April 26, 2022 • 45 mins
Ever dreamt of stepping into the dynamic realm of real estate investment? This episode promises to offer an in-depth understanding of the world of real estate, transforming your ambitions into achievable endeavors. We kick-start the conversation by sharing our personal journeys, including triumphs, pitfalls, and continuous adaptability in the ever-evolving real estate landscape.
Transitioning into the world of real estate can often feel like navigating uncharted territory. Dallin, our co-host, illuminates this process by sharing his personal transition into the industry, offering invaluable insights into how to tackle the unknowns and ask the right questions. He also demystifies the concept of the capital stack and its relevance to the fix and flip market in Utah.
So, how can one bootstrap their way into real estate investment? Dallin, having been there himself, explains the concept of 'skin in the game' and narrates his inspiring story of putting together his first deal, even when his pockets were empty. He also opens up about his single-family condo venture in Moab, giving you an inside look on managing an Airbnb business. Whether you're an aspiring investor or already dipping your toes in the real estate pool, this episode is packed with a wealth of practical, experience-based knowledge and tips to set you up for success. Tune in and embark on your journey to becoming a savvy real estate investor!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Wayne Aston.
Here with Aston Incorporated,I'm your host, and this show is
designed for our serialentrepreneurs in their ruthless
pursuit of personal expansion.
We're going to be talking abouthow to build your real estate
empire, start and scale asuccessful business here in the
USA and, most importantly,discover your unique skills and
talents to make your own impacton humanity.
Speaker 2 (00:30):
Alright, audio is a go, video is a go.
Speaker 1 (00:38):
Welcome back to the podcast guys.
It is Aston Incorporated.
I'm your host, wayne Aston, andis my co-host, nalan Aston.
Hi, everyone.
Speaker 2 (00:49):
Good to be back.
Speaker 1 (00:51):
We had a kind of the last episode was kind of a ended
up being a heavy episode man.
Kind of heavy.
Did not expect it to go as deepas it did.
I think today's episode, youknow we're going to get into as
promised, we're going to getinto real estate 101.
Target for today is to provide abroad education on real estate
(01:13):
Any of our beginners who want to.
In fact, I had someone yesterdayapproach me and ask me hey, you
know we've got this land up inMorgan, utah, and thinking about
doing an Airbnb business upthere, wondering you know where
you would recommend we get, likeyou know, some tiny homes or
(01:33):
something.
Okay, so this is on the mindsof people in this nation, like,
how do we get it, how do we comeinto Airbnb business, how do we
get into real estate?
So we're going to be, we'regoing to be having some stories,
we're going to talk about somereal battle tested like reality
of real estate and hopefullyprovide some of the like the
base level definitions and youknow nuts and bolts of how to do
(01:57):
a real estate deal.
So, absolutely, with that inmind, you know you are a
qualified real estate investorat this point at you know the
right page of 24, which I thinkis super exciting.
I mean, I think of me at 24years old and I was running a
stonentile contracting businessand you know that was really all
(02:23):
I knew how to do.
I mean for me, for me it waslike go work the hours and use
my hands and my body and and Icould measure how much I could
make by the number of squarefeet I lay in a day, and, and
real estate presented this thingfor me.
Later on, as I became awarethat, you know, real estate
(02:44):
investing was a thing, it becameclear to me that this is the
way to use my mind, Like yeahthis is something I could scale.
It's something that I'm notgoing to break my body down
doing, and so I got to learn.
And, and I can remember,somewhere, somewhere during the
10 years of being in thestonentile, you know, lost my
(03:09):
first house.
Speaker 2 (03:10):
The first house I built when I was 21,.
Speaker 1 (03:12):
It got upside down, got it into short selling and we
lost the house, had to move andwe moved in with your grandma
for a while and I remember theforced transition out of the
construction do stuff with myhands.
Mentality into the I mustfigure something else out.
(03:35):
Mentality and I would go overto the librarian Hunter the
Hunter Librarian, Kerns, Utah,and I would rent every book I
could find from Donald Trump andRobert Kiyosaki and those
original gangsters in the realestate space who had put books
out at the time.
Right, I mean, we're talkingabout like we're talking about
(03:55):
like 2003 ish, that that aboutthat range, and I started to
devour these books and Icouldn't get enough of it.
I was just like Neo on thematrix man, just plug that thing
in.
All said I'm flying ahelicopter tomorrow, right, so
that was how that's it.
So you know, you find out aboutme.
(04:16):
I think you're a lot of thesame way.
It's all or nothing Like.
I go into six gear and I'mstuck in six years.
Speaker 2 (04:22):
It's all, it's all in .
Speaker 1 (04:23):
So that was like you know it was hard to be at home.
It was.
It was.
There was so much guilt andshame Having lost the house, and
your mother at the time wasjust so displeased with me that
I was just.
I needed to be in the library,I needed to expand.
I need to figure something outdesperately.
There was a desperation behindthis, needing to learn.
(04:44):
And so you know where, wheredid the actual where did the
first action begin in the realestate investing career?
Back then, because I was goodat stone and tile, I thought you
know what, maybe, maybe fixingand flipping houses would be
(05:05):
cool.
I could do that.
Yeah, I built a house when Iwas 21.
I've done more.
You know drywall, paint,electrical framing.
I mean, when I built that house, it was funny because your
grandpa was like, hey, youshould just build a house, don't
hire a general contractor, justbuild it.
I'll help you build it Of coursehe lives in Layton and I'm not
(05:25):
thinking like right.
Speaker 2 (05:26):
Okay.
Speaker 1 (05:28):
So so you know, I ended up building like 80% of
this house on my own and prettyfunny story on its own right,
but that was actually.
Building the house at 21 isprobably the first true real
estate investment Got the first,more at the first construction
loan, built the house from theground up, nailed my hand to the
wall in the process and that'sa funny story so built the first
(05:54):
house, lost it a few yearslater.
When I really startedtransitioning into being
effective in real estate, I wasconsuming all these books and
you know we were doing fix andflips.
And fix and flips, man, I mean,there's guys, I know guys that
will do 100 houses a year fixand flip.
(06:15):
They'll just buy an old housein Ogden or where we're at right
now, or they'll.
You know Salt Lake.
There's markets inside of youknow Utah that are more ripe for
you know, infill project like afix and flip.
So you find those markets.
You know you find a good dealand you know that was
(06:38):
interesting because we did a lot.
We did not make a lot of money.
I'll be honest, I wasn't greatbecause I really valued high
quality finishes, like if I wasgoing in doing the stone and
tile, I'm like doing thesecustom cut decos and these
granite floors.
Like I yeah, I couldn't.
(06:59):
I had a real problem providingvalue at a price, that price
point that made sense, and so Iwas always overpaying for
materials and doing more than Ishould to really make a good
profit margin.
So you know you see the guys onTV doing the fix and flips and
you're like man, that's.
That really really takes talentand discipline To discipline
(07:19):
yourself, to just spend just seta budget and spend the budget.
That is a very tempting thing togo to want to spend and go over
budget because it's beautiful.
You want to make it, you wantto make it, of course.
So for the beginning listenersout there, dallin, let's start
with you.
Like you're pretty new inactually taking action as an
(07:44):
active real estate investor,successful.
You own rental properties, youhave a thriving Airbnb business.
What was maybe give me?
Give me like the top threethings that you needed to figure
out from.
Like a definition, like, whatwas it the title work?
(08:06):
Was it the construction process?
Like, what was the hardest,what were the choke points for
you?
Well, like, trying to navigateas a new investor?
Yeah, the first and foremostthing.
Speaker 2 (08:16):
Just my immediate thought is I didn't know what I
didn't know, and I think that isprobably the biggest thing that
holds everyone back and youthink about it like how can you
do something you don't even, Iguess?
How can you get an answer to aquestion you didn't know?
You need to ask yeah, Right,and that was the hardest thing
(08:40):
for me, because I'm sitting heresaying, okay, here's my desired
outcome I want to buy these twoproperties.
Okay, Everyone in their dogwants to buy property Of course
and so for me it was the wholewell, geez, I don't even know
where to.
You know, what questions do Ineed to ask?
(09:01):
You know, because for me, ifyou take you know some of my
earlier businesses, guitar hacks, or you know my marketing
company or you know some otherthings, you know questions drive
my research.
So if I'm trying to learn askill, say for my guitar
business, I was sitting theregoing, okay, I want to sell
(09:25):
people on how to play the guitar.
Okay, well, what kind of thingsdo people need to know?
How did I learn?
I mean, these questions arethings that guided my own
curriculum that I created.
Okay, well, how does someone goabout this to get the same
results that I did?
How do I do this?
How do I do that?
You know, what are people gonnapay for this?
And these questions led toother questions.
When I'm sitting here with aproperty, okay, how do I buy it?
(09:48):
Which led to I don't have themoney.
Who has the money?
How do I get them to give methe money?
How do I structure the deal?
How do I deal with title?
Speaker 1 (10:02):
What is title?
Speaker 2 (10:03):
And then you know, now that I have this
understanding okay, title, Ididn't.
Back then I didn't even know.
You know what I mean?
I don't have these now, allthese terms that I can just
throw out, I had no idea thatthey even existed.
So what questions are I need tobe asking to get there?
You know, just starting, Ithink, is the.
This is the biggest choke point.
It's like because there's somuch newness.
(10:23):
Yeah, it's a little daunting.
Speaker 1 (10:27):
How to finance and structure your financing around
a real estate deal is it's asunique, almost as a snowflake.
Every deal can potentially haveits own unique capital
structure and that's that'smaybe good news for new, new
potential hopefuls.
Speaker 2 (10:46):
Yeah.
Speaker 1 (10:46):
That there's more than one way to do things and it
could be bad news for you knowconventional lenders but when we
when we talk about a capitalstack, the definition of a
capital stack is the totalamount of a project required to
complete it.
So right.
So if you're buying a house,you're going to fix and flip.
You've got the cost of thehouse.
(11:08):
Yep, You've got the commissionspaid to the agents that helped
you buy the house, Right.
You've got the fees the titleagency pays to ensure that that
the title is clear and free ofliens or encumbrances.
And then, if it's a fix andflip, you've got a renovation
budget.
Yeah, After you've bought thehouse, you have the rest of the
(11:30):
cap stack, is it could be?
as much as buying the house,depending on the and I've done
the lowest renovation.
The highest renovation I everdid was a.
We paid $1.8 million for thehouse and spent 900,000
renovating Serious fix and flipyeah, and it didn't end well.
You know, typically you'regoing to see the fix and flip
(11:53):
markets between 250,000 and600,000.
Right.
Property values in Utah havegone up dramatically in the last
few years, so the market movesand fix and flippers will focus
where the market moves what cansell in a week, right.
So structuring the capital stackso you can go to the bank, you
(12:14):
walk in designs bank or someconventional bank and they will
gladly say, yeah, we'll give you50% LTV and you're like what is
LTV, what is this?
Speaker 2 (12:25):
Do you remember that conversation?
I do, so.
How did that go?
Speaker 1 (12:28):
Like what, like don't name the bank.
Speaker 2 (12:30):
But like what?
What was that conversation like?
Speaker 1 (12:32):
when they dropped the LTV on you.
Speaker 2 (12:35):
I'm sitting here going oh, great, great, you know
like.
Because with a severe lack ofunderstanding, I'm not wanting
to let them know that I don'tunderstand, you're right, but
I'm also saying I need to knowwhat that means.
So I'm over here googling youknow I'm googling things, but
but it's a real eye-opener whenyou sit in here and look at,
(12:57):
okay, awesome.
And then they'll ask you and Iremember everyone asked me so
how much are you gonna put down?
Yeah, how much are you gonna do?
You know what's your skin inthe game and what's your skin in
the game.
Speaker 1 (13:14):
Yeah, that's.
That's my most hated, that'swhat they all say, that's maybe
my most loathsome term in realestate, how much?
Skin in the game.
Have you got Right?
That is a.
That's the old boys club.
Yeah, Lender.
Mentality of if you're notputting half in, then you're not
worthy.
Speaker 2 (13:34):
Right, we're not gonna do this deal for you if
you can't come in with it.
Speaker 1 (13:38):
And the dysfunction behind the how much skin in the
game question is it's limited tothe dollars amount they should
really say how many dollars areyou?
Investing Right Skin in thegame could be so much bigger
than dollars.
Speaker 2 (13:52):
So for the new investors, pay attention.
Speaker 1 (13:56):
Skin in the game could be sweat equity, okay.
If you're gonna go fix and flipa house, okay, go do the the
stone and time yourself Right,do all the demolition yourself.
Speaker 2 (14:05):
That's worth 10 grand .
Speaker 1 (14:07):
Yep, do all of the countertops yourself.
That's worth 15 grand.
So sweat equity is one way toaugment the cap stack and it
flies in the face of thatinstitutional lender who wants
skin in the game.
Really, what they want is theywant to see how much money you
can put down.
Speaker 2 (14:23):
Yeah.
Speaker 1 (14:23):
And that's really an attempt to kind of keep you out
of the market.
So if you're that new investorwith no money but you want to be
an investor, how do you startLike you don't have a rich uncle
Right, there is no trust fund,you're not.
You're not just making a phonecalled a rich uncle Bob and
saying, hey, man, I need fun.
Speaker 2 (14:41):
I need half a million to do this deal.
That's just not a possibility,right?
Speaker 1 (14:44):
So we're talking really about bootstrapping Yep,
yep.
And so you know that's when yougo, you typically will go get
investors, you'll go findinvestor partners.
Speaker 2 (14:55):
I call that a syndication yeah, Okay.
Speaker 1 (14:58):
So so if I don't have , like you explained on your
first deal, you didn't even havethe $10,000 for the earnest
money deposit, I had nothing Toput the deal under contract.
So you, you were faced with aunique conversation, a unique
task at hand to go find aninvestor who not only believed
you could pull it off but waswilling to give you capital with
(15:21):
no skin in the game, so tospeak.
Speaker 2 (15:23):
Yeah.
Speaker 1 (15:24):
That's a that's a magical equation, guys, to be
able to pull that off, to beconfident enough and present
well enough to actually persuadean investor to pull the trigger
Now right.
Fortunately for you, you had anexcellent plan.
You spent months of duediligence and you knew exactly
where it would go.
Speaker 2 (15:44):
Yeah.
Speaker 1 (15:44):
And it's performing well and I bet your investors
probably want to do more.
Yeah, because it's doing so, sothey they made it a good bet on
the right jockey, right and andthe horse is the deal.
Speaker 2 (15:56):
Yeah, the horse was an excellent horse but Dallin's
an excellent jockey.
Speaker 1 (16:00):
So the combination of world class, you know, horse
with a world class jockey butthat's a winning equation Right,
so that's easier to raisecapital for.
Speaker 2 (16:09):
Well, I can't emphasize enough that the very
beginning I'm sitting here, youknow, that's the ones that.
So, going back to the nature ofevery deal being like a
snowflake, they're all so unique, Mine's basically, they were
new builds.
So I mean, if that's a doublewhammy, that's a double.
And so there's, there's so muchadditional.
I was having to put in theearnest money seven months
(16:33):
before we even closed.
Yeah, so I'm sitting here,going, man, I can you know, and
it went non-refundable twomonths later, I believe.
I mean, it was like it was likethis is going to be
non-refundable yeah, just beprepared for that, right.
It's like oh my God, so if Ilose it, like if something
doesn't work, I'm going to lose10 grand.
Yeah, and where is even 10grand coming?
(16:54):
So I and so I can't emphasizeenough the, the avenue of hey,
you know you have to be socreative and so focused on the
value I would reach out to.
I had several buddies who havedone.
You know, summer sales go sellpest control, sell solar and I'd
reach out to them.
I'd be like hey guys, this iswhat I'm doing.
I need, I need to, you knowfive, and I tell them five grand
(17:15):
, because I just get two of them.
I was like I need five grand forthe earnest money.
And I was structured a deal andI had a couple of them say okay
, yeah, until my my actualinvestor, came in and said, well
, just take care of it.
And I'm like, okay, but you seewhere I'm coming from.
I tried to exhaust everythingthat I could think of.
That was unorthodox, it wasoutside the box.
Because I'm sitting here havingall these lenders telling me
I'm too young, I don't have thecredit profile, the history,
(17:39):
yeah, while I had a great creditscore, it just wasn't long
enough for them.
Right, and you know it was.
It was interesting.
And then I also have lenderssay we need to, we need to
season the funds in yourpersonal checking account for
two months.
And I was like that's not goingto work.
Right Like hey, investor, giveme, give me all the money in my
personal checking, right, Likewhat?
Speaker 1 (18:00):
Yeah, so I mean it presents a lot of unique
challenges.
Integrity might be an importantfactor in that equation.
Right yeah, If you're going tohave an investor put dollars in
a personal account to season itin order to get a mortgage, to
make it all right.
Speaker 2 (18:15):
You know, for me, I was just like that's not going
to, that's not going to work.
Speaker 1 (18:18):
I just didn't want to go that route.
Speaker 2 (18:20):
You know, and that being said, I don't think
there's one way of just doingthings.
Speaker 1 (18:25):
That's right.
Speaker 2 (18:26):
And so and this is a perfect example of that, when
we're talking about newinvestors Well, okay, if there's
not just one way of doingthings, can I go to private
money?
Can I, can I get a mortgage?
Right, and maybe you can.
Yeah, maybe you can, and maybethat's how you start.
Maybe you just need the downpayment and you know, maybe you
have a lot of it, but you don'thave enough.
And that's when you can kind ofgo syndicate, like we're
(18:47):
talking about here but there.
But if you are sitting therewith no money, no capital, no
credit I mean that's like bareminimum how can you make that
happen?
Well, you know, it's a matterof who, and then I think we get
into the relationship.
Speaker 1 (19:03):
Yeah, yeah, yeah.
Well see, that's a funny thing,because that natural barrier to
entry if you're the guy outthere listening who is driven to
money in the bottom line.
good luck, Because what you'reup against is a nearly
impossible circumstance.
But if you're the guy over here, that's focused on
(19:24):
relationships first and servingas a fiduciary to someone and
trying to provide value to aninvestor, that's a different
conversation.
Absolutely that's a doableconversation because you're
committed to providing values.
Through the deal, you'vecreated a clear path for a solid
return and a reasonable exit,and that's a winning equation.
(19:46):
So many of our listeners mightjust tune out of the show, like
that's OK, right, yeah.
Today is the day to bounce.
If you're the money-driven guyand you're not on the
relationship side of theequation, then real estate is
going to be a hard, hard row foryou.
It's going to be a hard careerfor you, and you know what?
(20:08):
It's never too late to evolve.
Like I said, I think in episodeone or two, I started out as
the money guy.
Speaker 2 (20:17):
I started out that way.
A lot of people, most people,probably do.
You're perspective determinesbehavior.
Speaker 1 (20:22):
I mean, we all like to say that Perspective
determines behavior.
We always say that Perspectivedetermines behavior.
Speaker 2 (20:26):
You know, you're sitting here with no experience,
no perspective on what this is,and you're sitting there going
man I can make a ton of money.
Yeah, I mean, that's great.
Like you can.
Yeah, like, let's get thisstraight Like you totally can,
there's nothing bad about that.
In fact, you'll make a ton ofmoney if you do it right.
But that shouldn't be yourpriority, or why, as we talked
about in the most recent episode, let's talk about the different
(20:49):
species of real estate.
Speaker 1 (20:51):
I think it's cool that your first kind of first
success will really go At.
Real estate had two components.
You had a new acquisition butit was a new construction deal.
Speaker 2 (21:03):
So that adds a level of exposure and complexity.
Speaker 1 (21:08):
You don't have that with a.
Ok, let's start with the basics.
If we're thinking of monopolyand you've got the greenhouses
and we graduate to the biggerand to the hotel, ultimately
let's rank kind of I'd like toprovide my personal.
This has no relevance, by theway.
Disclaimer we're not attorneys,we're not accountants Very
important yeah.
Don't take anything I'm sayingor down says as legal advice.
(21:31):
Go talk to your accountants andattorneys before you try and
pull any deal off, right?
We're just talking frompersonal experience, and so when
I talk about ranking the typesof the asset classes and what I
like, it's going to be differentfor everybody.
Yeah, there are differenttactics that make it easier for
(21:52):
folks to get into single familyhomes.
Single family properties and acondo qualifies, so that's what
you're in.
So at the very baseline in realestate, you buy a house.
This is Robert Kiyosaki's.
His story is OK, I bought ahouse, I rented the house to
someone.
They paid 1,000 a month.
(22:13):
My mortgage was 800 a month.
I made 200 a month.
That's rough numbers, right.
And he did that 100 times andthen he started buying duplexes
and then eight plexes, and thenhe so Robert Kiyosaki has a very
excellent example of how oldschool real estate just
(22:34):
grassroots start with one houseand build a portfolio into
hotels.
Ok, I have had the experience ofthat.
The fix and flip is also asingle family asset class.
You're buying a house, you'refixing it, you're flipping it.
There's different risk profilewith that.
If the market shifts down whenyou're in the middle of a
(22:57):
renovation which has happened tome you're not going to sell it
for what you projected it wouldbe worth.
At the end of the day, you'regoing to probably lose on that.
Now, depending on where you gotthe money to buy the house.
If it's hard money, the hardmoney lender will probably make
his money.
You'll probably sell it a lowerprice, but you'll accept.
(23:18):
You just won't make your margin.
So there's exposure in a fix andflip that always made me pretty
uncomfortable because I couldnever do like some of these guys
.
I either was timing or themarket or whatever.
So I was never a great fix andflip guy and I did dozens of fix
and flips because I was goodwith my hands and I knew how to
(23:39):
do repairs and stuff.
There was this other type ofsingle family investment that we
really got heavy into and thatwas buying home.
Subject to.
Buying a home subject to meansthat I'm aware that someone that
owns this home is in default ontheir mortgage payment.
They're late on the mortgagepayment, the bank has filed a
(24:00):
notice of default and they'regoing to foreclose.
I come in as an investor andwith the homeowner I say, hey, I
can help, I can start makingthese payments for you.
I'll buy the home subject toyour existing mortgage.
Now I don't have to go to alender like you did.
I don't have to have theseannoying conversations with the
bank about how to qualify andbeing too young and all that
(24:21):
dumb shit.
So I skip all of the bankingprocess.
Now I'm buying a home with thatmortgage in place and it's just
a contract.
It's a legally binding contract.
I take title subject to theexisting mortgage.
They're my new renter Now.
Letting them stay in the houseis typically that's problematic
(24:43):
because they already are notable to afford the payment, so
how are they going to pay myrent?
So most of?
the time if I were to qualifythis, I did 87 of these.
So, about 87 single familyhomes subject to, and it would
typically be best if I wouldjust take over the payment and
(25:03):
let them move out withoutgetting their credit crushed in
a foreclosure.
That's the value to that seller.
That's a big deal when you havea foreclosure.
It's going to be there forseven to 10 years and good luck
getting another mortgage orgetting a car loan Some car
loans they'll look past it aftertwo or three years.
But, guys, just so you know,after the apocalypse of 2008, my
(25:29):
credit score got down to 435.
Speaker 2 (25:33):
So anyone paying attention to?
Speaker 1 (25:34):
their credit scores and those what that means.
It's like you have to try toget down there 435 is like
negative a million.
It's like yeah, yeah, I mean ahigh school kid with no credit
profile can have a 650 and zerocredit.
Speaker 2 (25:53):
Yeah, and they can miss a couple of payments to get
down like six.
Speaker 1 (25:56):
Yeah.
Speaker 2 (25:56):
That's still.
Speaker 1 (25:58):
So 435 is like you are certified, you are
non-financible, and so that putme into this unique category of
entrepreneur investor.
We're cash only, so I'm doingstuff cash.
So subject two was greatbecause I could go and I could
work the deal out and I'd figureout how to get the money to
(26:18):
make the payments, and I didthat.
Problem is 2008 comes along myrenters in all of these single
family home stuff paying theirrent and one by one and I'll
remember this nightmarish,sickening feeling of in October
(26:38):
that year I think we had 15renters miss mortgages.
So I stroke a check for like 80grand to cover the mortgages.
I'm like, oh gosh, I hope theycould pay next month.
It was like 30.
We got into paying six figuresto cover these mortgages.
(26:59):
We could only do that for threemonths.
90 days later we started losingall these houses, they all
started closing and 2008 wasthere and the company's imploded
.
So the takeaway after that,after the battle scars came out
of that apocalypse, were I justdon't personally like a single
(27:21):
family investment.
Speaker 2 (27:22):
I don't like a single family home.
Speaker 1 (27:23):
Now there's an exception to that, the exception
to if I were to do a singlefamily home investment, it would
have to be a nightly rentalprogramming, it would have to be
an Airbnb, Because if you're anAirbnb guy, your guests comes
in, they leave, they come in,they leave.
It's up to me.
I can control the marketingflow so I can kind of control my
(27:47):
occupancy rate.
Versus if I sign a 12 monthlease for someone to rent my
house number one, I know whatthe end result is.
I'm gonna make that $200 or$500 spread every month and
that's all I'm gonna make.
But in a nightly rental man, ifI crush the marketing man, I
can make four or five times morethan what.
Speaker 2 (28:10):
So let's do the math on it.
Let's do the math.
Speaker 1 (28:12):
Let's just for comparison, for the listeners
Like what does that look like?
Well, if we take RobertKiyosaki's example and you've
got a three bedroom, two bathhouse and you have a renter
paying $1,000.
, Yep, let's make it morerealistic today, but let's say
that the mortgage payment is$1,800.
(28:34):
And I'm charging $2,500 a monthfor rent.
That's a realistic $2,700profit, Okay so $700 profit each
month.
Speaker 2 (28:45):
Yep.
Speaker 1 (28:46):
So for a year what is that?
Speaker 2 (28:48):
Your eight grand $8,400.
Okay, so.
Speaker 1 (28:51):
I'm gonna make $8,400 in a year on a single family
property, renting ittraditionally like a landlord.
Speaker 2 (28:58):
Right.
Speaker 1 (28:59):
Now I'm gonna be responsible for fixing the
toilet every time it breaks.
Speaker 2 (29:02):
Yep and I'm gonna take the issues.
Speaker 1 (29:04):
So that's gonna eat away from my $8,400.
If I have to hire a third partymanagement company.
Speaker 2 (29:10):
It's gonna eat into it.
That's gonna be three to fivepercent, depending on where you
are in the country, right?
Speaker 1 (29:14):
So, dude.
I mean, are we excited to getout of bed for like 300 a month?
Right, If I own 100 or 500homes like that.
Yeah, that doesn't make senseAbsolutely, but the average
guy's only gonna have a few ofthese and that's not that
exciting to me.
So for me personally, I'm outwhen it comes to the landlord
(29:35):
business.
I don't like the landlord modeland we'll get into multifamily
apartments.
I'm the same way.
Speaker 2 (29:42):
Now.
Speaker 1 (29:43):
I know a lot of my listeners are gonna be
multifamily apartment jet eyes.
Yeah, I know some people arelistening that own thousands of
doors of apartments and theycrush it.
There's guys right in ourbackyard that I respect very
much who have their private jets, make millions and millions of
(30:04):
dollars.
Landlord and multifamily.
It's just not my game.
That's all I'm saying.
It's cool for them.
There's a lot of competition inthat You're competing with the
Blackstones and KKRs of theworld, Big hedge funds.
Like in 2009 and 10, I actuallyhad the opportunity of selling
portfolios of REO, so that'sanother real estate term.
(30:27):
Reo stands for real estateowned that's a bank owned
property that went through aforeclosure.
So all 87 of those houses I hadowned subject to all became REO
property after they foreclosed.
And then the bank is trying tosell that toxic debt off onto
the secondary markets, and so2008 was extraordinarily painful
(30:50):
because you had like 500 plusbanks go out of business,
including Merrill Lynch.
I mean, Merrill Lynch had beenin business for 140 something
years and they went under.
So what we went under with them.
It was like, well, you know, Ijust wasn't smart enough, I
suppose, admittedly, to be ableto know how to hedge against
(31:11):
that kind of an apocalypse event.
But, like I say, the learninglesson for me was just stay away
from single family.
Speaker 2 (31:17):
Now, well, you know again, there's not one way of
doing things.
Some people will do really wellat it, Some just not.
You know, it comes down to that, you know.
Speaker 1 (31:27):
So let's go to the math model on the Knightley
rental, so you take that sameproperty.
You have an $1,800 mortgage.
Speaker 2 (31:35):
Yep.
Speaker 1 (31:36):
And let's use one of your condos in Moab Like.
Walk us through the economicsof one of your properties in
Moab.
What does that look like?
Speaker 2 (31:44):
Yeah, so this is a great example.
So I'll take last month in justone of the units.
If I pull up my Airbnb, whatwas the purchase price on that
unit?
$349,000.
Okay, so if I go into my Airbnbaccount I can pull this up and
tell you right now the exactnumbers.
Last month we are sitting at$7,345 in the revenue right
(32:09):
7,000.
7,000, okay, so you're almostto the number that your profit
is for the year when you do asingle family A long-term lease.
Speaker 1 (32:20):
A long-term lease okay.
Speaker 2 (32:21):
So, and then that's from Nightly Reynolds and we're
sitting around, I think.
Let's see it looks like it'slike a 350.
Yeah, it's like $350 a nightfor this month, $350 per night.
Speaker 1 (32:36):
So that's what I'm charging per night.
That's what we refer to, guys,for the listeners out there,
that is what we call an ADR,your average daily rate in a
nightly rental property.
That's a key metric.
The ADR.
Speaker 2 (32:49):
How much do?
Speaker 1 (32:50):
I make per night.
And the second most importantmetric, I think, in the nightly
rental space is occupancy.
What's my average occupancyover the year?
Speaker 2 (32:59):
Right.
Speaker 1 (33:00):
And you can break that down to the week or the
month or whatever.
Speaker 2 (33:03):
What's your?
Speaker 1 (33:03):
average occupancy on that same unit.
Speaker 2 (33:05):
So I'll give you.
Last month's was 71%.
Speaker 1 (33:09):
Okay.
So now I'm looking at this andwhat you're telling me is you've
got a single family condo inMoab that's got a renter in it
71% of the time At $350 a night,and so it's grossing over
$7,000 a month.
Speaker 2 (33:26):
Yeah, and I think I misread this.
What did I say?
7,100?
7,700.
Speaker 1 (33:32):
7,700.
Speaker 2 (33:33):
It's actually the.
Speaker 1 (33:35):
And you're managing it so you don't have the third
party manager fees, right, right, so you get to manage it and
keep all the.
Speaker 2 (33:40):
And now, an interesting thing is my
financing structure is veryunique and we've talked about
this in the Origins and Previousepisodes.
But for simple terms here Ihave a private company called
Mortgage from a partner and wekind of came in with the idea
we'll refinance in six monthsinto a long-term mortgage.
(34:02):
But this initial financingsituation I'm sitting at $1,000
a month for the mortgage, it'slike 900.
I mean, it's not exactly athousand, but it's under a
thousand, and so the mortgage isabout a thousand.
Just for simple terms, it's like936, 963, I can't remember
which of the two.
But then you have your cleaningand you have supplies and I
(34:26):
mean you're talking two grand.
I probably spend two grand onaverage a month to maintain
everything.
And so I mean look at that.
So if we just go simple terms,let's say I do 7,500 in revenue
in the month and then I subtractthe cleaning, the mortgage, the
supplies, maintenance, let'ssay that's 2,200.
(34:49):
I'm left with $5,300 in profitper month.
Speaker 1 (34:57):
So listen up, guys, per month If you're wondering if
you should get into Airbnbbusiness versus land-looting or
doing the fix and flips.
We're not telling you what youshould do, but there's some
basic math Now that's compellingmath.
Speaker 2 (35:11):
It's very compelling.
But I'll tell you somethingthat is very, very important to
understand and you can probablytest on this as well.
There are all these articlesout there and I've seen this
lately because I'm so immersedin this space.
I'll see articles, newsarticles, social media posts.
Airbnb is dead.
You know.
Verbo, all these platforms aredead.
(35:32):
You know, like all this stuff,and if you pay close attention
Airbnb, verbo, all theseplatforms are so saturated
Everyone thinks they can justthrow a property on there, take
some okay pictures.
I mean, it's a function ofmarketing.
When you're talking about thesenumbers, this is not just me
(35:54):
saying I'm going to go, take apicture of my phone and then say
, hey, come, stay here becausethis is a cool place.
You have hundreds of thousands,probably millions of properties
on Airbnb.
It's a very, very bloody water.
It's very bloody.
Speaker 1 (36:10):
It's a red ocean.
Speaker 2 (36:11):
So when you're talking about succeeding on
Airbnb, you know you have allthese people saying it's dead,
it's dead, but it's only becausethe majority of people on
Airbnb in my opinion again thisis kind of from my experience,
my opinion it's because peopleare not viewing it as a
functioning of marketing,they're viewing it as oh, if I
put it on Airbnb it'll sell.
Speaker 1 (36:31):
Yeah, it's not the case.
Yeah, it's not the case.
Speaker 2 (36:34):
That's a great distinction.
Speaker 1 (36:35):
Yeah, I don't want to mislead our listeners, but
that's very true, and whatyou're touching on is finding
the right market.
Yeah, finding the right deal,finding the right market and
then performing in said marketyou can find Moab.
Moab is an anomaly, I'd sayAnyone with a pulse, any fool
(36:56):
can go make money and have aproperty in Moab and make money,
they'll do fine, and thatdoesn't happen on the lost edge
front.
Speaker 2 (37:03):
So it's all like say that you buy an Airbnb, you
might use money.
Well, and you might not.
You might not make any money.
I'm in several Airbnb hostgroups on Facebook and these
other social platforms andthey're all so many people daily
post pictures of theireverybodies and vacant.
Yeah, they're like.
I used to have something likewhat is going on, but it's
because everyone is doing it andit becomes a price war.
(37:26):
What happens is, you know andthis is an important thing, I
think, to understand as well youknow you have a lot of control
to make a ton of money throughthis model, but only if you can
stand out and differentiateyourself and leverage that.
Why to make this so unique andsuch an experience?
That's what people are missing.
They're thinking I'm just goingto put this on here and have
people just come stay, justbecause they need a place to
(37:47):
stay.
Yeah, people are looking for anexperience now more than ever.
So if you just throw a listingup, you're going to be competing
with everyone in their dogwho's just going to drive prices
down, and eventually you'regoing to be.
So if that's your race, you'llnever win.
It's just driving the pricemore down and down and it
becomes a commodity.
Yeah, and that's when you lose.
You want to charge premiumprices for a premium experience,
(38:08):
but you have to have the value,you have to have the value
Convance her to the price Right.
Speaker 1 (38:12):
That's the key.
So you're really you'restarting to get deep into
programming, a programmingconversation.
I'm actually feeling like Imight give a little more detail
on the asset types.
Yeah, let's do that, and wemight actually just do real
estate one-on-one.
Speaker 2 (38:32):
Second, episode like the second Part two.
Part two Part two.
Speaker 1 (38:37):
Part two, because it will be unfair to the listeners
to end this conversation.
That's sort of like theprogramming of this.
That is so critical, oh, andit's important to cross the
board on every asset type.
Yeah, right, yeah, it isAbsolutely.
Speaker 2 (38:48):
So it's applicable.
Speaker 1 (38:50):
Yeah, absolutely.
So you know, let's talk a littlebit about Sage Creek and Moab.
That is my baby.
That's a marquee resort projectthat I developed over a number
of years Designed it, developedit, built it, programmed it,
operated it and fantasticproperty.
(39:12):
Yes, it is technically singlefamily asset class.
It is a condominium, it'splated as a condo and you could
buy one and live in it if youwant.
State statute prohibits.
If you've got an HOA set up athomeowner's association or a COA
(39:33):
condo on condominium owner'sassociation, I can't tell you
you can't live in your own condo.
If you bought it from me as adeveloper, right.
But you know you have thisnightly rental opportunity.
There's a rental pool and ifyou want to be involved and you
want to have your property putinto that now, there's some
programming to talk about.
Okay, so now we're.
(39:55):
Now, if you do the samecomparison math, let's talk math
just on a bigger scale.
If I'm talking to mymultifamily, my apartment folks
and I have a hundred apartmentsin one complex and a hundred
apartments.
My mortgage on each apartmentis going to be for these, it's
(40:19):
going to be in that 2200 a monthrange and I could probably
charge 2700 a month for the longterm lease to rent a hundred
apartments on a 12 month leasefor someone to live in that unit
.
So what does that do?
Speaker 2 (40:35):
Yeah, so if we're sitting here at a hundred units
and we're charging 2700 a month,then we're sitting at 50 grand
profit 50 grand a month.
Yep.
Speaker 1 (40:47):
On a hundred units.
Speaker 2 (40:49):
So then, if we do that by 12, a year is 600K
600,000.
Speaker 1 (40:53):
So that's cool, but that's going to cost me.
It's going to cost me 20something million dollars to
have Well, no, it would be more,it would be closer to 50
million dollars to build anapartment complex.
Speaker 2 (41:06):
Of a hundred, units Of a hundred and some odd units
versus condos for same butdifferent programming.
Speaker 1 (41:13):
So both projects cost almost the same.
Now, on a resort programproperty like the resort in Moab
, it's got a three and a halfmillion dollar pool.
It's got elite level finishes.
We clearly paid more thananyone would pay in an apartment
complex because the programmingcan support that.
But, for rough numbers.
(41:35):
Take the same 50 million dollarproperty mortgage is still the
same.
It's still.
What did I say?
2400?
Speaker 2 (41:43):
a month.
You said 22.
2200.
Speaker 1 (41:46):
2200 a month.
Speaker 2 (41:48):
But these units these units.
Speaker 1 (41:50):
because of the finishes and amenities, they
gross around 17, 18,000 a month.
Speaker 2 (41:56):
Yeah, so per units, right Per unit.
So let's, let's do the mathhere.
If we have, you know, obviouslyyou have the cleaning and I
call that stuff, but right now.
So this is 220k a Month for thehundred units of mortgage and
you subtract what did you say?
17 grand 17,000 per unit.
(42:16):
17 times 100, that gives us aMillion four hundred and eighty
one point four, eight millionper month, per month in gross
profit.
Now you also factor in cleaningand all that stuff.
Yeah, right, yeah, but I meanso let's, let's multiply this by
(42:39):
12.
Speaker 1 (42:42):
We're sitting here at 17 almost 18 million, almost 18
million in gross profit afterthe mortgages paid now I also
operate as, so you know, priceresort management group charges
20 25% Management fee to run thenightly programming on the
rental management pool.
So that comes off the top.
So a typical investor who buysa unit, they're going to shave
(43:05):
25% off the top.
But that's turnkey marketing,programming, housekeeping.
Speaker 2 (43:09):
Yeah, all the expenses.
Speaker 1 (43:11):
but you see the comparison, yeah the contrast of
the same Floor plan.
Essentially, right with along-term lease programming
versus a nightly rentalprogramming.
Right and and that you can seethe difference in the revenue
potential.
I mean it's, it's Millions.
Staggering how much do?
(43:32):
Yeah, now Is there moreexposure in the nightly rental
game if you're in the wrongmarket?
Yes, yeah, if you don'tunderstand program, I'm
programming, absolutely.
Yeah, and the funny thing is itwon one lesson and I'll give
the last lesson and we'll wrapup.
The one lesson I learned as adeveloper and doing a big
(43:55):
project like that is you know,we did sell some units, fee,
simple right, and we gave thoseunit owners the option to Hire a
third-party manager or justdon't put it in the rental pool.
Well, it's funny how everyoneyou know, you, they buy a condo
and overnight there.
They're a hotelier, yeah,Immediately.
I own an Airbnb, so I knoweverything about hotel program
(44:18):
resort programming.
Yeah, it's shocking, yeah, so wehad to produce CCNRs within a
project that dictated thefurniture, right furnishings,
all the the FF&E, thefurnishings, fixtures and
equipment.
It all had to be resort level.
It had to look and feel thesame.
There.
There are a lot of programmingmeasures that go into Making it
(44:42):
produce like that.
Yeah, just because you're inMoab and an amazing market with
an amazing pool Doesn'tautomatically guarantee that you
make I think that's part of thepoint you were trying to make
earlier is Programming's key.
Let's cut it off there.
Yeah, let's go into, you know,part two of real estate 101.
You guys, thanks for listening.
This is Aston Incorporated.
(45:03):
I'm your host, wayne Aston,with my co-host, dallin Aston.
Have a good night, guys.
Thanks for listening.
Talk soon.
Wayne Aston.
Here with Aston Incorporated,I'm your host, and this show is
designed for our serialentrepreneurs in their ruthless
pursuit of personal expansion.
We're going to be talking abouthow to build your real estate
empire, start and scale asuccessful business here in the
USA and, most importantly,discover your unique skills and
talents to make your own impacton humanity.
Speaker 2 (00:30):
Alright, audio is a go, video is a go.
Speaker 1 (00:38):
Welcome back to the podcast guys.
It is Aston Incorporated.
I'm your host, wayne Aston, andis my co-host, nalan Aston.
Hi, everyone.
Speaker 2 (00:49):
Good to be back.
Speaker 1 (00:51):
We had a kind of the last episode was kind of a ended
up being a heavy episode man.
Kind of heavy.
Did not expect it to go as deepas it did.
I think today's episode, youknow we're going to get into as
promised, we're going to getinto real estate 101.
Target for today is to provide abroad education on real estate
(01:13):
Any of our beginners who want to.
In fact, I had someone yesterdayapproach me and ask me hey, you
know we've got this land up inMorgan, utah, and thinking about
doing an Airbnb business upthere, wondering you know where
you would recommend we get, likeyou know, some tiny homes or
(01:33):
something.
Okay, so this is on the mindsof people in this nation, like,
how do we get it, how do we comeinto Airbnb business, how do we
get into real estate?
So we're going to be, we'regoing to be having some stories,
we're going to talk about somereal battle tested like reality
of real estate and hopefullyprovide some of the like the
base level definitions and youknow nuts and bolts of how to do
(01:57):
a real estate deal.
So, absolutely, with that inmind, you know you are a
qualified real estate investorat this point at you know the
right page of 24, which I thinkis super exciting.
I mean, I think of me at 24years old and I was running a
stonentile contracting businessand you know that was really all
(02:23):
I knew how to do.
I mean for me, for me it waslike go work the hours and use
my hands and my body and and Icould measure how much I could
make by the number of squarefeet I lay in a day, and, and
real estate presented this thingfor me.
Later on, as I became awarethat, you know, real estate
(02:44):
investing was a thing, it becameclear to me that this is the
way to use my mind, Like yeahthis is something I could scale.
It's something that I'm notgoing to break my body down
doing, and so I got to learn.
And, and I can remember,somewhere, somewhere during the
10 years of being in thestonentile, you know, lost my
(03:09):
first house.
Speaker 2 (03:10):
The first house I built when I was 21,.
Speaker 1 (03:12):
It got upside down, got it into short selling and we
lost the house, had to move andwe moved in with your grandma
for a while and I remember theforced transition out of the
construction do stuff with myhands.
Mentality into the I mustfigure something else out.
(03:35):
Mentality and I would go overto the librarian Hunter the
Hunter Librarian, Kerns, Utah,and I would rent every book I
could find from Donald Trump andRobert Kiyosaki and those
original gangsters in the realestate space who had put books
out at the time.
Right, I mean, we're talkingabout like we're talking about
(03:55):
like 2003 ish, that that aboutthat range, and I started to
devour these books and Icouldn't get enough of it.
I was just like Neo on thematrix man, just plug that thing
in.
All said I'm flying ahelicopter tomorrow, right, so
that was how that's it.
So you know, you find out aboutme.
(04:16):
I think you're a lot of thesame way.
It's all or nothing Like.
I go into six gear and I'mstuck in six years.
Speaker 2 (04:22):
It's all, it's all in .
Speaker 1 (04:23):
So that was like you know it was hard to be at home.
It was.
It was.
There was so much guilt andshame Having lost the house, and
your mother at the time wasjust so displeased with me that
I was just.
I needed to be in the library,I needed to expand.
I need to figure something outdesperately.
There was a desperation behindthis, needing to learn.
(04:44):
And so you know where, wheredid the actual where did the
first action begin in the realestate investing career?
Back then, because I was goodat stone and tile, I thought you
know what, maybe, maybe fixingand flipping houses would be
(05:05):
cool.
I could do that.
Yeah, I built a house when Iwas 21.
I've done more.
You know drywall, paint,electrical framing.
I mean, when I built that house, it was funny because your
grandpa was like, hey, youshould just build a house, don't
hire a general contractor, justbuild it.
I'll help you build it Of coursehe lives in Layton and I'm not
(05:25):
thinking like right.
Speaker 2 (05:26):
Okay.
Speaker 1 (05:28):
So so you know, I ended up building like 80% of
this house on my own and prettyfunny story on its own right,
but that was actually.
Building the house at 21 isprobably the first true real
estate investment Got the first,more at the first construction
loan, built the house from theground up, nailed my hand to the
wall in the process and that'sa funny story so built the first
(05:54):
house, lost it a few yearslater.
When I really startedtransitioning into being
effective in real estate, I wasconsuming all these books and
you know we were doing fix andflips.
And fix and flips, man, I mean,there's guys, I know guys that
will do 100 houses a year fixand flip.
(06:15):
They'll just buy an old housein Ogden or where we're at right
now, or they'll.
You know Salt Lake.
There's markets inside of youknow Utah that are more ripe for
you know, infill project like afix and flip.
So you find those markets.
You know you find a good dealand you know that was
(06:38):
interesting because we did a lot.
We did not make a lot of money.
I'll be honest, I wasn't greatbecause I really valued high
quality finishes, like if I wasgoing in doing the stone and
tile, I'm like doing thesecustom cut decos and these
granite floors.
Like I yeah, I couldn't.
(06:59):
I had a real problem providingvalue at a price, that price
point that made sense, and so Iwas always overpaying for
materials and doing more than Ishould to really make a good
profit margin.
So you know you see the guys onTV doing the fix and flips and
you're like man, that's.
That really really takes talentand discipline To discipline
(07:19):
yourself, to just spend just seta budget and spend the budget.
That is a very tempting thing togo to want to spend and go over
budget because it's beautiful.
You want to make it, you wantto make it, of course.
So for the beginning listenersout there, dallin, let's start
with you.
Like you're pretty new inactually taking action as an
(07:44):
active real estate investor,successful.
You own rental properties, youhave a thriving Airbnb business.
What was maybe give me?
Give me like the top threethings that you needed to figure
out from.
Like a definition, like, whatwas it the title work?
(08:06):
Was it the construction process?
Like, what was the hardest,what were the choke points for
you?
Well, like, trying to navigateas a new investor?
Yeah, the first and foremostthing.
Speaker 2 (08:16):
Just my immediate thought is I didn't know what I
didn't know, and I think that isprobably the biggest thing that
holds everyone back and youthink about it like how can you
do something you don't even, Iguess?
How can you get an answer to aquestion you didn't know?
You need to ask yeah, Right,and that was the hardest thing
(08:40):
for me, because I'm sitting heresaying, okay, here's my desired
outcome I want to buy these twoproperties.
Okay, Everyone in their dogwants to buy property Of course
and so for me it was the wholewell, geez, I don't even know
where to.
You know, what questions do Ineed to ask?
(09:01):
You know, because for me, ifyou take you know some of my
earlier businesses, guitar hacks, or you know my marketing
company or you know some otherthings, you know questions drive
my research.
So if I'm trying to learn askill, say for my guitar
business, I was sitting theregoing, okay, I want to sell
(09:25):
people on how to play the guitar.
Okay, well, what kind of thingsdo people need to know?
How did I learn?
I mean, these questions arethings that guided my own
curriculum that I created.
Okay, well, how does someone goabout this to get the same
results that I did?
How do I do this?
How do I do that?
You know, what are people gonnapay for this?
And these questions led toother questions.
When I'm sitting here with aproperty, okay, how do I buy it?
(09:48):
Which led to I don't have themoney.
Who has the money?
How do I get them to give methe money?
How do I structure the deal?
How do I deal with title?
Speaker 1 (10:02):
What is title?
Speaker 2 (10:03):
And then you know, now that I have this
understanding okay, title, Ididn't.
Back then I didn't even know.
You know what I mean?
I don't have these now, allthese terms that I can just
throw out, I had no idea thatthey even existed.
So what questions are I need tobe asking to get there?
You know, just starting, Ithink, is the.
This is the biggest choke point.
It's like because there's somuch newness.
(10:23):
Yeah, it's a little daunting.
Speaker 1 (10:27):
How to finance and structure your financing around
a real estate deal is it's asunique, almost as a snowflake.
Every deal can potentially haveits own unique capital
structure and that's that'smaybe good news for new, new
potential hopefuls.
Speaker 2 (10:46):
Yeah.
Speaker 1 (10:46):
That there's more than one way to do things and it
could be bad news for you knowconventional lenders but when we
when we talk about a capitalstack, the definition of a
capital stack is the totalamount of a project required to
complete it.
So right.
So if you're buying a house,you're going to fix and flip.
You've got the cost of thehouse.
(11:08):
Yep, You've got the commissionspaid to the agents that helped
you buy the house, Right.
You've got the fees the titleagency pays to ensure that that
the title is clear and free ofliens or encumbrances.
And then, if it's a fix andflip, you've got a renovation
budget.
Yeah, After you've bought thehouse, you have the rest of the
(11:30):
cap stack, is it could be?
as much as buying the house,depending on the and I've done
the lowest renovation.
The highest renovation I everdid was a.
We paid $1.8 million for thehouse and spent 900,000
renovating Serious fix and flipyeah, and it didn't end well.
You know, typically you'regoing to see the fix and flip
(11:53):
markets between 250,000 and600,000.
Right.
Property values in Utah havegone up dramatically in the last
few years, so the market movesand fix and flippers will focus
where the market moves what cansell in a week, right.
So structuring the capital stackso you can go to the bank, you
(12:14):
walk in designs bank or someconventional bank and they will
gladly say, yeah, we'll give you50% LTV and you're like what is
LTV, what is this?
Speaker 2 (12:25):
Do you remember that conversation?
I do, so.
How did that go?
Speaker 1 (12:28):
Like what, like don't name the bank.
Speaker 2 (12:30):
But like what?
What was that conversation like?
Speaker 1 (12:32):
when they dropped the LTV on you.
Speaker 2 (12:35):
I'm sitting here going oh, great, great, you know
like.
Because with a severe lack ofunderstanding, I'm not wanting
to let them know that I don'tunderstand, you're right, but
I'm also saying I need to knowwhat that means.
So I'm over here googling youknow I'm googling things, but
but it's a real eye-opener whenyou sit in here and look at,
(12:57):
okay, awesome.
And then they'll ask you and Iremember everyone asked me so
how much are you gonna put down?
Yeah, how much are you gonna do?
You know what's your skin inthe game and what's your skin in
the game.
Speaker 1 (13:14):
Yeah, that's.
That's my most hated, that'swhat they all say, that's maybe
my most loathsome term in realestate, how much?
Skin in the game.
Have you got Right?
That is a.
That's the old boys club.
Yeah, Lender.
Mentality of if you're notputting half in, then you're not
worthy.
Speaker 2 (13:34):
Right, we're not gonna do this deal for you if
you can't come in with it.
Speaker 1 (13:38):
And the dysfunction behind the how much skin in the
game question is it's limited tothe dollars amount they should
really say how many dollars areyou?
Investing Right Skin in thegame could be so much bigger
than dollars.
Speaker 2 (13:52):
So for the new investors, pay attention.
Speaker 1 (13:56):
Skin in the game could be sweat equity, okay.
If you're gonna go fix and flipa house, okay, go do the the
stone and time yourself Right,do all the demolition yourself.
Speaker 2 (14:05):
That's worth 10 grand .
Speaker 1 (14:07):
Yep, do all of the countertops yourself.
That's worth 15 grand.
So sweat equity is one way toaugment the cap stack and it
flies in the face of thatinstitutional lender who wants
skin in the game.
Really, what they want is theywant to see how much money you
can put down.
Speaker 2 (14:23):
Yeah.
Speaker 1 (14:23):
And that's really an attempt to kind of keep you out
of the market.
So if you're that new investorwith no money but you want to be
an investor, how do you startLike you don't have a rich uncle
Right, there is no trust fund,you're not.
You're not just making a phonecalled a rich uncle Bob and
saying, hey, man, I need fun.
Speaker 2 (14:41):
I need half a million to do this deal.
That's just not a possibility,right?
Speaker 1 (14:44):
So we're talking really about bootstrapping Yep,
yep.
And so you know that's when yougo, you typically will go get
investors, you'll go findinvestor partners.
Speaker 2 (14:55):
I call that a syndication yeah, Okay.
Speaker 1 (14:58):
So so if I don't have , like you explained on your
first deal, you didn't even havethe $10,000 for the earnest
money deposit, I had nothing Toput the deal under contract.
So you, you were faced with aunique conversation, a unique
task at hand to go find aninvestor who not only believed
you could pull it off but waswilling to give you capital with
(15:21):
no skin in the game, so tospeak.
Speaker 2 (15:23):
Yeah.
Speaker 1 (15:24):
That's a that's a magical equation, guys, to be
able to pull that off, to beconfident enough and present
well enough to actually persuadean investor to pull the trigger
Now right.
Fortunately for you, you had anexcellent plan.
You spent months of duediligence and you knew exactly
where it would go.
Speaker 2 (15:44):
Yeah.
Speaker 1 (15:44):
And it's performing well and I bet your investors
probably want to do more.
Yeah, because it's doing so, sothey they made it a good bet on
the right jockey, right and andthe horse is the deal.
Speaker 2 (15:56):
Yeah, the horse was an excellent horse but Dallin's
an excellent jockey.
Speaker 1 (16:00):
So the combination of world class, you know, horse
with a world class jockey butthat's a winning equation Right,
so that's easier to raisecapital for.
Speaker 2 (16:09):
Well, I can't emphasize enough that the very
beginning I'm sitting here, youknow, that's the ones that.
So, going back to the nature ofevery deal being like a
snowflake, they're all so unique, Mine's basically, they were
new builds.
So I mean, if that's a doublewhammy, that's a double.
And so there's, there's so muchadditional.
I was having to put in theearnest money seven months
(16:33):
before we even closed.
Yeah, so I'm sitting here,going, man, I can you know, and
it went non-refundable twomonths later, I believe.
I mean, it was like it was likethis is going to be
non-refundable yeah, just beprepared for that, right.
It's like oh my God, so if Ilose it, like if something
doesn't work, I'm going to lose10 grand.
Yeah, and where is even 10grand coming?
(16:54):
So I and so I can't emphasizeenough the, the avenue of hey,
you know you have to be socreative and so focused on the
value I would reach out to.
I had several buddies who havedone.
You know, summer sales go sellpest control, sell solar and I'd
reach out to them.
I'd be like hey guys, this iswhat I'm doing.
I need, I need to, you knowfive, and I tell them five grand
(17:15):
, because I just get two of them.
I was like I need five grand forthe earnest money.
And I was structured a deal andI had a couple of them say okay
, yeah, until my my actualinvestor, came in and said, well
, just take care of it.
And I'm like, okay, but you seewhere I'm coming from.
I tried to exhaust everythingthat I could think of.
That was unorthodox, it wasoutside the box.
Because I'm sitting here havingall these lenders telling me
I'm too young, I don't have thecredit profile, the history,
(17:39):
yeah, while I had a great creditscore, it just wasn't long
enough for them.
Right, and you know it was.
It was interesting.
And then I also have lenderssay we need to, we need to
season the funds in yourpersonal checking account for
two months.
And I was like that's not goingto work.
Right Like hey, investor, giveme, give me all the money in my
personal checking, right, Likewhat?
Speaker 1 (18:00):
Yeah, so I mean it presents a lot of unique
challenges.
Integrity might be an importantfactor in that equation.
Right yeah, If you're going tohave an investor put dollars in
a personal account to season itin order to get a mortgage, to
make it all right.
Speaker 2 (18:15):
You know, for me, I was just like that's not going
to, that's not going to work.
Speaker 1 (18:18):
I just didn't want to go that route.
Speaker 2 (18:20):
You know, and that being said, I don't think
there's one way of just doingthings.
Speaker 1 (18:25):
That's right.
Speaker 2 (18:26):
And so and this is a perfect example of that, when
we're talking about newinvestors Well, okay, if there's
not just one way of doingthings, can I go to private
money?
Can I, can I get a mortgage?
Right, and maybe you can.
Yeah, maybe you can, and maybethat's how you start.
Maybe you just need the downpayment and you know, maybe you
have a lot of it, but you don'thave enough.
And that's when you can kind ofgo syndicate, like we're
(18:47):
talking about here but there.
But if you are sitting therewith no money, no capital, no
credit I mean that's like bareminimum how can you make that
happen?
Well, you know, it's a matterof who, and then I think we get
into the relationship.
Speaker 1 (19:03):
Yeah, yeah, yeah.
Well see, that's a funny thing,because that natural barrier to
entry if you're the guy outthere listening who is driven to
money in the bottom line.
good luck, Because what you'reup against is a nearly
impossible circumstance.
But if you're the guy over here, that's focused on
(19:24):
relationships first and servingas a fiduciary to someone and
trying to provide value to aninvestor, that's a different
conversation.
Absolutely that's a doableconversation because you're
committed to providing values.
Through the deal, you'vecreated a clear path for a solid
return and a reasonable exit,and that's a winning equation.
(19:46):
So many of our listeners mightjust tune out of the show, like
that's OK, right, yeah.
Today is the day to bounce.
If you're the money-driven guyand you're not on the
relationship side of theequation, then real estate is
going to be a hard, hard row foryou.
It's going to be a hard careerfor you, and you know what?
(20:08):
It's never too late to evolve.
Like I said, I think in episodeone or two, I started out as
the money guy.
Speaker 2 (20:17):
I started out that way.
A lot of people, most people,probably do.
You're perspective determinesbehavior.
Speaker 1 (20:22):
I mean, we all like to say that Perspective
determines behavior.
We always say that Perspectivedetermines behavior.
Speaker 2 (20:26):
You know, you're sitting here with no experience,
no perspective on what this is,and you're sitting there going
man I can make a ton of money.
Yeah, I mean, that's great.
Like you can.
Yeah, like, let's get thisstraight Like you totally can,
there's nothing bad about that.
In fact, you'll make a ton ofmoney if you do it right.
But that shouldn't be yourpriority, or why, as we talked
about in the most recent episode, let's talk about the different
(20:49):
species of real estate.
Speaker 1 (20:51):
I think it's cool that your first kind of first
success will really go At.
Real estate had two components.
You had a new acquisition butit was a new construction deal.
Speaker 2 (21:03):
So that adds a level of exposure and complexity.
Speaker 1 (21:08):
You don't have that with a.
Ok, let's start with the basics.
If we're thinking of monopolyand you've got the greenhouses
and we graduate to the biggerand to the hotel, ultimately
let's rank kind of I'd like toprovide my personal.
This has no relevance, by theway.
Disclaimer we're not attorneys,we're not accountants Very
important yeah.
Don't take anything I'm sayingor down says as legal advice.
(21:31):
Go talk to your accountants andattorneys before you try and
pull any deal off, right?
We're just talking frompersonal experience, and so when
I talk about ranking the typesof the asset classes and what I
like, it's going to be differentfor everybody.
Yeah, there are differenttactics that make it easier for
(21:52):
folks to get into single familyhomes.
Single family properties and acondo qualifies, so that's what
you're in.
So at the very baseline in realestate, you buy a house.
This is Robert Kiyosaki's.
His story is OK, I bought ahouse, I rented the house to
someone.
They paid 1,000 a month.
(22:13):
My mortgage was 800 a month.
I made 200 a month.
That's rough numbers, right.
And he did that 100 times andthen he started buying duplexes
and then eight plexes, and thenhe so Robert Kiyosaki has a very
excellent example of how oldschool real estate just
(22:34):
grassroots start with one houseand build a portfolio into
hotels.
Ok, I have had the experience ofthat.
The fix and flip is also asingle family asset class.
You're buying a house, you'refixing it, you're flipping it.
There's different risk profilewith that.
If the market shifts down whenyou're in the middle of a
(22:57):
renovation which has happened tome you're not going to sell it
for what you projected it wouldbe worth.
At the end of the day, you'regoing to probably lose on that.
Now, depending on where you gotthe money to buy the house.
If it's hard money, the hardmoney lender will probably make
his money.
You'll probably sell it a lowerprice, but you'll accept.
(23:18):
You just won't make your margin.
So there's exposure in a fix andflip that always made me pretty
uncomfortable because I couldnever do like some of these guys
.
I either was timing or themarket or whatever.
So I was never a great fix andflip guy and I did dozens of fix
and flips because I was goodwith my hands and I knew how to
(23:39):
do repairs and stuff.
There was this other type ofsingle family investment that we
really got heavy into and thatwas buying home.
Subject to.
Buying a home subject to meansthat I'm aware that someone that
owns this home is in default ontheir mortgage payment.
They're late on the mortgagepayment, the bank has filed a
(24:00):
notice of default and they'regoing to foreclose.
I come in as an investor andwith the homeowner I say, hey, I
can help, I can start makingthese payments for you.
I'll buy the home subject toyour existing mortgage.
Now I don't have to go to alender like you did.
I don't have to have theseannoying conversations with the
bank about how to qualify andbeing too young and all that
(24:21):
dumb shit.
So I skip all of the bankingprocess.
Now I'm buying a home with thatmortgage in place and it's just
a contract.
It's a legally binding contract.
I take title subject to theexisting mortgage.
They're my new renter Now.
Letting them stay in the houseis typically that's problematic
(24:43):
because they already are notable to afford the payment, so
how are they going to pay myrent?
So most of?
the time if I were to qualifythis, I did 87 of these.
So, about 87 single familyhomes subject to, and it would
typically be best if I wouldjust take over the payment and
(25:03):
let them move out withoutgetting their credit crushed in
a foreclosure.
That's the value to that seller.
That's a big deal when you havea foreclosure.
It's going to be there forseven to 10 years and good luck
getting another mortgage orgetting a car loan Some car
loans they'll look past it aftertwo or three years.
But, guys, just so you know,after the apocalypse of 2008, my
(25:29):
credit score got down to 435.
Speaker 2 (25:33):
So anyone paying attention to?
Speaker 1 (25:34):
their credit scores and those what that means.
It's like you have to try toget down there 435 is like
negative a million.
It's like yeah, yeah, I mean ahigh school kid with no credit
profile can have a 650 and zerocredit.
Speaker 2 (25:53):
Yeah, and they can miss a couple of payments to get
down like six.
Speaker 1 (25:56):
Yeah.
Speaker 2 (25:56):
That's still.
Speaker 1 (25:58):
So 435 is like you are certified, you are
non-financible, and so that putme into this unique category of
entrepreneur investor.
We're cash only, so I'm doingstuff cash.
So subject two was greatbecause I could go and I could
work the deal out and I'd figureout how to get the money to
(26:18):
make the payments, and I didthat.
Problem is 2008 comes along myrenters in all of these single
family home stuff paying theirrent and one by one and I'll
remember this nightmarish,sickening feeling of in October
(26:38):
that year I think we had 15renters miss mortgages.
So I stroke a check for like 80grand to cover the mortgages.
I'm like, oh gosh, I hope theycould pay next month.
It was like 30.
We got into paying six figuresto cover these mortgages.
(26:59):
We could only do that for threemonths.
90 days later we started losingall these houses, they all
started closing and 2008 wasthere and the company's imploded
.
So the takeaway after that,after the battle scars came out
of that apocalypse, were I justdon't personally like a single
(27:21):
family investment.
Speaker 2 (27:22):
I don't like a single family home.
Speaker 1 (27:23):
Now there's an exception to that, the exception
to if I were to do a singlefamily home investment, it would
have to be a nightly rentalprogramming, it would have to be
an Airbnb, Because if you're anAirbnb guy, your guests comes
in, they leave, they come in,they leave.
It's up to me.
I can control the marketingflow so I can kind of control my
(27:47):
occupancy rate.
Versus if I sign a 12 monthlease for someone to rent my
house number one, I know whatthe end result is.
I'm gonna make that $200 or$500 spread every month and
that's all I'm gonna make.
But in a nightly rental man, ifI crush the marketing man, I
can make four or five times morethan what.
Speaker 2 (28:10):
So let's do the math on it.
Let's do the math.
Speaker 1 (28:12):
Let's just for comparison, for the listeners
Like what does that look like?
Well, if we take RobertKiyosaki's example and you've
got a three bedroom, two bathhouse and you have a renter
paying $1,000.
, Yep, let's make it morerealistic today, but let's say
that the mortgage payment is$1,800.
(28:34):
And I'm charging $2,500 a monthfor rent.
That's a realistic $2,700profit, Okay so $700 profit each
month.
Speaker 2 (28:45):
Yep.
Speaker 1 (28:46):
So for a year what is that?
Speaker 2 (28:48):
Your eight grand $8,400.
Okay, so.
Speaker 1 (28:51):
I'm gonna make $8,400 in a year on a single family
property, renting ittraditionally like a landlord.
Speaker 2 (28:58):
Right.
Speaker 1 (28:59):
Now I'm gonna be responsible for fixing the
toilet every time it breaks.
Speaker 2 (29:02):
Yep and I'm gonna take the issues.
Speaker 1 (29:04):
So that's gonna eat away from my $8,400.
If I have to hire a third partymanagement company.
Speaker 2 (29:10):
It's gonna eat into it.
That's gonna be three to fivepercent, depending on where you
are in the country, right?
Speaker 1 (29:14):
So, dude.
I mean, are we excited to getout of bed for like 300 a month?
Right, If I own 100 or 500homes like that.
Yeah, that doesn't make senseAbsolutely, but the average
guy's only gonna have a few ofthese and that's not that
exciting to me.
So for me personally, I'm outwhen it comes to the landlord
(29:35):
business.
I don't like the landlord modeland we'll get into multifamily
apartments.
I'm the same way.
Speaker 2 (29:42):
Now.
Speaker 1 (29:43):
I know a lot of my listeners are gonna be
multifamily apartment jet eyes.
Yeah, I know some people arelistening that own thousands of
doors of apartments and theycrush it.
There's guys right in ourbackyard that I respect very
much who have their private jets, make millions and millions of
(30:04):
dollars.
Landlord and multifamily.
It's just not my game.
That's all I'm saying.
It's cool for them.
There's a lot of competition inthat You're competing with the
Blackstones and KKRs of theworld, Big hedge funds.
Like in 2009 and 10, I actuallyhad the opportunity of selling
portfolios of REO, so that'sanother real estate term.
(30:27):
Reo stands for real estateowned that's a bank owned
property that went through aforeclosure.
So all 87 of those houses I hadowned subject to all became REO
property after they foreclosed.
And then the bank is trying tosell that toxic debt off onto
the secondary markets, and so2008 was extraordinarily painful
(30:50):
because you had like 500 plusbanks go out of business,
including Merrill Lynch.
I mean, Merrill Lynch had beenin business for 140 something
years and they went under.
So what we went under with them.
It was like, well, you know, Ijust wasn't smart enough, I
suppose, admittedly, to be ableto know how to hedge against
(31:11):
that kind of an apocalypse event.
But, like I say, the learninglesson for me was just stay away
from single family.
Speaker 2 (31:17):
Now, well, you know again, there's not one way of
doing things.
Some people will do really wellat it, Some just not.
You know, it comes down to that, you know.
Speaker 1 (31:27):
So let's go to the math model on the Knightley
rental, so you take that sameproperty.
You have an $1,800 mortgage.
Speaker 2 (31:35):
Yep.
Speaker 1 (31:36):
And let's use one of your condos in Moab Like.
Walk us through the economicsof one of your properties in
Moab.
What does that look like?
Speaker 2 (31:44):
Yeah, so this is a great example.
So I'll take last month in justone of the units.
If I pull up my Airbnb, whatwas the purchase price on that
unit?
$349,000.
Okay, so if I go into my Airbnbaccount I can pull this up and
tell you right now the exactnumbers.
Last month we are sitting at$7,345 in the revenue right
(32:09):
7,000.
7,000, okay, so you're almostto the number that your profit
is for the year when you do asingle family A long-term lease.
Speaker 1 (32:20):
A long-term lease okay.
Speaker 2 (32:21):
So, and then that's from Nightly Reynolds and we're
sitting around, I think.
Let's see it looks like it'slike a 350.
Yeah, it's like $350 a nightfor this month, $350 per night.
Speaker 1 (32:36):
So that's what I'm charging per night.
That's what we refer to, guys,for the listeners out there,
that is what we call an ADR,your average daily rate in a
nightly rental property.
That's a key metric.
The ADR.
Speaker 2 (32:49):
How much do?
Speaker 1 (32:50):
I make per night.
And the second most importantmetric, I think, in the nightly
rental space is occupancy.
What's my average occupancyover the year?
Speaker 2 (32:59):
Right.
Speaker 1 (33:00):
And you can break that down to the week or the
month or whatever.
Speaker 2 (33:03):
What's your?
Speaker 1 (33:03):
average occupancy on that same unit.
Speaker 2 (33:05):
So I'll give you.
Last month's was 71%.
Speaker 1 (33:09):
Okay.
So now I'm looking at this andwhat you're telling me is you've
got a single family condo inMoab that's got a renter in it
71% of the time At $350 a night,and so it's grossing over
$7,000 a month.
Speaker 2 (33:26):
Yeah, and I think I misread this.
What did I say?
7,100?
7,700.
Speaker 1 (33:32):
7,700.
Speaker 2 (33:33):
It's actually the.
Speaker 1 (33:35):
And you're managing it so you don't have the third
party manager fees, right, right, so you get to manage it and
keep all the.
Speaker 2 (33:40):
And now, an interesting thing is my
financing structure is veryunique and we've talked about
this in the Origins and Previousepisodes.
But for simple terms here Ihave a private company called
Mortgage from a partner and wekind of came in with the idea
we'll refinance in six monthsinto a long-term mortgage.
(34:02):
But this initial financingsituation I'm sitting at $1,000
a month for the mortgage, it'slike 900.
I mean, it's not exactly athousand, but it's under a
thousand, and so the mortgage isabout a thousand.
Just for simple terms, it's like936, 963, I can't remember
which of the two.
But then you have your cleaningand you have supplies and I
(34:26):
mean you're talking two grand.
I probably spend two grand onaverage a month to maintain
everything.
And so I mean look at that.
So if we just go simple terms,let's say I do 7,500 in revenue
in the month and then I subtractthe cleaning, the mortgage, the
supplies, maintenance, let'ssay that's 2,200.
(34:49):
I'm left with $5,300 in profitper month.
Speaker 1 (34:57):
So listen up, guys, per month If you're wondering if
you should get into Airbnbbusiness versus land-looting or
doing the fix and flips.
We're not telling you what youshould do, but there's some
basic math Now that's compellingmath.
Speaker 2 (35:11):
It's very compelling.
But I'll tell you somethingthat is very, very important to
understand and you can probablytest on this as well.
There are all these articlesout there and I've seen this
lately because I'm so immersedin this space.
I'll see articles, newsarticles, social media posts.
Airbnb is dead.
You know.
Verbo, all these platforms aredead.
(35:32):
You know, like all this stuff,and if you pay close attention
Airbnb, verbo, all theseplatforms are so saturated
Everyone thinks they can justthrow a property on there, take
some okay pictures.
I mean, it's a function ofmarketing.
When you're talking about thesenumbers, this is not just me
(35:54):
saying I'm going to go, take apicture of my phone and then say
, hey, come, stay here becausethis is a cool place.
You have hundreds of thousands,probably millions of properties
on Airbnb.
It's a very, very bloody water.
It's very bloody.
Speaker 1 (36:10):
It's a red ocean.
Speaker 2 (36:11):
So when you're talking about succeeding on
Airbnb, you know you have allthese people saying it's dead,
it's dead, but it's only becausethe majority of people on
Airbnb in my opinion again thisis kind of from my experience,
my opinion it's because peopleare not viewing it as a
functioning of marketing,they're viewing it as oh, if I
put it on Airbnb it'll sell.
Speaker 1 (36:31):
Yeah, it's not the case.
Yeah, it's not the case.
Speaker 2 (36:34):
That's a great distinction.
Speaker 1 (36:35):
Yeah, I don't want to mislead our listeners, but
that's very true, and whatyou're touching on is finding
the right market.
Yeah, finding the right deal,finding the right market and
then performing in said marketyou can find Moab.
Moab is an anomaly, I'd sayAnyone with a pulse, any fool
(36:56):
can go make money and have aproperty in Moab and make money,
they'll do fine, and thatdoesn't happen on the lost edge
front.
Speaker 2 (37:03):
So it's all like say that you buy an Airbnb, you
might use money.
Well, and you might not.
You might not make any money.
I'm in several Airbnb hostgroups on Facebook and these
other social platforms andthey're all so many people daily
post pictures of theireverybodies and vacant.
Yeah, they're like.
I used to have something likewhat is going on, but it's
because everyone is doing it andit becomes a price war.
(37:26):
What happens is, you know andthis is an important thing, I
think, to understand as well youknow you have a lot of control
to make a ton of money throughthis model, but only if you can
stand out and differentiateyourself and leverage that.
Why to make this so unique andsuch an experience?
That's what people are missing.
They're thinking I'm just goingto put this on here and have
people just come stay, justbecause they need a place to
(37:47):
stay.
Yeah, people are looking for anexperience now more than ever.
So if you just throw a listingup, you're going to be competing
with everyone in their dogwho's just going to drive prices
down, and eventually you'regoing to be.
So if that's your race, you'llnever win.
It's just driving the pricemore down and down and it
becomes a commodity.
Yeah, and that's when you lose.
You want to charge premiumprices for a premium experience,
(38:08):
but you have to have the value,you have to have the value
Convance her to the price Right.
Speaker 1 (38:12):
That's the key.
So you're really you'restarting to get deep into
programming, a programmingconversation.
I'm actually feeling like Imight give a little more detail
on the asset types.
Yeah, let's do that, and wemight actually just do real
estate one-on-one.
Speaker 2 (38:32):
Second, episode like the second Part two.
Part two Part two.
Speaker 1 (38:37):
Part two, because it will be unfair to the listeners
to end this conversation.
That's sort of like theprogramming of this.
That is so critical, oh, andit's important to cross the
board on every asset type.
Yeah, right, yeah, it isAbsolutely.
Speaker 2 (38:48):
So it's applicable.
Speaker 1 (38:50):
Yeah, absolutely.
So you know, let's talk a littlebit about Sage Creek and Moab.
That is my baby.
That's a marquee resort projectthat I developed over a number
of years Designed it, developedit, built it, programmed it,
operated it and fantasticproperty.
(39:12):
Yes, it is technically singlefamily asset class.
It is a condominium, it'splated as a condo and you could
buy one and live in it if youwant.
State statute prohibits.
If you've got an HOA set up athomeowner's association or a COA
(39:33):
condo on condominium owner'sassociation, I can't tell you
you can't live in your own condo.
If you bought it from me as adeveloper, right.
But you know you have thisnightly rental opportunity.
There's a rental pool and ifyou want to be involved and you
want to have your property putinto that now, there's some
programming to talk about.
Okay, so now we're.
(39:55):
Now, if you do the samecomparison math, let's talk math
just on a bigger scale.
If I'm talking to mymultifamily, my apartment folks
and I have a hundred apartmentsin one complex and a hundred
apartments.
My mortgage on each apartmentis going to be for these, it's
(40:19):
going to be in that 2200 a monthrange and I could probably
charge 2700 a month for the longterm lease to rent a hundred
apartments on a 12 month leasefor someone to live in that unit
.
So what does that do?
Speaker 2 (40:35):
Yeah, so if we're sitting here at a hundred units
and we're charging 2700 a month,then we're sitting at 50 grand
profit 50 grand a month.
Yep.
Speaker 1 (40:47):
On a hundred units.
Speaker 2 (40:49):
So then, if we do that by 12, a year is 600K
600,000.
Speaker 1 (40:53):
So that's cool, but that's going to cost me.
It's going to cost me 20something million dollars to
have Well, no, it would be more,it would be closer to 50
million dollars to build anapartment complex.
Speaker 2 (41:06):
Of a hundred, units Of a hundred and some odd units
versus condos for same butdifferent programming.
Speaker 1 (41:13):
So both projects cost almost the same.
Now, on a resort programproperty like the resort in Moab
, it's got a three and a halfmillion dollar pool.
It's got elite level finishes.
We clearly paid more thananyone would pay in an apartment
complex because the programmingcan support that.
But, for rough numbers.
(41:35):
Take the same 50 million dollarproperty mortgage is still the
same.
It's still.
What did I say?
2400?
Speaker 2 (41:43):
a month.
You said 22.
2200.
Speaker 1 (41:46):
2200 a month.
Speaker 2 (41:48):
But these units these units.
Speaker 1 (41:50):
because of the finishes and amenities, they
gross around 17, 18,000 a month.
Speaker 2 (41:56):
Yeah, so per units, right Per unit.
So let's, let's do the mathhere.
If we have, you know, obviouslyyou have the cleaning and I
call that stuff, but right now.
So this is 220k a Month for thehundred units of mortgage and
you subtract what did you say?
17 grand 17,000 per unit.
(42:16):
17 times 100, that gives us aMillion four hundred and eighty
one point four, eight millionper month, per month in gross
profit.
Now you also factor in cleaningand all that stuff.
Yeah, right, yeah, but I meanso let's, let's multiply this by
(42:39):
12.
Speaker 1 (42:42):
We're sitting here at 17 almost 18 million, almost 18
million in gross profit afterthe mortgages paid now I also
operate as, so you know, priceresort management group charges
20 25% Management fee to run thenightly programming on the
rental management pool.
So that comes off the top.
So a typical investor who buysa unit, they're going to shave
(43:05):
25% off the top.
But that's turnkey marketing,programming, housekeeping.
Speaker 2 (43:09):
Yeah, all the expenses.
Speaker 1 (43:11):
but you see the comparison, yeah the contrast of
the same Floor plan.
Essentially, right with along-term lease programming
versus a nightly rentalprogramming.
Right and and that you can seethe difference in the revenue
potential.
I mean it's, it's Millions.
Staggering how much do?
(43:32):
Yeah, now Is there moreexposure in the nightly rental
game if you're in the wrongmarket?
Yes, yeah, if you don'tunderstand program, I'm
programming, absolutely.
Yeah, and the funny thing is itwon one lesson and I'll give
the last lesson and we'll wrapup.
The one lesson I learned as adeveloper and doing a big
(43:55):
project like that is you know,we did sell some units, fee,
simple right, and we gave thoseunit owners the option to Hire a
third-party manager or justdon't put it in the rental pool.
Well, it's funny how everyoneyou know, you, they buy a condo
and overnight there.
They're a hotelier, yeah,Immediately.
I own an Airbnb, so I knoweverything about hotel program
(44:18):
resort programming.
Yeah, it's shocking, yeah, so wehad to produce CCNRs within a
project that dictated thefurniture, right furnishings,
all the the FF&E, thefurnishings, fixtures and
equipment.
It all had to be resort level.
It had to look and feel thesame.
There.
There are a lot of programmingmeasures that go into Making it
(44:42):
produce like that.
Yeah, just because you're inMoab and an amazing market with
an amazing pool Doesn'tautomatically guarantee that you
make I think that's part of thepoint you were trying to make
earlier is Programming's key.
Let's cut it off there.
Yeah, let's go into, you know,part two of real estate 101.
You guys, thanks for listening.
This is Aston Incorporated.
(45:03):
I'm your host, wayne Aston,with my co-host, dallin Aston.
Have a good night, guys.
Thanks for listening.
Talk soon.
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