start making money because I understood investors, so I could find deals that I knew they would like because I would buy them if I had the money.
I love working with and so what we try to do is we build teams across the country. We’re nationwide and actually in other countries now where we’re constantly buying. So we build teams and relationships with other agents that specialize but really like a lot of our stuff comes off of the MLS because we have to understand how to underwrite it.
I love when we find wholesalers or people that understand us as investors and what we’re looking for because a lot of times they’re not just sending us everything that hits the MLS, they’re actually finding off-market deals and they’re doing kind of their hustle on the back end in the markets that they’re in finding these deals. And us, we’re basically retail buyers at this stage in the game. We’re not actually out trying to find our own deals. We try to find those investors that are doing that for us. And we’re happy to paint.
Brandon Barnes 23:30
That’s awesome! So how do you identify markets or cities that you go into and look to buy these homes?
Shawn Moore 23:36
There are so many good markets across the country. It’s hard to judge based on the investability. We have tons of reports. We love data. We’re looking at data all the time. And so we are scraping data and trying to find kind of the investability matrix that we’re looking for typically on the front end that has to do with the average revenue in the area and the average acquisition cost. And we’re looking for a certain ratio there that we’ll look at. But really, I always tell people, like when I build my personal portfolio, so we have a kind of a Vodyssey portfolio, and then I have my personal portfolio, my personal portfolio, my criteria is where do I want to own my next vacation home?
And then we will go try to figure out and run the numbers, see how investable it is. Some markets are better than others, but I always start with it because I just told you that personal use for me is a big deal. And so we look for areas that where we want to own homes in, typically because there are good properties and bad properties in almost every market. Like you’ve been in the real estate game, right?
Every property in every market doesn’t mean like you can find one of the best markets as far as investability. And every home you find is not going to be a perfect candidate for a flip, right? And some are going to be overpriced. Some are going to be at a good deal. You can buy them at a discount. That’s the same with vacation rental market. So anywhere that has decent profit drivers, the ones that always people think about, the beaches, the mountains, the ski hills, the national parks, those things that we go visit for.
But there are a lot of really strong profit drivers like major medical centers, colleges, and different things, major corporate headquarters. Bentonville, Arkansas, where Walmart is located right now, they’re building that up as kind of a mountain bike area as well. But really, what was driving Bentonville was the corporate headquarters for Walmart. And it’s a very nice short-term rental market, so any of those major profit drivers can make for a really good short-term rental marketplace.
Brandon Barnes 25:33
I think it’s. Cool that you’re looking at it just outside of Strictly Your Vacation because everybody can see mountain speeches, those kind of things. But it’s seeing the corporate headquarters. I had never heard of Bentonville, Arkansas, and I have two friends that live there now, and that’s when I obviously about Walmart, but then found out it’s like the number one place to go mountain biking.
Shawn Moore 25:55
Yeah. And Walmart and they have built that area to be that right. I mean, those mountain bike trails have all kinds of money behind them, and they’re awesome. They’re beautiful, they’re great. And so there are a lot of really great things that are fueled by that being because it’s the Walmart headquarters.
Brandon Barnes 26:13
How much research do you have to do, or how difficult is it sometimes to find out vacation rental regulations and things like that? Is there a place to find it? Because I know one for our specific city. Folly beach just passed a short-term rental app, and it is going nuts down here right now because these people own these multimillion-dollar homes making tons of money, and now they can’t sell them because they can’t pass on the short-term rental making money. But it changes the ability of the home now and the value.
Shawn Moore 26:48
Yeah, absolutely! And so one, we do it old school. One, there are a lot of tools out there that say that you can double-check regulations. We’re pretty old school. We call the county the city, the HOAs. We look at the regulations. We only invest in areas that have given the blessing towards short-term rentals, allowing them to be to where we can get permitted, we can get licensed, and we can make sure that we operate. It’s those gray areas that people were operating. And then these areas are coming in and saying, okay, we’re changing this now to say we either like it or we don’t like it, or here’s where we like it.
If you’re finding an area that they end up doing a cap or they end up doing a moratorium or something like that, you’re going to be grandfathered in. Doesn’t always mean it’s going to pass on to somebody else, though. You’re just going to be grandfathered in while you own the property. But there are many times where people invest in areas that it’s not addressed one way or the other, and so they’re allowed to operate until it’s addressed. But then you’ve got a 50-50 shot of them telling you yes or no. And a lot of times, people feel like that was changed on them.
Well, they never had the blessing to do it anyway, and so they just decided to address it. That’s becoming less and less of an issue recently because this is becoming more of a mainstream asset that most municipalities, HOAs are addressing them, and so of whether they want them or not, I don’t believe that they should be operated everywhere. I’ve been in real estate for a long time, when I was developing or still continue to develop at times. I can’t go put high-density housing in an area that’s not zoned for high-density.
I can’t go put up an apartment compass. I can’t go put a 7-11 on every corner that I want that I can find a vacant lot. It has to be zoned correctly. And these municipalities are going to identify where they want them, where they don’t, and what rules they want short-term rental operators to follow. For us, that’s a big deal. The last couple of years especially, you have to look into that on the acquisition side. And we do it old school. We make sure that we contact county, city, and HOAs. All of those layers have different rules and regulations that we have to look at.
Brandon Barnes 28:50
I like the tip. It’s like invest in the places that they’ve made a decision because you’re right. If they haven’t made a decision, then they technically didn’t change anything on you. They just never made a decision.
Shawn Moore 29:00
Yeah. They’ve never addressed it. Exactly, and three or four years ago, you pretty much had to kind of take that risk a little bit because not a lot of areas were making the municipalities weren’t making the decisions or how they wanted to operate. Today, especially the last year and a half, two years, has been really sweeping regulations across the board where they’re really coming out and saying what they want and how they want to operate.
So we only go to areas, and we’ll buy. We’re preaching the ownership on. I’m not controlling properties. I know sometimes that’s popular and can be ways to make money doing that. We’re investing in buying these properties for the long term. I need to make sure that I’m going to actually be able to operate the way I want to operate.
Brandon Barnes 29:41
Yeah, that’s super key because going to Folly Beach, my wife, her aunt, lives there. We’ve talked to her as like, hey, when you’re because she’s in the kind of part of her life where she’s thinking of selling now, she’s tired of the traffic. And then all of a sudden they passed this ordinance, I don’t know, maybe two months ago, and it crushed the value of her home because people want to go live there long term, they want to hang out there and then rent it when they’re not there.
Shawn Moore 30:10
Brandon Barnes 30:11
So it’s been interesting to kind of see how it’s unfolding now with people protesting and different things being done.
Shawn Moore 30:18
Yeah. When it starts to affect, and I think sometimes too, the pendulum will swing one way, and then usually it’s going to fall somewhere in the middle. So a lot of times you will see some of these. We’ve seen it in different areas that were really popular in the beginning stages of really passing some strict regulations.
They realized that it did affect property values. It did affect some of the revenue that they’re able to generate a lot of these areas. Their major source of revenue are hospitality taxes. And so they start to say, okay, we just gave ourselves a huge pay cut, so maybe we’re going to be a little bit more lenient. And we’ve actually started seeing that pendulum start to swing back to the middle in a lot of areas. So you just have to watch it on a regular basis.
Brandon Barnes 30:58
Do some of those regulations have to do with poor ownership and management, you think, with short-term rentals? Or do you think it’s more just kind of municipality specific? Because I would imagine a bad management on a vacation rental could really put a bad taste in that neighborhood or city or whatever.
Shawn Moore 31:15
Absolutely. Yeah, for sure! I think that a lot of these one, we always hear about the horror stories, right? People talk about we always talk about the outliers, good or bad. We never talk about kind of the middle. And so when you go to some of these meetings, you got these people that are really upset because they heard about one party or somebody got out of control. That’s not normally what happens. But the more bad operators you have, the more bad management that you have in the space that’s not treated as professionals, the more likely we’re going to see more regulations come in place.
Like, I’m a big proponent of you saying, hey listen, this is the time of professional management and managers and owners that we have to be good neighbors, right? There’s no reason that I don’t want a party house right next to where I live, either. So being a good neighbor and being able to show that okay, as an industry as a whole, that’s always not the case either. There are going to be bad apples as popular as short-term rentals got in the last two or three years, where everybody was buying properties and everybody was making money. Even at the very beginning of our conversation was saying I had to go in, and there were no cleaning supplies. I have a checklist of all these things I can do.
There are operators in this game right now that probably shouldn’t be in the game. And so the regulations and some of the rules that are being placed are because of that probably it’s not a bad thing to raise awareness that, hey, if we’re going to operate this as an actual asset, then we’ve got to be a good neighbor.
We’ve got to be able to follow the rules. And I don’t think it’s wrong with there’s nothing wrong with the municipalities passing those rules, but they’re hearing the outlier stories. So it’s our job to also have some good stories on what it’s done for the communities, what it’s done for tax revenue, all of that stuff. Because a lot of these areas that is where their tax revenue comes from.
Brandon Barnes 33:04
Absolutely. Tourists come in. They spend money.
Shawn Moore 33:07
Yeah, everything’s great for businesses, everything else.
Brandon Barnes 33:10
So for somebody getting their first vacation rental, would you suggest them managing it on their own, bringing in a management company? What would advise you give for somebody that wanted to get their first vacation rental?
Shawn Moore 33:25
So this is going to be a different opinion than almost anybody’s going to tell you on the front end. And I don’t believe that most people are cut out to manage their own properties. And so, it is a large expense to hire full-service management on these properties. But that comes back to the numbers and underwriting. I don’t manage any of my own properties. I know how to manage properties, but I don’t do it because it takes a lot of time, and it can really turn into a full-time job.
And that can be detrimental to one your portfolio growth because you’ve got to have some time for your active income to continue to build your portfolio. But also, it’s a drag when you look at the amount of time that they take versus the money you’re making, especially that first 12 to 18 months.
And so I don’t think that most people should manage properties just to save the money because you’re going to end up doing a lot of $10 an hour work that you probably make more money doing something else and hiring somebody to do. But also, that person, that professional management company, is going to do a much better job. And so your job as an investor and owner is, I believe, go find the right assets underwrite these assets, find right properties in the right areas, set up a unique experience, and hire the professionals to help you deliver that experience to your guest.
Brandon Barnes 34:34
Because being a short-term or vacation rental management person, people are also probably asking recommendations like it’s a lot more in-depth than just, hey, here’s a lease, here’s a key, pay me rent once a month. I mean, they’re interacting with the guest for an experience.
Shawn Moore 34:50
Absolutely. You’re part of that experience. You’re dealing with one. You’re dealing with check-ins and checkouts on a regular basis. You’re dealing with the turnover of the property, making sure it’s set up correctly every time somebody comes in. You’re in the hospitality game right now. Right? And so you’re exactly right. Way different than a landlord-tenant relationship versus a host and a guest relationship when you’re a host.
Yeah, where am I going to go eat? How far am I from the major profit drivers? What are some of the tips that I can do to avoid the lines of some of these areas and get into some of the best restaurants when I’m not from here? All those different things that you’re going to be interacting with on a regular basis is part of the game.
Brandon Barnes 35:28
Now, where can people learn how to underwrite short-term rentals? Because I know in my journey so far, the two that we’ve purchased, it is very difficult to know. I think AirDNA is a website, but where can somebody learn to think, like, what are the costs into it? What can I underwrite it? What can I rent for? Kind of….
Shawn Moore 35:48
Right. So AirDNA is a good data tool a lot of people are familiar with. We use AirDNA on a regular basis. We use about three or four other data tools that we invest in because we find that data. We extract certain data from different areas and different properties. We’re really looking at major things. Are the Occupancy in the area the average nightly rate range? There’s always a range for your average nightly rate for your property type and area, and then understanding the seasonality and then ultimately what the costs on the back end are going to be.
Now, the part that makes it hard and difficult to underwrite is most people don’t understand what that average nightly rate range is in the market for, let’s say, a five-bedroom property at Folly Beach. We’re just talking about, well, that range is going to be different depending on where you’re located in that area as well. Whether you’re on the beach, whether you’re a couple of rows back, whether you’re further back, maybe you’re on a golf course in the area. Understanding how to identify the difference in those different changes depending on where you’re at is where it becomes difficult.
AirDNA is a good tool. I really think you have to have the back-end version, the paid version of AirDNA. They’ve got a couple of different tools that you pay for if somebody was going to start. That’s the most affordable data tool to be able to look at. If you go on to underwriting, the deal is probably one of the most complicated because it’s different. It’s not complicated, and it’s hard to do. It’s just different than what most people are used to underwriting.
And so if you go to Vodyssey.com, we have some training on how to do that and what we do to underwrite them. Because you’re really having to look at the overall market revenue range, how much money is being spent in the market, what the average nightly rate range is for every individual property type and location in that market.
And then you start to look at Occupancy, and then you start multiplying and timing everything together to start running your numbers. And so it can feel overwhelming. Once you understand how to do it, though, it’s not complicated or hard in that it’s super difficult. It’s just that most people don’t understand how to run those numbers.
Brandon Barnes 37:51
Got you! Yeah. I remember looking at ours, and people ask us, well, what’s it going to rent for? And I honestly had no clue. Our first vacation rental was not purchased in the sense we bought it. The numbers work for anything, but because of its location, we decided to use it for golf and tournament and stuff like that. We started trying underwriting understand what’s it going to rent for. I mean, there was ranges from $65 a day to $200 a day.
Then you’d have spikes in obviously the tournament for two weeks, then a couple of other events that happened in the city, and it was all over the place to kind of understand, like, what’s this thing actually going to rent for. So we ended up just saying, all right, this is the long-term rental; this is the ARV of it. Let’s just underwrite it like we would normally, and then it’ll cash flow more than what our debt service is. So we’re okay.
Shawn Moore 38:44
Yeah. Sometimes in these areas, there are some areas that both work, right? Long-term rental can work, and you can cash flow. Short-term rental can work, and you can cash flow in other areas and vice versa. There are some areas that long-term rents don’t cash flow. That’s one thing about short-term rentals that is nice is some of these more expensive vacation home areas. You typically don’t have the demand for long-term rentals in some of these areas, but also even the small demand that is there, it doesn’t cover the bills.
And so you’re forced to say, okay, can I make it work as a short-term rental, or am I just trying to supplement a vacation home for myself? And so, yeah, understanding the numbers, and it’s one of those things that everybody wants the easy button. So there’s a lot of software tools that are out there saying, okay, even AirDNA that we’re talking about, they have a rentalizer tool that you can plug the address in bedrooms, baths, and it’ll tell you what they think the numbers are going to be. That’s a very misleading thing at times because it doesn’t look at the range.
All it does is look at the other three or four bedrooms within a certain vicinity, just like we would run real estate comps. That doesn’t work because you could have a property that’s a couple of blocks away that happens to be on the beach, and yours isn’t. And your revenue is going to be skewed big time by that beach property right when yours is not. And so there’s some logic-based underwriting that you have to be able to deduct some of these when we’re looking at those numbers.
Brandon Barnes 40:03
Yeah, and something we learned, which I thought was you speak, like being very specific in your house and where it’s located. One thing we did learn with ours is that this specific city and I’m sure it’s common in other cities, two bedroom, two bathrooms were much more ideal than three bedrooms. It worked to the travelers, business travelers, or two people to travel together, have their own bedroom, have their own bathroom, and it was cheaper than their hotel stipends, and they would come rent it for 30, 60, 90 days at a time.
Shawn Moore 40:34
Yeah, it’s huge. And that’s a great point. With vacation rentals, we’re always looking for a one to one bedroom bathroom count. We don’t typically look at that so much on other properties, right? That we’re going to be long-term renting. But we’re really focused on the bedroom-bathroom ratio, and we want to see a one-to-one ratio as much as possible because you’re exactly right. If you’re going with a couple of people that you’re not family members with, you don’t want to share the bathrooms.
Brandon Barnes 41:00
Yeah, that’s a cool tip. I would not have even thought about it just in general, but the house we just stayed at, Myrtle Beach, I think, was nine bedrooms, nine bathrooms, nine and a half baths. It was one. That makes sense if you’re traveling with somebody. Everybody gets their own bedroom. Everybody gets their own bathroom. They want to have their own space.
Shawn Moore 41:17
Brandon Barnes 41:18
So Vodyssey, that’s your rental portfolio company?
Shawn Moore 41:21
Yes, Vodyssey is actually a training company. We have a coaching mentoring program for investors that are trying to build a portfolio in the ownership model of vacation rentals. And so that’s what Vodyssey is. I’ve got a coaching training platform and where we help people get into this game and really understand it fully because you’re writing some big checks a lot of times, and you want to make sure that you’re walking into it with your eyes wide open. And that’s what we do over here at Vodyssey.
Brandon Barnes 41:47
And teaching them how to be good managers and good owners because it’s amazing how people have treated it over the last couple of years. It’s just, hey. Well.
Shawn Moore 41:54
Yeah, the game is going to be a little different going forward, for sure. Now there’s more money being spent than ever before in this game, and so that’s really exciting. And there are no real signs of slowing down. I mean, short-term rentals have been kind of the shining star in hospitality, not just as investors’ kind of being the shiny object, but they’ve been overall revenue and money being spent.
And demand for short-term rentals continues to go up, which is really exciting. But the game is going to change the top 20% of the market, and the owners are going to make 80% of the money, just like what happens in most markets and most immature asset classes. We’re going to start to see that, and we already are seeing that in the short-term rental gate.
Brandon Barnes 42:36
Got you! So for those of you looking to buy short-term rentals, treat it like the asset that it should be treated as, not just as a mistake. And somebody will pay me just to live there for.
Shawn Moore 42:44
Brandon Barnes 42:45
Well, cool. So we have four kind of questions we ask every guest. These are geared maybe towards more of the newer investor. So what would be cool? Obviously, you’re in a different niche, so it’s a little bit different stuff. But we’re covering the four pillars of what REsimpli is built on, which are sales, marketing, data, and operations. And so just kind of give us your one piece of advice for all four of those. So for somebody newer in getting into sales, what would be the one piece of advice you would give them for real estate investment?
Shawn Moore 43:13
Yeah, and I’ll kind of lump marketing and sales. They’re totally different. But if you’re new one, marketing is to attract people to raise their hand and say, I want to talk to you, right? Sales is being able to actually convert those people that want to do business with you into actual business. One thing that I see, and I made the mistake early on in my career, is I’m only marketing when I need another deal, right? It’s like, okay, if I need a deal, I’m going to market. You always should be marketing. Have a marketing plan that is always going, and that goes back to the sales.
You should always be trying to have conversations, whether it’s your next wholesale deal, whether it’s your next fix and flip, whether it’s your next development deal, whether it’s on our side, whether it’s our next purchase on a short term rental for a long term asset to build a portfolio. So those two, sales and marketing, don’t think that you only do it when you need the business, right? Because there’s a pipeline that always needs to be built and conversations that always need to be happening on the sales side.
And so my biggest piece of advice is set that up, have a long-term plan that is consistent and always going. And then so on the other two, what we have, we had operations and data. Don’t ignore the data. One, if you’re investing, understands your numbers. I feel like the biggest mistake that people make is that they say, I’m not a numbers person, I’m not a data person, and I’m going to let somebody else underwrite my deals. I’m going to let somebody else tell me whether it’s a good deal, whether it’s another investor, whether it’s a software tool, that it’s plug-and-play. Understand the numbers.
We have some amazing tools out there today. REsimpli, a great tool to be able to tap in, organize everything, tap in, and figure out where that data is coming from. When you’re writing checks, when you’re in the investment game, you’ve got to understand the numbers, and you’ve got to have reliable data that you’re being able to get numbers from. One of the things I was talking to you about, we’ve got a number of data tools.
We’re able to recognize bad data as well. When you understand the numbers, and you’re looking at enough data on a regular basis, you’re going to understand that there’s going to be good data and bad data, and you’re going to start to see some of the outlier things that you can kick out when you’re not involved in the data on a regular basis again.
Now you’re just saying. Okay, I’m going to place it on red or black and see what hits. And so it comes down to being able to underwrite the numbers. And then, on the operations side, one of the things that understand what your time is worth there are a lot of things that you can outsource delegate pay for versus trying to do it all yourself.
I think in the very beginning, sometimes we have more time than money, and we do need to do some of the things ourselves. We do need to roll up our sleeves. But there’s going to be times where as you progress, and the only way to grow is to start to say, okay, I’m going to offload some of the $10 an hour work to other people to be able to do.
And don’t be afraid to pay somebody what they’re worth. Like I just told you before, I used to do wholesale deals and fix and flip deals, and we would go to market and find our own deals. Now we’re at the stage in our business where it makes more sense for me to build a portfolio, and I pay. Like I said, I’m a retail buyer. And people are like, well, you’re an investor. Why would you ever buy retail? Right?
I love getting a good deal, just like anybody else. But that money that I’m spending somebody else to go hustle and find those deals is worth the time that it saved me to go do other things and build my business in other ways, that I have higher leverage activities. And so when it comes to the operations, understand where you’re at in your business and be able to say, okay, there are times where I have more time than money, and I have to do some of those $10 an hour jobs. Don’t continue to do that for the long term as you start to build and grow.
Brandon Barnes 46:43
As that time starts squeezing, what’s one thing I can take off my plate?
Shawn Moore 46:48
Brandon Barnes 46:49
It will change dramatically your business 100%.
Shawn Moore 46:52
Brandon Barnes 46:53
Shawn, Dude, I appreciate it. That was some advice. That just makes sense for every business, every level of investors. Like, be consistent, value your time, know when to do it, and then know your numbers. When people tell me, I’m not a numbers person. We’re not asking you to build algorithms in your excitement.
Shawn Moore 47:12
Brandon Barnes 47:13
Hey, just look at your PNL. Look at your since you have and say, is this working or is it not?
Shawn Moore 47:18
Yeah, Absolutely. One of my mentors a long time ago told me, he said, look at your bank account every single day because where you pay attention to what you focus will go there, and things will grow. And so every morning now I drink coffee, I open my bank account. Sometimes I don’t have any reason to do it, but it’s just a habit now. And he says because I used to say I don’t even want to look at it because I don’t know if it’s good or bad today. And so we would ignore it. But even just knowing the numbers of what’s in your bank account on a day-to-day basis, it sounds like a simple thing to do. But it’s almost guaranteed that that bank account will start to grow because you’re paying attention to it.
Brandon Barnes 47:52
Yeah, I’ve heard that as well. Shawn, thanks for your time. How can people find you, reach out to you, get in touch with you?
Shawn Moore 47:59
Yeah. Awesome, Brandon! So if they go to vodyssey.com, V-O-D-Y-S-S-E-Y, you’ll find everything we’re doing over here on the vacation rental side. You’ve got a book that I wrote. It’s a bestseller on Amazon. You’re welcome to go buy it there. You can also download it for free on our website. So go check that stuff out.Got tons of free trainings.Nothing for sale there. Everything’s for free. So you can go find everything we’re doing over there at vodyssey.com.
Brandon Barnes 48:22
Awesome, man! I appreciate it. Take it easy. And I thank you for your advice and wisdom and learning about something that honestly intrigues me as well as we’re getting into that world, too.
Shawn Moore 43:48
Absolutely. Brandon appreciates you having me!